SC TO-T

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE TO

(Rule 14d-100)

Tender Offer Statement Under Section 14(d)(1) or Section 13(e)(1) of

the Securities Exchange Act of 1934

D & K HEALTHCARE RESOURCES, INC.

(Name of Subject Company)

SPIRIT ACQUISITION CORPORATION

a wholly owned subsidiary of

MCKESSON CORPORATION

(Names of Filing Persons (Offerors))

COMMON STOCK, PAR VALUE $0.01 PER SHARE

(Title of Class of Securities)

232861104

(CUSIP Number of Class of Securities)

Ivan D. Meyerson

Executive Vice President, General Counsel and Secretary

McKesson Corporation

One Post Street

San Francisco, CA 94104-5296

Telephone: (415) 983-8300

(Name, address and telephone number of person authorized to receive notices

and communications on behalf of filing persons)

Copies to:

Kenton J. King, Esq.

Celeste E. Greene, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

525 University Avenue

Palo Alto, CA 94301

Telephone: (650) 470-4500

CALCULATION OF FILING FEE

Transaction Valuation*	Amount of Filing Fee**
$212,565,362	$25,018.94

*	The transaction valuation was calculated by adding (i) the number of all outstanding shares of common stock of D & K Healthcare Resources, Inc. (14,260,856 shares) multiplied by a purchase price of $14.50 per share and (ii) the number of options to purchase shares of common stock of D & K Healthcare Resources Inc. with exercise prices at or below $14.50 per share (options to purchase 774,066 shares) multiplied by the difference between (A) $14.50 per share and (B) the weighted average exercise price per share ($7.03) of such options.
**	The filing fee was calculated pursuant to Rule 0-11 under the Securities Exchange Act of 1934, as amended, and was determined by multiplying 0.00011770 by the sum of (i) the number of all outstanding shares of common stock of D & K Healthcare Resources, Inc. (14,260,856 shares) multiplied by a purchase price of $14.50 per share and (ii) the number of options to purchase shares of common stock of D & K Healthcare Resources Inc. with exercise prices at or below $14.50 per share (options to purchase 774,066 shares) multiplied by the difference between (A) $14.50 per share and (B) the weighted average exercise price per share ($7.03) of such options.
o	Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number or the Form or Schedule and the date of its filing.

Amount Previously Paid: N/A	Form or Registration No. N/A
Filing party: N/A	Date Filed: N/A

o   Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

þ third-party tender offer subject to Rule 14d-1.

o   issuer tender offer subject to Rule 13e-4.

o   going-private transaction subject to Rule 13e-3.

o   amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer:  o

     This Tender Offer Statement on Schedule TO (“Schedule TO”) relates to the offer by Spirit Acquisition Corporation, a Delaware corporation (“Purchaser”) and a wholly owned subsidiary of McKesson Corporation, a Delaware corporation (“Parent”), to purchase all of the outstanding shares of common stock, par value $0.01 per share (the “Common Stock”), of D & K Healthcare Resources, Inc., a Delaware corporation (“D&K”), including the associated preferred stock purchase rights and other rights (the “Rights” and, together with the Common Stock, the “Shares”) issued pursuant to the Rights Agreement, dated as of November 12, 1998, between D&K and Harris Trust and Savings Bank, at a purchase price of $14.50 per Share, net to the seller in cash, without interest thereon and less any required withholding taxes, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 22, 2005 (the “Offer to Purchase”), and in the related Letter of Transmittal (which, together with the Offer to Purchase any supplements or amendments to the Offer to Purchase or the Letter of Transmittal, collectively constitute the “Offer”), copies of which are attached as Exhibits (a)(1)(A) and (a)(1)(B) hereto, respectively.

Items 1 through 9 and Item 11.

      The information in the Offer to Purchase and the related Letter of Transmittal, copies of which are filed with this Schedule TO as Exhibits (a)(1)(A) and (a)(1)(B) hereto, respectively, are incorporated herein by reference in answer to Items 1 through 9 and Item 11 in this Tender Offer Statement on Schedule TO.

Item 10.     Financial Statements.

      Not applicable.

Item 12.     Exhibits.

(a)(1)(A)	Offer to Purchase, dated July 22, 2005.
(a)(1)(B)	Form of Letter of Transmittal.
(a)(1)(C)	Form of Notice of Guaranteed Delivery.
(a)(1)(D)	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(1)(E)	Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(1)(F)	Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(1)(G)	Press Release issued by McKesson Corporation on July 11, 2005, incorporated herein by reference to Form 8-K previously filed with the Securities and Exchange Commission.
(a)(1)(H)	Press Release issued by McKesson Corporation on July 22, 2005.
(a)(5)	Summary Advertisement, dated July 22, 2005, appearing in The Wall Street Journal.
(d)(1)	Agreement and Plan of Merger, dated as of July 8, 2005, by and among McKesson Corporation, Spirit Acquisition Corporation and D & K Healthcare Resources, Inc.
(d)(2)	Stockholder Support Agreement, dated as of July 8, 2005, among McKesson Corporation, Spirit Acquisition Corporation and certain shareholders of D & K Healthcare Resources, Inc. that are listed on Schedule I attached thereto.
(d)(3)	Confidentiality Agreement, dated as of March 24, 2005, between McKesson Corporation and D & K Healthcare Resources, Inc.

SIGNATURE

      After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Spirit Acquisition Corporation
By:	/s/ Nicholas A. Loiacono --------------------------------------------- Name: Nicholas A. Loiacono Title:  Vice President and Treasurer
McKesson Corporation
By:	/s/ Ivan D. Meyerson --------------------------------------------- Name: Ivan D. Meyerson Title:  Executive Vice President, General Counsel and Secretary

Dated: July 22, 2005

EXHIBIT INDEX

Exhibit No.		Exhibit Name
	(a)(1)(A)	Offer to Purchase, dated July 22, 2005.
	(a)(1)(B)	Form of Letter of Transmittal.
	(a)(1)(C)	Form of Notice of Guaranteed Delivery.
	(a)(1)(D)	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
	(a)(1)(E)	Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
	(a)(1)(F)	Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
	(a)(1)(G)	Press Release issued by McKesson Corporation on July 11, 2005, incorporated herein by reference to Form 8-K previously filed with the Securities and Exchange Commission.
	(a)(1)(H)	Press Release issued by McKesson Corporation on July 22, 2005.
	(a)(5)	Summary Advertisement, dated July 22, 2005, appearing in The Wall Street Journal.
	(d)(1)	Agreement and Plan of Merger, dated as of July 8, 2005, by and among McKesson Corporation, Spirit Acquisition Corporation and D & K Healthcare Resources, Inc.
	(d)(2)	Stockholder Support Agreement, dated as of July 8, 2005, among McKesson Corporation, Spirit Acquisition Corporation and certain shareholders of D & K Healthcare Resources, Inc. that are listed on Schedule I attached thereto.
	(d)(3)	Confidentiality Agreement, dated as of March 24, 2005, between McKesson Corporation and D & K Healthcare Resources, Inc.

EX-99.1

EXHIBIT 99.1
EXHIBIT (a)(1)(A)

Offer to Purchase for Cash

All Outstanding Shares of Common Stock

(Including the Associated Preferred Stock Purchase Rights)

of

D & K Healthcare Resources, Inc.

at

$14.50 Net Per Share

by

Spirit Acquisition Corporation

a wholly owned subsidiary of

McKesson Corporation

The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Thursday, August 18, 2005, unless the Offer is extended.

      The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of July 8, 2005 (the “Merger Agreement”), by and among McKesson Corporation, a Delaware corporation (“McKesson” or “Parent”), Spirit Acquisition Corporation, Inc., a Delaware Corporation (“Purchaser”) and a wholly owned subsidiary of Parent, and D & K Healthcare Resources, Inc., a Delaware corporation (“D&K”). The Board of Directors of D&K, by unanimous vote of all directors, with one director, who is an officer of D&K’s financial advisor, abstaining, (1) has determined that the terms of the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger (each as defined herein), are adviseable, fair to, and in the best interests of, D&K and the holders (the “Stockholders”) of all issued and outstanding shares of common stock, par value $0.01 per share, of D&K (the “Common Stock”), including the associated preferred share purchase rights and other rights issued pursuant to the Rights Agreement, dated November 12, 1998 (the “Rights Agreement”) between D&K and Harris Trust and Savings Bank (the “Rights” and, together with the Common Stock, the “Shares”), (2) has approved the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger and (3) recommends that the Stockholders accept the Offer and tender their shares (as defined herein) to Purchaser in the Offer.

      The Offer is conditioned upon, among other things, (1) there being validly tendered and not properly withdrawn prior to the expiration of the Offer that number of shares which represents at least a majority of the then outstanding shares of Common Stock on an as-if-converted basis and (2) the expiration or termination of any waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). The Offer is also subject to the other terms and conditions contained in this Offer to Purchase. See Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase.

IMPORTANT

      Any Stockholder desiring to tender all or any portion of his or her Shares should either (i) complete and sign the Letter of Transmittal (or a manually signed facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it, together with the certificate(s) representing tendered Shares and any other required documents, to the Depositary (as defined herein) or tender such Shares pursuant to the procedures for book-entry transfer described in Section 2 — “Procedures for Tendering Shares” of this Offer to Purchase or (ii) request his or her broker, dealer, commercial bank, trust company or other nominee to effect the transaction for him or her. A Stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if he or she desires to tender such Shares.

      A Stockholder who desires to tender his or her Shares and whose certificates representing such Shares are not immediately available or who cannot comply with the other procedures on a timely basis may tender such Shares by following the procedures for guaranteed delivery described in Section 2 — “Procedures for Tendering Shares” of this Offer to Purchase.

      Questions and requests for assistance may be directed to Georgeson Shareholder (the “Information Agent”) at the address and telephone number indicated on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be obtained from the Information Agent or from brokers, dealers, commercial banks and trust companies.

July 22, 2005

TABLE OF CONTENTS

	Page
SUMMARY TERM SHEET		i
INTRODUCTION		1
THE TENDER OFFER		4
1.   Terms of the Offer; Expiration Date		4
2.   Procedures for Tendering Shares		6
3.   Withdrawal Rights		9
4.   Acceptance for Payment and Payment for Shares		10
5.   Certain United States Federal Income Tax Consequences		11
6.   Price Range of the Shares; Dividends		12
7.   Effect of the Offer on the Market for the Shares; Nasdaq Quotation; Exchange Act Registration; Margin Regulations		12
8.   Certain Information Concerning D&K		14
9.   Certain Information Concerning Purchaser and Parent		15
10. Background of the Offer; Contacts with D&K		17
11. Purpose of the Offer; Plans for D&K		19
12. The Merger Agreement, Stockholder Agreement and Other Relevant Agreements		20
13. Source and Amount of Funds		32
14. Dividends and Distributions		32
15. Certain Conditions of the Offer		32
16. Certain Legal Matters; Required Regulatory Approvals		34
17. Certain Fees and Expenses		37
18. Miscellaneous		37
Schedule I — Directors and Executive Officers of Spirit Acquisition Corporation		S-1
Annex I — Delaware General Corporation Law Section 262 — Appraisal Rights		A-1

SUMMARY TERM SHEET

Securities Sought:	All outstanding shares of common stock, par value $0.01 per share, including the associated preferred stock purchase rights, of D & K Healthcare Resources, Inc.
Price Offered Per Share:	$14.50 net to you in cash, without interest.
Scheduled Expiration of Offer:	12:00 midnight, New York City time, on August 18, 2005, unless extended.
Purchaser:	Spirit Acquisition Corporation, a wholly owned subsidiary of McKesson Corporation.
D&K Board Recommendation:	D&K’s board of directors with one director who is an officer of D&K’s financial advisor, abstaining, by unanimous vote, recommends that you accept the offer and tender your shares.

      The following are some of the questions you, as a stockholder of D&K, may have and our answers to those questions. We urge you to carefully read the remainder of this Offer to Purchase and the Letter of Transmittal because the information in this summary is not complete. Additional important information is contained in the remainder of this Offer to Purchase and the Letter of Transmittal.

Who is offering to purchase my shares?

      Our name is Spirit Acquisition Corporation, and we are a Delaware corporation formed solely to acquire all of the outstanding shares of common stock, including the associated preferred stock purchase rights, of D & K Healthcare Resources, Inc. We are a wholly owned subsidiary of McKesson Corporation, a Delaware corporation. We are newly formed and have not conducted any business other than in connection with the merger agreement described below and this offer. See “Introduction” and Section 9 — “Certain Information Concerning Purchaser and Parent” of this Offer to Purchase.

Why are you making this offer?

      We are making this offer as a first step in our plan to acquire all of the outstanding shares of D&K common stock on the terms and subject to the conditions set forth in the merger agreement. See “Introduction” and Section 11 — “Purpose of the Offer; Plans for D&K” of this Offer to Purchase.

What are the classes and amounts of securities sought in the offer?

      We are seeking to purchase all of the outstanding shares of common stock, par value $0.01 per share, of D&K and the rights to purchase preferred stock associated with those shares. See “Introduction” and Section 1 — “Terms of the Offer; Expiration Date” of this Offer to Purchase.

How much are you offering to pay for the shares? What is the form of payment? Will I have to pay any brokerage or similar fees or commissions?

      We are offering to pay $14.50 per share, net to you, in cash, without interest and less any required withholding taxes. If you are the record owner of your shares and you tender the shares to us in the offer, you will not have to pay any broker fees or similar expenses. If you own your shares through a broker or other nominee and your broker or nominee tenders shares on your behalf, your broker or other nominee may charge you a fee for doing so. You should consult your broker or other nominee to determine whether any charges will apply. See “Introduction” and Section 1 — “Terms of the Offer; Expiration Date” of this Offer to Purchase.

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Do you have the financial resources to make the payment?

      Yes. McKesson Corporation, our parent, will provide us with sufficient funds to purchase all shares validly tendered and not properly withdrawn in the offer. Our offer is not conditioned on any financing arrangements. See Section 13 — “Source and Amount of Funds” of this Offer to Purchase.

Is your financial condition relevant to my decision to tender shares?

      We do not believe that our financial condition is relevant to your decision whether to tender shares and accept the offer, because:

•  the offer is being made for all of the outstanding shares of D&K solely for cash;

•  the offer is not subject to any financing condition; and

•  pursuant to the merger agreement, McKesson Corporation, our parent, has agreed to provide us with the funds necessary to consummate our offer and to pay for any outstanding shares of D&K common stock (and the associated preferred stock purchase rights) not owned by McKesson, D&K or us pursuant to any merger of us into D&K.

See Section 13 — “Source and Amount of Funds” of this Offer to Purchase.

How long do I have to decide whether to tender my shares in the offer?

      You have until 12:00 midnight, New York City time, on Thursday, August 18, 2005, to tender your shares in the offer, unless the offer is extended. If you cannot deliver all documents and instruments required to make a valid tender by that time, you may be able to use a guaranteed delivery procedure to tender your shares, which is described in this Offer to Purchase. See Section 2 — “Procedures for Tendering Shares” of this Offer to Purchase.

Can the offer be extended and, if so, under what circumstances?

      Yes. We may extend the offer beyond the initial scheduled expiration date or any subsequent extended expiration of the offer with D&K’s prior written consent.

      We may extend the offer beyond the initial scheduled expiration date or any subsequent extended expiration of the offer without D&K’s consent:

•  if, at the scheduled or extended expiration of the offer, any of the conditions to the offer, which are described in Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase, are not satisfied or waived or

•  if extension of the offer is required by the United States Securities and Exchange Commission.

      We are required under the merger agreement to extend the offer beyond the initial scheduled expiration date or any subsequent extended expiration of the offer if, at the scheduled expiration of the offer, the sole condition or conditions to the offer described in Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase that have not been satisfied or waived are (1) the Antitrust Condition and/or (2) the Inventory Verification Condition (each as defined below). We are not, however, required to extend the offer beyond January 8, 2006.

      We may also elect to immediately accept for payment and promptly purchase shares tendered prior to the expiration of the initial offer period at midnight on August 18, 2005 or such later time as the offer may have been extended and provide a “subsequent offering period” without D&K’s consent, which would be an additional period of three to twenty business days beginning after the offer expires. During this subsequent offering period, you would be permitted to tender, but not withdraw, your shares (and the associated preferred stock purchase rights) and receive $14.50 per share, net to you in cash, without interest and less any required withholding taxes. We do not currently intend to provide a subsequent

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offering period, although we reserve the right to do so. See Section 1 — “Terms of the Offer; Expiration Date” of this Offer to Purchase.

How will I be notified if the offer is extended or a subsequent offering period is provided?

      If we extend the offer or provide for a subsequent offering period, we will inform The Bank of New York, the depositary for the offer, of that fact and will make a public announcement of the extension, not later than 9:00 a.m., New York City time, on the next business day after the day on which the offer was scheduled to expire. See Section 1 — “Terms of the Offer; Expiration Date” of this Offer to Purchase.

What are the most important conditions to the offer?

      We are not obligated to purchase any shares that are validly tendered in the offer unless, among other things:

•  Stockholders validly tender and do not properly withdraw before expiration of the offer that number of shares which represents at least a majority of the then outstanding shares of D&K common stock, determined on an as-if-converted basis. We refer to this condition as the “Minimum Condition.”

•  The expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. We refer to this as the “Antitrust Condition.”

•  We shall have verified the useable and saleable inventories of D&K as described in Section 15 — “Certain Conditions to the Offer” of this Offer to Purchase and if there is a dispute as to the useable and saleable inventories of D&K that is pending and continuing, the applicable dispute resolution period has expired or been terminated. We refer to this condition as the “Inventory Verification Condition.”

•  There has been no event that is reasonably likely to result in a material adverse effect on D&K as described in Section 12 — “The Merger Agreement, the Stockholder Agreement and Other Relevant Agreements” of this Offer to Purchase.

•  No Governmental Entity (as defined in the Merger Agreement) shall have instituted a legal action or investigation: (i) challenging or making materially more costly the transactions contemplated by the merger agreement; (ii) seeking to limit our, D&K’s or McKesson’s ownership or operation of, or to compel disposition of any of our or their respective material business or assets; (iii) seeking to impose any limitation on our or McKesson’s ability to exercise effectively full rights of ownership, or to require divestiture, of any D&K shares; or (iv) which, individually or in the aggregate, otherwise would reasonably be expected to prevent or materially delay consummation of the offer or the merger or would reasonably be expected to have a material adverse effect on D&K;

•  The representations and warranties of D&K in the merger agreement that are qualified as to materiality or material adverse effect shall be true and correct in all respects and all such representations and warranties that are not so qualified shall be true and correct in all material respects, in each case as if such representations and warranties were made as of such time on or after the date of the merger agreement

•  D&K shall have performed, in all material respects, all of its obligations and complied, in all material respects, with all of its agreements or covenants under the merger agreement, or shall have cured any failure to perform or comply that is capable of cure within thirty (30) days after receipt of notice of such failure from McKesson;

•  The D&K board of directors or any committee thereof shall not have (i) withdrawn, or modified or changed in a manner adverse to the transactions contemplated by the merger agreement, to McKesson or to us (including by amendment of the Schedule 14D-9 which is being mailed to D&K stockholders with this Offer to Purchase), its recommendation of the offer, the merger agreement or the merger, (ii) recommended any Acquisition Proposal (as defined in the Merger

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Agreement), (iii) taken a neutral position or made no recommendation with respect to another proposal or offer (other than by McKesson or us) after a reasonable amount of time (and in no event more than ten (10) business days following receipt thereof) has elapsed for the D&K board of directors or any committee thereof to review and make a recommendation with respect thereto or (iv) resolved to do any of the foregoing.

      The offer is subject to a number of additional conditions, which are described in this Offer to Purchase. We can waive any of the conditions to the offer without the consent of D&K. See Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase.

How do I tender my shares?

      To tender your shares in the offer, you must complete the enclosed Letter of Transmittal (or a manually signed facsimile of the Letter of Transmittal) and deliver it, along with your share certificates, to The Bank of New York, the depositary for the offer, prior to the expiration of the offer. If you are unable to deliver any required document or instrument to the depositary in time, you may, with the assistance of a broker, bank or other fiduciary who is a member of a Medallion Program approved by the Securities Transfer Association, Inc. or other eligible institution, deliver to the depositary, in lieu of the missing documents, the enclosed notice of guaranteed delivery. However, the depositary must receive the missing items within three Nasdaq National Market trading days after the date of notice of guaranteed delivery. If your shares are held in “street” name (that is, through a broker, dealer or other nominee), your nominee will tender the shares on your behalf at your instruction. See Section 2 — “Procedures for Tendering Shares” of this Offer to Purchase.

What does the board of directors of D&K think of the offer?

      We are making the offer pursuant to our merger agreement with D&K, which has been unanimously approved by the board of directors of D&K with one director, who is an officer of D&K’s financial advisor, abstaining. The board of directors of D&K, with one director, who is an officer of D&K’s financial advisor, abstaining, also has unanimously determined that the terms of the Merger Agreement and the transactions contemplated thereby, including, the offer and the merger, which are described in this Offer to Purchase, are advisable, fair to, and in the best interests of, D&K and its stockholders, and also has approved the merger agreement and the transactions contemplated thereby, including the stockholder support agreement, the offer and the merger. The board of directors of D&K recommends that D&K’s stockholders tender their shares to us in the offer. See “Introduction” and Section 10 — “Background of the Offer; Contacts with D&K” of this Offer to Purchase.

Have any stockholders already agreed to tender their shares?

      Yes. Pursuant to a stockholder support agreement all of the executive officers and directors of D&K other than one of D&K’s directors who is also an officer of D&K’s financial advisor (each, a Supporting Stockholder), who, in the aggregate, hold approximately 8.4% of the issued and outstanding shares of D&K common stock, including Mr. J. Hord Armstrong III, Chairman of the board of directors and Chief Executive Officer of D&K, and Mr. Martin Wilson, President, Chief Operating Officer and member of the board of directors of D&K, and Mr. Harvey Jewett, member of the board of directors of D&K, have agreed to tender their shares to us in the offer. See Section 12 — “The Merger Agreement, Stockholder Agreement and Other Relevant Agreements” of this Offer to Purchase.

If I tender any shares, when will I get paid?

      If the conditions to the offer are satisfied or waived and we consummate the offer and accept your shares for payment, you will receive a check for an amount equal to the product of the number of shares you have tendered in the offer multiplied by $14.50 per share, net to you, in cash, without interest and less any required withholding taxes. We expect that such checks will be mailed out promptly following our

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acceptance of shares in the offer. See Section 4  — “Acceptance for Payment and Payment For Shares” of this Offer to Purchase.

Until what time and how can I withdraw my previously tendered shares?

      You may withdraw all or a portion of your shares tendered in the offer by delivering written or facsimile notice to the depositary at any time prior to the expiration of the offer. If we have not agreed to accept your shares for payment by September 19, 2005, you can withdraw them at any time after such date until we accept them for payment. You may not withdraw shares during any subsequent offering period. See Section 3 — “Withdrawal Rights” of this Offer to Purchase.

If a majority of the shares is tendered and accepted for payment, will D&K continue as a public company?

      If we merge with and into D&K, McKesson will own all of the outstanding capital stock of D&K and D&K no longer will be publicly owned. Even if the merger does not take place, if we purchase all the tendered shares, there may be so few remaining stockholders and publicly held shares that D&K’s common stock will no longer be eligible to be traded through the Nasdaq National Market or on a securities exchange, in which event there may not be a public trading market for D&K common stock and D&K may cease making filings with the United States Securities and Exchange Commission or otherwise being required to comply with United States Securities and Exchange Commission rules relating to publicly held companies. See Section 11 — “Purpose of the Offer; Plans for D&K” of this Offer to Purchase.

Will the offer be followed by the merger if all of the shares are not tendered in the offer?

      If we accept for payment and pay for tendered shares of D&K, we will be obliged to merge with and into D&K subject to the terms and conditions of the merger agreement and upon the vote of D&K’s stockholders, if such vote is required. D&K will be the surviving corporation in the merger and will become a wholly owned subsidiary of McKesson. In the merger, D&K stockholders who did not tender their shares in the offer will receive $14.50 per share in cash (or any higher price per share which is paid in our offer), without any interest and less any required withholding taxes, in exchange for their shares. If shares tendered in the offer constitute more than 90% of the outstanding shares of D&K’s common stock, we may be able to effect the merger without convening a meeting of stockholders. Pursuant to the stockholder support agreement described above, all of the shares of common stock owned by the D&K directors and officers party thereto (other than shares of restricted stock) are required to be tendered into the offer. There are no appraisal rights available in connection with our offer, but stockholders who have not sold their shares in the offer would have appraisal rights available in connection with the merger under Delaware law if those rights are perfected.

      See “Introduction” and Section 11 — “Purpose of the Offer; Plans for D&K” of this Offer to Purchase.

If I do not tender but the offer is successful, what will happen to my shares?

      If you do not tender your shares in the offer and we merge with D&K, your shares will be cancelled. Unless you properly exercise appraisal rights under Delaware law, you will receive the same amount of cash per share, without interest and less any required withholding taxes, that you would have received had you tendered your shares in the offer. Therefore, if the merger takes place, the only difference to you between tendering your shares and not tendering your shares is that you will be paid earlier if you tender your shares and that, in connection with the merger, you may have appraisal rights under Delaware law.

      If the merger does not take place after the offer is completed, however, the number of stockholders and number of shares of D&K common stock which are still in the hands of the public may be so small that there no longer may be an active public trading market (or, possibly, any public trading market) for D&K common stock. Also, D&K may cease making filings with the United States Securities and

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Exchange Commission or otherwise being required to comply with the United States Securities and Exchange Commission rules relating to publicly held companies. See Section 7  — “Effect of the Offer on the Market for the Shares; Nasdaq Quotation; Exchange Act Registration; Margin Regulations” and Section 11 — “Purpose of the Offer; Plans for D&K” of this Offer to Purchase.

What are the United States federal income tax consequences of the transaction?

      The receipt of cash by you in exchange for your shares pursuant to the offer, or the conversion of shares into cash pursuant to the merger, is a taxable transaction for United States federal income tax purposes and may also be a taxable transaction under applicable state, local, or foreign tax laws. You are urged to consult your tax advisor about the particular tax consequences to you of exchanging your shares for cash pursuant to the offer, or the conversion of shares into cash pursuant to the merger. See Section 5 — “Certain United States Federal Income Tax Consequences” of this Offer to Purchase.

Are appraisal rights available in the offer?

      There are no appraisal rights or dissenters’ rights in the offer. If you so choose, you are, however, entitled to exercise appraisal rights in the merger so long as you do not tender your shares in the offer or vote your shares in favor of the merger and so long as you take all other steps required to perfect your appraisal rights. See Section 16 — “Certain Legal Matters; Required Regulatory Approvals” and Annex I of this Offer to Purchase.

What is the market value of my shares as of a recent date?

      On July 8, 2005, the last full trading day before public announcement of the merger agreement, the last reported sales price of the D&K common stock reported on the Nasdaq National Market was $8.50 per share. On July 21, 2005, the last full trading day before commencement of the offer, the last reported sales price of D&K common stock reported on the Nasdaq National Market was $14.31 per share. We encourage you to obtain a recent quotation for your shares of common stock prior to deciding whether or not to tender your shares. See Section 6 — “Price Range of the Shares; Dividends” of this Offer to Purchase.

Whom can I call with questions about the offer?

      You can call Georgeson Shareholder, the information agent for our offer, at (866) 391-6922, with any questions. See the back cover of this Offer to Purchase for additional information on how to contact our information agent.

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To the Holders of Common Stock of

D&K Healthcare Resources, Inc.

INTRODUCTION

      Spirit Acquisition Corporation, a Delaware corporation (“Purchaser”) and a wholly owned subsidiary of McKesson Corporation, a Delaware corporation (“Parent”), hereby offers to purchase all of the outstanding shares of common stock, par value $0.01 per share (the “Common Stock”), of D & K Healthcare Resources, Inc., a Delaware corporation (“D&K”), including the associated preferred stock purchase rights and other rights (the “Rights” and, together with the Common Stock, the “Shares”) issued pursuant to the Rights Agreement, dated as of November 12, 1998, between D&K and Harris Trust and Savings Bank (the “Rights Agreement”), at a purchase price of $14.50 per Share (the “Offer Price”), net to the seller in cash, without interest thereon and less any required withholding taxes, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the “Offer”).

      The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of July 8, 2005 (the “Merger Agreement”), by and among Parent, Purchaser and D&K. The Merger Agreement provides, among other things, for the commencement of the Offer by Purchaser. Following consummation of the Offer and subject to the satisfaction or waiver of certain conditions, Purchaser will be merged with and into D&K (the “Merger”), with the surviving corporation (the “Surviving Corporation”) becoming a wholly owned subsidiary of Parent. In the Merger, each outstanding Share (other than Shares held by stockholders of D&K who have properly exercised their appraisal rights under Delaware law, Shares held by D&K or any subsidiary of D&K and Shares held by Parent or any subsidiary of Parent) will be converted at the effective time of the Merger (the “Effective Time”) into the right to receive the Offer Price, in cash, without interest thereon and less any required withholding taxes (the “Merger Consideration”).

      The Merger Agreement is more fully described in Section 12 — “The Merger Agreement, Stockholder Agreement and Other Relevant Agreements” of this Offer to Purchase.

      The board of directors of D&K (the “D&K Board”), by unanimous vote of all directors with one director, who is an officer of D&K’s financial advisor, abstaining, (1) has determined that the terms of the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are advisable and fair to, and in the best interests of, D&K and its stockholders (the “Stockholders”), (2) has approved the Merger Agreement and the transactions contemplated thereby, including the Stockholder Support Agreement (as defined herein), the Offer and the Merger and (3) recommends that the Stockholders accept the Offer and tender their shares to Purchaser in the Offer.

      Citigroup Global Markets Inc. (“Citigroup”), D&K’s financial advisor, has delivered to the D&K Board its written opinion, dated July 8, 2005, to the effect that, as of that date, the Offer Price to be received by the Stockholders in the Offer and the Merger was fair, from a financial point of view, to the Stockholders (other than Parent and its affiliates). The full text of Citigroup’s written opinion, which describes the assumptions made, matters considered and limitations on the review undertaken, is included as an exhibit to D&K’s Solicitation/ Recommendation Statement on Schedule 14D-9 (the “Schedule 14D-9”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which is being mailed to Stockholders with this Offer to Purchase. Stockholders are urged to read the Schedule 14D-9 and the opinion carefully in their entirety.

      The Offer is conditioned upon, among other things, (i) there being validly tendered and not properly withdrawn prior to the Expiration Date (as defined in Section 1 — “Terms of the Offer; Expiration Date” of this Offer to Purchase) that number of Shares which represents at least a majority of the then outstanding Common Stock of D&K, determined on an as-if-converted basis (the “Minimum Condition”)

and (ii) the expiration or termination of any waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (the “Antitrust Condition”). The Offer is also subject to certain other terms and conditions. See Sections 1 — “Terms of the Offer; Expiration Date”, 15 — “Certain Conditions of the Offer” and 16 — “Certain Legal Matters; Required Regulatory Approvals” of this Offer to Purchase. For purposes of this Offer, “on an as-if converted basis” means, as of any date, the number of shares of Common Stock issued and outstanding, together with shares of Common Stock issuable by D&K upon the conversion of any convertible securities or upon the exercise of any options, warrants or rights (other than the Rights) outstanding at that date, whether or not vested or then exercisable.

      D&K has informed Purchaser and has stated in the Schedule 14D-9 that, as of July 20, 2005, there were: (i) 14,260,856 shares of Common Stock issued and outstanding (of which 297,970 shares of Common Stock are subject to outstanding restricted stock agreements) and 1,249,300 shares of Common Stock held in treasury; and (ii) outstanding options to purchase an aggregate of 1,510,666 shares of Common Stock under D&K’s stock option plans and option agreements. Based on the foregoing, and assuming that no shares of Common Stock were issued by D&K after July 8, 2005, the Minimum Condition will be satisfied if at least 7,261,112 Shares are validly tendered and not properly withdrawn prior to the expiration of the Offer. If the Minimum Condition is satisfied and Purchaser accepts for payment the Shares tendered pursuant to the Offer, Purchaser will be able to elect a majority of the members of the D&K Board and to effect the Merger without the affirmative vote of any other Stockholder. See Section 11 — “Purpose of the Offer; Plans for D&K” and Section 12 — “The Merger Agreement, Stockholder Agreement and Other Relevant Agreements” of this Offer to Purchase.

      As a condition and inducement to Parent’s and Purchaser’s entering into the Merger Agreement, all of the executive officers and directors of D&K other than one of D&K’s directors who is also an officer of D&K’s financial advisor (each, a “Supporting Stockholder”), including Mr. J. Hord Armstrong, III, Chairman of the D&K Board and Chief Executive Officer of D&K, and Mr. Martin Wilson, President, Chief Operating Officer of D&K and member of the D&K Board of D&K and Mr. Harvey Jewett, member of the D&K Board, who, in the aggregate, hold approximately 8.4% of the issued and outstanding shares of Common Stock, entered into a Stockholder Support Agreement, dated as of July 8, 2005 (the “Stockholder Agreement”). Pursuant to the Stockholder Agreement, each Supporting Stockholder has agreed, among other things, to tender all of his Shares (other than Shares of restricted stock) in the Offer, to vote his Shares in favor of the Merger and the Merger Agreement and to appoint Parent or a designee of Parent as the Supporting Stockholders’ proxy to vote such Shares in certain circumstances. See Section 12 — “The Merger Agreement, Stockholder Agreement and Other Relevant Agreement” of this Offer to Purchase.

      The Schedule 14D-9 indicates that, to the best of D&K’s knowledge, all of D&K’s executive officers and the members of the D&K Board who own Shares presently intend, subject to compliance with applicable law including Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to tender all of their Shares (other than Shares of restricted stock) in the Offer.

      The consummation of the Merger is subject to the satisfaction or waiver of a number of conditions, including, if required, the approval and adoption of the Merger Agreement by the requisite vote or consent of the holders of Shares. Under the Delaware General Corporation Law (the “DGCL”) and D&K’s Certificate of Incorporation, the affirmative vote of the holders of at least a majority of the outstanding shares of Common Stock is required to approve and adopt the Merger Agreement. If Purchaser acquires at least 90% of the outstanding Shares pursuant to the Offer or otherwise, Purchaser would be able to consummate the Merger pursuant to the “short-form” merger provisions of Section 253 of the DGCL, without any action by any other Stockholder. In such event, Purchaser intends to effect the Merger as promptly as practicable following the final purchase of Shares in the Offer. See Section 11 — “Purpose of the Offer; Plans for D&K” of this Offer to Purchase.

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      Tendering Stockholders whose Shares are registered in their own name and who tender their shares directly to the Depositary (as defined herein) will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the sale of Shares pursuant to the Offer. Stockholders who have Shares registered in the name of their broker or bank should consult with such nominee to determine if any fees may apply. Purchaser will pay all charges and expenses of The Bank of New York, as Depositary (the “Depositary”), and Georgeson Shareholder, as Information Agent (the “Information Agent”), incurred in connection with the Offer. See Section 17 — “Certain Fees and Expenses” of this Offer to Purchase.

      Certain U.S. federal income tax consequences of the sale of Shares pursuant to the Offer and the exchange of Shares for the Merger Consideration pursuant to the Merger are described in Section 5 — “Certain U.S. Federal Income Tax Consequences” of this Offer to Purchase.

      THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ CAREFULLY IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.

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THE TENDER OFFER

1. Terms of the Offer; Expiration Date.

      Upon the terms and subject to the satisfaction or waiver of the conditions of the Offer prior to the Expiration Date (including, if the Offer is extended or amended as required or permitted by the Merger Agreement, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and thereby purchase all Shares validly tendered, and not properly withdrawn, in accordance with the procedures described in Section 2 — “Procedures for Tendering Shares” of this Offer to Purchase, on or prior to the Expiration Date. The term “Expiration Date” means 12:00 midnight, New York City time, on Thursday, August 18, 2005, unless and until Purchaser, in accordance with the Merger Agreement and the terms of this Offer, extends the period of time for which the Offer is open, in which event the term “Expiration Date” means the time and date at which the Offer, as so extended by Purchaser, will expire.

      Purchaser may extend the Offer at any time, and from time to time, beyond the Expiration Date with D&K’s prior written consent. In addition, Purchaser may extend the Offer at any time, and from time to time, beyond the Expiration Date without D&K’s consent if, at such Expiration Date, all of the conditions to the Offer described in Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase have not been satisfied or waived or if required by the United States Securities and Exchange Commission (the “Commission”). Purchaser also will, as required by the Merger Agreement, extend the Offer at any time, and from time to time, beyond the Expiration Date if, at such Expiration Date, the sole condition or conditions to the Offer described in Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase that have not been satisfied or waived are (1) the Antitrust Condition and/or (2) the Inventory Verification Condition. Notwithstanding the foregoing, Purchaser will not be required under the terms of the Merger Agreement to extend the Offer beyond January 8, 2006 (the “Outside Date”).

      The Offer is conditioned upon, among other things, satisfaction of the Minimum Condition, the Antitrust Condition and the Inventory Verification Condition. The Offer is also subject to certain other conditions set forth in Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase. As provided in the Merger Agreement, without the consent of D&K, Purchaser will not decrease the Offer Price or the number of Shares sought in the Offer, impose conditions to the Offer in addition to those specified in Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase or amend any other term of the Offer in any manner disadvantageous to the Stockholders.

      Subject to the applicable regulations of the Commission and the terms of the Merger Agreement, Purchaser expressly reserves the right, at any time or from time to time, to (i) delay acceptance for payment of, or payment for, Shares, regardless of whether Shares were previously accepted for payment, pending receipt of any regulatory or governmental approvals specified in Section 16 — “Certain Legal Matters; Required Regulatory Approvals” of this Offer to Purchase, (ii) terminate the Offer (whether or not any Shares have previously been accepted for payment) if any of the conditions set out in Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase remain unsatisfied by the Expiration Date and (iii) waive any condition or otherwise amend the Offer in any respect, in each case, by giving oral or written notice of the delay, termination, waiver or amendment to the Depositary.

      If Purchaser extends the Offer, is delayed in its purchase of or payment for Shares (whether before or after its acceptance of Shares for payment) or is unable to purchase or pay for Shares for any reason, then, without prejudice to the rights of Purchaser under the Offer, the Depositary may retain tendered Shares on behalf of Purchaser and such Shares may not be withdrawn, except to the extent that tendering Stockholders are entitled to withdrawal rights as set forth in Section 3 — “Withdrawal Rights” of this Offer to Purchase. The ability of Purchaser to delay the payment for Shares that Purchaser has accepted for payment is limited, however, by Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the shares deposited by or on behalf of stockholders promptly after the termination or withdrawal of such bidder’s offer. If a bidder elects to offer a subsequent offering period (a “Subsequent Offering Period”) under Rule 14d-11 under the Exchange Act the bidder must pay for shares tendered in accordance with that rule.

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      Pursuant to Rule 14d-11 under the Exchange Act, Purchaser may, subject to certain conditions, provide a Subsequent Offering Period following the expiration of the Offer on the Expiration Date. Rule 14d-11 provides that Purchaser may include a Subsequent Offering Period so long as, among other things:

(i)	the Offer was open for at least 20 business days and has expired,
(ii)	the Offer is for all outstanding Shares,
(iii)	Purchaser accepts and promptly pays for all Shares tendered during the Offer,
(iv)	Purchaser announces the results of the Offer, including the approximate number and percentage of Shares tendered, no later than 9:00 a.m. New York City time on the next business day after the Expiration Date and immediately begins the Subsequent Offering Period,
(v)	Purchaser immediately accepts and promptly pays for Shares as they are tendered during the Subsequent Offering Period and
(vi)	Purchaser pays the same form and amount of consideration for all Shares tendered during the Subsequent Offering Period.

D&K has agreed in the Merger Agreement (to the extent permitted under Rule 14d-11 of the Exchange Act) that Purchaser may, in its sole discretion, provide a Subsequent Offering Period. A Subsequent Offering Period, if one is included, is not an extension of the Offer. A Subsequent Offering Period would be an additional period of time, following the expiration of the Offer, in which Stockholders may tender Shares not tendered during the Offer. Pursuant to Rule 14d-7 under the Exchange Act, no withdrawal rights will apply to Shares tendered into a Subsequent Offering Period and no withdrawal rights apply during the Subsequent Offering Period with respect to Shares tendered in the Offer and accepted for payment. The same consideration, the Offer Price, will be paid to Stockholders tendering Shares in the Offer or in a Subsequent Offering Period, if applicable. Purchaser does not currently intend to provide a Subsequent Offering Period, although it reserves the right to do so in its own discretion.

      Under no circumstances will interest be paid on the Offer Price for tendered Shares, regardless of any extension or amendment to the Offer or any delay in paying for the Shares.

      Any extension, delay, termination or amendment of the Offer or commencement or extension of a Subsequent Offering Period will be followed as promptly as practicable by public announcement thereof, and such announcement in the case of an extension of the Offer, or commencement or extension of a Subsequent Offering Period, will be made no later than 9:00 a.m. New York City time on the next business day after the previously scheduled Expiration Date.

      If Purchaser makes a material change in the terms of the Offer or waives a material condition to the Offer, Purchaser will extend the Offer and disseminate additional Offer materials to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of an offer, other than a change in price or a change in percentage of securities sought or the provision for a soliciting dealer’s fee, will depend upon the facts and circumstances, including the materiality, of the changes. In the Commission’s view, an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to Stockholders, and, if material changes are made with respect to information that approaches the significance of price and the percentage of securities sought, a minimum of ten business days may be required to allow for adequate dissemination of information and investor response. The requirements to extend an offer will not apply to the extent that the number of business days remaining between the occurrence of the change and the then scheduled Expiration Date equals or exceeds the minimum extension period that would be required because of such change. For the purposes of the Offer, a “business day” means any day other than a Saturday or Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, eastern standard time.

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      In accordance with the Merger Agreement, D&K has furnished Purchaser with a list of its Stockholders, mailing labels and any available listing or computer file containing the names and addresses of all of the record holders of the Shares and lists of securities positions of Shares held in stock depositaries, in each case true and correct as of the most recent practicable date for the purpose of disseminating the Offer to holders of Shares. D&K has also agreed to provide Purchaser such additional information (including updated lists of Stockholders, mailing labels and securities positions) and such other assistance as Purchaser may reasonably request in connection with the Offer.

      This Offer to Purchase and the related Letter of Transmittal and, if required, other relevant materials will be mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of Shares.

2. Procedures for Tendering Shares.

      Valid Tender of Shares. Except as set forth below, in order for Shares to be validly tendered pursuant to the Offer, either (i) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or (ii) an Agent’s Message (as defined herein) in connection with a book-entry delivery of Shares, and any documents required by the Letter of Transmittal and any other required documents, must be received by the Depositary at one of its addresses specified on the back cover of this Offer to Purchase on or prior to the Expiration Date and either (a) share certificates for such Shares (“Share Certificates”) representing tendered Shares must be received by the Depositary or (b) confirmation of the book-entry transfer of such Shares pursuant to the procedures set forth for book-entry transfer (“Book-Entry Confirmation”) must be received by the Depositary, in each case, on or prior to the Expiration Date or (ii) the guaranteed delivery procedures described below must be complied with by the tendering Stockholder.

      The term “Agent’s Message” means a message transmitted by the Book-Entry Transfer Facility (as defined below) to, and received by, the Depositary and forming a part of the Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares which are the subject of the Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant.

      Book-Entry Transfer. The Depositary will make a request to establish accounts with respect to the Shares at The Depository Trust Company (the “Book-Entry Transfer Facility”) for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make a book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary’s account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility’s procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary’s account at the Book-Entry Transfer Facility, the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent’s Message in connection with a book-entry transfer, and any other required documents must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, or the tendering Stockholder must comply with the guaranteed delivery procedure described below.

      Signature Guarantees. Except as otherwise provided below, signatures on all Letters of Transmittal must be guaranteed by a firm that is a bank, broker, dealer, credit union, savings association or other entity and a member in good standing of a Medallion Program approved by the Securities Transfer Association, Inc. or any other “eligible guarantor institution” (as such term is defined in Rule 17Ad-15 under the Exchange Act (each an “Eligible Institution”)), unless the Shares tendered thereby are tendered (i) by a registered holder of Shares who has not completed either the box labeled “Special

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Payment Instructions” or the box labeled “Special Delivery Instructions” on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instruction 1 of the Letter of Transmittal.

      If the Share Certificates are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made to, or Share Certificates for unpurchased Shares are to be issued to, a person other than the registered holder, then the tendered Share Certificates must be properly endorsed or otherwise be in proper form for transfer, the signatures on the Share Certificates must be accompanied by appropriate stock powers, signed exactly as the name or names of the registered holder or holders appear on the Share Certificates, with the signatures on the Share Certificates or stock powers guaranteed by an Eligible Institution as provided in the Letter of Transmittal. The person surrendering the Shares must pay to the Depositary any transfer or other taxes required by reason of payment of the Offer Price to a person other than the registered holder of the Share Certificates surrendered or must establish to the satisfaction of the Depositary that such taxes have been paid or are not applicable. See Instructions 1 and 6 of the Letter of Transmittal.

      If the Share Certificates are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) must accompany each such delivery.

      Guaranteed Delivery. If a Stockholder desires to tender Shares pursuant to the Offer and such Stockholder’s Share Certificates are not immediately available or such Stockholder cannot deliver the Share Certificates and all other required documents to the Depositary on or prior to the Expiration Date, or such Stockholder cannot complete the procedures for book-entry transfer on a timely basis, such Shares may still be tendered if all of the following guaranteed delivery procedures are satisfied:

      (i) such tender is made by or through an Eligible Institution;

      (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser with this Offer to Purchase, is received by the Depositary, as provided below, on or prior to the Expiration Date; and

      (iii) the Share Certificates (or a Book-Entry Confirmation) representing all tendered Shares, in proper form for transfer together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message) and any other documents required by the Letter of Transmittal are received by the Depositary, within three Nasdaq National Market (the “Nasdaq”) trading days after the date of execution of such Notice of Guaranteed Delivery. A “Nasdaq trading day” is any day on which the National Association of Securities Dealers Automated Quotation System is open for business.

      The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery made available by Purchaser.

      Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of Share Certificates for, or of Book-Entry Confirmation with respect to, such Shares, a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message), and any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering Stockholders at the same time, and will depend upon when Share Certificates are received by the Depositary or Book-Entry Confirmations of such Shares are received into the Depositary’s account at the Book-Entry Transfer Facility.

      The method of delivery of Share Certificates, the Letter of Transmittal, the Notice of Guaranteed Delivery (if applicable) and all other required documents and instruments, including delivery through the book-entry transfer facility, is at the election and sole risk of the tendering Stockholder. The Shares will be deemed delivered only when actually received by the Depositary (including, in the case of a book-entry

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transfer, by Book-Entry Confirmation). If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. Delivery of documents to the book-entry transfer facility in accordance with the book-entry transfer facility’s procedures does not constitute delivery to the Depositary.

      Backup Withholding. Under U.S. federal income tax law, the Depositary may be required to withhold 30% of any payments made to certain Stockholders pursuant to the Offer or the Merger, or in a Subsequent Offering Period (if one is included). To prevent backup federal income tax withholding on payments made to certain Stockholders with respect to the purchase price of Shares purchased pursuant to the Offer, or in a Subsequent Offering Period (if one is included), or converted into cash pursuant to the Merger, each such Stockholder must provide the Depositary with his correct taxpayer identification number and certify, under penalty of perjury, that such taxpayer identification number is correct and that he is not subject to backup federal income tax withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. A Stockholder that does not provide a correct taxpayer identification number may be subject to penalties imposed by the Internal Revenue Service. Certain Stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. Exempt Stockholders that are not foreign persons should indicate their exempt status on Substitute Form W-9. Foreign Stockholders should complete and sign an Internal Revenue Service Form W-8BEN (a copy of which may be obtained from the Depositary) in order to avoid backup withholding. Any amounts withheld generally will be allowed as a credit against the Stockholder’s U.S. federal income tax liability for the year. See Instruction 9 of the Letter of Transmittal.

      Appointment as Proxy. By executing the Letter of Transmittal (or a facsimile thereof) or, in the case of a book entry transfer, an Agent’s Message in lieu of a Letter of Transmittal), a tendering Stockholder irrevocably appoints designees of Purchaser, and each of them, as such Stockholder’s attorneys-in-fact and proxies, with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such Stockholder’s rights with respect to the Shares tendered by such Stockholder and accepted for payment by Purchaser and with respect to any and all other Shares and other securities or rights issued or issuable in respect of such Shares on or after the date of this Offer to Purchase. All such powers of attorney and proxies will be considered irrevocable and coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon payment by Purchaser for the Shares, all powers of attorney and proxies given by such Stockholder with respect to such Shares and such other securities or rights prior to such payment will be revoked, without further action, and no subsequent powers of attorney and proxies may be given by such Stockholder (and, if given, will not be deemed effective). The designees of Purchaser will, with respect to the Shares for which such appointment is effective, be empowered to exercise all voting and other rights of such Stockholder as they in their sole discretion may deem proper at any annual or special meeting of the Stockholders, or any adjournment or postponement thereof, or otherwise in such manner as they in their sole discretion may deem proper with respect to any written consent. Purchaser reserves the absolute right to require that, in order for Shares to be deemed validly tendered, immediately upon the payment for such Shares, Purchaser or its designee must be able to exercise full voting, consent and other rights with respect to such Shares and other securities, including voting at any meeting of the Stockholders. The Offer does not constitute a solicitation of proxies, absent a purchase of Shares, for any meeting of Stockholders.

      Determination of Validity. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser, in its sole discretion, whose determination will be final and binding on all parties. Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance of or payment for which may, in the opinion of Purchaser’s counsel, be unlawful. Purchaser also reserves the absolute right (subject to the provisions of the Merger Agreement) to waive any of the conditions of the Offer or any defect or irregularity in any tender of Shares of any particular Stockholder whether or not similar defects or irregularities are waived in the case of other Stockholders.

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      Purchaser’s interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. No tender of Shares will be deemed to have been validly made until all defects and irregularities with respect to such tender have been cured or waived. None of Purchaser, Parent or any of their affiliates or assigns, if any, the Depositary or, the Information Agent or any other person will be under any duty to give any notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification.

      Purchaser’s acceptance for payment of Shares tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering Stockholder and Purchaser upon the terms and subject to the conditions of the Offer.

3. Withdrawal Rights.

      Except as otherwise provided in this Section 3 — “Withdrawal Rights” of this Offer to Purchase, tenders of Shares are irrevocable. Shares tendered in the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofor accepted for payment and paid for pursuant to the Offer, may also be withdrawn at any time after September 19, 2005.

      If Purchaser extends the Offer or, for any reason whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or Purchaser is unable to accept for payment or pay for Shares tendered pursuant to the Offer, then, without prejudice to Purchaser’s rights set forth herein, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares and such Shares may not be withdrawn except to the extent that the tendering Stockholder is entitled to and duly exercises withdrawal rights as described in this Section 3 — “Withdrawal Rights” of this Offer to Purchase. Any such delay will be by an extension of the Offer to the extent required by law.

      For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name, address and taxpayer identification number of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn, and (if Share Certificates have been tendered) the name of the registered holder of the Shares as set forth in the Share Certificate, if different from that of the person who tendered such Shares. If Share Certificates have been delivered or otherwise identified to the Depositary, then prior to the physical release of such Share Certificates, the tendering Stockholder must also submit the serial numbers shown on the particular Share Certificates evidencing the Shares to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Shares tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer described in Section 2 — “Procedures for Tendering Shares” of this Offer to Purchase, the notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the first sentence of this paragraph. Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be retendered at any subsequent time on or prior to the Expiration Date by following any of the procedures described in Section 2 — “Procedures for Tendering Shares” of this Offer to Purchase.

      No withdrawal rights will apply to Shares tendered during a Subsequent Offering Period and no withdrawal rights apply during the Subsequent Offering Period with respect to Shares tendered in the Offer and accepted for payment. See Section 1 — “Terms of the Offer; Expiration Date” of this Offer to Purchase.

      All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. None of Purchaser, Parent nor any of their affiliates or assigns, if any, the Depositary, the Information Agent nor any other person will be under any duty to give any notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification.

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      The method for delivery of any documents related to a withdrawal is at the election and sole risk of the withdrawing Stockholder. Any documents related to a withdrawal will be deemed delivered only when actually received by the Depositary. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. Delivery of documents to a book-entry transfer facility in accordance with the Book-Entry Transfer Facility’s procedures does not constitute delivery to the Depositary.

4. Acceptance for Payment and Payment for Shares.

      Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended in accordance with the Merger Agreement, the terms and conditions of the Offer as so extended or amended), Purchaser will accept for payment (and thereby purchase), and pay for, all Shares validly tendered and not properly withdrawn (as permitted by Section 3 — “Withdrawal Rights” of this Offer to Purchase) prior to the Expiration Date, promptly after the Expiration Date, if the conditions to the Offer described in Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase have each been satisfied or waived. If Purchaser includes a Subsequent Offering Period, Purchaser will immediately accept and promptly pay for Shares as they are tendered during the Subsequent Offering Period. In addition, subject to applicable rules of the Commission, Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Shares pending receipt of any regulatory or governmental approvals specified in Section 16 — “Certain Legal Matters; Required Regulatory Approvals” of this Offer to Purchase.

      In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) Share Certificates for such Shares or confirmation of the book-entry transfer of such Shares into the Depositary’s account at the Book-Entry Transfer Facility, pursuant to the procedures described in Section 2 — “Procedures for Tendering Shares” of this Offer to Purchase hereof, (ii) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent’s Message (as defined in Section 2 — “Procedures for Tendering Shares” of this Offer to Purchase) in connection with a book-entry transfer and (iii) any other required documents.

      For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn if, as and when Purchaser gives oral or written notice to the Depositary of Purchaser’s acceptance of such Shares for payment pursuant to the Offer. In all cases, upon the terms and subject to the conditions of the Offer, payment for Shares purchased in the Offer and any Subsequent Offering Period will be made by deposit of the Offer Price therefor with the Depositary, which will act as agent for tendering Stockholders for the purpose of receiving payment from Purchaser and transmitting such payment to Stockholders who validly tender their shares.

      If Purchaser is delayed in its acceptance for payment of, or payment for, Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser’s rights under the Offer (including such rights as are set forth in Section 1 — “Terms of the Offer; Expiration Date” and Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase) (but subject to compliance with Rule 14e-1(c) under the Exchange Act), the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 3 — “Withdrawal Rights” of this Offer to Purchase. Under no circumstances will interest be paid on the Offer Price regardless of any extension of the Offer or delay in making such payment.

      If any tendered Shares are not purchased pursuant to the Offer for any reason, or if Share Certificates are submitted representing more Shares than are tendered, Share Certificates representing unpurchased or untendered Shares will be returned, without expense to the tendering Stockholder (or, in the case of Shares delivered by book-entry transfer into the Depositary’s account at the Book-Entry Transfer Facility pursuant to the procedures described in Section 2  — “Procedures for Tendering Shares” of this Offer to

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Purchase, such Shares will be credited to an account maintained within the Book-Entry Transfer Facility), as promptly as practicable following the expiration, termination or withdrawal of the Offer.

      Purchaser reserves the right to transfer or assign, in whole or in part, to Parent or to any affiliate of Parent the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering Stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer.

      If, prior to the Expiration Date, Purchaser increases the consideration offered to holders of Shares pursuant to the Offer, such increased consideration will be paid to all holders of Shares that are purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in consideration.

5. Certain United States Federal Income Tax Consequences.

      The following is a summary of certain United States federal income tax consequences of the Offer and the Merger relevant to a Stockholder whose Shares are tendered and accepted for payment pursuant to the Offer or whose Shares are converted into cash in the Merger. The summary is based on United States federal income tax law as currently in effect which is subject to change or differing interpretations, possibly with retroactive effect. The summary is for general information only and does not purport to address all of the tax consequences that may be relevant to particular Stockholders in light of their personal circumstances. The summary is written for Stockholders who hold their Shares as capital assets and may not apply to Stockholders subject to special rules under the Internal Revenue Code, including, without limitation, persons who acquired their Shares pursuant to the exercise of employee stock options or other compensation arrangements, partnerships and their partners, insurance companies, tax-exempt organizations, dealers in securities, financial institutions, foreign persons, persons who hold the Shares as part of a straddle, hedge, conversion transaction or other integrated investment for United States federal income tax purposes or persons that have a functional currency other than the United States dollar. The summary does not address any state, local or foreign tax consequences of the Offer or the Merger. Stockholders are urged to consult their tax advisors about the particular tax consequences of exchanging Shares for cash pursuant to the Offer or the conversion of Shares into cash pursuant to the Merger.

      To ensure compliance with Treasury Department Circular 230, stockholders are hereby notified that: (a) any federal tax advice contained herein is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code; (b) the advice is written in connection with the promotion or marketing of the transaction or the matters addressed herein; and (c) stockholders should seek advice based on the stockholder’s particular circumstances from an independent tax advisor.

      The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for United States federal income tax purposes and may be a taxable transaction for state, local, and foreign tax purposes. In general, a Stockholder who sells Shares pursuant to the Offer or has Shares converted into cash pursuant to the Merger will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the amount of cash received and the Stockholder’s adjusted tax basis in the Shares sold pursuant to the Offer or converted into cash pursuant to the Merger. Gain or loss may be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) tendered pursuant to the Offer or converted into cash pursuant to the Merger. Such gain or loss generally will be long-term capital gain or loss if the Stockholder has held the Shares for more than one year. The deductibility of capital loss is subject to limitations.

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6. Price Range of the Shares; Dividends.

      The shares of Common Stock are traded on Nasdaq under the symbol “DKHR.” The following table sets forth, for each of the periods indicated, the high and low reported sales prices per share of Common Stock, on the Nasdaq based on published financial sources:

		High		Low
Fiscal 2004
	First Quarter	$	18.35	$	13.09
	Second Quarter	$	15.90	$	12.02
	Third Quarter	$	14.50	$	9.70
	Fourth Quarter	$	14.91	$	10.00
Fiscal 2005
	First Quarter	$	11.75	$	9.10
	Second Quarter	$	10.69	$	7.03
	Third Quarter	$	8.71	$	6.75
	Fourth Quarter	$	8.80	$	7.30
Fiscal 2006
	First Quarter (through July 21, 2005)	$	14.35	$	8.26

      D&K has paid the following dividends during the past two years:

Payment Date	Amount
March 14, 2003	$	0.015
June 13, 2003	$	0.015
September 18, 2003	$	0.015
December 17, 2003	$	0.015
March 17, 2004	$	0.015
June 16, 2004	$	0.015
September 15, 2004	$	0.015
December 15, 2004	$	0.015
March 16, 2005	$	0.015
June 9, 2005	$	0.015

      On July 8, 2005, the last full trading day before public announcement of the execution of the Merger Agreement, the last reported sales price of the shares of Common Stock reported on Nasdaq was $8.50 per Share. On July 21, 2005, the last full trading day before commencement of the Offer, the last reported sales price of the Shares reported on Nasdaq was $14.31 per Share. Stockholders are urged to obtain a current market quotation for the Shares.

      The Merger Agreement provides that, without the prior written consent of Parent, from the date of the Merger Agreement until the earlier to occur of the termination of the Merger Agreement or the Effective Time, D&K may not declare, set aside on pay dividends on or make any other distributions in respect of its capital stock except for cash dividends paid in amounts and at times consistent with past practice.

7. Effect of the Offer on the Market for the Shares; Nasdaq Quotation; Exchange Act Registration; Margin Regulations.

      Effect of the Offer on the Market for the Shares. The purchase of Shares by Purchaser in to the Offer will reduce the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares held by the public.

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      Nasdaq Quotation. The Shares are traded on Nasdaq. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of Nasdaq for continued listing and may, therefore, be delisted from that market. According to Nasdaq’s published guidelines, Nasdaq would consider delisting the Shares if, among other things, the number of publicly held Shares was less than 750,000, the aggregate market value of the publicly-held Shares was less than $5,000,000 or there were not at least two registered and active market makers. Shares held directly or indirectly by an executive officer or director of D&K or by a beneficial owner of more than 10% of the Shares will ordinarily not be considered as being publicly held for purposes of these standards. In the event that the Shares are no longer eligible for Nasdaq quotation, quotations may still be available from other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend on the number of holders of such Shares remaining at such time, the interest in maintaining a market in such Shares on the part of securities firms, the possible termination of registration of such Shares under the Exchange Act as described below and other factors. D&K has advised Purchaser that, as of July 8, 2005, there were 14,260,856 shares of Common Stock outstanding, 1,249,300 shares of Common Stock were held by D&K in its treasury and, as of July 20, 2005, there were 85 holders of record of shares of D&K Common Stock.

      If the Nasdaq and the NASDAQ Smallcap Market were to cease publication of quotations for shares of Common Stock, it is possible that shares of Common Stock would continue to trade in the over-the-counter market and that price or other quotations would be reported by other sources. The extent of the public market for such shares and the availability of such quotations would depend, however, upon such factors as the number of stockholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in shares of Common Stock on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors.

      Exchange Act Registration. The Shares are currently registered under the Exchange Act. The purchase of the Shares pursuant to the Offer may result in the Shares becoming eligible for deregistration under the Exchange Act. Registration of the Shares may be terminated upon application by D&K to the Commission if the Shares are not listed on a “national securities exchange” and there are fewer than 300 record holders of Shares. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by D&K to its Stockholders and the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirement of furnishing a proxy statement in connection with Stockholders’ meetings pursuant to Section 14(a) or 14(c) and the related requirement of an annual report, no longer applicable to the Shares. If the Shares are no longer registered under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect to “going private” transactions would no longer be applicable to D&K. Furthermore, the ability of “affiliates” of D&K and persons holding “restricted securities” of D&K to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, may be impaired or eliminated. If, as a result of the purchase of Shares pursuant to the Offer or the Merger, D&K is no longer required to maintain registration of the Shares under the Exchange Act, Parent intends to cause D&K to apply for termination of such registration. See Section 11 — “Purpose of the Offer; Plans for D&K” of this Offer to Purchase.

      Margin Regulations. The Shares are currently “margin securities” as such term is defined under the regulations of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such Shares for the purpose of buying, carrying or trading in securities (“Purpose Loans”). Depending upon factors such as the number of record holders of the Shares and the number and market value of publicly-held Shares, following the purchase of Shares pursuant to the Offer, the Shares might no longer constitute “margin securities” for purposes of the Federal Reserve Board’s margin regulations and, therefore, could no longer be used as collateral for Purpose Loans made by brokers. In addition, if registration of the Shares under the Exchange Act is terminated, the Shares will no longer constitute “margin securities” or be eligible for Nasdaq reporting.

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8. Certain Information Concerning D&K.

      General Information. D&K is a Delaware corporation with its principal executive offices located at 8235 Forsyth Boulevard, St. Louis, Missouri 63105. The telephone number of D&K at such offices is (314) 727-3485.

      Available Information. The Shares are registered under the Exchange Act. Accordingly, D&K is subject to the information and reporting requirements of the Exchange Act and is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Certain information, as of particular dates, concerning D&K’s business, principal physical properties, capital structure, material pending legal proceedings, operating results, financial condition, directors and officers (including their remuneration and stock options granted to them), the principal holders of D&K’s securities, any material interests of such persons in transactions with D&K and certain other matters is required to be disclosed in proxy statements and annual reports distributed to D&K’s stockholders and filed with the Commission. The Schedule 14D-9 as well as these other reports, proxy statements and other information, may be inspected at the Commission’s public reference library at 100 F Street, NE, Room 1580, Washington D.C. 20549. Copies of such information should be obtainable by mail, upon payment of the Commission’s customary charges, by writing to the Commission’s principal office at 100 F Street, NE, Room 1580, Washington D.C. 20549. The Commission also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information relating to D&K that have been filed via the EDGAR System.

      Although Parent and Purchaser have no knowledge, as of the date of this Offer to Purchase, that any such information is untrue, Parent and Purchaser take no responsibility for the accuracy or completeness of information concerning D&K, provided by D&K or contained in the documents and records referred to herein or for any failure by D&K to disclose events that may have occurred and may affect the significance or accuracy of any such information.

      Certain Projections. To the knowledge of Parent and the Purchaser, D&K does not as a matter of course make public forecasts as to its future financial performance. However, in connection with the discussions concerning the Offer and the Merger, D&K furnished Parent with projections for fiscal year 2006. D&K’s projections for fiscal year 2006 anticipated net sales of approximately $3,844 million, cost of sales of approximately $3,722 million, operating expenses of approximately $91 million and other expenses of approximately $18 million. Fiscal net earnings for 2006 were projected at approximately $7.6 million.

      The financial projections contained herein are based on numerous assumptions made by the management of D&K, including assumptions concerning sales volume, operating expenses, sale and lease of certain automated dispensing, units, interest rates, weighted average borrowings under D&K’s existing working capital credit facility and sales run rate and excludes the impact of expensing options under FAS 123R. These projections do not give effect to the Offer or the potential combined operations of Parent or any of its affiliates and D&K or any alterations that Parent or any of its affiliates may make to D&K’s operations or strategy after the consummation of the Offer. Accordingly, there can be no assurance that the assumptions made in preparing the projections will prove accurate or that any of the projections will be realized.

      Although Parent and Purchaser were provided with such projections, they did not base their analysis of D&K on such projections. The projections were not prepared with a view to public disclosure or compliance with the published guidelines of the Commission or the guidelines established by the American Institute of Certified Public Accountants regarding projections or forecasts. The projections do not purport to present operations in accordance with U.S. generally accepted accounting principles (“GAAP”), and D&K’s independent auditors have not examined, complied or otherwise applied procedures to the projections and, accordingly, assume no responsibility for them. D&K has advised Parent and the Purchaser that its internal financial forecasts (upon which the projections provided to Parent and the Purchaser were based in part) are, in general, prepared solely for internal use and capital budgeting and other management decisions and are subjective in many respects and thus susceptible to interpretations and periodic revision based on actual experience and business developments.

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      It is expected that there will be differences between actual and projected results, and actual results may be materially greater or less than those contained in the projections due to numerous risks and uncertainties, including, but not limited to changes in vendor supply chain management policies and the use of inventory management agreements in the pharmaceutical distribution industry; the loss of one or more of D&K’s customers or a significant decline in the level of purchases made by one or more of D&K’s customers; the loss of D&K’s prime vendor status with a cooperative purchasing group; D&K’s ability to obtain and maintain agreements with customers, suppliers and distributors; D&K’s ability to attract and retain qualified sales forces and other key personnel; the impact, if any, of war and terrorist activities on the operations and activities of D&K and third parties, including regulatory authorities; and the other risks and uncertainties described in reports filed by D&K with the Commission under the Exchange Act, including without limitation under the heading “Factors That May Impact Future Results” in D&K’s 2004 Annual Report on Form 10-K. All projections are forward-looking statements; these and other forward-looking statements are expressly qualified in their entirety by the risks and uncertainties identified above and the cautionary statements contained in D&K’s 2004 Annual Report on Form 10-K filed with the Commission.

      The inclusion of the projections herein should not be regarded as an indication that any of Parent, the Purchaser, D&K or their respective affiliates or representatives considered or consider the projections to be a reliable prediction of future events, and the projections should not be relied upon as such. None of Parent, the Purchaser, D&K or any of their respective affiliates or representatives has made or makes any representation to any person regarding the ultimate performance of D&K compared to the information contained in the projections, and none of them undertakes any obligation to update or otherwise revise the projections to reflect circumstances existing after the date such projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the projections are shown to be in error.

      Stockholders are cautioned not to place undue reliance on the financial projections included in this Offer to Purchase.

9. Certain Information Concerning Purchaser and Parent.

      General Information. Parent and Purchaser. Purchaser, a Delaware corporation and a wholly owned subsidiary of Parent, was organized to acquire all of the outstanding Shares pursuant to the Offer and has not conducted any activities other than in connection with the Offer and the Merger since its organization.

      McKesson Corporation, a Delaware corporation, has its principal executive offices located at One Post Street, San Francisco, California 94104, Telephone (415) 983-8300. McKesson is a healthcare services and information technology company that provides supply, information and care management products and services designed to reduce costs and improve quality across the healthcare industry.

      The name, citizenship, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of each of Parent and Purchaser are set forth in Schedule I hereto.

      Pursuant to the Stockholder Agreement, Parent and Purchaser may be deemed to beneficially own 1,192,316 shares of Common Stock constituting approximately 8.4% of the total outstanding Common Stock. See Section 12 — “The Merger Agreement, Stockholder Agreement and Other Relevant Agreements” in this Offer to Purchase.

      Except as described in this Offer to Purchase, (i) none of Parent, Purchaser, or, to the best knowledge of the foregoing, any associate or majority-owned subsidiary of the foregoing, or any of the persons listed in Schedule I hereto or any associate or majority-owned subsidiary of any such person, beneficially owns or has a right to acquire any equity security of D&K and (ii) none of Parent, Purchaser, or, to the best knowledge of the foregoing, any of the other persons referred to above, or any of the

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respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of D&K during the past 60 days.

      Except as set forth in this Offer to Purchase, none of Parent, Purchaser or, to the best knowledge of each of the foregoing, any of the persons listed in Schedule I hereto, on the one hand, has had any business relationship or transaction with D&K or any of its directors, executive officers or affiliates, on the other hand, that is required to be disclosed pursuant to the rules and regulations of the Commission.

      Except as set forth in this Offer to Purchase, there have been no negotiations, transactions, or material contacts, between Parent, Purchaser or any of their respective subsidiaries or, to the best knowledge of each of the foregoing, any of the persons listed on Schedule I hereto, on the one hand, and D&K or any of its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets.

      None of Parent, Purchaser or, to the best knowledge of each of the foregoing, any of the persons listed in Schedule I hereto, has been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors). None of Parent, Purchaser or, to the best knowledge of each of the foregoing, any of the persons listed in Schedule I has, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

      Transactions with D&K. McKesson Health Systems, a division of Parent, and D&K’s subsidiary Pharmaceutical Buyers, Inc. (“PBI”) are parties to a prime vendor supply agreement dated as of July 1, 2002, under which McKesson Health Systems acts as a prime vendor of pharmaceutical products of PBI’s participating member facilities. The agreement has a term of five years. Parent’s subsidiary, McKesson Medical-Surgical Minnesota Supply, Inc. (“McKesson Minnesota”) also has an agreement to supply medical supplies to members of PBI. Under these arrangements, McKesson Health Systems or McKesson Minnesota provides pricing to PBI member facilities on a cost-plus basis depending on purchase volume, and PBI receives a quarterly rebate or administrative fee based upon sales volume to its member facilities.

      Available Information. Pursuant to Rule 14d-3 under the Exchange Act, Parent and the Purchaser filed with the Commission a Tender Offer Statement on Schedule TO (the “Schedule TO”), of which this Offer to Purchase forms a part, and exhibits to the Schedule TO.

      Additionally, Parent is subject to the information and reporting requirements of the Exchange Act and is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Certain information, as of particular dates, concerning Parent’s business, principal physical properties, capital structure, material pending legal proceedings, operating results, financial condition, directors and officers (including their remuneration and stock options granted to them), the principal holders of Parent’s securities, any material interests of such persons in transactions with Parent and certain other matters is required to be disclosed in proxy statements and annual reports distributed to Parent’s stockholders and filed with the Commission. The Schedule TO and the exhibits thereto, as well as these other reports, proxy statements and other information, may be inspected at the Commission’s public reference library at 100 F Street, NE, Room 1580, Washington D.C. 20549. Copies of such information should be obtainable by mail, upon payment of the Commission’s customary charges, by writing to the Commission’s principal office at 100 F Street, NE, Room 1580, Washington D.C. 20549. The Commission also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information relating to Parent that have been filed via the EDGAR System.

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10. Background of the Offer; Contacts with D&K.

      The following information was prepared by Parent, Purchaser and D&K. Information about D&K was provided by D&K, and neither of Parent nor Purchaser takes any responsibility for the accuracy or completeness of any information regarding meetings or discussions in which Parent, Purchaser or their respective representatives did not participate.

      In late February of 2005, Paul Julian, Executive Vice President and Group President of Parent phoned Martin D. Wilson, D&K’s President and Chief Operating Officer and informed him that Parent had a potential interest in acquiring D&K. Mr. Wilson replied that he would broach the idea with J. Hord Armstrong, III, Chairman of the D&K Board and D&K’s Chief Executive Officer and facilitate a meeting with Mr. Armstrong and a representative of Parent.

      On March 24, 2005, Mr. Julian and Marc Owen, Executive Vice President, Corporate Strategy and Business Development of Parent met with Mr. Armstrong and Mr. Wilson. In the meeting, Messrs. Julian and Owen informed Messrs. Armstrong and Wilson that Parent was prepared to submit a written expression of interest to acquire D&K if D&K would provide Parent with certain non-public financial information concerning D&K. On the same day, Parent executed a confidentiality agreement with D&K.

      On April 14, 2005, Mr. Julian and Mr. Owen of Parent met with representatives of Citigroup Global Markets, Inc. (“Citigroup”), D&K’s financial advisor, who provided Messrs. Julian and Owen with certain financial information concerning D&K. The representatives of Citigroup informed Messrs. Julian and Owen that D&K would be willing to consider an acquisition proposal of $16.00 per Share, with expedited negotiating and due diligence schedules and a brief exclusivity period. Following the meeting, Mr. Owen telephoned Citigroup and expressed Parent’s interest in pursuing a possible acquisition transaction with D&K on the proposed terms, subject to due diligence and other customary conditions.

      On April 18, 2005, Parent submitted a non-binding expression of interest to D&K in which Parent stated that, based upon information provided to date, its preliminary indication of the consideration it would be willing to pay for D&K Common Stock was $16.00 per Share. On April 22, 2005, D&K granted Parent a binding exclusive negotiating period until May 20, 2005, subject to earlier termination under certain circumstances. On May 27, 2005, D&K agreed to extend the exclusivity period to June 3, 2005.

      On April 23, 2005, Armstrong Teasdale LLP (“Armstrong Teasdale”), counsel for D&K, provided a draft Merger Agreement to Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden Arps”), counsel for Parent. The draft Merger Agreement contemplated, among other things and subject to due diligence, a two-step transaction in which a subsidiary of Parent would commence a tender offer for all of the outstanding Shares at a cash purchase price of $16.00 per share, followed by a merger in which all remaining stockholders of D&K, other than those exercising appraisal rights under the DGCL, would receive the same consideration.

      At a regular meeting of Parent’s board of directors on April 28, 2005, members of management updated the board, and the finance committee of the board, on the status of the transaction. Following discussion, the board authorized management to proceed with negotiations and its due diligence review of D&K.

      On April 29, 2005, Skadden Arps, on behalf of Parent, delivered comments on the draft Merger Agreement to Armstrong Teasdale, on behalf of D&K. Thereafter and through the execution of the Merger Agreement on July 8, 2005, counsel for D&K and Parent continued to negotiate the terms of the Merger Agreement, including the representations and warranties, conditions to closing the Offer, non-solicitation provisions, the withdrawal of recommendation provisions, the definition and use of the term “material adverse effect,” the termination provision and the provision regarding the payment of a fee upon termination.

      Beginning on May 9, 2005, D&K made due diligence materials available to Parent and its legal and other advisers in a data room established at the offices of its counsel, Armstrong Teasdale, in St. Louis, Missouri. The data room remained open until May 22, 2005 and the due diligence process continued

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throughout the period prior to execution of the Merger Agreement. Throughout the due diligence process, numerous meetings were held between various parties representing Parent and D&K with regard to specific matters involving D&K’s operations and affairs. Also during the process, certain provisions of the Merger Agreement were negotiated by Messrs. Julian and Owen on behalf of Parent with Messrs. Armstrong and Wilson on behalf of D&K.

      On May 17, 2005, Messrs. Julian and Owen met with Messrs. Armstrong and Wilson at Parent’s offices in San Francisco to discuss and negotiate certain issues concerning the combination of D&K and Parent. At a subsequent meeting held in Chicago on May 31, 2005, Messrs. Julian and Owen informed Messrs. Armstrong and Wilson that, following Parent’s due diligence review, Parent was not willing to acquire D&K at a price of $16.00 per Share. In subsequent discussions between Mr. Owen and representatives of Citigroup, Mr. Owen indicated Parent’s willingness to pursue a transaction at $13.00 per Share.

      At a regular meeting of Parent’s board of directors on May 25, 2005, members of management updated the board, and the finance committee of the board, on the status of negotiations and the findings of Parent’s due diligence review. Following discussion, the board authorized management to continue subject to resolution of diligence issues.

      On June 10, 2005, representatives of Citigroup informed Mr. Owen that the D&K Board concluded that the proposed price of $13.00 per share was not adequate, and that D&K was not willing to proceed at that price but would consider a transaction at a price of $15.00 per share.

      On June 24, 2005, representatives of Citigroup contacted Messrs. Julian and Owen, and informed them that the D&K Board was willing to consider a purchase price of $15.00 per Share. During the discussion, Parent informed Citigroup that it was prepared to negotiate a transaction with the Company at a price of $14.50 per Share.

      On June 30, the board of directors of Parent held a special meeting to consider the potential acquisition. At this meeting, members of management and a representative from Skadden Arps updated the board on the status of negotiations with D&K and described the terms of the Merger Agreement and the Stockholder Support Agreement and the board considered the terms of the Merger Agreement and the Stockholder Support Agreement. Following discussion, the board determined that Parent’s long-term business strategies and goals would be furthered by convergence with those of D&K and noted its unanimous support for the proposed transaction on the terms described to the board. Parent’s board also deemed it in the best interests of Parent and its stockholders to grant, and did grant, to an acquisition committee of the board, the powers of the board, to the extent permitted by law, to act on behalf of Parent in connection with the consideration and approval of the Merger Agreement and the transactions contemplated by the Merger Agreement.

      On July 2, 2005, Skadden Arps on behalf of Parent provided a proposed form of the Stockholder Support Agreement to Armstrong Teasdale, on behalf of D&K and informed Armstrong Teasdale that Parent required, as a condition to executing the Merger Agreement, that each executive officer and each director of D&K execute the Stockholder Support Agreement. Pursuant to the terms of the Stockholder Support Agreement, each executive officer and director of D&K would agree to (i) tender the Shares owned by such executive officer or director in the Offer, (ii) not to otherwise transfer such Shares; (iii) grant an irrevocable proxy to Parent to vote such Shares in favor of the Merger and against any action that would impede the Merger, and (iv) cease and cause to be terminated any activities related to a proposal that competes with the Offer.

      During the week of July 4, 2005, counsel for Parent and D&K negotiated the final terms of the Merger Agreement and the Stockholder Support Agreement.

      At a special meeting of the acquisition committee of Parent’s board of directors held on the morning of July 8, 2005, members of Parent’s management and a representative of Skadden Arps presented to the committee, and the acquisition committee discussed, the terms of the Merger Agreement and the Stockholder Support Agreement. Following the presentations and the discussion, the acquisition committee

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approved and adopted the Merger Agreement, the Stockholder Support Agreement and the transactions contemplated by the Merger Agreement and determined that the agreements and the transactions contemplated by them were in the best interests of Parent and its stockholders.

      At a special meeting held on the afternoon of July 8, 2005, the D&K Board unanimously, with one director who is an officer of Citigroup abstaining, approved the Merger Agreement, the Offer and the Merger, and determined that the transactions contemplated by the Merger Agreement, including the Offer and the Merger, are advisable, fair to and in the best interests of D&K’s Stockholders.

      On the evening of July 8, 2005, following the meeting of the D&K Board, Parent, Purchaser and D&K signed the Merger Agreement and each executive officer of D&K and each director of D&K other than one director who is an officer of Citigroup, executed the Stockholder Support Agreement. On the morning of July 11, 2005, before the markets opened, Parent and D&K issued press releases announcing the Merger Agreement and the Offer. A copy of Parent’s press release is incorporated by reference in Exhibit (a)(1)(G) to the Schedule TO filed with the Commission.

      Purchaser commenced the Offer on July 22, 2005.

11. Purpose of the Offer; Plans for D&K.

      Purpose of the Offer. The purpose of the Offer and the Merger is to acquire control of, and the entire equity interest in, D&K. The Offer is being made pursuant to the Merger Agreement and is intended to increase the likelihood that the Merger will be effected promptly. The purpose of the Merger is to acquire all of the outstanding Shares not acquired in the Offer. If the Offer is successful, we intend to consummate the proposed Merger as promptly as practicable following the final purchase of Shares in the Offer.

      If the Merger is consummated, Parent’s common equity interest in D&K would increase to 100% and Parent would be entitled to all the benefits resulting from that interest. These benefits include complete management with regard to the future conduct of D&K’s business and any increase in its value. Similarly, Parent will also bear the risk of any losses incurred in the operation of D&K in the value of D&K.

      D&K Stockholders who sell their Shares in the Offer will cease to have any equity interest in D&K and to participate in any future growth. If the Merger is consummated, D&K Stockholders will no longer have an equity interest in D&K and instead will have only the right to receive cash consideration pursuant to the Merger Agreement. See Section 12 — “The Merger Agreement, Stockholder Agreement and Other Relevant Agreements” in this Offer to Purchase. Similarly, D&K Stockholders will not bear the risk of any decrease in the value of D&K after selling their Shares in the Offer or the subsequent Merger.

      Except as disclosed in this Offer to Purchase, neither Parent nor the Purchaser has any present plan or proposal that would result in the acquisition by any person of additional securities of D&K, or the disposition of securities of D&K, an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving D&K or its subsidiaries or the sale or transfer of a material amount of assets of D&K or its subsidiaries. After the purchase of the Shares by the Purchaser in the Offer, Parent may appoint its representatives to the D&K Board in proportion to its ownership of the outstanding Shares, as described below under the caption “Directors” in Section 12 — “The Merger Agreement, Stockholder Agreement and Other Relevant Agreements” in this Offer to Purchase. Following completion of the Offer and the Merger, Parent intends to operate D&K as a subsidiary of Parent under the direction of Parent’s management. Parent will continue to evaluate and review D&K and its business, assets, corporate structure, capitalization, operations, properties, policies, management and personnel with a view toward determining how optimally to realize any potential benefits which arise from the rationalization of the operations of D&K with those of the other business units and subsidiaries of Parent. Such evaluation and review is ongoing and is not expected to be completed until after the consummation of the Offer and Merger. If, as and to the extent that Parent acquires control of D&K, Parent will complete such evaluation and review of D&K and will determine what, if any, changes would be desirable in light of the circumstances and the strategic business portfolio which then exist. Such changes could include, among

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other things, restructuring D&K through changes in D&K’s business, corporate structure, certificate of incorporation, by-laws, capitalization or management or could involve consolidating and streamlining certain operations and reorganizing other businesses and operations. Accordingly, Parent and the Purchaser reserve the right to change their plans and intentions at any time, as they deem appropriate.

      Parent, Purchaser or an affiliate of Parent may, following the consummation or termination of the Offer, seek to acquire additional Shares through open market purchases, privately negotiated transactions, a tender offer or exchange offer or otherwise, upon such terms and at such prices as they will determine, which may be more or less than the price paid in the Offer.

      Stockholder Approval. Under the DGCL, the approval of the D&K Board and the affirmative vote of the holders of a majority of the outstanding shares of Common Stock are required to adopt and approve the Merger Agreement and the Merger. D&K has represented in the Merger Agreement that the execution and delivery of the Merger Agreement by D&K and the consummation by D&K of the transactions contemplated by the Merger Agreement have been duly authorized by all necessary corporate action on the part of D&K, subject to the approval of the Merger by D&K’s Stockholders if required in accordance with the DGCL. In addition, D&K has represented that the affirmative vote of the holders of a majority of the outstanding shares of Common Stock is the only vote of the holders of any class or series of D&K’s capital stock necessary to approve the Merger. Therefore, unless the Merger is consummated pursuant to the Short-Form Merger (as defined below) provisions under the DGCL described below (in which case no further corporate action by the D&K Stockholders will be required to complete the Merger), the only remaining required corporate action of D&K will be the approval of the Merger Agreement and the transactions contemplated thereby by the affirmative vote of the holders of a majority of the outstanding shares of Common Stock. D&K has agreed to duly call, give notice of, convene and hold a special meeting of its Stockholders to consider and take action upon the approval and adoption of the Merger Agreement and the approval of the Merger as soon as reasonably practicable following the acceptance for payment and purchase of Shares by Purchaser pursuant to the Offer for the purpose of considering and taking action upon the Merger Agreement. Parent has agreed to vote, or cause to be voted, all of the Shares then owned by it, Purchaser or any of its other subsidiaries in favor of the approval of the Merger and the adoption of the Merger Agreement. In the event that Parent, Purchaser and Parent’s other subsidiaries and affiliates acquire in the aggregate at least a majority of the outstanding shares of Common Stock (which would be the case if the Minimum Condition is satisfied and the Purchaser were to accept for payment Shares tendered in the Offer), they would have the ability to effect the Merger without the affirmative votes of any other D&K Stockholders.

      Short-Form Merger. Section 253 of the DGCL provides that, if a corporation owns at least 90% of the outstanding shares of each class of another corporation, the corporation holding such stock may merge itself into such corporation without any action or vote on the part of the board of directors or the stockholders of such other corporation (such merger, a “Short-Form Merger”). In the event that Parent, the Purchaser and any other subsidiaries of Parent acquire in the aggregate at least 90% of the outstanding shares of Common Stock in the Offer or otherwise, then, at the election of Parent, a Short-Form Merger could be effected without any approval of the D&K Board or the Stockholders of D&K, subject to compliance with the provisions of Section 253 of the DGCL. Even if Parent and the Purchaser do not own 90% of the outstanding shares of Common Stock following consummation of the Offer, Parent and the Purchaser could seek to purchase additional shares in the open market or otherwise in order to reach the 90% threshold and employ a Short-Form Merger. The per-share consideration paid for any shares so acquired may be greater or less than that paid in the Offer. Parent presently intends to effect a Short-Form Merger if permitted to do so under the DGCL.

12. The Merger Agreement, Stockholder Agreement and Other Relevant Agreements.

      The Merger Agreement. The following is a summary of the material provisions of the Merger Agreement and is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is filed with the Commission as Exhibit (d)(1) to the Schedule TO, and is incorporated herein by

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reference. The Merger Agreement should be read in its entirety for a more complete description of the matters summarized below. The Merger Agreement may be examined, and copies obtained, as described in Section 9 — “Certain Information Concerning Purchaser and Parent” in this Offer to Purchase.

      The Offer. The Merger Agreement provides for the making of the Offer. Purchaser’s obligation to accept for payment and pay for Shares tendered pursuant to the Offer is subject to the satisfaction of the Minimum Condition and the other conditions described in Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase. The Merger Agreement provides that each Stockholder who tenders Shares in the Offer will receive $14.50 for each Share tendered, net to the Stockholder in cash, without interest and less any required withholding taxes. Purchaser has agreed that, without the prior written consent of D&K, it will not:

•  decrease the Offer Price to be paid in the Offer;

•  decrease the number of Shares sought in the Offer;

•  impose conditions to the Offer other than the conditions described in Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase; or

•  amend any other term of the Offer in any manner adverse to the Stockholders.

      Extensions of the Offer. The Merger Agreement permits Purchaser to extend the Offer from time to time with D&K’s prior written consent. In addition, The Merger Agreement permits Purchaser to extend the Offer from time to time, without D&K’s consent if, on the initial scheduled Expiration Date or any subsequent Expiration Date, any condition to the Offer has not been satisfied or waived or if required by the Commission. The Merger Agreement requires Purchaser to extend the Offer from time to time, beyond the scheduled Expiration Date or any subsequent extended Expiration Date if, at any such Expiration Date, the sole condition or conditions to the Offer that have not been satisfied or waived are (1) the Antitrust Condition and/or (2) the Inventory Verification Condition. Notwithstanding the foregoing, Purchaser is not required under the terms of the Merger Agreement to extend the Offer beyond the Outside Date.

      The Merger Agreement obligates Purchaser to accept for payment, as soon as practicable after Purchaser is legally permitted to do so under applicable law, and to pay for all Shares validly tendered (and not withdrawn) in the Offer promptly following acceptance of the Shares for payment.

      Subsequent Offering Period. The Merger Agreement permits Purchaser, in its sole discretion, to provide for, in compliance with applicable law, subsequent offering periods.

      Directors. The Merger Agreement provides that after completion of the Offer, Parent and Purchaser will be entitled to designate the number of directors to the D&K Board equivalent to the percentage of total outstanding shares accepted for payment in the Offer. D&K is required under the Merger Agreement to take all actions necessary to cause such designees to be elected or appointed to the D&K Board. Subject to applicable law and applicable stock exchange regulations, D&K will also cause individuals designated by Parent and Purchaser to have appropriate representation on each committee of the D&K Board and the Board of Directors of each subsidiary of D&K (and each committee thereof). The Merger Agreement further provides that at least three of the directors of D&K not designated by Parent and Purchaser shall remain a director of D&K until the Effective Time.

      Following the election or appointment of Parent’s and Purchaser’s designees to the D&K Board and until the Effective Time, the approval of a majority of the directors of D&K then in office who were not designated by Parent and Purchaser will be required to authorize:

•  any amendment or termination of the Merger Agreement;

•  any exercise or waiver of any of D&K’s rights or remedies under the Merger Agreement;

•  any extension of the time for performance of Parent’s and Purchaser’s respective obligations under the Merger Agreement;

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•  any action by the D&K Board under or in connection with the Merger Agreement;

•  any amendment to the Certificate of Incorporation or Bylaws of D&K; or

•  any other action by D&K which could adversely affect the interests of D&K Stockholders (other than Parent, Purchaser and their affiliates (other than the Company and its Subsidiaries)), with respect to the transactions contemplated by the Merger Agreement.

      The Merger. The Merger Agreement provides that at the Effective Time, Purchaser will be merged with and into D&K in accordance with the DGCL. At that time, the separate existence of Purchaser will cease, and D&K will be the Surviving Corporation.

      The Merger will become effective at the time a certificate of merger is filed with the Delaware Secretary of State. We expect to complete the Merger in late summer or early fall 2005, however we cannot assure you when, or if, all the conditions to completion of the Merger will be satisfied or waived. See Section 15 — “Conditions of the Merger” of this Offer to Purchase.

      Under the terms of the Merger Agreement, at the Effective Time, each Share then outstanding will be converted into the right to receive a cash amount equal to the Offer Price paid in the Offer, without interest. Notwithstanding the foregoing, the merger consideration will not be payable in respect of (a) Shares held by D&K or any of its subsidiaries, (b) Shares held by Parent or any of its subsidiaries, which will be cancelled upon the closing of the Merger, and (c) Shares as to which appraisal rights have been properly exercised. If appraisal rights for any D&K Shares are perfected by any D&K Stockholders, then those shares will be treated as described under Section 16 — “Certain Legal Matters, Required Regulatory Approvals — Appraisal Rights”.

      Stock Options. The Merger Agreement provides that, to the extent outstanding and not exercised, at the Effective Time, each D&K Stock Option will be cancelled and, in consideration of such cancellation, each holder of an D&K Stock Option will receive a payment (subject to any withholding tax) in cash (the “Option Payment”) in an amount equal to the product of (i) the excess, if any, of the Offer Price paid in the Offer over the per Share exercise price of such D&K Stock Option and (ii) the number of shares of Common Stock subject to such D&K Stock Option. As a result, any D&K Stock Option with a per Share exercise price equal to or in excess of $14.50 (or such higher price as is paid in the Offer) will be cancelled without payment. To the extent necessary or required under the terms of any plan or arrangement of D&K or pursuant to the terms of any D&K Stock Option, D&K will take all necessary action to obtain a signed consent of each holder of D&K Stock Options to the treatment of such D&K Stock Options as described above.

      Certificate of Incorporation and Bylaws. The Merger Agreement provides that at the Effective Time, the certificate of incorporation and bylaws of Purchaser will become the certificate of incorporation and bylaws of the Surviving Corporation, except that the name of the surviving corporation shall remain D & K Healthcare Resources, Inc.

      Representations and Warranties. Pursuant to the Merger Agreement, D&K has made customary representations and warranties to Parent and Purchaser, including representations relating to:

•  due organization, power and standing, and other corporate matters of D&K and its subsidiaries;

•  the Certificate of Incorporation and Bylaws of D&K and its subsidiaries;

•  D&K’s capitalization;

•  authorization, execution, delivery and enforceability of the Merger Agreement and other documents;

•  conflicts or violations under charter documents, contracts and instruments of law, and required consents and approvals;

•  compliance with laws;

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•  reports filed with the Commission , the accuracy of the information in those documents and compliance with the Sarbanes-Oxley Act of 2002;

•  conduct of business consistent with past practice and the absence of a “Material Adverse Effect” and certain other changes or events concerning D&K and its subsidiaries since June 30, 2004;

•  pending or threatened litigation;

•  employment and employee benefit plans and arrangements;

•  accuracy of information supplied in connection with documents filed with the Commission in connection with the Merger;

•  real property and other material tangible properties and assets;

•  taxes;

•  environmental matters;

•  the Rights Agreement;

•  contracts;

•  insurance matters;

•  brokerage or finders’ fees, and other fees with respect to the Merger;

•  intellectual property;

•  accounting matters;

•  accounts receivable;

•  inventory matters;

•  healthcare regulatory and Food and Drug Administration compliance;

•  secondary markets; and

•  customers.

Pursuant to the Merger Agreement, Parent and Purchaser have made customary representations and warranties to D&K, including representations relating to:

•  due organization, power and standing, and other corporate matters of D&K and its subsidiaries;

•  authorization, execution, delivery and enforceability of the Merger Agreement and other documents;

•  conflicts or violations under charter documents, contracts and instruments of law, and required consents and approvals;

•  sufficient capital resources;

•  accuracy of information supplied in connection with documents filed with the Commission in connection with the Merger;

•  brokerage or finders’ fees, and other fees with respect to the Merger;

•  pending or threatened litigation; and

•  no ownership of D&K Common Stock.

      The representations and warranties the parties made to each other contained in the Merger Agreement are made as of specific dates. The assertions embodied in those representations and warranties were made solely for purposes of the contract between McKesson and D&K and may be subject to important qualifications and limitations agreed by the parties in connection with negotiating its terms. Moreover, certain representations and warranties may not be accurate or complete as of any specified date

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because they are subject to a contractual standard of materiality different from those generally applicable to shareholders or were used for the purpose of allocating risk between the parties rather than establishing matters as facts. For the foregoing reasons, the representations and warranties should not be relied upon as statements of factual information.

      For purposes of the Merger Agreement and this Offer to Purchase, the term “Material Adverse Effect” means, with respect to D&K, a material adverse effect on the business, operations, condition (financial or otherwise) or results of operations of D&K and its subsidiaries, taken as a whole; except, in each case, for any such event, circumstance, change or effect resulting from (i) the loss by D&K and/or its subsidiaries of certain identified customers as a result of D&K’s failure to obtain consents under the change of control provisions contained in such customers’ contracts with D&K, (ii) any seasonal reduction in the revenues or earnings of D&K that is of a magnitude consistent with prior periods, (iii) changes in United States economic, financial market, political or regulatory conditions generally, (iv) changes in the wholesale drug distribution industry, which do not disproportionately affect D&K as compared to others in the industry in any material respect, (v) the loss by D&K and/or its subsidiaries of any customers or employees primarily as a result of (A) any public announcement by Parent or D&K (which, in the case of D&K, is made in accordance with the requirements of the Merger Agreement, the Offer, the Merger or the other transactions contemplated by the Merger Agreement) or (B) any public announcement by Parent of its intentions with respect to the future conduct of the business of D&K and its subsidiaries after consummation of the Offer and the Merger, provided that, in case either (A) or (B) above applies, (1) there has been no loss by D&K and/or its subsidiaries of any customers or employees primarily as a result of (x) misfeasance or malfeasance by D&K, its subsidiaries or any of their respective officers, directors or employees, (y) pricing action by D&K and/or any of its subsidiary disproportionate to general industry pricing or (z) D&K and its subsidiaries having an Adjusted Service Level (as defined in the Merger Agreement) of ninety-two percent (92%) or less and (2) such loss or losses in the case of this proviso, individually or in the aggregate, would reasonably be expected to materially and adversely affect the business, operations, condition financial or otherwise or results of operations of D&K and its subsidiaries, taken as a whole, (vi) any actions taken, or failures to take action, or such other effects, changes or occurrences to which Parent has separately consented in writing or (vii) terrorist activities, war or armed hostilities if the effect thereof would reasonably be expected to be transitory.

      Conduct of D&K. The Merger Agreement provides that, except as Parent shall otherwise consent in writing, D&K will, and will cause each of its subsidiaries to:

a.	use commercially reasonable efforts to preserve intact their respective business organizations and goodwill, keep available the services of their respective officers, employees and consultants and preserve their current relationships with customers, suppliers and other persons having significant business dealings with them;
b.	conduct their respective operations according to their ordinary course of business consistent with past practice which would not require the approval of the board;
c.	not (i) amend their respective certificates of incorporation or bylaws or comparable governing instruments or (ii) amend the Rights Agreement or take any action with respect to the Rights Agreement, including, without limitation, redemption of the rights issued pursuant to the Rights Agreement;
d.	not issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of any class of capital stock of D&K or any of its subsidiaries, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest, of D&K or any of its subsidiaries, or (ii) any assets of D&K or any of its subsidiaries, except in the ordinary course of business and in a manner consistent with past practice;

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e.	not declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of their respective capital stock except for cash dividends paid in amounts and at times consistent with past practice;
f.	not reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of their respective capital stock;
g.	not (i) acquire any corporation, partnership, other business organization or any division thereof, any real property or any material amount of assets; (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, except in the ordinary course of business and consistent with past practice; (iii) enter into, amend, modify or terminate any derivative, swap or hedging arrangement or contract; (iv) enter into any contract or agreement other than in the ordinary course of business and consistent with past practice; (v) authorize, or make any commitment with respect to, any single capital expenditure which is in excess of $250,000 or capital expenditures which are, in the aggregate, in excess of $1,000,000 for D&K and its subsidiaries taken as a whole; or (vi) enter into, amend or modify any such contract, commitment or arrangement, subject to certain exceptions in the ordinary course of business consistent with past practice;
h.	not hire or terminate any employee except in the ordinary course of business consistent with past practice or increase the salary, bonus or other compensation payable or to become payable or the benefits provided to their respective current or former directors, officers, other employees or consultants, except for increases in the ordinary course of business and consistent with past practice in salaries or wages of employees of D&K or any of its subsidiaries who are not directors or officers of D&K, or grant or increase any bonus, incentive compensation, retention payments, severance change-in-control or termination pay to, or enter into, amend or modify any employment, consulting, change-in-control or severance agreement with, any current or former director, officer, other employee or consultant of D&K or of any of its subsidiaries, or establish, adopt, enter into, amend or modify, except as required by law, any collective bargaining or other contract with a labor union, bonus, profit-sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, change-in-control, severance or other plan, program, agreement, trust, fund, policy or arrangement for the benefit of any current or former director, officer, other employee or consultant;
i.	not take any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice, with respect to accounting policies or procedures, except as required by GAAP as advised by D&K’s regular independent public accountants;
j.	not make any tax election or settle or compromise any material United States federal, state or local income tax liability;
k.	not enter into, amend, modify or consent to the termination of any material contract, or amend, waive, modify or consent to the termination of D&K’s or any of its subsidiaries’ rights thereunder, other than in the ordinary course of business and consistent with past practice;
l.	not settle, compromise or make any payment with respect to any material action, other than in the ordinary course of business consistent with past practice;
m.	not enter into, amend or modify any contract with any officer or director of D&K or any stockholder of D&K holding five percent or more of

D&K’s outstanding Shares;

n. not take any action that would reasonably be expected to cause any of D&K’s representations and warranties contained in the Merger Agreement that are qualified as to materiality or Material Adverse Effect to not be true and correct in any respect or any such representation or warranty that is not so qualified to not be true and correct in any material respect;

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o.

not authorize any of, or announce an intention to, commit or agree to take any of, the foregoing actions; and

p.

promptly notify Parent of (a) the occurrence, or non-occurrence, of any event which reasonably would reasonably be expected to cause any representation or warranty contained in the Merger Agreement to be untrue or inaccurate in any material respect and (b) any failure of D&K, Parent or Purchaser, as the case may be, to comply with or satisfy any covenant or agreement required to be complied with or satisfied by it under the Merger Agreement.

      D&K Stockholder Meeting. If Stockholder approval of the Merger is required under applicable law, D&K has agreed in the Merger Agreement to (a) hold a meeting of Stockholders as promptly as practicable after completion of the Offer for the purpose of considering and voting on the adoption of the Merger Agreement and (b) take all lawful action to solicit the approval of its Stockholders in favor of adoption of the Merger Agreement. Parent and Purchaser have agreed to vote all Shares held by Parent and Purchaser after completion of the Offer in favor of the Merger Agreement and Merger.

      Acquisition Proposals. From the date of the Merger Agreement until the Effective Time, D&K has agreed that it will not, and will not permit or authorize any of its subsidiaries or their respective officers, directors or representatives to:

•  solicit, initiate or encourage, or take any other action designed to facilitate or encourage any inquiries or the making of any proposal that constitutes, or is reasonably likely to lead to, any Acquisition Proposal (as defined herein);

•  participate in any discussions or negotiations regarding, or provide any nonpublic information or data to any person relating to, any Acquisition Proposal; or

•  make or authorize any statement, recommendation or solicitation in support of, or execute or enter into, or propose to execute or enter into, any letter of intent, agreement in principle, merger agreement, acquisition agreement, option agreement or other similar agreement related to, any Acquisition Proposal.

      “Acquisition Proposal” means (i) any proposal or offer from any person relating to any direct or indirect acquisition of (A) all or a substantial part of the assets of D&K or of any of its subsidiaries or (B) over fifteen percent of any class of equity securities of D&K or any of its subsidiaries; (ii) any tender offer or exchange offer that, if completed, would result in any person beneficially owning fifteen percent or more of any class of equity securities of D&K or any of its subsidiaries; or (iii) any merger, consolidation, business combination, sale of all or a substantial part of the assets, recapitalization, liquidation, dissolution or similar transaction involving D&K or any of its subsidiaries, other than the Merger.

      Notwithstanding the foregoing, prior to consummation of the Offer, the D&K Board may engage in discussions or negotiations with, or provide confidential information to, any person in response to an unsolicited, bona fide, written Acquisition Proposal first made by such person after the date of the Merger Agreement that did not result from a breach of the non-solicitation provisions of the Merger Agreement which the D&K Board concludes in good faith (after consultation with outside counsel and its financial advisor) constitutes or would reasonably be expected to lead to a Superior Proposal only:

(1)	if and to the extent the D&K Board reasonably determines in good faith (after consultation with outside legal counsel) that it is required to do so in order to comply with its fiduciary duties under applicable law,
(2)	prior to furnishing nonpublic information to, or entering into discussions or negotiations with such person, D&K enters into a confidentiality agreement with such person that is no less restrictive to such person than the confidentiality agreement between Parent and D&K and
(3)	D&K complies with the non-solicitation provisions of the Merger Agreement.

      “Superior Proposal” means a bona fide, written Acquisition Proposal involving D&K ( and except that references to fifteen percent of any class of equity securities in the definition of “Acquisition

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Proposal” above are deemed to be references to a majority of the equity securities) which the D&K Board determines in good faith, after consultation with its financial and legal advisors, taking into account all legal, financial, regulatory and other aspects of the proposal and the person making the proposal:

(i)	is more favorable to the Stockholders of D&K from a financial point of view than the transactions contemplated by the Merger Agreement (including any adjustment to the terms and conditions proposed by Parent in response to such proposal) and
(ii)	is fully financed or reasonably capable of being fully financed, reasonably likely to receive all required governmental approvals on a timely basis and otherwise reasonably likely of being completed on the terms proposed on a timely basis.

      The Merger Agreement requires D&K to promptly give notice to Parent of each inquiry, offer, proposal or request for nonpublic information received by D&K with respect to any Acquisition Proposal, such notice to include the identity of the person making the Acquisition Proposal, inquiry or request and a written summary of the materials terms thereof, including a copy thereof and any related documentation and correspondence. D&K is also required to notify Parent as promptly as practicable and at least 24 hours prior to (1) any meeting of the D&K Board called to consider any Acquisition Proposal or such inquiry and (2) entering into discussions with or providing non-public information to any person. In addition, D&K must inform Parent of all material developments with respect to the status and the terms, substantive discussions or negotiations with respect to an Acquisition Proposal, including by delivering a copy of all documentation and correspondence relating thereto.

      D&K Board Recommendation. The Merger Agreement provides that the D&K Board will recommend the Offer and the Merger, and may not (i) amend, modify or withdraw its approval or recommendation of the Offer or (ii) approve, enter into or recommend the approval or acceptance of a Superior Proposal unless, prior to completion of the Offer, the D&K Board determines in good faith after consultation with its financial advisors and outside legal counsel, that failure to do so would result in a reasonable likelihood of a breach of the fiduciary duties of the Board under applicable law. The Merger Agreement, however, does permit the D&K Board to make any disclosure to its Stockholders that is required by applicable law.

      Filings; Other Actions. The Merger Agreement provides that D&K, Parent and Purchaser will:

a. promptly make their respective regulatory filings and thereafter make any other required submissions under, the HSR Act and applicable foreign antitrust laws and regulations with respect to the Offer and the Merger; and

b. use commercially reasonable efforts to obtain all consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with D&K and its subsidiaries as are necessary for the consummation of the transactions contemplated hereby, including the Offer and the Merger.

      Indemnification of Directors and Officers. The Merger Agreement provides that until six (6) years from the Effective Time, unless otherwise required by law, the certificate of incorporation and bylaws of the Surviving Corporation will contain provisions no less favorable with respect to the elimination of liability of directors and the indemnification of directors, officers than are set forth in the certificate of incorporation and bylaws of D&K, as in effect on the date of the Merger Agreement.

      The Merger Agreement further provides that, from and after the Effective Time, Parent and the Surviving Corporation shall indemnify and hold harmless each person who is now, or has been at any time prior to the date of the Merger Agreement or who becomes prior to the Effective Time, an officer or director of D&K or any of its subsidiaries (collectively, the “Indemnified Parties”) against all losses, claims, damages, liabilities, costs, expenses, judgments, fines and amounts paid in settlement in connection with, any threatened or actual claim, action, suit, proceeding or investigation (a “Claim”), based in whole or in part on or arising in whole or in part out of the fact that the Indemnified Party (or the person controlled by the Indemnified Party) is or was a director or officer of D&K or any of its subsidiaries or

27

pertaining to any matter arising out of the Merger Agreement or any of the transactions contemplated by the Merger Agreement, whether asserted or claimed prior to, at or after the Effective Time, in each case to the fullest extent permitted under law. Without limiting the foregoing, the Merger Agreement provides that in the event any such Claim is brought against any of the Indemnified Parties, (i) such Indemnified Parties may retain counsel (including necessary local counsel) satisfactory to them and which shall be reasonably satisfactory to Parent and Parent shall pay the reasonable fees and expenses of such counsel for such Indemnified Parties; and (ii) Parent and the Surviving Corporation shall their best efforts to assist in the defense of any such Claim; provided that Parent will not be liable for any settlement effected without its prior written consent, such consent not be unreasonably withheld or delayed.

      The Merger Agreement further provides that, Parent will maintain in effect, during the six year period commencing as of the Effective Time, a policy of directors’ and officers’ liability insurance for the benefit of the persons serving as officers and directors of D&K on the date of the Merger Agreement with respect to acts or omissions occurring prior to the Effective Time which were committed by such officers and directors in their capacity as such providing coverage and containing terms no less advantageous than the coverage and terms of D&K’s existing policy of directors’ and officers’ liability insurance; provided, however, that Parent shall not be required to pay a per annum premium in excess of an agreed upon amount.

      Further Action. The Merger Agreement provides that, subject to applicable law, each of the parties will use its reasonable efforts to take all actions reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by the Merger Agreement.

      Conditions of the Offer. See Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase.

      Conditions of the Merger. The obligations of each party to complete the Merger are subject to the satisfaction of the following conditions:

a.	if required by Delaware law, approval and adoption by the Stockholders of the Merger Agreement and the Merger;
b.	the expiration or termination of any waiting period applicable to the consummation of the Merger under the HSR Act;
c.	the absence of any injunction or other order or decree by any governmental authority prohibiting or preventing the consummation of the Merger or materially changing the terms or conditions of the Merger Agreement; and
d.	the purchase of Shares pursuant to the Offer.

      Termination. The Merger Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time (notwithstanding any approval of the Merger Agreement by the Stockholders):

a.	by mutual written consent of each of Parent, Purchaser and D&K,
b.	by Parent, Purchaser or D&K, if:

i.	the Effective Time has not occurred on or before January 8, 2006 (the “Outside Date”); provided that, that no party to the Merger Agreement may terminate the Merger Agreement if its own failure to fulfill any obligation under the Merger Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before the Outside Date; or
ii.	a court of competent jurisdiction or a governmental authority has issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the Offer or the Merger, and such order, decree, ruling or other action has become final and nonappealable.

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c. by Parent, if due to an occurrence or circumstance that would result in a failure to satisfy any condition to the obligations of Purchaser to accept for payment any Shares tendered pursuant to the Offer, Purchaser has:

i.	failed to commence the Offer within ten business days following the date of the Merger Agreement;
ii.	terminated the Offer, or the Offer has expired in accordance with its terms, in each case, without Purchaser having accepted any Shares for payment thereunder; or
iii.	failed to accept Shares for payment pursuant to the Offer within 90 days following the commencement of the Offer,

except where such action or inaction has been caused by or resulted from the failure of Parent or Purchaser to perform its covenants or agreements under the Merger Agreement, or the material breach by Parent or Purchaser of any of its representations or warranties under the Merger Agreement.

d. by Parent if, prior to the purchase of Shares pursuant to the Offer:

i.	the D&K Board has failed to include in the Schedule 14D-9 or the proxy statement to be delivered to D&K Stockholders in connection with the Merger, if required, its approval or recommendation of the Merger Agreement, the Offer or the Merger;
ii.	the D&K Board or any committee thereof has withdrawn or modified in a manner adverse to Parent or Purchaser its approval or recommendation of the Merger Agreement, the Offer or the Merger;
iii.	D&K has exercised a right with respect to a Superior Proposal and continues discussions with any third party concerning a Superior Proposal for more than ten days after the date of receipt of such Superior Proposal;
iv.	an Acquisition Proposal that is publicly disclosed shall have been commenced, publicly proposed or communicated to D&K which contains a proposal as to price and D&K has not rejected such proposal within ten business days of its receipt;
v.	any person other than Parent or Purchaser becomes the beneficial owner of more than 15% of the Shares and shall have become an “Acquiring Person” as defined in the Rights Agreement;
vi.	D&K has recommended or approved any Acquisition Proposal;
vii.	D&K has breached any of its obligations to not solicit inquiries or proposals from third persons under the Merger Agreement which results in such third person making an Acquisition Proposal;
viii.	D&K has materially breached its obligations under the Merger Agreement by reason of a failure to file the Schedule 14D-9; and
ix.	the D&K Board has resolved to do any of the foregoing.

e. By D&K, upon approval by the D&K Board, if Purchaser has:

i.	failed to commence the Offer within ten business days following the date of the Merger Agreement;
ii.	terminated the Offer, or the Offer has expired in accordance with its terms, in each case, without Purchaser having accepted any Shares for payment thereunder; or
iii.	failed to accept Shares for payment pursuant to the Offer within 90 days following the commencement of the Offer, except where such action or inaction has been caused by or resulted from the failure of D&K to perform its covenants or agreements under the

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Merger Agreement, or the material breach by D&K of any of its representations or warranties under the Merger Agreement.

f. By D&K, upon approval by the D&K Board, if prior to the purchase of any Shares pursuant to the Offer, the D&K Board determines in good faith that failure to do so would result in a reasonable likelihood of a breach of its fiduciary duties under applicable law, after consultation with outside legal counsel, in order to enter into a definitive written agreement with respect to a Superior Proposal, provided that D&K has not breached any of its obligations to not solicit inquiries or proposals from third persons under the Merger Agreement and has made full payment of the termination fee as described immediately below.

      Termination Fees. D&K has agreed in the Merger Agreement to pay Parent a fee in immediately available funds equal to $10,210,000, if:

a. any person has commenced, publicly proposed or communicated to D&K an Acquisition Proposal that is publicly disclosed or any person has publicly disclosed or communicated to D&K an intention to make an Acquisition Proposal and

i.	the Offer has remained open for at least 20 business days;
ii.	less than a majority of the Shares have been validly tendered and not withdrawn in the Offer;
iii.	the Merger Agreement is terminated pursuant to clauses (b) or (c) under “Termination” above; and
iv.	D&K enters into an agreement with respect to an Acquisition Proposal, or an Acquisition Proposal is consummated, in each case, within 12 months after termination of the Merger Agreement;

b.	the Merger Agreement is terminated pursuant to clauses (i), (ii), (iii), (v), (vi) or (viii) of clause (d) under “Termination” above; or
c.	the Merger Agreement is terminated:

i.	pursuant to clauses (iv), (vii) or (ix) of clause (d) under “Termination” above; and
ii.	D&K enters into an agreement with respect to an Acquisition Proposal or an Acquisition Proposal is consummated, in each case, within 12 months after termination of the Merger Agreement.

      Amendments; No Waivers. The Merger Agreement may be amended or waived prior to the Effective Time if in writing and signed, in the case of an amendment, by each party, or in the case of a waiver, by the party against whom the waiver is to be effective. After the Stockholders approve the Merger Agreement, however, no amendment to the Merger Agreement will be made that would reduce the amount or change the type of consideration into which each Share shall be converted upon consummation of the Merger.

      Fees and Expenses. Except as provided in “Termination Fees” above, all costs and expenses incurred in connection with the Merger Agreement will be paid by the party incurring such costs and expenses.

      The Stockholder Agreement. The following is a summary of the material provisions of the Stockholder Agreement, which is filed with the Commission as Exhibit (d)(4) to the Schedule TO, and is incorporated herein by reference. The summary is qualified in its entirety by reference to the Stockholder Agreement.

      In connection with the execution of the Merger Agreement, Parent and Purchaser entered into a Stockholder Agreement with the following Supporting Stockholders who own an aggregate of approximately 8.4% of the outstanding Shares (the “Owned Shares”): J. Hord Armstrong, III, Martin

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Wilson, Thomas Hilton, Richard Keffer, Ed Petrella, Brian Landry, Richard Ford, Harvey Jewett, Bryan Lawrence, Thomas Patton and Mary Ann Van Lokeren.

      Pursuant to the Stockholder Agreement, each of the Supporting Stockholders (i) agreed to tender such Supporting Stockholder’s Owned Shares, excluding unexercised option and shares of restricted stock that have not vested, in the Offer promptly following commencement of the Offer and to not withdraw any Owned Shares so tendered unless the Offer is terminated or has expired without Purchaser purchasing all Shares validly tendered in the Offer and (ii) irrevocably granted to, and appointed, Parent and any designee of Parent, such Supporting Stockholder’s proxy and attorney-in-fact, for and in the name, place and stead of such Supporting Stockholder, to vote such Supporting Stockholder’s Owned Shares, or to grant a consent or approval in respect of such Supporting Stockholder’s Owned Shares, in connection with any meeting of the Stockholders of D&K or any action by written consent in lieu of a meeting of the Stockholders of D&K. Each Supporting Stockholder affirmed that the proxy is coupled with an interest and shall be irrevocable.

      Each Supporting Stockholder further irrevocably and unconditionally agreed (i) to vote or consent, or cause to be voted or consented, such Supporting Stockholder’s Owned Shares in favor of the consummation of the Merger if Parent is unable to vote such Supporting Stockholder’s Owned Shares at such meeting; (ii) to execute and deliver or cause to be executed and delivered any written consent in favor of the Merger with respect to all of such Supporting Stockholder’s Owned Shares; and (iii) with respect to such Supporting Stockholder’s Owned Shares, to vote or execute and deliver any written consent against any Acquisition Proposal (as defined in the Merger Agreement) or action that would be impede, interfere with or prevent the Merger.

      Each Supporting Stockholder also agreed that he will not, without the prior written consent of Parent, (a) transfer, assign, sell, gift-over, pledge or otherwise dispose of, create or suffer to exist any encumbrances on, or consent to any of the foregoing (a “Transfer”) with respect to any or all of such Supporting Stockholder’s Owned Shares, (b) enter into any contract, option or other agreement, arrangement or understanding with respect to any Transfer; (c) grant any proxy, power-of-attorney or other authorization or consent with respect to any of such Supporting Stockholder’s Owned Shares; (d) deposit any of such Supporting Stockholder’s Owned Shares into a voting trust, or enter into a voting agreement or arrangement with respect to any of such Supporting Stockholder’s Owned Shares or (e) directly or indirectly take or cause the taking of any other action that would in any way restrict, limit or interfere with the performance of such Supporting Stockholder’s obligations under the Stockholder Support Agreement or the Merger.

      The Stockholder Agreement terminates upon the earlier of (i) six months following the date of the termination of the Merger Agreement in accordance with its terms and (ii) the Effective Time.

      Confidentiality Agreement. The following is a summary of certain of the material provisions of the Confidentiality Agreement, dated as of March 24, 2005, between Parent and D&K (the “Confidentiality Agreement”). This summary does not purport to be complete and is qualified in its entirety by reference to the complete text of the Confidentiality Agreement which is filed with the Commission as Exhibit (d)(3)(A) to the Schedule TO, and is incorporated herein by reference.

      Under the Confidentiality Agreement, Parent and D&K agreed to restrictions concerning use of “Evaluation Materials” (as defined therein) provided by D&K to Parent. Parent agreed (i) to keep the Evaluation Materials confidential and (ii) not to use the Evaluation Materials for any purpose other than to evaluate a possible acquisition transaction with D&K.

      Expression of Interest. On April 18, 2005, Parent submitted to D&K a non-binding expression of interest in acquiring D&K. On April 22, 2005, D&K agreed that until May 20, 2005, which period was subsequently extended to June 3, 2005, (i) neither the capital stock nor the assets of D&K would be sold or placed on the market for sale to a party other than Parent, and (ii) D&K would not solicit, encourage or respond to inquiries, discussions or proposals for or provide any person or entity with information relating to the sale of the capital or assets of D&K.

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13. Source and Amount of Funds.

      The Offer and the Merger are not subject to any financing condition. Parent and Purchaser estimate that the total amount of funds required to purchase all of the outstanding Shares pursuant to the Offer and the Merger and to pay related fees and expenses will be approximately $223 million. Purchaser will acquire such funds from Parent, which has sufficient cash on hand to complete the Offer and the Merger and will cause Purchaser to have sufficient funds available to complete the Offer and the Merger.

      As the only consideration in the Offer and Merger is cash and the Offer is for all outstanding Shares, and in view of both the absence of a financing condition and the financial capacity of Parent, Parent and Purchaser believe the financial condition of Parent and its affiliates is not material to a decision by any stockholder whether to sell, tender or hold Shares pursuant to the Offer.

14. Dividends and Distributions.

      The Merger Agreement provides that from the date of the Merger Agreement until the earlier to occur of termination of the Merger Agreement or the Effective Time, D&K will not and will not permit any of its subsidiaries to authorize, declare or pay any dividends on, or make other distributions with respect to, the Shares, except for cash dividends paid in amounts and at times consistent with past practice, or change the number of Shares outstanding as a result of any stock split, stock dividend, recapitalization or other similar transaction.

15. Certain Conditions of the Offer.

      Notwithstanding any other terms of the Offer, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser’s obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer unless prior to the Expiration Date (i) the Minimum Condition shall have been satisfied and (ii) the Antitrust Condition shall have been satisfied and (iii) at any time on or after the date of the Merger Agreement and prior to the Expiration Date, none of the following conditions exists:

      (a) any Governmental Entity (as defined in the Merger Agreement) shall have instituted a legal action or investigation: (i) challenging or seeking to make illegal, materially delay, or otherwise, directly or indirectly, restrain or prohibit or make materially more costly, the making of the Offer, the acceptance for payment of any Shares, the purchase of Shares or the consummation of any other transaction contemplated by the Merger Agreement, or seeking to obtain material damages in connection with any transaction contemplated by the Merger Agreement; (ii) seeking to prohibit or limit materially the ownership or operation by D&K, Parent or any of their subsidiaries of all or any of their or their subsidiaries’ material business or assets, or to compel D&K, Parent or any of their subsidiaries to dispose of or to hold separate all or any portion of their or their subsidiaries’ material business or assets; (iii) seeking to impose or confirm any limitation on the ability of Parent, Purchaser or any other affiliate of Parent to exercise effectively full rights of ownership of any Shares; (iv) seeking to require Parent, Purchaser or any other affiliate of Parent to divest of any Shares; or (v) which, individually or in the aggregate, otherwise would reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would reasonably be expected to prevent or materially delay D&K from performing its obligations under the Merger Agreement or would reasonably be expected to have a Material Adverse Effect;

      (b) any court, arbitral tribunal or Governmental Entity shall have issued a final and non-appealable order, decree, injunction or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting or materially delaying or preventing the transactions contemplated by the Merger Agreement;

      (c) there shall have been any statute, rule, regulation, legislation or interpretation enacted, promulgated, amended or issued applicable to (i) Parent, D&K or any of their subsidiaries or affiliates or (ii) any transaction contemplated by the Merger Agreement, by any United States or other governmental

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authority with appropriate jurisdiction, other than the routine application of the waiting period provisions of the HSR Act to the Offer or the Merger, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above;

      (d) any Material Adverse Effect, or any occurrence, circumstance or event that is reasonably likely to result in a Material Adverse Effect, shall have occurred;

      (e) the occurrence of (i) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (ii) any limitation (whether or not mandatory) by any United States Governmental Entity on the extension of credit generally by banks or other financial institutions, or (iii) in the case of either of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof;

      (f) any representation or warranty of D&K in the Merger Agreement that is qualified as to materiality or Material Adverse Effect shall not be true and correct in any respect or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case as if such representation or warranty was made as of such time on or after the date of the Merger Agreement;

      (g) D&K shall have failed to perform, in any material respect, any of its obligations or to comply, in any material respect, with any of its agreements or covenants under the Merger Agreement, and, if such failure is capable of cure within thirty (30) days, shall not have cured any such failure within thirty (30) days after receipt of notice of such failure from Parent;

      (h) the D&K Board or any committee thereof shall have (i) withdrawn, or modified or changed in a manner adverse to the transactions contemplated by the Merger Agreement, to Parent or to Purchaser (including by amendment of the Schedule 14D-9), its recommendation of the Offer, the Merger Agreement, or the Merger, (ii) recommended any Acquisition Proposal, (iii) taken a neutral position or made no recommendation with respect to another proposal or offer (other than by Parent or Purchaser) after a reasonable amount of time (and in no event more than ten (10) business days following receipt thereof) has elapsed for the D&K Board or any committee thereof to review and make a recommendation with respect thereto or (iv) resolved to do any of the foregoing;

      (i) Purchaser shall not have received a certificate executed by D&K’s President or a Vice President of D&K, dated as of the scheduled expiration of the Offer, to the effect that the conditions set forth in paragraphs (f), (g), (i), and (l) of this Section 15 have not occurred;

      (j) the Merger Agreement shall have been terminated in accordance with its terms;

      (k) Purchaser and D&K shall have agreed in writing that Purchaser shall terminate the Offer or postpone the acceptance for payment of Shares thereunder; or

      (l) the useable and saleable (and not expired or short-dated) inventories of the 80% Items (certain pharmaceutical products as further defined in the Merger Agreement) of D&K and its subsidiaries, taken as a whole, as determined by Parent after physical inspection thereof and valued in accordance with GAAP consistently applied with the past practices of D&K, have a realizable value (net of reserves) more than five percent (5%) less than the carrying value of the inventories of the 80% Items of the Company and its Subsidiaries, taken as whole, reflected on the consolidated balance sheet of the Company and its Subsidiaries dated as of the date of such physical inspection of the inventory, and, in the event of a dispute between Parent and D&K with respect to such valuation, the independent accounting firm selected to resolve the dispute shall not have determined within thirty (30) calendar days (the “Dispute Resolution Period”) after its acceptance of its selection, that this condition has been satisfied.

      The above conditions are for the benefit of Parent and Purchaser and may, subject to the terms of the Merger Agreement, be waived by Parent and Purchaser in whole or in part at any time and from time to time in their reasonable discretion. The failure by Parent and Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and

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circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time.

16. Certain Legal Matters; Required Regulatory Approvals.

      General. Parent and Purchaser are not aware of any licenses or regulatory permits that appear to be material to the business of D&K and its subsidiaries, taken as a whole, and that might be adversely affected by the acquisition of Shares in the Offer or the Merger. In addition, except as described below, Parent and Purchaser are not aware of any filings, approvals or other actions by or with any governmental authority or administrative or regulatory agency that would be required for Purchaser’s acquisition or ownership of the Shares. Should any such approval or other action be required, Parent and Purchaser expect to seek such approval or action. Should any such approval or other action be required, Parent and Purchaser cannot be certain that they would be able to obtain any such approval or action without substantial conditions or that adverse consequences might not result to D&K’s businesses, or that certain parts of the business of D&K might not have to be disposed of or held separate in order to obtain such approval or action. In that event, Purchaser may not be required to purchase any Shares in the Offer. See “Introduction” and Section 15  — “Certain Conditions of the Offer” of this Offer to Purchase.

      State Takeover Laws. Section 203 of the DGCL, in general, prohibits a Delaware corporation, such as D&K, from engaging in a “Business Combination” (defined as a variety of transactions, including mergers) with an “Interested Stockholder” (defined generally as a person that is the beneficial owner of 15% or more of the outstanding voting stock of the subject corporation) for a period of three years following the date that such person became an Interested Stockholder unless, (i) prior to the date such person became an Interested Stockholder, the board of directors of the corporation approved either the Business Combination or the transaction that resulted in the stockholder becoming an Interested Stockholder, (ii) upon becoming an Interested Stockholder, Stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced or (iii) on or subsequent to the date the stockholder becomes an Interested Stockholder, the Business Combination is approved by the board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the Interested Stockholder. The D&K Board approved the Merger Agreement, and the transactions contemplated thereby, including the Stockholder Agreement, the Offer, the Merger and the purchase of the Shares as contemplated by the Offer. Accordingly, Purchaser and Parent believe that Section 203 of the DGCL is inapplicable to the Offer and the Merger.

      A number of states have adopted laws and regulations that purport to apply to attempts to acquire corporations that are incorporated in such states, or whose business operations have substantial economic effects in such states, or which have substantial assets, security holders, employees, principal executive officers or principal places of business in such states. In Edgar v. MITE Corp., the Supreme Court of the United States (the “Supreme Court”) invalidated on constitutional grounds the Illinois Business Takeover statute, which, as a matter of state securities law, made certain corporate acquisitions more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders, provided that those laws were applicable only under certain conditions. Subsequently, a number of federal district courts have ruled that various state takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside the state of enactment.

      Parent and Purchaser do not believe that the antitakeover laws and regulations of any state other than the State of Delaware will by their terms apply to the Offer or the Merger and, except as described above with respect to Section 203 of the DGCL, neither Parent nor Purchaser has attempted to comply with any state antitakeover statute or regulations in connection with the Offer and the Merger. Parent and Purchaser reserve the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger and nothing in this Offer to Purchase or any action taken in connection with

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the Offer or the Merger is intended as a waiver of such right. If it is asserted that any state antitakeover statute is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, Parent and Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and Parent and Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer or may be delayed in continuing or consummating the Offer or completing the Merger. In such case, Purchaser may not be obligated to accept for payment, or pay for, any Shares tendered pursuant to the Offer. See Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase.

      Antitrust. Under the HSR Act, and the related rules and regulations that have been issued by the U.S. Federal Trade Commission (the “FTC”), certain acquisition transactions may not be completed until certain information and documentary material has been furnished for review by the FTC and the Antitrust Division of the U.S. Department of Justice (the “Antitrust Division”) and certain waiting period requirements have been satisfied. These requirements apply to Parent’s and Purchaser’s acquisition of Shares in the Offer and the Merger.

      Under the HSR Act, the purchase of Shares in the Offer may not be completed until the expiration of a 15-calendar-day waiting period following the filing of certain required information and documentary material concerning the Offer with the FTC and the Antitrust Division, unless the waiting period is earlier terminated by the FTC and the Antitrust Division. McKesson filed a Premerger Notification and Report Form under the HSR Act with the FTC and the Antitrust Division in connection with the purchase of Shares in the Offer and the Merger on or about July 13, 2005. As a result, the required waiting period with respect to the Offer and the Merger would expire at 11:59 p.m., New York City time, on or about July 28, 2005, unless earlier terminated by the FTC or the Antitrust Division or one of the filing parties receives a request for additional information or documentary material prior to that time. If, within the 15-calendar-day waiting period, either the FTC or the Antitrust Division requests additional information or documentary material from McKesson, the waiting period would be extended for an additional period of 10 calendar days following the date of its substantial compliance with that request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR rules. After that time, the waiting period could be extended only by court order or with filing parties’ consent. The FTC or the Antitrust Division may terminate the additional 10-calendar-day waiting period before its expiration. In practice, complying with a request for additional information or documentary material can take a significant period of time. Although D&K is also required to make an HSR filing with the FTC and the Antitrust Division in connection with the Offer, neither D&K’s failure to make that filing nor a request made to D&K from the FTC or the Antitrust Division for additional information or documentary material will extend the waiting period with respect to the purchase of Shares in the Offer and the Merger. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions, such as Parent’s and Purchaser’s acquisition of Shares in the Offer and the Merger. At any time before or after the Purchaser’s purchase of Shares, the FTC or the Antitrust Division could take action under the antitrust laws that either considers necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares in the Offer and the Merger, the divestiture of Shares purchased in the Offer or the divestiture of substantial assets of D&K or any of its subsidiaries or affiliates. Private parties as well as state attorneys general may also bring legal actions under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made the result thereof. See Section 15 — “Certain Conditions of the Offer” of this Offer to Purchase.

      If the Antitrust Division, the FTC, a state or a private party raises antitrust concerns in connection with the proposed transaction, the parties may engage in negotiations with the relevant governmental agency or party concerning possible means of addressing these issues and may delay consummation of the Offer or the Merger while such discussions are ongoing. D&K and the parties have agreed to use all reasonable efforts to cooperate with one another in determining which filings are required to be made prior to the Effective Time with, and which consents, approvals, permits or authorizations are required to be obtained prior to the Effective Time from, governmental authorities in connection with the execution and

35

delivery of this Merger Agreement and the consummation of the transactions contemplated hereby; and timely making all such filings and timely seeking all such consents, approvals, permits or authorizations.

      Statutory Requirements. In general, under the DGCL, a merger of two Delaware corporations requires the adoption of a resolution by the board of directors of each of the corporations desiring to merge approving an agreement and plan of merger containing provisions with respect to certain statutorily specified matters and the approval of such agreement by the stockholders of each corporation by the affirmative vote of the holders of at least a majority of all of the outstanding shares of stock entitled to vote on such matter, unless otherwise provided for in that corporation’s certificate of incorporation or in the case of a short-form merger as described in the next paragraph. Accordingly, except in the case of a short-form merger, a vote of at least a majority of the Stockholders is required in order to adopt the Merger Agreement. Assuming that the Minimum Condition is satisfied, upon consummation of the Offer, Purchaser would own sufficient Shares to enable it to satisfy the Stockholder approval requirement to approve the Merger. Purchaser intends to seek to consummate the Merger with D&K as promptly as practicable after the final purchase of shares pursuant to the Offer.

      The DGCL also provides that if a parent corporation owns at least 90% of each class of the stock of a subsidiary, that corporation can effect a short-form merger with that subsidiary without the action of the other stockholders of the subsidiary. Accordingly, if as a result of the Offer or otherwise, Purchaser acquires or controls at least 90% of the outstanding Shares, Purchaser could, and intends to, effect the Merger without prior notice to, or any action by, any other Stockholder.

      Appraisal Rights. No appraisal rights are available in connection with the Offer. However, if the Merger is consummated, the Stockholders would have certain rights under Section 262 of the DGCL to dissent and demand appraisal of, and payment in cash of the fair value of, their Shares. Such rights, if the statutory procedures were complied with, could lead to a judicial determination of the fair value (excluding any element of value arising from the accomplishment or expectation of the Merger) required to be paid in cash to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than, or in addition to, the price paid in the Offer and the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more or less than the purchase price per Share pursuant to the Offer or the consideration per Share to be paid in the Merger. If any holder of Shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses his or her right to appraisal, as provided in the DGCL, each of the Shares of such holder will be converted into the Offer Price in accordance with the Merger Agreement. A stockholder may withdraw his or her demand for appraisal by delivery to Purchaser of a written withdrawal of his or her demand for appraisal prior to the Merger. Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of such rights. See Annex I — Delaware General Corporation Law Section 262 — Appraisal Rights.

      THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE DGCL DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.

      “Going Private” Transactions. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain “going private” transactions and which may under certain circumstances be applicable to the Merger or another business combination following the purchase of Shares pursuant to the Offer in which Parent or Purchaser seeks to acquire the remaining Shares not held by them. However, Rule 13e-3 would be inapplicable if (i) the Shares are deregistered under the Exchange Act prior to the Merger or other business combination or (ii) the Merger or other business combination is consummated within one year after the purchase of the Shares pursuant to the Offer and the amount paid per Share in the Merger or other business combination is at least equal to the amount paid per Share in the Offer. If applicable, Rule 13e-3 requires, among other things, that certain financial information concerning the

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fairness of the proposed transaction and the consideration offered to minority stockholders in such transaction be filed with the Commission and disclosed to Stockholders prior to the consummation of the transaction.

17. Certain Fees and Expenses.

      Parent has retained Georgeson Shareholder as Information Agent in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee Stockholders to forward material relating to the Offer to beneficial owners of Shares. Parent will pay the Information Agent reasonable and customary compensation for these services in addition to reimbursing the Information Agent for its reasonable out-of-pocket expenses. Parent has agreed to indemnify the Information Agent against certain liabilities and expenses in connection with the Offer, including certain liabilities under the U.S. federal securities laws.

      In addition, Parent has retained The Bank of New York as the Depositary. Parent will pay the Depositary reasonable and customary compensation for its services in connection with the Offer, will reimburse the Depositary for its reasonable out-of-pocket expenses, and will indemnify the Depositary against certain liabilities and expenses, including certain liabilities under the U.S. federal securities laws.

      Except as set forth above, Parent will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. Parent will reimburse brokers, dealers, commercial banks and trust companies and other nominees, upon request, for customary clerical and mailing expenses incurred by them in forwarding offering materials to their customers.

18. Miscellaneous.

      The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares residing in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction or any administrative or judicial action pursuant thereto. However, Purchaser may, in its discretion, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares in such jurisdiction.

      In jurisdictions whose laws require that the Offer be made by a licensed broker or dealer, the Offer shall be deemed to be made on Purchaser’s behalf by one or more registered brokers or dealers licensed under the laws of such jurisdiction.

      Parent and Purchaser have filed with the Commission the Schedule TO, together with Exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer, and may file amendments thereto. Such Schedule TO, including Exhibits, and any amendments thereto, may be examined and copies may be obtained from the Commission in the same manner as described in Section 8 — “Certain Information Concerning D&K” of this Offer to Purchase with respect to information concerning D&K.

      No person has been authorized to give any information or to make any representation on behalf of Purchaser not contained in this Offer to Purchase or in the related Letter of Transmittal and, if given or made, any such information or representation must not be relied upon as having been authorized. Neither the delivery of the Offer to Purchase nor any purchase of Shares pursuant to the Offer will, under any circumstances, create any implication that there has been no change in the affairs of Parent, Purchaser or D&K since the date as of which information is furnished or the date of this Offer to Purchase.

SPIRIT ACQUISITION CORPORATION

July 22, 2005

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Schedule I

Directors and Executive Officers of Spirit Acquisition Corporation

      The name, current principal occupation or employment and material occupations, positions, offices or employment for the past five years, of each director and executive officer of Spirit are set forth below. References herein to ‘Spirit’ means Spirit Acquisition Corporation. Unless otherwise indicated below, the business address of each director and executive officer is c/o McKesson Corporation, One Post Street, San Francisco, California 94104. Where no date is shown, the individual has occupied the position indicated for the past five years. Unless otherwise indicated, each person below is a citizen of the United States of America. Unless otherwise indicated, each occupation set forth opposite an individual’s name refers to employment with Spirit.

Name & Country of Citizenship	Position and Principal Occupation
Kristina Veaco	Director, Vice President, Secretary
Nicholas A. Loiacono	Director, Vice President, Treasurer
Paul C. Julian	President

      Ms. Veaco has been the Assistant General Counsel and Assistant Secretary of McKesson Corporation with responsibility for the Corporate Secretary’s Office since she joined McKesson in 1999.

      Mr. Loiacono is a corporate Vice President and Treasurer of McKesson, a position that he has held since 2001. Previously, he was Vice President of Finance and Treasurer of McKesson. He is an officer and director of various McKesson subsidiaries, and he has been with McKesson since 1997.

      Mr. Julian has served as Executive Vice President, Group President of McKesson since April 2004 and served as Senior Vice President of McKesson since August 1999, and President of the Supply Solutions Business of McKesson since March 2000. Previously, he served as Group President, McKesson General Medical from 1997 to 2000 and as Executive Vice President, McKesson Health Systems from 1996 to 1997. He has been with McKesson for nine years.

Directors and Executives Officers of McKesson Corporation

      The name, current principal occupation or employment and material occupations, positions, offices or employment for the past five years, of each director and executive officer of McKesson are set forth below. References herein to ‘McKesson’ mean McKesson Corporation. Unless otherwise indicated below, the business address of each director and executive officer is c/o McKesson Corporation, One Post Street, San Francisco, California 94014. Where no date is shown, the individual has occupied the position indicated for the past five years. Unless otherwise indicated, each person is a citizen of the United States of America. Unless otherwise indicated, each occupation set forth opposite an individual’s name refers to employment with McKesson.

Name & Country of Citizenship	Position and Principal Occupation
Marie L. Knowles	Member of the Board of Directors, Chairman of the Audit Committee and member of the Finance Committee of McKesson
Jane E. Shaw	Member of the Board of Directors, the Audit Committee and Committee on Directors and Corporate Governance of McKesson
Richard F. Syron	Member of the Board of Directors, Chairman of the Committee on Directors and Corporate Governance and member of the Compensation Committee
Wayne A. Budd	Member of the Board of Directors, the Audit Committee and the Committee on Directors and Corporate Governance

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Name & Country of Citizenship	Position and Principal Occupation
Alton F. Irby III	Member of the Board of Directors, Chairman of the Compensation Committee and member of the Finance Committee of McKesson
David M. Lawrence	Member of the Board of Directors and the Compensation Committee of McKesson
James V. Napier	Member of the Board of Directors and the Finance Committee of McKesson
John H. Hammergren	Chairman of the Board of Directors and President and Chief Executive Officer of McKesson
M. Christine Jacobs	Member of the Board of Directors, the Compensation Committee and the Committee on Directors and Corporate Governance of McKesson
Robert W. Matschullat	Member of the Board of Directors, Chairman of the Finance Committee and member of the Audit Committee of McKesson
Jeffrey C. Campbell	Executive Vice President and Chief Financial Officer of McKesson
Paul C. Julian	Executive Vice President, Group President of McKesson
Ivan D. Meyerson	Executive Vice President, General Counsel and Corporate Secretary of McKesson
Marc E. Owen	Executive Vice President, Corporate Strategy and
(United Kingdom)	Business Development of McKesson
Pamela J. Pure	Executive Vice President of McKesson President, McKesson Provider Technologies
Randall Spratt	Executive Vice President and Chief Information Officer of McKesson

      Ms. Knowles retired from Atlantic Richfield Company (“ARCO”) in 2000 and was Executive Vice President and Chief Financial Officer from 1996 until 2000 and a director from 1996 until 1998. She joined ARCO in 1972. Ms. Knowles is a director of Phelps Dodge Corporation and a member of the Board of Trustees of the Fidelity Funds. She has been a director of McKesson since March 2002. She is the Chairman of the Audit Committee and a member of the Finance Committee.

      Dr. Shaw has been Chairman of the Board of Aerogen, Inc., a company specializing in the development of products for improving respiratory therapy, since 1998. Additionally, she served as Chief Executive Officer of that company from 1998 to June 30, 2005. She is a director of Office Max Incorporated and Intel Corporation. Dr. Shaw has been a director of McKesson since 1992. She is a member of the Audit Committee and the Committee on Directors and Corporate Governance.

      Mr. Syron has been Chairman and Chief Executive Officer of Freddie Mac since December 2003. He was Executive Chairman of Thermo Electron Corporation since November 2002 and Chairman of the Board since January 2000. He was Chief Executive Officer at Thermo Electron from June 1999 until November 2002, and President from June 1999 to July 2000. From April 1994 until May 1999, Mr. Syron was the Chairman and Chief Executive Officer of the American Stock Exchange Inc. He has been a director of McKesson since March 2002. He is a member of the Compensation Committee and the Chairman of the Committee on Directors and Corporate Governance.

      Mr. Budd joined the law firm of Goodwin Procter LLP as Senior Counsel in October 2004. He had been Senior Executive Vice President and General Counsel and a director of John Hancock since 2000 and a director of John Hancock Life Insurance Company since 1998. From 1996 to 2000, Mr. Budd was Group President-New England for Bell Atlantic Corporation (now Verizon Communications, Inc.). From 1994 to 1997, he was a Commissioner, United States Sentencing Commission and from 1993 to 1996,

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Mr. Budd was a senior partner at the law firm of Goodwin Procter. From 1992 to 1993, he was an Associate Attorney General of the United States and from 1989 to 1992, he was United States Attorney for the District of Massachusetts. He is a director of Premcor, Inc. Mr. Budd has been a director of McKesson since October 2003. He is a member of the Audit Committee and the Committee on Directors and Corporate Governance.

      Mr. Irby is a founding partner of Tricorn Partners LLP, a privately held investment bank. He was a partner of Gleacher & Co. Ltd. from January 2001 until April 2003, was Chairman of Cobalt Media Group from January 2000 to July 2003, and was Chairman and Chief Executive Officer of HawkPoint Partners from 1997 until 2000. He is the chairman of ContentFilm plc and he also serves as a director of Penumbra Ltd. and Edmiston & Co. He is also a director of an indirect wholly-owned subsidiary of McKesson, McKesson Information Solutions UK Limited. Mr. Irby has been a director of McKesson since 1999. He is Chairman of the Compensation Committee and a member of the Finance Committee.

      Dr. Lawrence has been Chairman Emeritus of Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals since May 2002. He served as Chairman of the Board from 1992 to May 2002 and Chief Executive Officer from 1991 to May 2002 of Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals. He held a number of management positions with these organizations prior to assuming these positions, including Vice Chairman of the Board and Chief Operating Officer. He is a director of Agilent Technologies and Raffles Medical Group, Inc. Dr. Lawrence has been a director of McKesson since January 2004. He is a member of the Compensation Committee.

      Mr. Napier retired as Chairman of the Board, Scientific-Atlanta, Inc., a cable and telecommunications manufacturing company, in November 2000. He had been the Chairman of the Board since 1993. He is also a director of Engelhard Corporation, Vulcan Materials Company, Intelligent Systems, Inc. and WABTEC Corporation. Mr. Napier has been a director of McKesson since 1999. He is a member of the Finance Committee.

      Mr. Hammergren was named Chairman of the Board effective July 31, 2002 and was named President and Chief Executive Officer of McKesson effective April 1, 2001. He was Co-President and Co-Chief Executive Officer of McKesson from July 1999 until April 2001. He was Executive Vice President of McKesson and President and Chief Executive Officer of the Supply Management Business from January 1999 to July 1999; Group President, McKesson Health Systems from 1997 to 1999 and Vice President of McKesson since 1996. He is a director of Nadro, S.A. de C.V. (Mexico) and Verispan LLC, entities in which McKesson holds interests. He has been a director of McKesson since 1999.

      Ms. Jacobs is the President and Chief Executive Officer of Theragenics Corporation, a cancer treatment products manufacturing and distributing company. She also held the position of Chairman from 1998 to 2005. She was Co-Chairman of the Board from 1997 to 1998 and was elected President in 1992 and Chief Executive Officer in 1993. Ms. Jacobs has been a director of McKesson since 1999. She is a member of the Compensation Committee and the Committee on Directors and Corporate Governance.

      Mr. Matschullat is a private equity investor. He was Vice Chairman and Chief Financial Officer of The Seagram Company Ltd. from 1995 to 2000. Previously, he was head of worldwide investment banking for Morgan Stanley & Co. Incorporated and from 1992 to 1995, was a director of Morgan Stanley Group. Mr. Matschullat is a director of The Clorox Company and of The Walt Disney Company. He has been a director of McKesson since October 2002. He is Chairman of the Finance Committee and a member of the Audit Committee.

      Mr. Campbell has served as Executive Vice President and Chief Financial Officer of McKesson since April 2004, and served as Chief Financial Officer of McKesson since December 2003, and Senior Vice President of McKesson since January 2004. Previously, he served as Senior Vice President and Chief Financial Officer, AMR Corporation from 2002 to 2003, Vice President Europe from 2000 to 2002, Vice President Corporate Development and Treasurer from 1998 to 2000, and held various AMR management positions beginning in 1990. He has been with McKesson for one year.

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      Mr. Julian has served as Executive Vice President, Group President of McKesson since April 2004 and served as Senior Vice President of McKesson since August 1999, and President of the Supply Solutions Business of McKesson since March 2000. Additionally, he serves as President of Spirit Acquisition Corporation. Previously, he served as Group President, McKesson General Medical from 1997 to 2000 and as Executive Vice President, McKesson Health Systems from 1996 to 1997. He has been with McKesson for nine years.

      Mr. Meyerson has served as Corporate Secretary of McKesson since April 1999, Executive Vice President and General Counsel of McKesson since April 2004, and Senior Vice President and General Counsel of McKesson since January 1999. Previously, he served as Vice President and General Counsel of McKesson from 1987 to January 1999. He has been with McKesson for 27 years.

      Mr. Owen has served as Executive Vice President, Corporate Strategy and Business Development of McKesson since April 2004, as Senior Vice President, Corporate Strategy and Business Development of McKesson since October 2001 and as a consultant to McKesson from April 2001 to September 2001. Previously, he served as President and CEO of MindCrossing from April to November 2000 and as a Senior Partner of McKinsey and Company from 1987 to 2000. He has been with McKesson for four years.

      Ms. Pure has served as Executive Vice President, President, McKesson Provider Technologies since April 2004. Previously, she has served as Chief Operating Officer, McKesson Information Solutions from 2002 to 2004, Group President from 2001 to 2002 and Chief Operating Officer, Channel Health from 1999 to 2001. She has been with McKesson for four years.

      Mr. Spratt has served as Executive Vice President and Chief Information Officer of McKesson since July 1, 2005. He has been with McKesson for more than 18 years, most recently as chief process officer for McKesson Provider Technologies, McKesson’s medical software and services division. Additionally, he also managed the Business Development, Information Technology, and Strategic Planning offices, as well as the Technology Services business of McKesson Provider Technologies.

S-4

ANNEX I

DELAWARE GENERAL CORPORATION LAW

SECTION 262

APPRAISAL RIGHTS

§ 262. Appraisal rights.

      (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder’s shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word “stockholder” means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words “stock” and “share” mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words “depository receipt” mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.

      (b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to § 251 (other than a merger effected pursuant to § 251(g) of this title), § 252, § 254, § 257, § 258, § 263 or §264 of this title:

      (1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of § 251 of this title.

      (2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except:

      a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;

      b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders;

      c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or

      d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph.

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      (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.

      (c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable.

      (d) Appraisal rights shall be perfected as follows:

      (1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder’s shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder’s shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or

      (2) If the merger or consolidation was approved pursuant to § 228 or § 253 of this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder’s shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder’s shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given,

A-2

provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.

      (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder’s demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder’s written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later.

      (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.

      (g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.

      (h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder’s certificates of stock to the Register in Chancery, if such is required, may

A-3

participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section.

      (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court’s decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.

      (j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney’s fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.

      (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder’s demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just.

      (l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.

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      Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each Stockholder of the D&K or his broker, dealer, commercial bank, trust company or other nominee to the Depositary, at one of the addresses set forth below:

The Depositary for the Offer is:

THE BANK OF NEW YORK

By Mail:	By Overnight Courier:	By Hand:
The Bank of New York Reorganization Services P.O. Box 859208 Braintree, MA 02185-9208	The Bank of New York Reorganization Services 161 Bay State Road Braintree, MA 02184	The Bank of New York Reorganization Services 101 Barclay Street, 1-E Receive and Deliver Window New York, NY 10286

By Facsimile Transmission:

(For Eligible Institutions Only)

781-380-3388

To Confirm Facsimile Only:

781-843-1833, Ext. 200

      Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and all other tender offer material may be directed to the Information Agent at its address and telephone numbers set forth below. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer.

The Information Agent for the Offer is:

17 State Street, 10^th Floor

New York, NY 10004

Banks and Brokers Call Collect: (212) 440-9800

All Others Call Toll-Free: (866) 391-6922

EX-99.2

EXHIBIT 99.2
EXHIBIT (a)(1)(B)

Letter of Transmittal

to Tender Shares of Common Stock

(Including the Associated Preferred Stock Purchase Rights)

of

D & K Healthcare Resources, Inc.

Pursuant to the Offer to Purchase dated July 22, 2005

by

Spirit Acquisition Corporation

a wholly owned subsidiary of

McKesson Corporation

      THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, AUGUST 18, 2005, UNLESS THE OFFER IS EXTENDED.

The Depositary for the Offer is:

THE BANK OF NEW YORK

By Mail: The Bank of New York Reorganization Services P.O. Box 859208 Braintree, MA 02185-9208	By Overnight Courier: The Bank of New York Reorganization Services 161 Bay State Road Braintree MA 02184	By Hand: The Bank of New York Reorganization Services 101 Barclay Street, 1-E Receive and Deliver Window New York, New York 10286
By Facsimile Transmission: (For Eligible Institutions Only) 781-380-3388 To Confirm Facsimile Only: 781-843-1833, Ext. 200

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFOR BELOW, WITH SIGNATURE GUARANTEE IF REQUIRED, AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.

DESCRIPTION OF SHARES TENDERED
Name(s) and Address(es) of Registered Holder(s)
Please fill in blank, exactly as name(s) appear(s) on	Share Certificate(s) and Share(s) Tendered
Share Certificate(s)	(Attach additional signed list if necessary)
		Total Number of
		Shares
		Represented by	Number of
	Share Certificate	Share	Shares
	Number(s)*	Certificate(s)*	Tendered**
	Total Shares
* Need not be completed if transfer is made by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares described above are being tendered. See Instruction 4.

o  CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE BEEN LOST, DESTROYED OR STOLEN. SEE INSTRUCTION 11.

THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD

BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.

      This Letter of Transmittal is to be used by stockholders of D & K Healthcare Resources, Inc. either if certificates for Shares (as defined below) are to be forwarded herewith or, unless an Agent’s Message (as defined in Instruction 2 below) is utilized, if delivery of Shares is to be made by book-entry transfer to an account maintained by the Depositary at the Book-Entry Transfer Facility (as defined in, and pursuant to the procedures set forth in, Section 2 of the Offer to Purchase).

      Holders of Shares whose certificates for Shares are not immediately available or who cannot deliver either the certificates for, or a Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to, their Shares and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in the Offer to Purchase) must tender their Shares in accordance with the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

TENDER OF SHARES

o  CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY

2

TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):

Name of Tendering Institution: 

Account Number: 

Transaction Code Number: 

o  CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY, ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:

Name(s) of Registered Holder(s): 

Window Ticket No. (if any): 

Date of Execution of Notice of Guaranteed Delivery: 

Name of Eligible Institution that Guaranteed Delivery: 

3

NOTE: SIGNATURES MUST BE PROVIDED BELOW

PLEASE READ THE INSTRUCTIONS SET FORTH IN

THIS LETTER OF TRANSMITTAL CAREFULLY

Ladies and Gentlemen:

      The undersigned hereby tenders to Spirit Acquisition Corporation, a Delaware corporation (“Purchaser”) and a wholly owned subsidiary of McKesson Corporation, a Delaware corporation (“Parent”), the above-described shares of common stock, par value $0.01 per share (the “Common Stock”), of D & K Healthcare Resources, Inc., a Delaware corporation (“D&K”), including the associated preferred stock purchase rights and other rights (the “Rights” and, together with the Common Stock, the “Shares”) issued pursuant to the Rights Agreement, dated as of November 12, 1998, between D&K and Harris Trust and Savings Bank, at a purchase price of $14.50 per Share, net to the seller in cash, without interest thereon and less any required withholding taxes, upon the terms and subject to the conditions set forth in Purchaser’s Offer to Purchase, dated July 22, 2005 (the “Offer to Purchase”), and this Letter of Transmittal (which, together with any amendments or supplements thereto or hereto, collectively constitute the “Offer”). Receipt of the Offer is hereby acknowledged.

      Upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms of such extension or amendment) and effective upon acceptance for payment of, and payment for, the Shares tendered herewith in accordance with terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby (and any and all dividends, distributions, rights, other Shares or other securities issued or issuable in respect thereof on or after the date hereof (collectively, “Distributions”)) and irrevocably constitutes and appoints The Bank of New York (the “Depositary”), the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any and all Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver certificates for such Shares (and any Distributions) or transfer ownership of such Shares (and any and all Distributions) on the account books maintained by the Book-Entry Transfer Facility together, in any such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, Purchaser, (ii) present such Shares (and any and all Distributions) for transfer on D&K’s books and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any and all Distributions), all in accordance with the terms of the Offer.

      By executing this Letter of Transmittal, the undersigned hereby irrevocably appoints the designees of Purchaser, and each of them, as the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote at any annual, special or adjourned meeting of D&K’s stockholders or otherwise in such manner as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, to execute any written consent concerning any matter as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, and to otherwise act as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, the Shares (and any Distributions) tendered hereby that have been accepted for payment by Purchaser prior to the time any such action is taken and with respect to which the undersigned is entitled to vote. This appointment is effective when, and only to the extent that, Purchaser accepts for payment such Shares (and any and all Distributions) as provided in the Offer to Purchase. This power of attorney and proxy are irrevocable and are granted in consideration of the acceptance for payment of such Shares in accordance with terms of the Offer. Upon such acceptance for payment, all prior powers of attorney, proxies and consents given by the undersigned with respect to such Shares (and any and all Distributions) will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given (and, if given, will not be deemed effective) by the undersigned. Purchaser reserves the right to require that, in order for the Shares or other securities to be deemed validly tendered, immediately upon Purchaser’s acceptance for payment of such Shares, Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares (and any and all Distributions), including voting at any meeting of D&K’s stockholders.

4

      The undersigned hereby represents and warrants (i) that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and any and all Distributions, (ii) that the undersigned owns the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (iii) that the tender of the tendered Shares complies with Rule 14e-4 under the Exchange Act and (iv) that, when the same are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto and to any and all Distributions, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and any and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of Purchaser any and all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby or deduct from such purchase price, the amount or value of such Distribution as determined by Purchaser in its sole discretion.

      All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable.

      The undersigned understands that the valid tender of Shares pursuant to any of the procedures described in Section 2 of the Offer to Purchase and in the Instructions hereto will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms or conditions of any such extension or amendment). Without limiting the foregoing, if the price to be paid in the Offer is amended in accordance with the Merger Agreement (as defined in the Offer to Purchase), the price to be paid to the undersigned will be the amended price notwithstanding the fact that a different price is stated in this Letter of Transmittal. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, Purchaser may not be required to accept for payment any of the Shares tendered hereby.

      Unless otherwise indicated herein under “Special Payment Instructions,” please issue the check for the purchase price of all of the Shares purchased and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of the registered holder(s) appearing under “Description of Shares Tendered.” Similarly, unless otherwise indicated under “Special Delivery Instructions,” please mail the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment (and any accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under “Description of Shares Tendered.” In the event that both the “Special Delivery Instructions” and the “Special Payment Instructions” are completed, please issue the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment (and any accompanying documents, as appropriate) in the name(s) of, and deliver such check and/or return such certificates (and any accompanying documents, as appropriate) to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled “Special Payment Instructions,” please credit any Shares tendered herewith by book-entry transfer that are not accepted for payment by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that Purchaser has no obligation pursuant to the “Special Payment Instructions” to transfer any Shares from the name of the registered holder thereof if Purchaser does not accept for payment any of the Shares so tendered.

5

SPECIAL PAYMENT INSTRUCTIONS

(See Instructions 1, 5, 6 and 7)

   To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be issued in the name of someone other than the undersigned.

Issue:     o  Check o  Certificate(s) to:

Name: 

(Please Print)

Address: 

(Include Zip Code)

(Taxpayer Identification or Social Security Number)

(Also complete Substitute Form W-9 included herein)

SPECIAL DELIVERY INSTRUCTIONS

(See Instructions 1, 5, 6 and 7)

   To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be sent to someone other than the undersigned or to the undersigned at an address other than that shown under “Description of Shares Tendered.”

Mail:     o  Check o  Certificate(s) to:

Name: 

(Please Print)

Address: 

(Include Zip Code)

6

IMPORTANT—SIGN HERE

(Also Complete Substitute Form W-9 Below)

(Signature(s) of Stockholder(s))

Dated: , 200

(Must be signed by registered holder(s) as name(s) appear(s) on the certificate(s) for the Shares or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or other acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.)

Name(s):

________________________________________________________________________________  

(Please Print)

Capacity (Full Title): 

________________________________________________________________________________

Address: 

(Include Zip Code)

Area Code and Telephone Number: 

________________________________________________________________________________

Taxpayer Identification or Social Security Number: 

(See Substitute Form W-9)

Guarantee of Signature(s)

(If Required — See Instructions 1 and 5)

FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE BELOW.

Authorized Signature(s): 

________________________________________________________________________________

Name(s):

________________________________________________________________________________

(Please Print)

Title: 

________________________________________________________________________________

Name of Firm: 

________________________________________________________________________________

Address: 

(Include Zip Code)

Area Code and Telephone Number: 

________________________________________________________________________________

Dated: , 200

7

INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

      1. Guarantee of Signatures. Except as otherwise provided below, signatures on this Letter of Transmittal must be guaranteed by a firm that is a bank, broker, dealer, credit union, savings association or other entity and a member in good standing of a Medallion Program approved by the Securities Transfer Association, Inc. or any other “eligible guarantor institution” (as such term is defined in Rule 17Ad-15 under the Exchange Act (each an “Eligible Institution”)), unless the Shares tendered hereby are tendered (i) by a registered holder of Shares (which term, for the purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) who has not completed either the box labeled “Special Payment Instructions” or the box labeled “Special Delivery Instructions” on this Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instruction 5.

      2. Requirements of Tender. This Letter of Transmittal is to be completed by stockholders either if certificates are to be forwarded herewith or, unless an Agent’s Message (as defined below) is utilized, if delivery of Shares is to be made pursuant to the procedures for book-entry transfer set forth in Section 2 of the Offer to Purchase. For a stockholder to validly tender Shares pursuant to the Offer, either (i) a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, together with any required signature guarantees or, in the case of a book-entry transfer, an Agent’s Message, and any other required documents, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) and either certificates for tendered Shares must be received by the Depositary at one of such addresses or Shares must be delivered pursuant to the procedures for book-entry transfer set forth herein (and a Book-Entry Confirmation (as defined in the Offer to Purchase) must be received by the Depositary), in each case, prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedures set forth below and in Section 2 of the Offer to Purchase.

      Stockholders whose certificates for Shares are not immediately available or who cannot deliver their certificates and all other documents to the Depositary or complete the procedures for book-entry transfer prior to the Expiration Date may tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Pursuant to such procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by Purchaser with the Offer to Purchase must be received by the Depositary prior to the Expiration Date and (iii) the certificates for all tendered Shares in proper form or transfer (or a Book-Entry Confirmation with respect to all such Shares), together with a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent’s Message, and any other required documents, must be received by the Depositary within three Nasdaq trading days after the date of execution of such Notice of Guaranteed Delivery as provided in Section 2 of the Offer to Purchase. A “Nasdaq trading day” is any day on which the National Association of Securities Dealers Automated Quotation System is open for business.

      “Agent’s Message” means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, that states that such Book-Entry Transfer Facility has received an express acknowledgement from the participant in such Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant.

      The method of delivery of Share certificates, this Letter of Transmittal and all other required documents including delivery through any Book-Entry Transfer Facility, is at the election and sole risk of the tendering stockholder. Share certificates will be deemed delivered only when actually received by the Depositary (including, in the case of a book-entry transfer, by Book-Entry Confirmation). If delivery is by mail, registered mail, with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery.

8

      No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or facsimiles thereof), waive any right to receive any notice of the acceptance of their Shares for payment.

      3. Inadequate Space. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate signed schedule attached hereto.

      4. Partial Tenders (Not Applicable to Stockholders who Tender by Book-Entry Transfer). If fewer than all of the Shares evidenced by any certificate submitted are to be tendered, fill in the number of Shares that are to be tendered in the box entitled “Number of Shares Tendered.” In this case, new certificate(s) for the remainder of the Shares that were evidenced by the old certificate(s) will be sent to the registered holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the acceptance of payment of, and payment for the Shares tendered herewith. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated.

      5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder of the Shares tendered hereby, the signature must correspond with the name as written on the face of the certificate(s) without any change whatsoever.

      If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal.

      If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates.

      If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to Purchaser of their authority so to act must be submitted.

      If this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to, or certificates for Shares not tendered or accepted for payment are to be issued to, a person other than the registered owner(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution.

      If this Letter of Transmittal is signed by a person other than the registered owner(s) of certificates listed, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution.

      6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6, Purchaser will pay any stock transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates for Shares not tendered or accepted for payment are to be registered in the name of, any person(s) other than the registered owner(s), or if tendered certificates are registered in the name of any person(s) other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered owner(s) or such other person(s)) payable on account of the transfer to such other person(s) will be deducted from the purchase price of such Shares purchased unless evidence satisfactory to Purchaser of the payment of such taxes, or exemption therefrom, is submitted.

      Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificate(s) evidencing the Shares tendered hereby.

      7. Special Payment and Delivery Instructions. If a check is to be issued in the name of, and/or certificates for Shares not tendered or not accepted for payment are to be issued or returned to, a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to a person other than the person(s) signing this Letter of Transmittal or to an address other than that shown in this Letter of Transmittal, the appropriate boxes on this Letter of Transmittal should be completed.

9

      8. Waiver of Conditions. Subject to the terms and conditions of the Merger Agreement (as defined in the Offer to Purchase), Purchaser reserves the right, in its reasonable discretion, to waive, at any time or from time to time, any of the specified conditions of the Offer, in whole or in part, in the case of any Shares tendered.

      9. Substitute Form W-9. To ensure compliance with Treasury Department Circular 230, you are hereby notified that: (A) any federal tax advice contained herein is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code; (B) the advice is written in connection with the promotion or marketing of the transaction or the matters addressed herein; and (C) the taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

      Federal income tax law generally requires that a stockholder whose Shares are tendered and accepted for payment pursuant to the Offer must provide the Depositary (as payor) with such stockholder’s correct Taxpayer Identification Number (a “TIN”), which is generally such stockholder’s social security number or federal employer identification number, or otherwise establish an exemption. If the Depositary is not provided with the correct TIN or an adequate basis for an exemption, such stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service and backup withholding at the applicable rate on the amount of the gross proceeds received pursuant to the Offer. If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished to the Internal Revenue Service.

      To prevent backup withholding, each stockholder that is a United States person must provide such stockholder’s correct TIN by completing the “Substitute Form W-9” set forth herein, certifying that (A) the TIN provided is correct (or that such stockholder is awaiting a TIN), (B) the stockholder is a United States person, and (C) (i) the stockholder is exempt from backup withholding, (ii) the stockholder has not been notified by the Internal Revenue Service that such stockholder is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the Internal Revenue Service has notified the stockholder that such stockholder is no longer subject to backup withholding.

      If a stockholder that is a United States person does not have a TIN, such stockholder should consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the “W-9 Guidelines”) for instructions on applying for a TIN, check the box in Part 4 of the Substitute From W-9 and sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification Number set forth herein. If the box in Part 4 is checked and the Depositary is not provided with a TIN by the time of payment, the Depositary may withhold a portion of all such payments until a TIN is provided to the Depositary. Note: Writing “Applied For” on the form means that the stockholder has already applied for a TIN or that such stockholder intends to apply for one in the near future.

      If the Shares are held in more than one name or are not in the name of the actual owner, consult the W-9 Guidelines for information on which TIN to report.

      Exempt holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent possible backup withholding, an exempt stockholder that is a United States person should check the box in Part 2 of Substitute Form W-9. See the W-9 Guidelines for additional instructions.

      In order for a nonresident alien or foreign entity to qualify as exempt, such person generally must submit a completed Form W-8BEN, signed under penalty of perjury, attesting to such exempt status. Such form may be obtained from the Depositary.

      10. Requests for Assistance or Additional Copies. Questions and requests for assistance may be directed to the Information Agent at the address listed below. Additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 also may be obtained from the Information Agent or from brokers, dealers, banks, trust companies or other nominees.

      11. Lost, Destroyed or Stolen Certificates. If any certificate representing Shares has been lost, destroyed or stolen, the stockholder should promptly notify Computershare Investor Services (the “Transfer Agent”) at

10

(312) 588-4730. The stockholder will then be instructed by the Transfer Agent as to the steps that must be taken in order to replace the certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed.

      IMPORTANT: This Letter of Transmittal (or a manually signed facsimile hereof) together with any required signature guarantees, or, in the case of a book-entry transfer, an Agent’s Message, and any other required documents, must be received by the Depositary prior to the Expiration Date and either certificates for tendered Shares must be received by the Depositary or Shares must be delivered pursuant to the procedures for book-entry transfer, in each case prior to the Expiration Date, or the tendering stockholder must comply with the procedures for guaranteed delivery.

11

PAYERS NAME: THE BANK OF NEW YORK, AS DEPOSITARY
SUBSTITUTE Form W-9 Department of the Treasury Internal Revenue Service Payer’s Request For Taxpayer Identification Number (“TIN”) and Certification	Part 1 — PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW	Social Security Number OR Employer Identification Number(s)
Part 2—PLEASE CHECK THIS BOX IF YOU ARE EXEMPT FROM BACKUP WITHHOLDING EXEMPT PAYEEo Part 3—Certification(Under Penalties of Perjury), I certify that: (1) The number shown on this form is my current Taxpayer Identification Number (or I am waiting for a number to be issued to me); (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service (the “IRS”) that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and (3) I am a U.S. person (including a U.S. resident alien). Part 4—Awaiting TINo
Signature:    Date:   Name:   Address:   City:     State:     Zip Code:
Certification Instructions — You must cross out item (2) in Part 3 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if, after being notified by the IRS that you are subject to backup withholding, you then receive another notification from the IRS stating that you are no longer subject to backup withholding, then do not cross out item (2).

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING AT THE APPLICABLE RATE ON ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK THE BOX IN PART 4 OF SUBSTITUTE FORM W-9.

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

     I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me, and either (a) I have mailed or delivered an application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a Taxpayer Identification Number an amount equal to the then applicable backup withholding rate on all reportable payments made to me will be withheld until I provide a number.

Signature  Date 

12

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK

THE BOX IN PART 4 OF SUBSTITUTE FORM W-9.

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

      I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me, and either (a) I have mailed or delivered an application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a Taxpayer Identification Number an amount equal to the then applicable backup withholding rate on all reportable payments made to me will be withheld until I provide a number.

Signature                                    

Date                                    

      NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING AT THE APPLICABLE RATE ON ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

      MANUALLY SIGNED FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH STOCKHOLDER OF THE COMPANY OR SUCH STOCKHOLDER’S BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH ON THE FIRST PAGE.

      Questions and requests for assistance may be directed to the Information Agent at its address and telephone number listed below. Additional copies of the Offer to Purchase, this Letter of Transmittal and other tender offer materials also may be obtained from the Information Agent as set forth below, and will be furnished promptly at Purchaser’s expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer.

The Information Agent for the Offer is:

17 State Street, 10th Floor

New York, NY 10004

Banks and Brokers Call Collect: (212) 440-9800

All Others Call Toll-Free: (866) 391-6922

13 EX-99.3 4 f10807exv99w3.htm EXHIBIT 99.3

EXHIBIT 99.3
EXHIBIT (a)(1)(C)

Notice of Guaranteed Delivery

for Tender of Shares of Common Stock

(Including the Associated Preferred Stock Purchase Rights)

of

D & K Healthcare Resources, Inc.

to

Spirit Acquisition Corporation

a wholly owned subsidiary of

McKesson Corporation

(Not to be used for signature guarantees)

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, AUGUST 18, 2005, UNLESS THE OFFER IS EXTENDED.

      This Notice of Guaranteed Delivery, or a form substantially equivalent to it, must be used to accept the Offer (as defined below) if certificates representing Shares (as defined below) are not immediately available, if the procedure for book-entry transfer cannot be completed prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), or if time will not permit all required documents to reach The Bank of New York (the “Depositary”) prior to the Expiration Date. This form may be delivered by hand or mailed to the Depositary. See Section 2 of the Offer to Purchase.

The Depositary for the Offer is:

THE BANK OF NEW YORK

By Hand:	By Mail:	By Overnight Courier:
The Bank of New York Reorganization Services P.O. Box 859208 Braintree, MA 02185-9208	The Bank of New York Reorganization Services 161 Bay State Road Braintree, MA 02184	The Bank of New York Reorganization Services 101 Barclay Street, 1-E Receive and Deliver Window New York, NY 10286

By Facsimile Transmission:

(For Eligible Institutions Only):

781-380-3388

To Confirm Facsimile Only:

781-843-1833, Ext. 200

      DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SPECIFIED ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN AS SPECIFIED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.

      This form Notice of Guaranteed Delivery to the Depositary is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an “Eligible Institution” (as defined in the Offer to Purchase) under the instructions to such Letter of Transmittal, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal.

      The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal or an Agent’s Message (as defined in the Offer to Purchase) and certificates for Shares to the Depositary within the period shown herein. Failure to do so could result in a financial loss to such Eligible Institution.

THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.

2

Ladies and Gentlemen:

      The undersigned hereby tenders to Spirit Acquisition Corporation, a Delaware corporation (“Purchaser”) and a wholly owned subsidiary of McKesson Corporation, a Delaware corporation (“Parent”), upon the terms and subject to the conditions set forth in Purchaser’s Offer to Purchase, dated July 22, 2005 (the “Offer to Purchase”), and in the related Letter of Transmittal (which, together with the Offer to Purchase and any amendments and supplements to the Offer to Purchase and the Letter of Transmittal, collectively constitute the “Offer”), receipt of which is hereby acknowledged, the number of shares indicated below of common stock, par value $0.01 per share (the “Common Stock”), of D & K Healthcare Resources, Inc., a Delaware corporation (“D&K”), including the associated preferred stock purchase rights and other rights (the “Rights” and, together with the Common Stock, the “Shares”) issued pursuant to the Rights Agreement, dated as of November 12, 1998, between D&K and Harris Trust and Savings Bank pursuant to the guaranteed delivery procedures described in Section 2 of the Offer to Purchase.

Name(s) of Record Holder(s): 

(Please Print)

Number of Shares Tendered: 

(Please Print)

Certificate No.(s) (if available): 

(Please Print)

Address(es): 

(Zip Code)

o  Check if securities will be tendered by book-entry transfer

Name of Tendering Institution: 

Area Code and Telephone No.(s): 

Signature(s): 

Account No.: 

Dated: _______________, 2005

3

GUARANTEE

(Not to be used for signature guarantees)

          The undersigned, a participant in a Medallion Program approved by the Securities Transfer Association, Inc. or any other “eligible guarantor institution” (as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended), hereby guarantees to deliver to the Depositary either certificates representing the Shares tendered hereby, in proper form for transfer, or confirmation of a book-entry transfer of such Shares into the Depositary’s account at The Depository Trust Company, in each case, with delivery of a Letter of Transmittal or facsimile thereof properly completed and duly executed, with any required signature guarantees, or an Agent’s Message (as defined in the Offer to Purchase), and any other documents required by the Letter of Transmittal, within three Nasdaq National Market trading days after the date hereof.

          The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and certificates for Shares to the Depositary within the same time period stated herein. Failure to do so could result in a financial loss to such Eligible Institution.

Name of Firm: 

Address: 

(Zip Code)

Area Code & Tel. No.: 

Authorized Signature

Name: 

Please Print

Title: 

Dated: ____________________, 2005

DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES

SHOULD BE SENT ONLY WITH YOUR LETTER OF TRANSMITTAL.

4 EX-99.4 5 f10807exv99w4.htm EXHIBIT 99.4

EXHIBIT 99.4
EXHIBIT (a)(1)(D)

Offer to Purchase for Cash

All Outstanding Shares of Common Stock

(Including the Associated Preferred Stock Purchase Rights)

of

D & K Healthcare Resources, Inc.

at

$14.50 Net Per Share

by

Spirit Acquisition Corporation

a wholly owned subsidiary of

McKesson Corporation

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY

TIME, ON THURSDAY, AUGUST 18, 2005, UNLESS THE OFFER IS EXTENDED.

July 22, 2005

To Brokers, Dealers, Commercial Banks,

Trust Companies and Other Nominees:

      We have been appointed by Spirit Acquisition Corporation, a Delaware corporation (“Purchaser”) and a wholly owned subsidiary of McKesson Corporation, a Delaware corporation (“Parent”), to act as Information Agent in connection with Purchaser’s offer to purchase all of the outstanding shares of common stock, par value $0.01 per share (the “Common Stock”), of D & K Healthcare Resources, Inc., a Delaware corporation (“D&K”), including the associated preferred stock purchase rights and other rights (the “Rights” and, together with the Common Stock, the “Shares”) issued pursuant to the Rights Agreement, dated as of November 12, 1998, between D&K and Harris Trust and Savings Bank, at a purchase price of $14.50 per Share (the “Offer Price”), net to the seller in cash, without interest thereon and less any required withholding taxes, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 22, 2005 (the “Offer to Purchase”), and in the related Letter of Transmittal (which, together with the Offer to Purchase and any amendments and supplements to the Offer to Purchase or the Letter of Transmittal, collectively constitute the “Offer”) enclosed herewith. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee.

      The Offer is conditioned upon, among other things, (1) there being validly tendered and not properly withdrawn prior to the expiration of the Offer that number of Shares which represents at least a majority of the then outstanding shares of Common Stock on an as-if-converted basis and (2) the expiration or termination of any applicable waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Offer is also subject to other terms and conditions contained in the Offer to Purchase. See the Introduction and Sections 1, 15 and 16 of the Offer to Purchase.

      For your information and to forward to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents:

1.	Offer to Purchase dated July 22, 2005;
2.	Letter of Transmittal for your use in accepting the Offer and tendering Shares and for the information of your clients in accepting the Offer (facsimile copies of the Letter of Transmittal may be used to tender the Shares);

3.	The Letter to D&K stockholders, dated July 22, 2005, from the Chief Executive Officer of D&K accompanied by D&K’s Solicitation/ Recommendation Statement on Schedule 14D-9;
4.	Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares and all other required documents cannot be delivered to the Depositary, or if the procedures for book-entry transfer cannot be completed, by the Expiration Date (as defined in the Offer to Purchase);
5.	A letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients’ instructions with regard to the Offer;
6.	Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and
7.	A return envelope addressed to The Bank of New York (the “Depositary”).

      WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, AUGUST 18, 2005, UNLESS THE OFFER IS EXTENDED.

      The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of July 8, 2005 (the “Merger Agreement”), by and among Parent, Purchaser and D&K. The Merger Agreement provides, among other things, for the commencement of the Offer by Purchaser. Following consummation of the Offer and subject to the satisfaction or waiver of certain conditions, Purchaser will be merged with and into D&K (the “Merger”), with the surviving corporation becoming a wholly owned subsidiary of Parent. In the Merger, each outstanding Share (other than Shares held by stockholders of D&K who have properly exercised their appraisal rights under Delaware law, Shares held by D&K or any subsidiary of D&K and Shares held by Parent or any subsidiary of Parent) will be converted at the effective time of the Merger into the right to receive an amount in cash equal to the Offer Price, without interest thereon and less any required withholding taxes.

      Upon the terms and subject to the satisfaction or waiver of the conditions of the Offer prior to the Expiration Date (including, if the Offer is extended or amended, as required or permitted by the Merger Agreement, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and thereby purchase all Shares validly tendered prior to the Expiration Date and not properly withdrawn if, as and when Purchaser gives oral or written notice to the Depositary of Purchaser’s acceptance of such Shares for payment pursuant to the Offer.

      Payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (1) share certificates for such Shares, or timely confirmation of a book-entry transfer of such Shares into the Depositary’s account at The Depository Trust Company, pursuant to the procedures described in Section 2 of the Offer to Purchase, (2) a properly completed and duly executed Letter of Transmittal (or a properly completed and manually signed facsimile thereof) or an Agent’s Message (as defined in the Offer to Purchase) in connection with a book-entry transfer and (3) any other documents required by the Letter of Transmittal. Accordingly, tendering Stockholders may be paid at different times, depending upon when certificates for Shares or Book-Entry Confirmations with respect to such Shares are actually received by the Depositary. Under no circumstances will interest be paid on the purchase price of the Shares to be paid by Purchaser, regardless of any extension of the Offer or any delay in making such payment.

      Parent and Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Depositary and the Information Agent, as described in the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. Parent will reimburse brokers, dealers, commercial banks and trust companies and other nominees, upon request, for customary clerical and mailing expenses incurred by them in forwarding the enclosed materials to their customers.

      Purchaser will pay or cause to be paid all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the Letter of Transmittal.

      In order to take advantage of the Offer, a duly executed and properly completed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees, or an Agent’s Message in connection with a book-entry transfer of Shares, and any other required documents, should be sent to the Depositary, and certificates

2

representing the tendered Shares should be delivered or such Shares should be tendered by book-entry transfer, all in accordance with the instructions contained in the Letter of Transmittal and in the Offer to Purchase.

      If holders of Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents or to complete the procedures for delivery by book-entry transfer prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedures described in Section 2 of the Offer to Purchase.

      Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from, the Information Agent at its address and telephone number set forth on the back cover of the Offer to Purchase.

Very truly yours,

Georgeson Shareholder

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS WILL CONSTITUTE YOU THE AGENT OF PURCHASER, PARENT, D&K, THE INFORMATION AGENT, THE DEPOSITARY OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.

3 EX-99.5 6 f10807exv99w5.htm EXHIBIT 99.5

EXHIBIT 99.5
EXHIBIT (a)(1)(E)

Offer to Purchase for Cash

All Outstanding Shares of Common Stock

(Including the Associated Preferred Stock Purchase Rights)

of

D & K Healthcare Resources, Inc.

at

$14.50 Net Per Share

by

Spirit Acquisition Corporation

a wholly owned subsidiary of

McKesson Corporation

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY

TIME, ON THURSDAY, AUGUST 18, 2005, UNLESS THE OFFER IS EXTENDED.

July 22, 2005

To Our Clients:

      Enclosed for your consideration are the Offer to Purchase, dated July 22, 2005 (the “Offer to Purchase”), and the related Letter of Transmittal (which, together with the Offer to Purchase and any amendments and supplements to the Offer to Purchase or the Letter of Transmittal, collectively constitute the “Offer”) in connection with the offer by Spirit Acquisition Corporation, a Delaware corporation (“Purchaser”) and a wholly owned subsidiary of McKesson Corporation, a Delaware corporation (“Parent”), to purchase all of the outstanding shares of common stock, par value $0.01 per share (the “Common Stock”), of D & K Healthcare Resources, Inc., a Delaware corporation (“D&K”), including the associated preferred stock purchase rights and other rights (the “Rights” and, together with the Common Stock, the “Shares”) issued pursuant to the Rights Agreement, dated as of November 12, 1998, between D&K and Harris Trust and Savings Bank, at a purchase price of $14.50 per Share (the “Offer Price”), net to you in cash, without interest thereon and less any required withholding taxes, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal.

      Also enclosed is the Letter to stockholders of D&K (the “Stockholders”), dated July 22, 2005, from the Chief Executive Officer of D&K accompanied by D&K’s Solicitation/ Recommendation on Schedule 14D-9.

      WE (OR OUR NOMINEES) ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE ENCLOSED LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.

      We request instructions as to whether you wish us to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions contained in the Offer.

      Your attention is directed to the following:

1.	The Offer Price is $14.50 per Share, net to you in cash, without interest thereon and less any required withholding taxes, upon the terms and subject to the conditions of the Offer.
2.	The Offer is being made for all outstanding Shares.

3.	The board of directors of D&K, by unanimous vote of all directors with one director, who is an officer of D&K’s financial advisor, abstaining, (A) has determined that the terms of the Merger Agreement (as defined below) and the transactions contemplated thereby, including the Offer and the Merger (each as defined in the Offer to Purchase), are advisable and fair to, and in the best interests of, D&K and the Stockholders, (B) has approved the Merger Agreement, the Stockholder Agreement (as defined in the Offer to Purchase) and the transactions contemplated thereby, including the Offer and the Merger and (C) recommends that the Stockholders accept the Offer and tender their Shares to Purchaser pursuant to the Offer.
4.	The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of July 8, 2005 (the “Merger Agreement”), by and among Parent, Purchaser and D&K. The Merger Agreement provides, among other things, for the commencement of the Offer by Purchaser. Following consummation of the Offer and subject to the satisfaction or waiver of certain conditions, Purchaser will be merged with and into D&K, with the surviving corporation becoming a wholly owned subsidiary of Parent. In the Merger, each outstanding Share (other than Shares held by Stockholders who have properly exercised their appraisal rights under Delaware law, Shares held by D&K or any subsidiary of D&K and Shares held by Parent or any subsidiary of Parent) will be converted at the effective time of the Merger into the right to receive an amount in cash equal to the Offer Price, without interest thereon and less any required withholding taxes.
5.	THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, AUGUST 18, 2005 (THE “EXPIRATION DATE”), UNLESS AND UNTIL, IN ACCORDANCE WITH THE TERMS OF THE MERGER AGREEMENT, PURCHASER EXTENDS THE PERIOD OF TIME FOR WHICH THE OFFER IS OPEN, IN WHICH EVENT THE TERM “EXPIRATION DATE” SHALL MEAN THE TIME AT WHICH THE OFFER, AS SO EXTENDED BY PURCHASER, WILL EXPIRE.
6.	The Offer is conditioned upon, among other things, (A) there being validly tendered and not properly withdrawn prior to the Expiration Date that number of Shares which represents at least a majority of the then outstanding shares of Common Stock on as-if-converted basis and (B) the expiration or termination of any waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Offer is also subject to other terms and conditions contained in the Offer to Purchase. See the Introduction and Sections 1, 15 and 16 of the Offer to Purchase.
7.	Any stock transfer taxes applicable to the transfer and sale of Shares to Purchaser pursuant to the Offer will be paid by Purchaser, except as otherwise provided in Instruction 6 of the Letter of Transmittal.
8.	Backup federal income tax withholding at the applicable rate may be required, unless the required taxpayer identification information is provided or an exemption otherwise applies. See Instruction 9 of the Letter of Transmittal.

      To ensure compliance with Treasury Department Circular 230, you are hereby notified that: (a) any federal tax advice contained herein is not intended or written to be used, and cannot be used, by stockholders for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code; (b) the advice is written in connection with the promotion or marketing of the transaction or the matters addressed herein; and (c) stockholders should seek advice based on the stockholder’s particular circumstances from an independent tax advisor.

9. Tendering Stockholders whose Shares are registered in their own name and who tender directly to the Depositary will not be obligated to pay brokerage fees or commissions to the Depositary or the Information Agent.

      Your instructions to us should be forwarded promptly to permit us to submit a tender on your behalf prior to the Expiration Date.

2

      If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the instruction form attached to this letter. An envelope to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified on the attachment to this letter. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.

      Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by The Bank of New York (the “Depositary”) of (a) certificates for, or Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to, such Shares, (b) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message (as defined in the Offer to Purchase)) and (c) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering Stockholders at the same time, and will depend upon when Share certificates or Book-Entry Confirmations of such Shares are received into the Depositary’s account at the Book-Entry Transfer Facility (as defined in the Offer to Purchase).

      UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PRICE FOR THE SHARES TO BE PAID BY PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.

      The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction in which the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction.

3

Instructions with Respect to the

Offer to Purchase for Cash

All Outstanding Shares of Common Stock

(Including the Associated Preferred Stock Purchase Rights)

of

D & K Healthcare Resources, Inc.

at

$14.50 Net Per Share in Cash

       The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated July 22, 2005, and the related Letter of Transmittal in connection with the offer by Spirit Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of McKesson Corporation, a Delaware corporation, to purchase all of the outstanding shares of common stock, par value $0.01 per share (the “Common Stock”), of D & K Healthcare Resources, Inc., a Delaware corporation, including the associated preferred stock purchase rights (the “Rights” and, together with the Common Stock, the “Shares”) issued pursuant to the Rights Agreement, dated as of November 12, 1998, between D&K and Harris Trust and Savings Bank, at a purchase price of $14.50 per Share, net to the seller in cash, without interest thereon and less any required withholding taxes, upon the terms and subject to the conditions contained in the Offer to Purchase and related Letter of Transmittal (which, together with any amendments and supplements thereto, collectively constitute the “Offer”).

      This will instruct you to tender the number of Shares indicated below (or if no number is indicated below, all Shares) held by you for the account of the undersigned, upon the terms and subject to the conditions contained in the Offer.

	SIGN HERE
Number of Shares to be Tendered:(1)
Dated:           , 2005	Signature(s)
	Print Name(s)
	Address(es)
	Area Code and Telephone Number
	Tax Identification or Social Security Number

(1)  Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered.

4 EX-99.6 7 f10807exv99w6.htm EXHIBIT 99.6

EXHIBIT 99.6
EXHIBIT (a)(1)(F)

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION

NUMBER ON SUBSTITUTE FORM W-9

Guidelines for Determining the Proper Identification Number to Give the Payer. — Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.

      To ensure compliance with Treasury Department Circular 230, you are hereby notified that: (a) any federal tax advice contained herein is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code; (b) the advice is written in connection with the promotion or marketing of the transaction or the matters addressed herein; and (c) the taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

		Give the name and
		SOCIAL
		SECURITY
For this Type of Account:		Number of —
1.	Individual	The individual
2.	Two or more individuals (joint account)	The actual owner of the account or, if combined funds, the first individual on the account.(1)
3.	Custodian account of a minor (Uniform Gift to Minors Act)	The minor(2)
4.	a. The usual revocable savings trust account (grantor is also trustee)	The grantor-trustee(1)
	b. So-called trust account that is not a legal or valid trust under state law	The actual owner(1)
5.	Sole proprietorship or single- owner LLC	The owner(3)
6.	Sole proprietorship or single- owner LLC	The owner(3)

		Give the name and
		EMPLOYER IDENTIFICATION
For this Type of Account:		Number of —
7.	A valid trust, estate, or pension trust	The legal entity (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(4)
8.	Corporate or LLC electing corporate status on Form 8832	The corporation
9.	Association, club, religious, charitable, educational, or other tax-exempt organization	The organization
10.	Partnership or multi-member LLC	The partnership
11.	A broker or registered nominee	The broker or nominee
12.	Account with the Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments	The public entity

(1)	List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person’s number must be furnished.
(2)	Circle the minor’s name and furnish the minor’s social security number.
(3)	Show the individual name of the owner. Either the social security number or employer identification number may be furnished.
(4)	List first and circle the name of the legal trust, estate, or pension trust.

Note:  If no name is circled when there is more than one name, the number will be considered to be that of the first name listed.

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION

NUMBER ON SUBSTITUTE FORM W-9

Obtaining a Number

If you do not have a Taxpayer Identification Number or you do not know your number, obtain Form SS-5, Application for a Social Security Number Card, Form W-7, Application for IRS Individual Taxpayer Identification Number or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service or by calling 1 (800) TAX-FORM and apply for a number.

Payees Exempt from Backup Withholding

Payees specifically exempted from backup withholding on ALL payments include the following:

    •  An organization exempt from tax under Section 501(a), any IRA, or a custodial account under Section 403(b)(7) if the account satisfies the requirements of Section 401(f)(2).

    •  The United States or any of its agencies or instrumentalities.

    •  A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities.

    •  A foreign government or any of its political subdivisions, agencies or instrumentalities.

    •  An international organization or any of its agencies, or instrumentalities.

    Other payees that may be exempt from backup withholding include:

    •  A corporation.

    •  A financial institution.

    •  A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States

    •  A real estate investment trust.

    •  A common trust fund operated by a bank under Section 584(a).

    •  A trust exempt from tax under Section 664 or described in Section 4947.

    •  An entity registered at all times during the tax year under the Investment Company Act of 1940.

    •  A foreign central bank of issue.

    •  A middleman known in the investment community as a nominee or custodian.

    •  A futures commission merchant registered with the Commodity Futures Trading Commission.

    Payments of dividends and patronage dividends not generally subject to backup withholding include the following:

    •  Payments to nonresident aliens subject to withholding under Section 1441.

    •  Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner.

    •  Payments of patronage dividends not paid in money.

    •  Payments made by certain foreign organizations.

    •  Section 404(k) distribution made by an ESOP.

    Payments of interest not generally subject to backup withholding include the following:

    •  Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer’s trade or business and you have not provided your correct Taxpayer Identification Number to the payer.

    •  Payments of tax-exempt interest (including exempt-interest dividends under Section 852).

    •  Payments described in Section 6049(b)(5) to nonresident aliens.

    •  Payments on tax-free covenant bonds under Section 1451.

    •  Payments made by certain foreign organizations.

    •  Mortgage or student loan interest paid to you.

Exempt payees described above should file Substitute Form W-9 to avoid possible backup withholding. IF YOU ARE AN EXEMPT PAYEE, CHECK THE BOX ON THE FACE OF THE FORM IN PART 2, SIGN AND DATE THE FORM, AND RETURN IT TO THE PAYER. Certain payments, other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see Sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A, AND 6050N and the regulations thereunder.

    Privacy Act Notice. — Section 6109 requires most recipients of dividend, interest, or other payments to give their correct Taxpayer Identification Numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of tax returns. Payers must be given the numbers whether or not payees are required to file tax returns. Payers must generally withhold a certain percentage of taxable interest, dividend, and certain other payments to a payee who does not furnish a Taxpayer Identification Number to a payer. Certain penalties may also apply.

Penalties

(1) Penalty For Failure to Furnish Taxpayer Identification Number. — If you fail to furnish your Taxpayer Identification Number to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

(2) Civil Penalty for False Information with Respect to Withholding. — If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a penalty of $500.

(3) Criminal Penalty for Falsifying Information. — Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.

(4) Misuse of Taxpayer Identification Numbers. — If the requester discloses or uses Taxpayer Identification Numbers in violation of federal law, the requester may be subject to civil and criminal penalties.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE.

EX-99.3

exv99w3

EX-99.4

exv99w4

EX-99.5

exv99w5

EX-99.6

exv99w6

EX-99.8

EXHIBIT 99.8
EXHIBIT (a)(1)(H)

Contacts:

Investors and Financial Media
Larry Kurtz
Larry.Kurtz@McKesson.com
415-983-8418

General and Business Media
James Larkin
James.Larkin@McKesson.com
415-983-8736

McKesson Corporation Commences Tender Offer for D&K Healthcare Resources, Inc. at $14.50
Per Share

SAN FRANCISCO – July 22, 2005 – McKesson Corporation (NYSE: MCK), a leading pharmaceutical distributor and healthcare services company, announced today that Spirit Acquisition Corporation, its wholly-owned subsidiary, has commenced a cash tender offer for all of the outstanding shares of D&K Healthcare Resources, Inc. (NASDAQ: DKHR) for $14.50 net per share.

McKesson and D&K announced on July 11 that the two companies had signed a definitive agreement for McKesson to acquire D&K in an all cash tender offer. D&K is a leading distributor to independent and regional pharmacies, primarily in the Midwest, Upper Midwest and the South. The company, known for its strong customer relationships and personal, hands-on service, had sales of $2.5 billion in their FY2004.

The Board of Directors of D&K, by unanimous vote of all directors with one director, who is an officer of D&K’s financial advisor, abstaining, approved the acquisition and recommends that D&K’s stockholders tender their D&K shares in the offer.

Following completion of the tender offer, McKesson intends to merge Spirit with and into D&K to acquire all D&K shares not tendered in the offer. Any remaining D&K stockholders will receive the same cash price paid in the tender offer.

The tender offer is subject to regulatory approvals and certain closing conditions, including the tender of a majority of shares of capital stock of D&K on an as-if-converted basis and expiration or termination of any waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended.

Unless the offer is extended, the offer and withdrawal rights will expire at midnight New York time on August 18, 2005. Questions and requests for assistance may be directed to the Information Agent for the offer, Georgeson Shareholder at (212) 440-9800 (collect) or (866) 391-6922 (toll free).

About D&K

D&K Healthcare Resources, Inc. (NASDAQ:DKHR) is a full-service wholesale distributor of branded and generic pharmaceuticals and over-the-counter health and beauty aid products. Headquartered in St. Louis, Missouri, D&K primarily serves independent and regional pharmacies in the Midwest, Upper Midwest and the South from seven distribution centers. D&K also offers a number of proprietary information systems, as well as marketing and business management solutions. More information can be found at www.dkhealthcare.com.

About McKesson

McKesson Corporation (NYSE:MCK), currently ranked 15 on the Fortune 500, is a healthcare services and information technology company dedicated to helping its customers deliver high-quality healthcare by reducing costs, streamlining processes and improving the quality and safety of patient care. Over the

course of its 172-year history, McKesson has grown by providing pharmaceutical and medical-surgical supply management across the spectrum of care; healthcare information technology for hospitals, physicians, homecare and payors; hospital and retail pharmacy automation; and services for manufacturers and payors designed to improve outcomes for patients. For more information, visit us at www.mckesson.com.

Risk Factors

Except for historical information contained in this press release, matters discussed may constitute “forward-looking statements”, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These statements may be identified by their use of forward-looking terminology such as “believes”, “expects”, “anticipates”, “may”, “will”, “should”, “seeks”, “approximates”, “intends”, “plans”, “estimates” or the negative of these words or other comparable terminology. The most significant of these risks and uncertainties are described in McKesson’s Form 10-K, Form 10-Q and Form 8-K reports filed with the Securities and Exchange Commission and include, but are not limited to: the successful consummation of the proposed acquisition, the resolution or outcome of pending shareholder litigation regarding the 1999 restatement of our historical financial statements; the changing U.S. healthcare environment, including the impact of recently approved and potential future mandated benefits; changes in private and governmental reimbursement or in the delivery systems for healthcare products and services; governmental efforts to regulate the pharmaceutical supply chain; changes in pharmaceutical and medical-surgical manufacturers’ pricing, selling, inventory, distribution or supply policies or practices; changes in customer mix; substantial defaults in payment or a material reduction in purchases by large customers; challenges in integrating and implementing the company’s software and software system products, or the slowing or deferral of demand for these products; the company’s ability to successfully identify, consummate and integrate strategic acquisitions; changes in generally accepted accounting principles (GAAP); foreign currency fluctuations; and general economic conditions. The reader should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The company assumes no obligation to update or revise any such statements, whether as a result of new information or otherwise.

Additional Information

This announcement is neither an offer to purchase nor a solicitation of an offer to sell shares of any class of stock of D&K Healthcare Resources, Inc. On July 22, 2005, McKesson Corporation and its acquisition subsidiary, Spirit Acquisition Corporation, commenced a tender offer for all of the outstanding shares of common stock of D&K at $14.50 per share. This tender offer is scheduled to expire at midnight New York time on August 18, 2005, unless it is extended as provided in the related offer to purchase. McKesson and Spirit Acquisition will file with the U.S. Securities and Exchange Commission a tender offer statement on Schedule TO and related exhibits, including the offer to purchase, letter of transmittal, and other related documents. Shareholders should read the offer to purchase and the tender offer statement on Schedule TO and related exhibits because they contain important information. By the close of the business day on Friday, July 22, 2005, shareholders can obtain these documents free of charge from the Commission’s website at www.sec.gov or from McKesson’s website at www.mckesson.com.

EX-99.9

EXHIBIT 99.9
EXHIBIT (a)(5)

This announcement is neither an offer to purchase nor a solicitation of an offer to sell
Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase (as
defined below) and the related Letter of Transmittal and any amendments or supplements thereto and
is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the
acceptance there of would not be in compliance with the securities, blue sky or other laws of such
jurisdiction or any administrative or judicial action pursuant thereto. However, Purchaser (as
defined below) may, in its discretion, take such action as it may deem necessary to make the Offer in
any jurisdiction and extend the Offer to holders of Shares in such jurisdiction. In any jurisdiction
where securities, blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of Purchaser by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.

Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of

D & K Healthcare Resources, Inc.

at

$14.50 Net Per Share

by

Spirit Acquisition Corporation

a wholly owned subsidiary of

McKesson Corporation

     Spirit Acquisition Corporation, a Delaware corporation (“Purchaser”) and a wholly owned subsidiary of McKesson Corporation, a Delaware corporation (“Parent”), hereby offers to purchase all of the outstanding shares of common stock, par value $0.01 per share (the “Common Stock”), of D & K Healthcare Resources, Inc., a Delaware corporation (“D&K”), including the associated preferred stock purchase rights and other rights (the “Rights” and, together with the Common Stock, the “Shares”) issued pursuant to the Rights Agreement, dated as of November 12, 1998, between D&K and Harris Trust and Savings Bank, at a purchase price of $14.50 per Share (the “Offer Price”), net to the seller in cash, without interest thereon and less any required withholding taxes, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 22, 2005 (the “Offer to Purchase”), and in the related Letter of Transmittal (which, together with the Offer to Purchase and any amendments or supplements thereto, collectively constitute the “Offer”).

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, AUGUST 18, 2005, UNLESS THE OFFER IS EXTENDED.

     The Offer is conditioned upon, among other things, (1) there being validly tendered and not properly withdrawn prior to the expiration of the Offer that number of Shares which represents at least a majority of the then outstanding shares of Common Stock on an as-if-converted basis (the “Minimum Condition”), and (2) the expiration or termination of any waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Offer is also subject to other terms and conditions contained in the Offer to Purchase.

     The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of July 8, 2005 (the “Merger Agreement”), by and among Parent, Purchaser and D&K. The Merger Agreement provides, among other things, for the commencement of the Offer by Purchaser. Following consummation of the Offer and subject to the satisfaction or waiver of certain conditions, Purchaser will be merged with and into D&K (the “Merger”), with the surviving corporation becoming a wholly owned subsidiary of Parent. In the Merger, each outstanding Share (other than Shares held by stockholders of D&K who have properly exercised their appraisal rights under Delaware law, Shares held by D&K or any subsidiary of D&K and Shares held by Parent or any subsidiary of Parent) will be converted at the effective time of the Merger into the right to receive an amount in cash equal to the Offer Price, without interest thereon and less any required withholding taxes.

     The Board of Directors of D&K, by unanimous vote of all directors with one director, who is an officer of D&K’s financial advisor, abstaining, (1) has determined that the terms of the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are fair to, and in the best interests of, D&K and the Stockholders, (2) has approved the Merger Agreement and the transactions contemplated thereby, including the Stockholder Agreement (as defined below), the Offer and the Merger and (3) recommends that the Stockholders accept the Offer and tender their Shares to Purchaser pursuant to the Offer.

     As a condition and inducement to Parent and Purchaser entering into the Merger Agreement, all of the executive officers and directors of D&K other than one of D&K’s directors who is also an officer of D&K’s financial advisor (each, a “Supporting Stockholder”), who, in the aggregate, hold approximately 7.6% of the issued and outstanding shares of Common Stock on a fully diluted basis, including Mr. J. Hord Armstrong, III, Chairman of the Board of Directors and Chief Executive Officer of D&K, Mr. Martin Wilson, President and Chief Operating Officer of D&K and Mr. Harvey Jewett, member of the Board of Directors, have entered into a Stockholder Support Agreement, dated as of July 8, 2005 (the “Stockholder Agreement”), with Parent and Purchaser. Pursuant to the Stockholder Agreement, each Supporting Stockholder has agreed, among other things, to tender all of his Shares in the Offer, to vote his Shares in favor of the Merger and the Merger Agreement and to appoint Parent or a designee of Parent as the Supporting Stockholders’ proxy to vote such Shares in favor of the Merger and against any competing proposals.

     Tendering Stockholders whose Shares are registered in their own name and who tender their Shares directly to The Bank of New York (the “Depositary”) will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the sale of Shares pursuant to the Offer. Stockholders who have Shares registered in the name of their broker or bank should consult with such nominee to determine if any fees may apply.

     For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn, if, as and when Purchaser gives oral or written notice to the Depositary of Purchaser’s acceptance of such Shares for payment pursuant to the Offer. In all cases, upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the Offer Price therefor with the Depositary, which will act as agent for tendering Stockholders for the purpose of receiving payment from Purchaser and transmitting such payment to Stockholders who validly tender Shares. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) certificates representing such Shares or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to such Shares, (2) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent’s Message (as defined in the Offer to Purchase) in connection with a book-entry transfer and (3) any other required documents. Under no circumstances will interest be paid on the Offer Price regardless of any extension of the Offer or delay in making such payment.

     The term “Expiration Date” means 12:00 midnight, New York City time, on Thursday, August 18, 2005, unless and until Purchaser, in accordance with the Merger Agreement and the terms of this Offer, extends the period of time for which the Offer is open, in which event the term “Expiration Date”means the time and date at which the Offer, as so extended by Purchaser, will expire. If on the then scheduled Expiration Date, all conditions to the Offer under the Merger Agreement have not been satisfied or waived, Purchaser may, from time to time (and in certain circumstances is required under the Merger Agreement to), extend the Offer for one or more periods as Purchaser may determine; provided that no such extension is required to be made beyond the Outside Date (as defined in the Offer to Purchase). In addition, the Offer may also be extended as required by the Securities and Exchange Commission. If at the Expiration Date, all of the conditions to the Offer have been satisfied or waived, and Purchaser, among other things, accepts and promptly pays for all Shares tendered during the Offer, Purchaser may elect to offer a “Subsequent Offering Period” in accordance with Rule 14d-11 under the Securities Exchange Act of 1934, as amended (“the Exchange Act”), on one or more occasions for an aggregate period of not less than three nor more than 20 business days.

     Any extension, delay, termination or amendment of the Offer or commencement or extension of a Subsequent Offering Period will be followed as promptly as practicable by public announcement thereof, and such announcement, in the case of an extension of the Offer or commencement or extension of a Subsequent Offering Period, will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act.

     Except as otherwise provided in the Offer to Purchase or pursuant to applicable law,tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn (pursuant to the procedures set forth below) at any time prior to the Expiration Date and, unless theretofore accepted for payment, may also be withdrawn at any time after September 19, 2005. No withdrawal rights will apply to Shares tendered into a Subsequent Offering Period and no withdrawal rights apply during the Subsequent Offering Period with respect to Shares tendered in the Offer and accepted for payment. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name, address and taxpayer identification number of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and, if certificates representing Shares have been tendered, the name of the registered holder of the Shares as set forth in such certificate, if different from that of the person who tendered such Shares. If certificates representing Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the tendering Stockholder must also submit the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn, and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution (defined as a firm that is a bank, broker, dealer, credit union, savings association or other entity and a member in good standing of a Medallion Program approved by the Securities Transfer Association, Inc. or any other “eligible guarantor institution,” as such term is defined in Rule 17Ad-15 under the Exchange Act), except in the case of Shares tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in the Offer to Purchase, the notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be credited with the withdrawn Shares. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following the procedures described in the Offer to Purchase.

     The receipt of cash as payment for Shares pursuant to the Offer or the conversion of Shares into cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign tax laws. Stockholders are urged to consult with their own tax advisors as to the particular tax consequences of the Offer and the Merger to them, including the applicability and effect of any federal, state, local or other tax laws, and changes in tax laws. For a more complete description of certain U.S. federal income tax consequences of the Offer and the Merger, see Section 5 of the Offer to Purchase.

     D&K has furnished Purchaser with a list of Stockholders and lists of securities positions for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or in the name of whose nominees, appear on the Stockholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing, for subsequent transmittal to beneficial owners of Shares.

     The information required to be disclosed by paragraph (d)(1) of Rule 14d-6 under the Exchange Act is contained in the Offer to Purchase and is incorporated herein by reference.

     The Offer to Purchase and the related Letter of Transmittal contain important information and should be read carefully in their entirety before any decision is made with respect to the Offer.

     Questions and requests for assistance or copies of the Offer to Purchase, the related Letter of Transmittal and all other Offer documents may be directed to the Information Agent at the address and telephone number set forth below, and copies will be furnished promptly at Purchaser’s expense. Neither Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person (other than the Depositary and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer.

The Information Agent for the Offer is:

17 State Street, 10th Floor
New York, New York 10004
Banks and Brokers Call: (212) 440-9800
All Others Call Toll Free: (866) 391-6922

July 22, 2005

EX-99.10

EXHIBIT 99.10
EXHIBIT (d)(1)

AGREEMENT AND PLAN OF MERGER

AMONG

MCKESSON CORPORATION

SPIRIT ACQUISITION CORPORATION

AND

D&K HEALTHCARE RESOURCES, INC.

Dated as of July 8, 2005

TABLE OF CONTENTS

			Page
ARTICLE I DEFINITIONS				2
	SECTION 1.01	Definitions		2
ARTICLE II THE OFFER				12
	SECTION 2.01	The Offer		12
	SECTION 2.02	Company Action		16
	SECTION 2.03	Directors		18
ARTICLE III THE MERGER				20
	SECTION 3.01	The Merger		20
	SECTION 3.02	Effective Time; Closing		20
	SECTION 3.03	Effect of the Merger		21
	SECTION 3.04	Certificate of Incorporation; By-laws		21
	SECTION 3.05	Directors and Officers		22
	SECTION 3.06	Conversion of Securities		22
	SECTION 3.07	Employee Stock Options		23
	SECTION 3.08	Dissenting Shares		24
	SECTION 3.09	Surrender of Shares; Stock Transfer Books		25
	SECTION 3.10	Subsequent Actions		27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY				27
	SECTION 4.01	Organization and Qualification; Subsidiaries		28
	SECTION 4.02	Certificate of Incorporation and By-laws		28
	SECTION 4.03	Capitalization		29
	SECTION 4.04	Authority Relative to This Agreement		30
	SECTION 4.05	No Conflict; Required Filings and Consents		31
	SECTION 4.06	Permits; Compliance		33
	SECTION 4.07	SEC Filings; Financial Statements		34
	SECTION 4.08	Absence of Certain Changes or Events		37
	SECTION 4.09	Absence of Litigation		38
	SECTION 4.10	Employee Benefit Plans		39
	SECTION 4.11	Labor and Employment Matters		43
	SECTION 4.12	Offer Documents; Schedule 14D-9; Proxy Statement		45
	SECTION 4.13	Property and Leases		46
	SECTION 4.14	Taxes		48
	SECTION 4.15	Environmental Matters		51
	SECTION 4.16	Action with Respect to Rights Agreement		53
	SECTION 4.17	Material Contracts		53
	SECTION 4.18	Insurance		58
	SECTION 4.19	Brokers		59
	SECTION 4.20	Intellectual Property		59
	SECTION 4.21	Accounting or Audit Irregularities		63
	SECTION 4.22	Accounts Receivable		64
	SECTION 4.23	Inventory		64
	SECTION 4.24	Healthcare Regulatory and FDA Compliance		65
	SECTION 4.25	Secondary Markets		67

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				Page
		SECTION 4.26	Customers		68
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER					69
		SECTION 5.01	Corporate Organization		69
		SECTION 5.02	Authority Relative to This Agreement		69
		SECTION 5.03	No Conflict; Required Filings and Consents		70
		SECTION 5.04	Financing		71
		SECTION 5.05	Offer Documents; Proxy Statement		71
		SECTION 5.06	Brokers		72
		SECTION 5.07	Absence of Litigation		72
		SECTION 5.08	Company Stock		73
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER					73
		SECTION 6.01	Conduct of Business by the Company Pending the Merger		73
ARTICLE VII ADDITIONAL AGREEMENTS					77
		SECTION 7.01	Stockholders’ Meeting		77
		SECTION 7.02	Proxy Statement		78
		SECTION 7.03	Access to Information; Confidentiality		79
		SECTION 7.04	No Solicitation of Transactions		79
		SECTION 7.05	Employee Benefits Matters		84
		SECTION 7.06	Directors’ and Officers’ Indemnification and Insurance		85
		SECTION 7.07	Notification of Certain Matters		89
		SECTION 7.08	Further Action; Reasonable Efforts		89
		SECTION 7.09	Public Announcements		90
ARTICLE VIII CONDITIONS TO THE MERGER					90
		SECTION 8.01	Conditions to the Merger		90
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER					91
		SECTION 9.01	Termination		91
		SECTION 9.02	Effect of Termination		94
		SECTION 9.03	Fees and Expenses		94
		SECTION 9.04	Amendment		95
		SECTION 9.05	Waiver		96
ARTICLE X GENERAL PROVISIONS					96
		SECTION 10.01	Nonsurvival of Representations and Warranties		96
		SECTION 10.02	Notices		96
		SECTION 10.03	Severability		98
		SECTION 10.04	Entire Agreement; Assignment		98
		SECTION 10.05	Parties in Interest		98
		SECTION 10.06	Specific Performance		99
		SECTION 10.07	Governing Law		99
		SECTION 10.08	Waiver of Jury Trial		100
		SECTION 10.09	Headings		100
		SECTION 10.10	Counterparts		100
	Annex A Conditions to the Offer				A-1

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     AGREEMENT AND PLAN OF MERGER, dated as of July 8, 2005 (this “Agreement”), among McKesson Corporation, a Delaware corporation (“Parent”), Spirit Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent (“Purchaser”), and D&K Healthcare Resources, Inc., a Delaware corporation (the “Company”).

     WHEREAS, the Boards of Directors of Parent, Purchaser and the Company have each determined that it is in the best interests of their respective stockholders for Parent to acquire the Company upon the terms and subject to the conditions set forth herein;

     WHEREAS, in furtherance of such acquisition, it is proposed that Purchaser shall make a cash tender offer (the “Offer”) to acquire all the shares of common stock, par value $0.01 per share, of the Company, together with the associated Rights (as defined herein) (collectively, “Shares”) that are issued and outstanding for $14.50 per Share (such amount, or any greater amount per Share paid pursuant to the Offer, being the “Per Share Amount”), net to the seller in cash, upon the terms and subject to the conditions of this Agreement and the Offer;

     WHEREAS, the Board of Directors of the Company (the “Board”) has approved the making of the Offer and resolved to recommend that holders of Shares tender their Shares pursuant to the Offer;

     WHEREAS, as a condition and inducement to Parent to enter into this Agreement and incur the obligations set forth herein, concurrently with the execution and delivery of this Agreement, certain of the directors and executive officers of the Company have entered into a Stockholder Support Agreement pursuant to which each such person has agreed to tender the Shares held by such person in the Offer;

     WHEREAS, also in furtherance of such acquisition, the Boards of Directors of Parent, Purchaser and the Company have each approved this Agreement and declared its advisability and

approved the merger (the “Merger”) of Purchaser with and into the Company in accordance with the General Corporation Law of the State of Delaware (“Delaware Law”), following the consummation of the Offer and upon the terms and subject to the conditions set forth herein and

     WHEREAS, approval by the Board of the Offer and the Merger constituted the approval required by Section 203(a)(1) of Delaware Law.

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Purchaser and the Company hereby agree as follows:

ARTICLE I

DEFINITIONS

     SECTION 1.01 Definitions.

          (a) For purposes of this Agreement:

          “80% Items” means those s.k.u.’s of pharmaceutical products which, individually, have the highest carrying values as would be reflected on a consolidated balance sheet of the Company and the Subsidiaries dated as of the date of Parent’s physical inspection of the inventory provided for under Clause (m) of Annex A and which, in the aggregate, account for not less than eighty percent (80%) of the carrying value of the pharmaceutical inventories of the Company and the Subsidiaries, taken as a whole.

          “Acquisition Proposal” means (i) any proposal or offer from any person relating to any direct or indirect acquisition of (A) all or a substantial part of the assets of the Company or of any Subsidiary or (B) over fifteen percent (15%) of any class of equity securities of the Company or of any Subsidiary; (ii) any tender offer or exchange offer, as defined pursuant to the Exchange Act, that, if consummated, would result in any person beneficially owning fifteen percent (15%) or more of any class of equity securities of the Company or any Subsidiary; or

2

(iii) any merger, consolidation, business combination, sale of all or a substantial part of the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company or any Subsidiary, other than the Transactions.

          “Adjusted Service Level” means the quotient of lines filled plus “manufacturers cannot supply” lines divided by lines ordered. For purposes of this definition, lines for which fifty percent (50%) or fewer of the items ordered are shipped shall be deemed not filled, provided that lines for which a customer is placed on allocation because the customer’s orders substantially exceed the customer’s customary orders of such line items shall be deemed filled.

          “affiliate” of a specified person means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified person.

          “beneficial owner”, with respect to any Shares, means a person who shall be deemed to be the beneficial owner of such Shares (i) which such person or any of its affiliates or associates (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or indirectly, (ii) which such person or any of its affiliates or associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject to the passage of time or other conditions) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding or (iii) which are beneficially owned, directly or indirectly, by any other persons with whom such person or any of its affiliates or associates or person with whom such person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Shares.

3

          “Business Day” means any day, other than a Saturday, Sunday, or a Federal holiday, and shall consist of the time period from 12:01 a.m. through 12:00 midnight Eastern Standard Time.

          “Code” means the Internal Revenue Code of 1986, as amended.

          “Company Intellectual Property Rights” means any Intellectual Property Rights: purported to be owned by the Company or any Subsidiary.

          “Company Registered Intellectual Property Rights” means Registered Intellectual Property Rights within the Company Intellectual Property Rights.

          “Company Systems” shall mean all computer, hardware, software, systems, and equipment (including embedded microcontrollers in non-computer equipment) embedded within or required to operate the current products of the Company and the Subsidiaries, and/or material to or necessary for the Company and the Subsidiaries to carry on their businesses as currently conducted.

          “Computer Software” means all computer programs (whether in source code or object code form and including, without limitation, any and all software implementations of algorithms, models and methodologies), and all data bases, compilations and documentation (including, without limitation, user, operator, and training manuals) related to the foregoing.

          “Contract” means any note, bond, mortgage, indenture, contract, agreement, lease license, permit, franchise or other obligation or instrument, whether or not in writing.

          “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise.

4

          “Documentation” means a document or documents containing information recording each distribution of any given Drug, from sale by a pharmaceutical manufacturer, through acquisition and sale by any wholesale distributor or repackager, until final sale to a pharmacy or other person administering or dispensing the Drug. The information required to be included in a Drug’s Documentation must at least detail the amount of the Drug, its dosage form and strength, its lot numbers, the name and address of each owner of the Drug and his or her signature, its shipping information, including the name and address of each person certifying delivery or receipt of the Drug, and a certification that the recipient has authenticated the Documentation. It must also include the name, address, telephone number and, if available, email contact information of each wholesale distributor involved in the chain of custody of the Drug.

          “Drug” means any drug (including, but not limited to, finished dosage forms or active ingredients) that is subject to, defined by, or described by Section 503(b) of the Federal Food, Drug and Cosmetic Act.

          “Environmental Laws” means any foreign, federal, state, or local laws, regulations, ordinances, requirements of any Governmental Authorities and common law relating to (i) releases or threatened releases of Hazardous Substances or materials containing Hazardous Substances; (ii) the manufacture, handling, transport, use, treatment, storage or disposal of, and exposure to, Hazardous Substances or materials containing Hazardous Substances; or (iii) pollution or protection of the environment, health, safety or natural resources.

          “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Company or any Subsidiary that, together with the Company or

5

any Subsidiary, is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code.

          “Firm” means an independent accounting firm of national reputation selected by Parent and the Company or, if Parent and the Company are unable, within two (2) Business Days after the Company’s notice to Parent of a Dispute, to select the “Firm”, then an independent accounting firm of national reputation selected by the primary auditing firms of the Company and Parent.

          “Hazardous Substances” means (i) those substances defined in or regulated under the following United States federal statutes and their state counterparts, as each may be amended from time to time, and all regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum products, including crude oil and any fractions thereof; (iii) natural gas, synthetic gas, and any mixtures thereof; (iv) polychlorinated biphenyls, asbestos, radon, mold and fungus; (v) any other contaminant; and (vi) any substance, material or waste regulated by any Governmental Authority pursuant to any Environmental Law.

          “HIPAA” means the Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191, as amended, and all rules and regulations promulgated thereunder.

          “Identified Customers” means the two customers of the Company identified in Section 1.1(a) of the Disclosure Schedule.

          “Intellectual Property Rights” means any or all legal rights in, arising out of or associated with any patents, trade secrets, copyrights, trademarks or domain names.

6

          “knowledge” means the actual knowledge after due and diligent inquiry (and what such person should have known after due and diligent inquiry) of the Chairman of the Board and Chief Executive Officer, the President and Chief Operating Officer, the Senior Vice President and Chief Financial Officer, the Senior Vice President Sales and Business Development, the Vice President, General Counsel and Secretary, the Vice President and Controller, the Vice President Purchasing, the Director of Compliance and the Senior Vice President Operations and Chief Information Technology Officer of the Company (collectively, the “Knowledge Group”); provided, however, that due and diligent inquiry shall not require any member of the Knowledge Group to make inquiry of any person who is not a member of the Knowledge Group.

          “License Agreements” means all material written agreements between the Company or any Subsidiary, and third parties, other than those which have expired or been terminated for reasons unrelated to breach, and in which: (i) such third party has licensed or granted to the Company or any Subsidiary any right to use, exploit, practice, sell or distribute any of such third party’s Intellectual Property Rights or Technology (“Inbound License Agreements”); or (ii) the Company or any Subsidiary (x) has granted to such third party any right to use, exploit, practice, sell or distribute any Company Intellectual Property Rights or Technology, or (y) has agreed to any restriction on the right of Company or any Subsidiary (as the case may be) to use or enforce any Company Intellectual Property Rights or any Technology owned by the Company or any subsidiary ((x) and/or (y), “Outbound License Agreements”).

          “Material Adverse Effect” means, when used in connection with the Company or any Subsidiary, any event, circumstance, change or effect that is or is reasonably likely to be materially adverse to the business, operations, condition (financial or otherwise) or results of operations of the Company and the Subsidiaries, taken as a whole; except, in each case, for any

7

such event, circumstance, change or effect resulting from (i) the loss by the Company and/or its Subsidiaries of either or both of the Identified Customers as a result of the Company’s failure to obtain consents under the change of control provisions contained in such customers’ contracts with the Company, (ii) any seasonal reduction in the revenues or earnings of the Company that is of a magnitude consistent with prior periods, (iii) changes in United States economic, financial market, political or regulatory conditions generally, (iv) changes in the wholesale drug distribution industry (the “Industry”), which do not disproportionately affect the Company as compared to others in the Industry in any material respect, (v) the loss by the Company and/or the Subsidiaries of any customers or employees primarily as a result of (A) any public announcement by Parent or the Company (which, in the case of the Company, is made in accordance with the requirements of this Agreement, the Offer, the Merger or the other transactions contemplated by this Agreement) or (B) any public announcement by Parent of its intentions with respect to the future conduct of the business of the Company and the Subsidiaries after consummation of the Offer and the Merger, provided that, in case either (A) or (B) above applies, (1) there has been no loss by the Company and/or the Subsidiaries of any customers or employees primarily as a result of (x) misfeasance or malfeasance by the Company, the Subsidiaries or any of their respective officers, directors or employees, (y) pricing action by the Company and/or any Subsidiary disproportionate to general industry pricing or (z) the Company and the Subsidiaries having an Adjusted Service Level of ninety-two percent (92%) or less and (2) such loss or losses in the case of this proviso, individually or in the aggregate, would reasonably be expected to materially and adversely affect the business, operations, condition financial or otherwise or results of operations of the Company and its Subsidiaries, taken as a whole, (vi) any actions taken, or failures to take action, or such other effects, changes or

8

occurrences to which Parent has separately consented in writing or (vii) terrorist activities, war or armed hostilities if the effect thereof would reasonably be expected to be transitory.

          “person” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including, without limitation, a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.

          “Registered Intellectual Property Rights” shall mean Internet domain name registrations and any legal rights in, arising out of or associated with any applications (including written invention disclosures that have not yet been filed) for, or registrations or issuances or grants of, any Intellectual Property Rights before or by any governmental authority responsible for issuing or registering any of the Intellectual Property Rights, other than those which have been formally abandoned or formally allowed to lapse by the Company in the ordinary course of business in accordance with the exercise of reasonable business judgment.

          “subsidiary” or “subsidiaries” of the Company, the Surviving Corporation, Parent or any other person means an affiliate controlled by such person, directly or indirectly, through one or more intermediaries.

          “Superior Proposal” means a bona fide, written Acquisition Proposal which the Board determines in good faith, after consultation with its financial and legal advisors, taking into account all legal, financial, regulatory and other aspects of the proposal and the person making the proposal (including any break-up fees, expense reimbursement provisions and conditions to consummation), (i) is more favorable to the stockholders of the Company (in their capacities as stockholders) from a financial point of view than the Transactions (including any adjustment to the terms and conditions proposed by Parent in response to such proposal) and (ii)

9

is fully financed or reasonably capable of being fully financed, reasonably likely to receive all required governmental approvals on a timely basis and otherwise reasonably likely of being completed on the terms proposed on a timely basis; provided that, for purposes of this definition of “Superior Proposal,” the term Acquisition Proposal shall have the meaning assigned to such term in this Section 1.01 except that any reference to “over fifteen percent (15%) of any class of equity securities” or “fifteen percent (15%) or more of any class of equity securities” in the definition of “Acquisition Proposal” shall be deemed to be a reference to “a majority of the equity securities” and “Acquisition Proposal” shall only be deemed to refer to a transaction involving the Company.

          “Tax” or “Taxes” shall mean any and all taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority, including, without limitation: with respect to income, franchise, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration and documentation fees; and customs duties, tariffs and similar charges.

          “Tax Returns” shall mean all returns, information returns, estimates, reports and other documents relating to Taxes filed or required to be filed with any Governmental Authority.

          “Technology” means all processes, apparatuses, systems, formulae, algorithms, data, models, plans, methodologies, theories, ideas, techniques, discoveries, disclosures, inventions, Computer Software, information or know-how, and other technological subject matter.

10

          (b) The following terms have the meaning set forth in the Sections set forth below:

Defined Term	Location of Definition
Action	4.09
Agreement	Preamble
Board	Recitals
Certificate of Merger	3.02
Certificates	3.09(b)
Company	Preamble
Company Preferred Stock	4.03
Company Stock Option	3.07
Company Stock Plans	3.07
Confidentiality Agreement	7.03(b)
Completion Date	Paragraph (l) of Annex A
Delaware Law	Recitals
Disclosure Schedule	Introduction to Article IV
Dispute	Paragraph (l) of Annex A
Dispute Resolution Period	Paragraph (l) of Annex A
Dissenting Shares	3.08(a)
Effective Time	3.02
Environmental Permits	4.15
ERISA	4.10(a)
Exchange Act	2.01(a)
FDA	4.24.(h)
Fee	9.03(a)
GAAP	4.07(b)
Governmental Authority	4.05(b)
Governmental Entity	4.05(b)
HSR Act	2.01(a)
Indemnified Parties	7.06(a)
Insurance Amount	7.06(b)
IRS	4.10(a)
Law	4.05(a)
Liens	4.13(b)
Material Contracts	4.17(b)
Merger	Recitals
Merger Consideration	2.01(a)
Minimum Condition	2.01(a)
Multiemployer Plan	4.10(b)
Multiple Employer Plan	4.10(b)
Nasdaq	4.05(b)
Non-Material Computer Software	4.20(b)
Offer	Recitals

11

Defined Term	Location of Definition
Offer Documents	2.01(b)
Offer to Purchase	2.01(b)
Original Directors	2.03
Outlook	4.07(f)
Parent	Preamble
a Paying Agent	3.09(a)
Permits	4.06
Permitted Liens	4.13(b)
Per Share Amount	Recitals
Plans	4.10(a)
Proxy Statement	4.12
Purchaser	Preamble
Rights	4.03
Rights Agreement	4.03
Schedule 14D-9	2.02(b)
Schedule TO	2.01(b)
SEC	2.01(a)
SEC Reports	4.07(a)
Securities Act	4.07(a)
Shares	Recitals
SOX Act	4.07(a)
Stockholders’ Meeting	7.01(a)
Subsidiary	4.01(a)
Surviving Corporation	3.03
Tax Claim	4.14
Transactions	2.02(a)
2004 Balance Sheet	4.07(c)
WARN Act	4.11(e)

ARTICLE II

THE OFFER

     SECTION 2.01 The Offer.

          (a) Provided that this Agreement shall not have been terminated in accordance with Section 9.01 and that none of the events set forth in Annex A hereto shall have occurred and be continuing, Purchaser shall commence the Offer as promptly as reasonably practicable (and in any event within ten Business Days) after the date hereof. The obligation of Purchaser to accept for payment Shares tendered pursuant to the Offer shall be subject to the condition (the

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“Minimum Condition”) that at least the number of Shares that shall constitute a majority of the then outstanding Shares on an as-if-converted basis (including, without limitation, all Shares issuable upon the conversion of any convertible securities or upon the exercise of any options, warrants or rights (other than the Rights)) shall have been validly tendered and not withdrawn prior to the expiration of the Offer and also shall be subject to the satisfaction of each of the other conditions set forth in Annex A hereto. Purchaser expressly reserves the right (i) to waive any such condition, (ii) to increase the price per Share payable in the Offer and (iii) to make any other changes in the terms of the Offer; provided, however, that in the case of clause (iii) no other change may be made which (w) decreases the Per Share Amount payable in the Offer, (x) reduces the maximum number of Shares to be purchased in the Offer, (y) imposes conditions to the Offer in addition to those set forth in Annex A hereto or (z) is otherwise disadvantageous to the stockholders of the Company. Subject to the prior satisfaction or waiver by Parent or Purchaser of the Minimum Condition and the other conditions of the Offer set forth in Annex A hereto, Purchaser shall consummate the Offer in accordance with its terms and accept for payment and pay for all Shares tendered pursuant to the Offer as soon as practicable after Purchaser is legally permitted to do so under applicable law. Notwithstanding the foregoing, Purchaser may, without the consent of the Company, (i) extend the Offer beyond the scheduled expiration date, which shall be 20 Business Days following the commencement of the Offer, if, at the scheduled expiration of the Offer, any of the conditions to Purchaser’s obligation to accept for payment Shares, shall not be satisfied or waived, or (ii) extend the Offer for any period required by any rule, regulation or interpretation of the Securities and Exchange Commission (the “SEC”), or the staff thereof, applicable to the Offer. In addition, if, on the initial scheduled expiration date and each subsequent scheduled expiration date of the Offer, the sole condition or

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conditions remaining unsatisfied are the failure of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), to have expired or been terminated and/or, if there is a Dispute that is pending or continuing, the Dispute Resolution Period shall not have expired , then Purchaser shall extend the Offer from time to time until the fifth Business Day after the later to occur of (i) expiration or termination of the applicable waiting period under the HSR Act or (ii) the expiration of the Dispute Resolution Period. Purchaser may, in its sole discretion, provide a “subsequent offering period” in accordance with Rule 14d-11 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Purchaser shall not terminate the Offer prior to any scheduled expiration date (as the same may be extended or required to be extended) without the written consent of the Company except in the event that Purchaser terminates this Agreement pursuant to Section 9.01. The Per Share Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, upon the terms and subject to the conditions of the Offer. Purchaser shall pay for all Shares validly tendered and not withdrawn promptly following the acceptance of Shares for payment pursuant to the Offer. Notwithstanding the immediately preceding sentence and subject to the applicable rules of the SEC and the terms and conditions of the Offer, Purchaser expressly reserves the right to delay payment for Shares in order to comply in whole or in part with applicable laws. Any such delay shall be effected in compliance with Rule 14e-l(c) under the Exchange Act. If the payment equal to the Per Share Amount in cash (the “Merger Consideration”) is to be made to a person other than the person in whose name the surrendered certificate formerly evidencing Shares is registered on the stock transfer books of the Company, it shall be a condition of payment that the certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such payment shall have paid all transfer and

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other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the certificate surrendered, or shall have established to the satisfaction of Purchaser that such taxes either have been paid or are not applicable.

          (b) As promptly as reasonably practicable on the date of commencement of the Offer, Purchaser shall file with the SEC a Tender Offer Statement on Schedule TO (together with all amendments and supplements thereto, the “Schedule TO”) with respect to the Offer. The Schedule TO shall contain or shall incorporate by reference an offer to purchase (the “Offer to Purchase”) and forms of the related letter of transmittal and any related summary advertisement (the Schedule TO, the Offer to Purchase and such other documents, together with all supplements and amendments thereto, being referred to herein collectively as the “Offer Documents”). Parent, Purchaser and the Company agree to correct promptly any information provided by any of them for use in the Offer Documents that shall have become false or misleading and to correct any material omissions, and Parent and Purchaser further agree to take all steps necessary to cause the Schedule TO, as so corrected, to be filed with the SEC, and the other Offer Documents, as so corrected, to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given a reasonable opportunity to review the Offer Documents before they are filed with the SEC, and Parent and Purchaser shall give due consideration to all the reasonable additions, deletions or changes suggested thereto by the Company and its counsel. In addition, Parent and Purchaser agree to provide the Company and its counsel with any comments, whether written or oral, that Parent, Purchaser or their counsel may receive from time to time from the SEC or its staff with respect to the Offer Documents promptly after Parent’s or Purchaser’s, as the case may be, receipt of such comments, and any written or oral responses thereto. The Company and its

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counsel shall be given a reasonable opportunity to review any such written responses and Parent and Purchaser shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Company and its counsel. If the Offer is terminated or withdrawn by Purchaser, or this Agreement is terminated prior to the purchase of Shares in the Offer, Parent and Purchaser shall promptly return, and shall cause any depository or paying agent, including the Paying Agent (as hereinafter defined), acting on behalf of Parent and Purchaser, to return all tendered Shares to the registered holders thereof.

     SECTION 2.02 Company Action.

          (a) The Company hereby approves of and consents to the Offer and represents that (i) the Board, at a meeting duly called and held on July 8, 2005, has unanimously (A) determined that this Agreement and the transactions contemplated hereby, including each of the Offer and the Merger (collectively, the “Transactions”) are fair to, and in the best interests of, the holders of Shares, (B) approved, adopted and declared advisable this Agreement and the Transactions (such approval and adoption having been made in accordance with Delaware Law) and (C) resolved to recommend that the holders of Shares accept the Offer and tender Shares pursuant to the Offer, and approve and adopt this Agreement and the Transactions, and (ii) Citigroup Global Markets, Inc. has delivered to the Board an opinion, which will be confirmed promptly in writing, that the $14.50 per Share dollar amount to be received by the holders of Shares pursuant to each of the Offer and the Merger is fair to the holders of Shares from a financial point of view. The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board described in the immediately preceding sentence, and the Company shall not withdraw or modify such recommendation in any manner adverse to Purchaser or Parent except as provided in Section 7.04(c). The Company has been

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advised by its directors and executive officers that they intend either to tender all Shares beneficially owned by them to Purchaser pursuant to the Offer or to vote such Shares in favor of the approval and adoption by the stockholders of the Company of this Agreement and the Transactions.

          (b) As promptly as reasonably practicable on the date of commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the “Schedule 14D-9”) containing, except as provided in Section 7.04(c), the recommendation of the Board described in Section 2.02(a), and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated under the Exchange Act and any other applicable federal securities laws. The Company, Parent and Purchaser agree to correct promptly any information provided by any of them for use in the Schedule 14D-9 which shall have become false or misleading and to correct any material omissions, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9, as so corrected, to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. Parent, Purchaser and their counsel shall be given a reasonable opportunity to review the Schedule 14D-9 before it is filed with the SEC and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by Parent, Purchaser and their counsel. In addition, the Company agrees to provide Parent, Purchaser and their counsel with any comments, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the Company’s receipt of such comments, and any written or oral responses thereto. Parent, Purchaser and their counsel shall be given a reasonable opportunity to review any such written responses and the Company shall

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give due consideration to all reasonable additions, deletions or changes suggested thereto by Parent, Purchaser and their counsel.

          (c) The Company shall promptly furnish Parent or Purchaser with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of a recent date, together with all other available listings and computer files containing names, addresses and security position listings of record holders and beneficial owners of Shares. The Company shall promptly furnish Purchaser with such additional information, including, without limitation, updated listings and computer files of stockholders, mailing labels and security position listings, and such other assistance in disseminating the Offer Documents to holders of Shares as Parent or Purchaser may reasonably request. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer or the Merger, Parent and Purchaser shall hold in confidence the information contained in such labels, listings and files, shall use such information only in connection with the Transactions, and, if this Agreement shall be terminated in accordance with Section 9.01, shall deliver to the Company all copies of such information then in their possession.

     SECTION 2.03 Directors. Promptly upon the purchase of and payment for any Shares by Parent or Purchaser pursuant to the Offer (provided the Shares so purchased represent at least a majority of the Shares issued and outstanding), Parent shall be entitled to designate such number of directors, rounded to the nearest whole number, on the Board as is equal to the product of the total number of directors on the Board (giving effect to the directors designated by Parent pursuant to this sentence) multiplied by the percentage that the number of Shares so

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accepted for payment bears to the total number of Shares then outstanding. In furtherance of Parent’s rights under this Section 2.03, the Company shall, upon Parent or Purchaser’s request, use all reasonable efforts promptly either to increase the size of the Board or to secure the resignations of such number of its incumbent directors, or both, as is necessary to enable Parent’s designees to be so elected to the Board, and shall take all actions available to the Company to cause Parent’s designees to be so elected. At such time, the Company shall also cause persons designated by Parent to have appropriate representation on (i) each committee of the Board, (ii) each board of directors (or similar body) of each Subsidiary and (iii) each committee (or similar body) of each such board. The Company shall promptly take all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under this Section 2.03, including mailing to stockholders (as part of the Schedule 14D-9 or otherwise) the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable Parent’s designees to be elected to the Board (provided that Purchaser shall have provided to the Company on a timely basis all information required to be included with respect to Purchaser’s designees). In the event that Parent’s designees are elected to the Board, until the Effective Time (as defined below), the Board shall have at least three directors who are directors on the date of this Agreement (the “Original Directors”); provided that, in such event, if the number of Original Directors is reduced below three for any reason whatsoever, any remaining Original Directors (or Original Director, if there be only one remaining) shall be entitled to designate persons to fill such vacancies who shall be deemed to be Original Directors for purposes of this Agreement or, if no Original Director then remains, the other directors shall designate three persons to fill such vacancies who shall not be stockholders, affiliates or associates of Parent or Purchaser, and such persons shall be deemed to be Original Directors for

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purposes of this Agreement. Notwithstanding anything in this Agreement to the contrary, if Parent’s designees are elected to the Board before the Effective Time, the affirmative vote of a majority of the Original Directors shall be required for the Company to (a) amend or terminate this Agreement or agree or consent to any amendment or termination of this Agreement, (b) exercise or waive any of the Company’s rights, benefits or remedies hereunder, (c) extend the time for performance of Parent’s and Purchaser’s respective obligations under this Agreement, (d) take any other action by the Board under or in connection with this Agreement, (e) amend the Certificate of Incorporation or Bylaws of the Company or (f) approve any other action by the Company which could adversely affect the interests of the stockholders of the Company (other than Parent, Purchaser and their affiliates (other than the Company and its Subsidiaries)), with respect to the Transactions.

ARTICLE III

THE MERGER

     SECTION 3.01 The Merger. Upon the terms and subject to the conditions set forth in Article VIII, and in accordance with Delaware Law, Purchaser shall be merged with and into the Company.

     SECTION 3.02 Effective Time; Closing. As promptly as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article VIII, the parties hereto shall cause the Merger to be consummated by filing this Agreement or a certificate of merger or certificate of ownership and merger with the Secretary of State of the State of Delaware (the “Certificate of Merger”), in such form as is required by, and executed in accordance with, the relevant provisions of Delaware Law (the date and time of such filing being the “Effective Time”). Prior to such filing, a closing shall be held at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Embarcadero Center, San Francisco, CA 94111, or such other place

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as the parties shall agree, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article VIII.

     SECTION 3.03 Effect of the Merger. As a result of the Merger, the separate corporate existence of Purchaser shall cease and the Company shall continue as the surviving corporation of the Merger (the “Surviving Corporation”). At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Purchaser shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Company and Purchaser shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.

     SECTION 3.04 Certificate of Incorporation; By-laws.

          (a) At the Effective Time, subject to Sections 7.06(b) and (c), the Certificate of Incorporation of Purchaser, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by law and such Certificate of Incorporation; provided, however, that, at the Effective Time, Article I of the Certificate of Incorporation of the Surviving Corporation shall be amended to read as follows: “The name of the corporation is D&K Healthcare Resources, Inc.”

          (b) Unless otherwise determined by Parent prior to the Effective Time, and subject to Sections 7.06(b) and (c), the By-laws of Purchaser, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter amended as provided by law, the Certificate of Incorporation of the Surviving Corporation and such By-laws.

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     SECTION 3.05 Directors and Officers. The directors of Purchaser immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal.

     SECTION 3.06 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of Purchaser, the Company or the holders of any of the following securities:

          (a) Each Share issued and outstanding immediately prior to the Effective Time (other than any Shares to be canceled pursuant to Section 3.06(b) and any Dissenting Shares (as hereinafter defined), but including restricted Shares (whether vested or unvested) issued under Company Stock Plans (defined below)) shall be canceled and shall be converted automatically into the right to receive an amount equal to the Merger Consideration payable, without interest, to the holder of such Share, upon surrender, in the manner provided in Section 3.09, of the certificate that formerly evidenced such Share;

          (b) Each Share held in the treasury of the Company and each Share owned by Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or of the Company immediately prior to the Effective Time shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto; and

          (c) Each share of common stock, par value $0.001 per share, of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and

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exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation.

     SECTION 3.07 Employee Stock Options. Effective as of the Effective Time, the Company shall (i) terminate the Company’s Amended and Restated 2001 Long Term Incentive Plan, its 1992 Long Term Incentive Plan and its 1993 Stock Option Plan, each as amended through the date of this Agreement (the “Company Stock Plans”), and (ii) cancel, at the Effective Time, each outstanding option to purchase shares of Company Common Stock granted under the Company Stock Plans or otherwise (each, a “Company Stock Option”) that is outstanding and unexercised as of such date. Each holder of a Company Stock Option that is outstanding and unexercised at the Effective Time (whether or not such option has vested) shall be entitled to receive from the Surviving Corporation immediately after the Effective Time, in exchange for the cancellation of such Company Stock Option, an amount in cash equal to the excess, if any, of (x) the Per Share Amount over (y) the per share exercise price of such Company Stock Option, multiplied by the number of shares of Company Common Stock subject to such Company Stock Option as of the Effective Time. Any such payment shall be subject to all applicable federal, state and local tax withholding requirements. To the extent that amounts are so withheld by Parent, Purchaser, the Surviving Corporation or the Paying Agent, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Shares in respect of which such deduction and withholding was made by Parent, Purchaser, the Surviving Corporation or the Paying Agent. The Company shall take all necessary action to approve the disposition of the Company Stock Options in connection with the Transactions to the extent necessary to exempt such dispositions and acquisitions under Rule l6b-3 of the Exchange Act,

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and shall take all necessary action to effect the treatment of the Company Stock Plans and Company Stock Options set forth in this Section 3.07, including obtaining all necessary consents.

     SECTION 3.08 Dissenting Shares.

          (a) Notwithstanding any provision of this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time and that are held by stockholders who shall have neither voted in favor of the Merger nor consented thereto in writing and who shall have demanded properly in writing appraisal for such Shares in accordance with Section 262 of Delaware Law (collectively, the “Dissenting Shares”) shall not be converted into, or represent the right to receive, the Merger Consideration. Such stockholders shall be entitled to receive payment of the appraised value of such Shares held by them in accordance with the provisions of such Section 262, except that all Dissenting Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such Shares under such Section 262 shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 3.09, of the certificate or certificates that formerly evidenced such Shares.

          (b) The Company shall give Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to Delaware Law and received by the Company relating to rights of appraisal and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under Delaware Law. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.

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     SECTION 3.09 Surrender of Shares; Stock Transfer Books.

          (a) Prior to the Effective Time, Purchaser shall designate a bank or trust company to act as agent (the “Paying Agent”) for the holders of Shares to receive the funds to which holders of Shares shall become entitled pursuant to Section 3.06(a). For purposes of determining the amount of Merger Consideration to be so deposited, Parent and Purchaser shall assume that no stockholder of the Company will perfect any right to appraisal of his, her or its Shares. Such funds shall be invested by the Paying Agent as directed by Parent or the Surviving Corporation, in its sole discretion, pending payment thereof by the Paying Agent to the holders of the Shares. Earnings from such investments shall be the sole and exclusive property of Parent and the Surviving Corporation, and no part of such earnings shall accrue to the benefit of holders of Shares.

          (b) Promptly after the Effective Time, the Surviving Corporation shall cause to be mailed to each person who was, at the Effective Time, a holder of record of Shares entitled to receive the Merger Consideration pursuant to Section 3.06(a) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Shares (the “Certificates”) shall pass, only upon proper delivery of the Certificates to the Paying Agent) and instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly evidenced by such Certificate, and such Certificate shall then be canceled. No interest shall accrue or be paid on the Merger

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Consideration payable upon the surrender of any Certificate for the benefit of the holder of such Certificate. If the payment equal to the Merger Consideration is to be made to a person other than the person in whose name the surrendered certificate formerly evidencing Shares is registered on the stock transfer books of the Company, it shall be a condition of payment that the certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such payment shall have paid all transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the certificate surrendered, or shall have established to the satisfaction of Purchaser that such taxes either have been paid or are not applicable.

          (c) At any time following the sixth month after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of Shares (including, without limitation, all interest and other income received by the Paying Agent in respect of all funds made available to it), and, thereafter, such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Share for any Merger Consideration delivered in respect of such Share to a public official pursuant to any abandoned property, escheat or other similar law.

          (d) At the close of business on the day of the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Shares on the records of the Company. From and after the Effective Time, the

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holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided herein or by applicable law.

     SECTION 3.10 Subsequent Actions. If at any time after the Effective Time the Surviving Corporation shall determine, in its sole discretion, or shall be advised, that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Company or Purchaser acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, then the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of either the Company or Purchaser, all such deeds, bills of sale, instruments of conveyance, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title or interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as set forth in the Company’s disclosure schedule delivered to Parent prior to the execution of this Agreement (the “Disclosure Schedule”), the Company represents and warrants to Parent and Purchaser as set forth below. Each disclosure set forth in the Disclosure Schedule is identified by reference to, or has been grouped under a heading referring to, a specific individual section of this Agreement and disclosure made pursuant to any section thereof shall be deemed to be disclosed on each of the other sections of the Disclosure Schedule to the extent the

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applicability of the disclosure to such other section is reasonably apparent on its face from the disclosure made.

     SECTION 4.01 Organization and Qualification; Subsidiaries.

          (a) Each of the Company and each subsidiary of the Company (“Subsidiary”) is a corporation duly organized, validly existing and, to the extent applicable, in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted. The Company and each Subsidiary is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to have such good standing, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Section 4.01(a) of the Disclosure Schedule lists jurisdictions in which the Company and each Subsidiary is qualified as a foreign corporation.

          (b) Except as disclosed in Section 4.01(b) of the Disclosure Schedule, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity.

     SECTION 4.02 Certificate of Incorporation and By-laws. The Company has heretofore furnished to Parent a complete and correct copy of the Certificate of Incorporation and the By-laws or equivalent organizational documents, each as amended to date, of the Company and each Subsidiary. Such Certificate of Incorporation, By-laws or equivalent organizational documents are in full force and effect. Neither the Company nor any Subsidiary is in violation of

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any of the provisions of its Certificate of Incorporation, By-laws or equivalent organizational documents.

     SECTION 4.03 Capitalization. The authorized capital stock of the Company consists of 25,000,000 Shares and 1,000,000 shares of preferred stock, no par value (“Company Preferred Stock”). As of the date hereof, (a) 14,260,856 Shares are issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable, (b) 1,249,300 Shares are held in the treasury of the Company, (c) no Shares are held by any Subsidiary or affiliate of the Company, (d) 49,230 Shares are reserved for future issuance pursuant to employee stock options, restricted stock or any stock or stock-related incentive rights to be granted pursuant to the Company Stock Plans, (e) 1,510,666 Shares are issuable upon the exercise of existing options to purchase Shares, and (f) 297,970 Shares are subject to outstanding restricted stock agreements. As of the date hereof, no shares of Company Preferred Stock are issued and outstanding. Except as set forth in this Section 4.03 and Section 4.03 of the Disclosure Schedule, and except for the rights (the “Rights”) issued pursuant to the Rights Agreement, dated as of November 12, 1998 (the “Rights Agreement”), between the Company and Harris Trust and Savings Bank, as rights agent, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any Subsidiary or obligating the Company or any Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, or any other security exercisable or exchangeable for, or convertible into, any such shares or other equity interests in, the Company or any Subsidiary. All Shares subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be, when issued, duly authorized, validly issued, fully paid and nonassessable. There are no outstanding contractual obligations,

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arrangements or commitments of any character of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any Shares, any other capital stock of, or other equity interest in the Company or any Subsidiary or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary or any other person. There are no bonds, debentures, notes or other indebtedness of the Company or any Subsidiary having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company or any Subsidiary may vote. Each outstanding share of capital stock of each Subsidiary is duly authorized, validly issued, fully paid and nonassessable, and all such shares are owned by the Company or another Subsidiary free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Company’s or any Subsidiary’s voting rights, charges and other encumbrances of any nature whatsoever.

     SECTION 4.04 Authority Relative to This Agreement. The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by the Company and the consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the then-outstanding Shares, if and to the extent required by applicable law, and the filing and recordation of appropriate merger documents as required by Delaware Law). This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Purchaser,

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constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors’ rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. Assuming the accuracy of the representation and warranty set forth in Section 5.08, the action taken by the Board in approving this Agreement and the Transactions is sufficient to render inapplicable to this Agreement and the Transactions the restrictions on business combinations contained in Section 203 of the Delaware Law.

     SECTION 4.05 No Conflict; Required Filings and Consents.

          (a) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the Certificate of Incorporation or By-laws or equivalent organizational documents of the Company or any Subsidiary, (ii) assuming all consents, approvals, authorizations and other actions described in Section 4.05(b) have been obtained or taken, conflict with or violate any federal, state, local or foreign statute, law, ordinance, regulation, rule, agency requirement, code, executive order, injunction, judgment, decree, arbitral award or other order (“Law”) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in any breach of or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any Subsidiary pursuant to,

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any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation, except, with respect to clauses (ii) and (iii), (1) as set forth in Section 4.05 of the Disclosure Schedule and (2) for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, would not reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would not reasonably be expected to prevent or materially delay the Company from performing its obligations under this Agreement and would not reasonably be expected to have a Material Adverse Effect.

          (b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any United States federal, state, county, foreign or local governmental, regulatory or administrative authority, agency, instrumentality or commission (a “Governmental Entity”) or any court, tribunal, or judicial or arbitral body (together with a Governmental Entity, a “Governmental Authority”), except for (i) compliance with any applicable requirements of the Exchange Act, (ii) any filings as may be required under Delaware Law in connection with the Merger, (iii) filings permits, authorizations, consents and approvals as may be required under the HSR Act, (iv) the filing with the SEC and the Nasdaq National Market, Inc. (“Nasdaq”) of (A) the Schedule 14D-9, (B) the Proxy Statement (as hereinafter defined) if stockholder approval is required by law, (C) the information required by Rule 14f-1 under the Exchange Act and (D) such reports under Section 13(a) of the Exchange Act as may be required in connection with this Agreement and the Transactions, (v) such filings and approvals as may be required by any applicable state securities or blue sky laws, and (vi) where the failure to obtain such consents, approvals, authorizations or permits, or

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to make such filings or notifications, individually or in the aggregate, would not reasonably be expected to prevent or materially delay consummation of the Offer or the Merger, or otherwise would not reasonably be expected to prevent or materially delay the Company from performing its obligations under this Agreement, and would not reasonably be expected to have a Material Adverse Effect.

     SECTION 4.06 Permits; Compliance.

          (a) Except as set forth in Part I of Section 4.06 of the Disclosure Schedule, each of the Company and each Subsidiary is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Authority necessary for each of the Company and the Subsidiaries to own, lease and operate its properties and to carry on its business as it is now being conducted (the “Permits”), except where the failure to have, or the suspension or cancellation of, any of the Permits, individually or in the aggregate, would not reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would not reasonably be expected to prevent or materially delay the Company from performing its obligations under this Agreement and would not reasonably be expected to have a Material Adverse Effect. As of the date hereof, no suspension or cancellation of any of the Permits, is pending or, to the knowledge of the Company, threatened, except where the failure to have, or the suspension or cancellation of, any of the Permits, individually or in the aggregate, would not reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would not reasonably be expected to prevent or materially delay the Company from performing its obligations under this Agreement and would not reasonably be expected to have a Material Adverse Effect. Except as set forth in Part II of Section 4.06 of the Disclosure

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Schedule, neither the Company nor any Subsidiary is in conflict with, in default under, or in breach or violation of, (a) any Law applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected, or (b) any Contract to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any property or asset of the Company or any Subsidiary is bound, except for any such conflicts, defaults, breaches or violations that, individually or in the aggregate, would not reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would not reasonably be expected to prevent or materially delay the Company from performing its obligations under this Agreement and would not reasonably be expected to have a Material Adverse Effect.

     SECTION 4.07 SEC Filings; Financial Statements.

          (a) Except as set forth in Section 4.07(a) of the Disclosure Schedule, the Company has timely filed all forms, reports and documents (including exhibits and other information incorporated therein) required to be filed by it with the SEC since June 30, 2002 (the forms, reports and other documents referred to above being, collectively, the “SEC Reports”). The SEC Reports (i) were prepared in accordance with the requirements of the Securities Act of 1933, as amended (the “Securities Act”) and the rules and regulations promulgated thereunder or the Exchange Act and in the rules and regulations promulgated thereunder, as the case may be, applicable to such SEC Reports, (ii) the SEC Reports, as of their respective dates (and, if amended or superseded by a filing prior to the date of this Agreement or the expiration of the Offer, then on the date of such filing), complied in all material respects with all requirements of the Securities Act or the Exchange Act, as the case may be, and, in each case, the rules and regulations promulgated thereunder, applicable to such SEC Reports and (iii) did not, at the time

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they were filed, or, if amended, as of the date of such amendment, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No Subsidiary is required to file any form, report or other document with the SEC. The SEC Reports included or, with respect to such reports filed after the date hereof, will include all certificates required to be included therein pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended (the “SOX Act”), and the internal control report and attestation of the Company’s outside auditors required by Section 404 of the SOX Act.

          (b) The Company is in compliance in all material respects with the applicable provisions of the SOX Act and the applicable listing and governance rules and regulations of the Nasdaq. The Company has implemented disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) to ensure that material information relating to the Company is made known to the management of the Company by others within those entities. The Company and each Subsidiary (i) makes and keeps accurate books and records and (ii) maintains internal accounting controls which provide reasonable assurance that (a) transactions are executed in accordance with management’s general or specific authorization, (b) transactions are recorded as necessary to permit preparation of its financial statements in conformity with GAAP and to maintain accountability for its assets, (c) access to its assets is permitted only in accordance with management’s general or specific authorization and (d) the reported accounting for its assets and liabilities is compared with existing assets and liabilities at reasonable intervals. The Company has prepared a plan to comply with the requirements of Section 404 of the SOX Act on the date by which it must comply with such requirements.

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Except as set forth in Section 4.07(b) of the Disclosure Schedule, the Company is not aware of any reason it will not comply with the requirements of Section 404 of the SOX Act on the applicable compliance date and has no knowledge of any “significant deficiency” or “material weakness” in the Company’s internal controls. For purposes of this Agreement, the terms “significant deficiency” and “material weakness” shall have the meanings assigned to them in the Statements of Auditing Standards No. 60, as in effect on the date hereof.

          (c) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the SEC Reports was prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and each fairly presents, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its consolidated Subsidiaries as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which are not, individually or in the aggregate, material).

          (d) Except as and to the extent set forth on the consolidated balance sheet of the Company and the consolidated Subsidiaries as at June 30, 2004, including the notes thereto (the “2004 Balance Sheet”), neither the Company nor any Subsidiary has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise), except for liabilities and obligations, incurred in the ordinary course of business consistent with past practice since June 30, 2004, which, individually or in the aggregate, would not reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would not reasonably be expected to prevent or materially delay the Company from performing

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its obligations under this Agreement and would not reasonably be expected to have a Material Adverse Effect.

          (e) The Company has heretofore furnished to Parent complete and correct copies of all amendments and modifications that have not been filed by the Company with the SEC to all agreements, documents and other instruments that previously had been filed by the Company with the SEC and are currently in effect.

          (f) Set forth on Section 4.07(f) of the Disclosure Schedule is the most recently prepared financial outlook for the Company and Subsidiaries for fiscal year 2006 (the “Outlook”). Management of the Company prepared the Outlook in good faith based upon assumptions it believes are reasonable as of the date hereof; it is understood that all projections are subject to significant uncertainties and that no representation is being made hereby that the projected results will be achieved.

          (g) There are no uninstalled Units that have been recorded into income by the Company or any Subsidiary. For purposes of the immediately preceding sentence, “Units” has the meaning assigned to such term under the Purchasing Agreement by and between Parata Systems, LLC and Spirit effective as of July 21, 2003, as amended by the Addendum to the Purchasing Agreement dated April 30, 2004.

     SECTION 4.08 Absence of Certain Changes or Events. Since June 30, 2004, except as set forth in Section 4.08 of the Disclosure Schedule or in the SEC Reports, or as expressly contemplated by this Agreement, (a) the Company and the Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice, (b) there has not been any Material Adverse Effect or the occurrence of any event, circumstance or change that would reasonably be expected to have a Material Adverse Effect, and (c) neither the

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Company nor any Subsidiary has taken any action that, if taken after the date of this Agreement, would constitute a breach of any of the covenants set forth in Section 6.01.

     SECTION 4.09 Absence of Litigation. Except as set forth in Section 4.09(a) of the Disclosure Schedule, there is no litigation, suit, claim, action, proceeding or investigation (an “Action”) pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary, or any property or asset of the Company or any Subsidiary, before any Governmental Authority that (a) individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect or (b) seeks to or would, individually or in the aggregate, reasonably be expected to materially delay or prevent the consummation of any Transaction. None of the Company, any Subsidiary or any property or asset of the Company or any Subsidiary is subject to any continuing order of, consent decree, settlement agreement or similar written agreement with, or, to the knowledge of the Company, continuing investigation by, any Governmental Authority, or any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority that, individually or in the aggregate, would reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would reasonably be expected to prevent or materially delay the Company from performing its obligations under this Agreement or would reasonably be expected to have a Material Adverse Effect. Except as disclosed in Section 4.09(b) of the Disclosure Schedule, none of the Company or any Subsidiary or, to the knowledge of the Company, any of their respective officers, directors or employees, or any vendor or customer of the Company or any Subsidiary, is the subject of, has been named in or has received any notice of any investigation by any Governmental Authority relating to the diversion of any Drugs, or to alleged involvement in unauthorized or

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unlawful Drug resale, or the distribution or sale of adulterated, misbranded, subpotent, or expired Drugs.

     SECTION 4.10 Employee Benefit Plans.

          (a) Section 4.10(a) of the Disclosure Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and all bonus, profit sharing, savings, retirement, stock option, stock purchase, restricted stock, incentive, deferred compensation, fringe benefit, perquisite, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs, policies, agreements or arrangements, and all employment, consulting, change in control, termination, severance, retention or other Contracts or agreements (which, in the case of any employment agreement or Contract, is material), whether legally enforceable or not, to which the Company, any Subsidiary or any ERISA Affiliate is a party, with respect to which the Company, any Subsidiary or any ERISA Affiliate has any obligation or which are maintained, contributed to or sponsored by the Company, any Subsidiary or any ERISA Affiliate for the benefit of any current or former employee, officer, consultant or director of the Company, any Subsidiary and (ii) any material arrangements, understandings or Contracts between the Company, any Subsidiary or any ERISA Affiliate and any current or former employee, officer, consultant or director of the Company or any Subsidiary including, without limitation, any arrangements, understandings or Contracts relating in any way to a sale of the Company or any Subsidiary (collectively, the “Plans”). Except as set forth in Section 4.10(a) of the Disclosure Schedule, each Plan is in writing and the Company has furnished to Parent a true and complete copy of each Plan and all amendments thereto, and has delivered to Parent a true and complete copy of each material document, if any, prepared in connection with each such Plan, including, without

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limitation, (i) a copy of each trust or other funding arrangement, (ii) each summary plan description, summary of material modifications and prospectus, (iii) the most recently filed Internal Revenue Service (“IRS”) Form 5500 for the three most recent plan years, (iv) the most recently received IRS determination letter for each Plan that is intended to be qualified under Section 401(a) of the Code, and (v) the most recently prepared actuarial report and financial statement in connection with each such Plan. Neither the Company nor any Subsidiary has any express or implied commitment, whether legally enforceable or not, (i) to create, incur liability with respect to or cause to exist any other employee benefit plan, program, policy, agreement or arrangement, (ii) to enter into any Contract or agreement to provide compensation or benefits to any individual, or (iii) to modify, change or terminate any Plan, other than with respect to a modification, change or termination required by this Agreement or by Law.

          (b) Except as set forth in Part I of Section 4.10(b) of the Disclosure Schedule, neither the Company, any Subsidiary, or any ERISA Affiliates has any obligation under a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a “Multiemployer Plan”) or a single employer plan (within the meaning of Section 4001(a)(15) of ERISA) for which the Company or any Subsidiary could incur liability under Section 4063 or 4064 of ERISA (a “Multiple Employer Plan”). Except as set forth in Part I of Section 4.10(b) of the Disclosure Schedule, neither the Company nor any Subsidiary would incur any multiemployer withdrawal liability were either to withdraw or partially withdraw from any multiemployer plan. Except as set forth in Part II of Section 4.10(b) of the Disclosure Schedule, none of the Plans (i) obligates the Company or any Subsidiary to pay separation, severance, termination or similar-type benefits solely or partially as a result of any transaction contemplated by this Agreement, or (ii) obligates the Company or any Subsidiary to make any payment or

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provide any benefit as a result of a “change in control”, within the meaning of such term under Section 280G of the Code. Except as set forth in Part II of Section 4.10(b) of the Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not, either alone or in combination with another event, (A) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee, officer, consultant or director or (B) require the immediate funding or financing of any compensation or benefits. Except as set forth in Part III of Section 4.10(b) of the Disclosure Schedule, or as required by Part 6 of Title I of ERISA, none of the Plans provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer, director or consultant of the Company or any Subsidiary. Each of the Plans is subject only to the Laws of the United States or a political subdivision thereof.

          (c) Except as set forth in Section 4.10(c) of the Disclosure Schedule, each Plan is now and has been operated in all respects in accordance with its terms and in all material respects in accordance with the requirements of all applicable Laws including, without limitation, ERISA and the Code. Except as set forth in Section 4.10(c) of the Disclosure Schedule, the Company and the Subsidiaries and, to the knowledge of the Company, any ERISA Affiliate, have performed all obligations required to be performed by them under, are not in any respect in default under or in violation of, and have no knowledge of any default or violation by any party to, any Plan. No Action or audit by any Governmental Entity is pending or, to the knowledge of the Company, threatened with respect to any Plan (other than claims for benefits in the ordinary course) and no fact or event exists that could give rise to any such Action or audit.

          (d) Each Plan that is intended to be qualified under Section 401(a) of the Code has timely received a favorable determination letter from the IRS covering all of the provisions

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applicable to the Plan for which determination letters are currently available that the Plan is so qualified and each trust established in connection with any Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter from the IRS that it is so exempt, and no fact or event has occurred since the date of such determination letter or letters from the IRS to adversely affect the qualified status of any such Plan or the exempt status of any such trust.

          (e) Except as set forth in Section 4.10(e) of the Disclosure Schedule, there has not been any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan. None of the Company, any Subsidiary or any ERISA Affiliate has incurred any liability under, arising out of or by operation of Title IV of ERISA, including, without limitation, any liability in connection with (i) the termination or reorganization of any employee benefit plan subject to Title IV of ERISA, or (ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and no fact or event exists which could give rise to any such liability. Except as set forth in Section 4.10(e) of the Disclosure Schedule, no Plan is subject to Title IV or Section 302 of ERISA or Section 412 of the Code.

          (f) Except as set forth in Section 4.10(f) of the Disclosure Schedule, all contributions, premiums or payments required to be made with respect to any Plan have been made on or before their due dates.

          (g) Neither the Company, nor any Subsidiary has used the services of workers provided by third party contract labor suppliers, temporary employees, “leased employees” (as that term is defined in Section 414(n) of the Code), or individuals who have provided services as independent contractors to an extent that would reasonably be expected to result in the

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disqualification of any Plans or the imposition of penalties or excise taxes with respect to such plans by the IRS or the U.S. Department of Labor.

          (h) Except as set forth in Section 4.10(h) of the Disclosure Schedule, no amounts payable under any Plan will fail to be deductible for federal income tax purposes by virtue of Section 280G or Section 162(m) of the Code by reason of the transactions contemplated by this Agreement or otherwise.

     SECTION 4.11 Labor and Employment Matters.

          (a) Except as set forth in Section 4.11(a) of the Disclosure Schedule, (i) there are no controversies, lawsuits, actions, grievances, investigations or charges pending or, to the knowledge of the Company, threatened between the Company or any Subsidiary and any of their respective employees, which, individually or in the aggregate, would reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would reasonably be expected to prevent or materially delay the Company from performing its obligations under this Agreement or would reasonably be expected to have a Material Adverse Effect; (ii) neither the Company nor any Subsidiary is a party to any collective bargaining agreement or other Contract with a labor union applicable to persons employed by the Company or any Subsidiary, nor, to the knowledge of the Company, are there currently any activities or proceedings of any labor union to organize any such employees nor have there been any such activities for the past five (5) years; (iii) to the knowledge of the Company, neither the Company nor any Subsidiary has breached or otherwise failed to comply with any provision of any such agreement or Contract, and there are no grievances outstanding against the Company or any Subsidiary under any such collective bargaining agreement or Contract; (iv) to the knowledge of the Company, there are no unfair labor practice complaints pending against the Company or any

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Subsidiary before the National Labor Relations Board or any current union representation questions involving employees of the Company or any Subsidiary; and (v) there is no strike, slowdown, work stoppage or lockout, or, to the knowledge of the Company, threat thereof, by or with respect to any employees of the Company or any Subsidiary nor has there been any such occurrence for the past five (5) years.

          (b) The Company and the Subsidiaries are in material compliance with all applicable laws relating to the employment of labor, including those related to wages, hours, collective bargaining, discrimination, plant closures, layoffs and the payment and withholding of taxes and other sums as required by the appropriate Governmental Authority. The Company and the Subsidiaries have paid in full to all employees or adequately accrued for in accordance with GAAP consistently applied all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees and there is no claim with respect to payment of wages, salary or overtime pay that has been asserted or is now pending or threatened before any Governmental Authority with respect to any persons currently or formerly employed by the Company or any Subsidiary. Neither the Company nor any Subsidiary is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to employees or employment practices. To the knowledge of the Company, there is no charge or proceeding with respect to a violation of any occupational safety or health standards that has been asserted or is now pending or threatened with respect to the Company. Except as set forth in Section 4.11(b) of the Disclosure Schedule, to the knowledge of the Company, there is no charge of discrimination in employment or employment practices, for any reason, including, without limitation, age, gender, race, religion or other legally protected category, which has been asserted or is now pending or threatened before the United States Equal

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Employment Opportunity Commission, or any other Governmental Authority in any jurisdiction in which the Company or any Subsidiary have employed or employ any person.

          (c) The Company and its Subsidiaries are and have been in compliance with all notice and other requirements of the Worker Adjustment and Retaining Notification Act (the “WARN Act”) and any similar state or local statute. Except as set forth in Section 4.11(c) of the Disclosure Schedule, no employee of the Company or its Subsidiaries has suffered an “employment loss” (as defined in the WARN Act) during the ninety (90)-day period prior to the execution of this Agreement; provided however, that the Company will update this disclosure as necessary to reflect all “employment losses” in the ninety (90)-day period prior to the Effective Time, other than “employment losses” caused by Purchaser.

     SECTION 4.12 Offer Documents; Schedule 14D-9; Proxy Statement. Neither the Schedule l4D-9 nor any information supplied by the Company for inclusion in the Offer Documents shall, at the times the Schedule 14D-9, the Offer Documents or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to stockholders of the Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Neither the proxy statement to be sent to the stockholders of the Company in connection with the Stockholders’ Meeting (as hereinafter defined) or the information statement to be sent to such stockholders, as appropriate (such proxy statement or information statement, as amended or supplemented, being referred to herein as the “Proxy Statement”), shall, at the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of the Company, at the time of the Stockholders’ Meeting and at the Effective Time, contain any statement which, at the time

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and in light of the circumstances under which it was made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders’ Meeting which shall have become false or misleading. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by the Parent or Purchaser or any of their representatives for inclusion in any of the foregoing documents. The Schedule 14D-9 and the Proxy Statement shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder.

     SECTION 4.13 Property and Leases.

          (a) The Company and the Subsidiaries have good and marketable title to all their properties and assets required to conduct their respective businesses as currently conducted, with only such exceptions as would not reasonably be expected to have a Material Adverse Effect.

          (b) Part I of Section 4.13(b) of the Disclosure Schedule sets forth a list of each parcel of real property owned by the Company or any Subsidiary. Except as set forth in Part II of Section 4.13(b) of the Disclosure Schedule, each parcel of real property owned or leased by the Company or any Subsidiary (i) is owned or leased free and clear of all mortgages, pledges, liens, security interests, conditional and installment sale agreements, encumbrances, charges, easements, rights of way or other encumbrance to title, or any option, right of first refusal, or right of first offer or other claims of third parties of any kind (collectively, “Liens”), other than (A) statutory Liens for current taxes and assessments not yet past due, (B) inchoate mechanics’ and materialmen’s Liens for construction in progress, (C) workmen’s, repairmen’s,

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warehousemen’s and carriers’ Liens arising in the ordinary course of business of the Company or such Subsidiary consistent with past practice, and (D) all matters of record, Liens and other imperfections of title and encumbrances that, together with the Liens described in Clauses (A) through (C), individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect (collectively, “Permitted Liens”), and (ii) is neither subject to any governmental decree or order to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the knowledge of the Company, has any such condemnation, expropriation or taking been proposed.

          (c) All leases of real property leased for the use or benefit of the Company or any Subsidiary to which the Company or any Subsidiary is a party, and all amendments and modifications thereto, are, except as set forth on Section 4.13(c) of the Disclosure Schedule, in full force and effect and have not been modified or amended, and there exists no default under any such lease by the Company or any Subsidiary, nor any event which, with notice or lapse of time or both, would constitute a default thereunder by the Company or any Subsidiary, except as, individually or in the aggregate, would not reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would not reasonably be expected to prevent or materially delay the Company from performing its obligations under this Agreement and would not reasonably be expected to have a Material Adverse Effect.

          (d) There are no contractual or legal restrictions that preclude or restrict the ability to use any real property owned or leased by the Company or any Subsidiary for the purposes for which it is currently being used, except where the existence of such restrictions, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, there are no material latent defects or material

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adverse physical conditions affecting the real property, and improvements thereon, owned or leased by the Company or any Subsidiary other than those that, individually or in the aggregate, would not reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would not reasonably be expected to prevent or materially delay the Company from performing its obligations under this Agreement and would not reasonably be expected to have a Material Adverse Effect.

     SECTION 4.14 Taxes. Each of the Company and the Subsidiaries have timely filed (or there has been filed on their behalf) all material Tax Returns required to be filed, and all such Tax Returns are true, correct and complete, and have timely paid and discharged all material Taxes required to be paid or discharged, other than such payments as are being contested in good faith by appropriate proceedings and for which adequate reserves have been established on the 2004 Balance Sheet. No Governmental Authority has proposed, asserted or assessed against the Company or any Subsidiary any deficiency or claim for any Taxes which has not subsequently been paid in full; there are no federal, state, local or foreign audits, actions, suits, proceedings, investigations, claims, or administrative or other proceedings relating to Taxes or any Tax Returns of the Company or any Subsidiary (each, a “Tax Claim” and collectively “Tax Claims”) now pending; and neither the Company nor any Subsidiary has received any notice of any proposed Tax Claims. Neither the Company nor any Subsidiary has granted any waiver of or comparable consent regarding any statute of limitations with respect to, or any extension of a period for the assessment of any Tax. The reserve for Taxes set forth on the face of the 2004 Balance Sheet (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) are adequate for the payment of Taxes not yet due and payable, as determined in accordance with GAAP, and since the date of the 2004 Balance Sheet neither

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the Company nor any Subsidiary has incurred any liability for Taxes other than in the ordinary course of business. There are no Tax liens upon any property or assets of the Company or any Subsidiary except statutory liens for current Taxes not yet due. Except as set forth in Section 4.14 of the Disclosure Schedule, no power of attorney granted by or with respect to the Company or any Subsidiary relating to Taxes is currently in force. Except as set forth in Section 4.14 of the Disclosure Schedule, neither the Company nor any Subsidiary is required to include in income any adjustment pursuant to Section 481 of the Code by reason of a voluntary change in accounting method initiated by the Company or any of the Subsidiaries, and the IRS has not initiated or proposed any such adjustment or change in accounting method. Except as set forth in Section 4.14 of the Disclosure Schedule, there are no limitations on the ability of the Company or any Subsidiary to utilize or carry forward any net operating loss pursuant to Code Section 382 (or any corresponding or similar provision of state, local or foreign Tax law), nor any limitations with respect to any Tax attribute described in Code Section 383 (or any corresponding or similar provision of state, local or foreign Tax law). Except as set forth in the financial statements described in Section 4.07, neither the Company nor any of the Subsidiaries has entered into a transaction which is being accounted for under the installment method of Section 453 of the Code. Except as set forth in Section 4.14 of the Disclosure Schedule, neither the Company nor any Subsidiary has received any ruling from any Governmental Authority relating to Taxes and no closing agreement pursuant to Section 7121 of the Code (or similar provisions of state, local or foreign law) has been entered into by or with respect to the Company or any Subsidiary. No jurisdiction where the Company or any Subsidiary does not file a Tax Return has made a claim that the Company or any Subsidiary is required to file a Tax Return for such jurisdiction. Each of the Company and the Subsidiaries has complied with all applicable

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rules and regulations relating to the withholding of Taxes and has withheld and paid over to the relevant Governmental Authority all Taxes required to have been withheld and paid, including, without limitation, withholding in connection with payments to employees, independent contractors, creditors, stockholders or other third parties. The Company has not been a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Neither the Company nor any Subsidiary has been a member of any affiliated group within the meaning of Section 1504(a) of the Code, or any similar affiliated or consolidated group for Tax purposes under state, local or foreign law (other than a group, the common parent of which is the Company). Neither the Company nor any Subsidiary is liable for any Tax imposed on any other person or entity under Treasury Regulation Section 1.1502-6 for any similar provision of state, local, or foreign tax law) as a transferee or successor, or is bound by or has any obligation under any Tax sharing, Tax indemnification, or similar agreement, contract or arrangement, whether written on unwritten. Neither the Company nor any Subsidiary was or will be required to include any item of income in, or exclude any item of deduction from, taxable income for (i) the taxable year of the Company ending on June 30, 2005 or (ii) any taxable period (or portion thereof) ending on or after the date on which the Effective Time occurs, respectively, as a result of any intercompany transaction, deferred intercompany gain or excess loss account as described in Treasury Regulations under Code Section 1502 (or any corresponding or similar provision of state, local or foreign Tax law). During the five (5)-year period ending on the date hereof, neither the Company nor any Subsidiary has been a “distributing corporation” or a “controlled corporation” in a distribution of stock to any person qualifying for tax-free treatment under Section 355 of the Code, either in the two (2) years prior to the date of this Agreement, or in a distribution which

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could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the transactions contemplated under this Agreement. The Tax Returns of the Company and the Subsidiaries have been examined by the Internal Revenue Service (or the applicable statutes of limitation for the assessment of Taxes for such periods have expired) for all periods through and including June 30, 2001, and as of the date hereof no material adjustments have been asserted as a result of such examinations which have not been resolved and fully paid, or reserved on the financial statements in accordance with GAAP. Neither the Company nor any Subsidiary has engaged in any transaction that gives rise to (i) a registration obligation with respect to any person under Section 6111 of the Code or the regulations thereunder, (ii) a list maintenance obligation with respect to any person under Section 6112 of the Code or the regulations thereunder, or (iii) a disclosure obligation as a “reportable transaction” under Section 6011 of the Code and the regulations thereunder. Except as set forth in Section 4.14 of the Disclosure Schedule, neither the Company nor any subsidiary or affiliate of the Company has or participates in any deferred compensation or other agreements, arrangements or plans subject to the application of Section 409A of the Code (“Section 409A Plans”), and any such Section 409A Plans which the Company or any subsidiary or affiliate of the Company has or participates in is full compliance with the requirements of Section 409A of the Code taking into account the provisions of Internal Revenue Service Notice 2005-1 and any other rules, regulations or guidance promulgated under Section 409A of the Code.

     SECTION 4.15 Environmental Matters. Except as described in Section 4.15 of the Disclosure Schedule or that would not reasonably be expected to have a Material Adverse Effect, (a) neither the Company nor any Subsidiary has violated and is in violation of any Environmental Law and, to the knowledge of the Company, there are no circumstances that may

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prevent or interfere with compliance with Environmental Laws in the future; (b) to the knowledge of the Company, none of the properties currently or formerly owned, leased or operated by the Company or any Subsidiary (including, without limitation, soils and surface and ground waters) are contaminated with any Hazardous Substance; (c) neither the Company nor any Subsidiary is actually, or, to the knowledge of the Company, potentially or allegedly liable for any off-site contamination by Hazardous Substances; (d) neither the Company nor any Subsidiary is actually, potentially or allegedly liable under any Environmental Law (including, without limitation, pending or threatened liens or Actions); (e) the Company and the Subsidiaries have all permits, licenses and other authorizations required under any Environmental Law (“Environmental Permits”); (f) the Company and the Subsidiaries have always been and are in compliance with its Environmental Permits and, to the knowledge of the Company, there are no past or present actions, activities, circumstances, conditions, events or incidents that could form the basis of any Action against the Company, any Subsidiary or against any person or entity whose liability the Company or any Subsidiary has retained or assumed either contractually or by operation of law, or that otherwise could result in any costs or liabilities under Environmental Law; and (g) neither the execution of this Agreement nor the consummation of the Transactions will require any investigation, remediation or other action with respect to Hazardous Substances, or any notice to or consent of Governmental Authorities or third parties, pursuant to any applicable Environmental Law or Environmental Permit. The Company has provided to Parent all material assessments, reports, data, results of investigations or audits, and other information that is in the possession of or reasonably available to the Company and its Subsidiaries regarding environmental matters pertaining to the environmental condition of the business of the Company

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and its Subsidiaries, or the compliance (or noncompliance) by the Company and its Subsidiaries with any Environmental Laws.

     SECTION 4.16 Action with Respect to Rights Agreement. The Board has taken all necessary action with respect to the Rights Agreement so that (a) none of the execution or delivery of this Agreement, the making of the Offer, the acceptance for payment of Shares by Purchaser pursuant to the Offer, the consummation of the Merger, the purchase of Shares or the consummation of any other Transaction will result in (i) the Rights becoming exercisable, or (ii) the Rights becoming evidenced by, and transferable pursuant to, certificates separate from the certificates representing Shares, and (b) the Rights will expire pursuant to the terms of the Rights Agreement at the Effective Time.

     SECTION 4.17 Material Contracts.

          (a) The corresponding subsections of Section 4.17 of the Disclosure Schedule contain a list or a description of all of the following Contracts to which the Company or any Subsidiary is a party or to which the Company, any Subsidiary or any of their respective properties or other assets is subject:

     (i) Advertising Contracts requiring or which would reasonably be expected to require payments or expenditures by the Company or any Subsidiary in excess of $100,000 in any twelve (12)-month period;

     (ii) Contracts with any Governmental Authority;

     (iii) Contracts (A) under which the Company or any Subsidiary has incurred any indebtedness for borrowed money that is currently outstanding and has a principal amount in excess of $100,000, (B) in respect of the indebtedness or other obligations of any third party, including, without limitation any guarantee

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thereof or similar arrangement by the Company or any Subsidiary, (C) granting or pursuant to which is created or granted a Lien (other than a Lien described in clauses (A) through (C) of the definition of Permitted Liens) on any of the properties or assets of the Company or any Subsidiary, (D) associated with off balance sheet financing, including but not limited to arrangements for the sale of receivables and (E) relating to any interest rate, currency or commodity derivative, swap or hedging transaction;

     (iv) Contracts containing (I) a covenant not to compete applicable to the Company or any Subsidiary, (II) any other covenant limiting or restricting (or purporting to limit or restrict) the freedom of the Company or any Subsidiary (A) to develop, manufacture, market, distribute or sell any products or services or to extend in the future any line of products or services into other forms, (B) to enter into or compete in any line of business or geographic area or with any person or (C) to hire any individual or entity or group of individuals or entities, (III) any other covenant limiting or restricting (or purporting to limit or restrict) the Company or any Subsidiary from transacting any business or dealing in any manner with any other person or entity or (IV) Contracts which, after the consummation of the transactions contemplated by this Agreement, would have the effect of creating or imposing on, or otherwise making applicable to, the Company or any Subsidiary any of the restrictions or limitations described in the foregoing;

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     (v) Power of attorney or Contracts that result (or would reasonably be expected to result) in any person or entity holding a power of attorney from the Company or any Subsidiary;

     (vi) License Agreements and any other Contracts pursuant to which the Company or any Subsidiary obtains from a third party the right to use, exploit, practice, sell or distribute Intellectual Property Rights of or controlled by a third party or the Company grants to a third party the right to use, exploit, practice, sell or distribute Intellectual Property Rights, confidential information or other proprietary rights and process of the Company or any Subsidiary;

     (vii) Contracts for employment required to be listed in Section 4.10(a) of the Disclosure Schedule and collective bargaining agreements and other Contract with any labor union or association representing employees of the Company or any Subsidiary;

     (viii) (I) Management, service, consulting and other similar type of Contracts that are in writing and (II) material management, service, consulting and other similar type of Contracts that are not in writing, (excluding, in the case of Clauses (I) and (II), Contracts for employment listed in Section 4.17(a) of the Disclosure Schedule pursuant to subsection (vii) above);

     (ix) (I) Contracts with customers (including, without limitation, group purchasing organizations, buying groups or similar organizations), suppliers, distributors or other sales representatives likely to involve consideration of more than $500,000;

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     (x) Contracts pursuant to which the Company or any Subsidiary has received or which would reasonably be expected to receive payments in respect of services provided to pharmaceutical suppliers or suppliers of medical or surgical goods;

     (xi) Contracts relating to the consignment or warehousing of inventory or products of the Company or any Subsidiary;

     (xii) Contracts establishing, creating or relating to any partnership, joint venture, limited liability company, limited liability partnership or similar entity;

     (xiii) Contracts providing for “earn-outs”, “savings guarantees”, “performance guarantees”, or other contingent payments by the Company or any Subsidiary which would reasonably be expected to be in excess of $100,000 during any twelve (12)-month period;

     (xiv) Contracts with any director, officer, employee or affiliate of the Company or any Subsidiary or, to the knowledge of the Company, any stockholder of the Company or, in each case, any immediate family member thereof (excluding Contracts for employment listed in Section 4.17(a) of the Disclosure Schedule pursuant to subsection (vii) above);

     (xv) Contracts in respect of (A) the lease or sublease of any real or personal property, (B) the sale or purchase of any real property and (C) the release, transportation or disposal of Hazardous Materials, or the clean-up, abatement or other action relating to Hazardous Materials or Environmental Laws;

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     (xvi) Contracts pursuant to which the Company or any Subsidiary receives or would reasonably be expected to receive payments of administrative fees from pharmaceutical suppliers or suppliers of medical or surgical goods;

     (xvii) Individual Contracts or groups of related Contracts pursuant to which a customer (including, without limitation, group purchasing organizations, buying groups or similar organizations) and/or its affiliates purchase both distribution services and automation products or other technology from the Company or any Subsidiary;

     (xviii) Contracts in connection with which the Company or any Subsidiary may receive personal health information (as such term is defined in HIPAA);

     (xix) Contracts pursuant to which the Company or, to the Knowledge of the Company, any Subsidiary has assigned any of its rights with respect to any antitrust or similar claims with respect to branded pharmaceuticals products;

     (xx) Stock purchase agreements, asset purchase agreements or other acquisition or divestiture Contracts relating to material transactions since January 1, 2002; and

     (xxi) All other Contracts, whether or not made in the ordinary course of business, which are material to the Company, any Subsidiary or the conduct of their respective businesses, or the absence, breach or termination of which, individually or in the aggregate, would reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would reasonably be expected to prevent or materially delay the Company from

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performing its obligations under this Agreement or would reasonably be expected to have a Material Adverse Effect.

          (b) The Contracts required to be listed or described on Schedule 4.17(a) of the Disclosure Schedule are referred to herein as “Material Contracts”. Except as, individually or in the aggregate, would not reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would not reasonably be expected to prevent or materially delay the Company from performing its obligations under this Agreement and would not reasonably be expected to have a Material Adverse Effect and except as set forth in Section 4.17(b) of the Disclosure Schedule, (i) each Material Contract is a legal, valid and binding agreement, and none of the Material Contracts is in default by its terms or has been canceled by the other party; (ii) to the Company’s knowledge, no other party is in breach or violation of, or default under, any Material Contract; (iii) the Company and the Subsidiaries are not in receipt of any claim of default under any Material Contract; and (iv) neither the execution of this Agreement nor the consummation of any Transaction shall constitute default, give rise to cancellation rights, result in the acceleration of any obligation or the creation of any Lien or otherwise would reasonably be expected to adversely affect any of the Company’s rights under any Material Contract. The Company has furnished or made available to Parent true and complete copies of all Material Contracts that have not been filed with the SEC and included in the Exhibits Index to the Company’s Annual Report on Form 10-K for its fiscal year ended June 30, 2004, including any amendments thereto.

     SECTION 4.18 Insurance.

          (a) Section 4.18(a) of the Disclosure Schedule sets forth, with respect to each insurance policy, other than insurance policies relating to Plans under which the Company or any

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Subsidiary is insured, a named insured or otherwise the principal beneficiary of coverage which is currently in effect, (i) the names of the insurer, the principal insured and each named insured, (ii) the policy number, (iii) the period, scope and amount of coverage and (iv) the premium charged.

          (b) With respect to each such insurance policy: (i) the policy is legal, valid, binding and enforceable in accordance with its terms and is in full force and effect; (ii) all premiums due and payable to date under such policy have been paid; and (iii) neither the Company nor any Subsidiary is in material breach or default (including any such breach or default with respect to the payment of premiums or the giving of notice), and, to the knowledge of the Company, no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit termination or modification, under the policy.

          (c) At no time subsequent to January 1, 2001 has the Company or any Subsidiary (i) been denied any insurance or indemnity bond coverage which it has requested or (ii) made any material reduction in the scope or amount of its insurance coverage.

     SECTION 4.19 Brokers. No broker, finder or investment banker (other than Citigroup Global Markets Inc.) is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company. The Company has heretofore furnished to Parent a complete and correct copy of all agreements between the Company and Citigroup Global Markets, Inc. pursuant to which such firm would be entitled to any payment relating to the Transactions.

     SECTION 4.20 Intellectual Property.

          (a) Ownership of Intellectual Property Rights. Section 4.20(a) of the Disclosure Schedule lists all Company Registered Intellectual Property Rights, identifying in

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each case the inventors/authors, status, filing date, and issuance/registration/grant date, and prosecution status thereof. The Company or the Subsidiaries own all right, title, and interest (including the sole right to enforce) free and clear of all encumbrances in and to all Company Intellectual Property Rights, and with respect to Company Registered Intellectual Property Rights is listed in the records of the appropriate United States, state or foreign authority as the sole owner for each item thereof.

          (b) Software. For purposes of this section, “Company Software” means all Computer Software (other than Computer Software that is generally available on nondiscriminatory pricing terms and which has an individual acquisition cost of $1000 or less, hereafter “Non-Material Computer Software”) that was developed by or for, is owned by, or otherwise used in the business of the Company or the Subsidiaries. Except as set forth on Section 4.20(b) of the Disclosure Schedule: (i) no source code for any Company Software owned by the Company or any Subsidiary has been disclosed, delivered, licensed, or is subject to any source code escrow obligation, to a third party; and (ii) no portion of the Company Software is subject to any “open source” license (whether to or from a third party).

          (c) Licenses. Except as set forth on Section 4.20(c) of the Disclosure Schedule: (i) Each License Agreement is valid and binding on all parties thereto and enforceable in accordance with its terms; (ii) none of the Outbound License Agreements from the Company or any Subsidiary grants any third party exclusive rights, or the right to sublicense, under any Company Intellectual Property Rights; (iii) the Company and the Subsidiaries have not performed any act, or permitted any omission, that would give rise to a right of termination under any License Agreements; (iv) to the knowledge of the Company, no other party to any License

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Agreement has performed any act, or permitted any omission, that would give rise to a right of termination thereunder.

          (d) No Restrictions. There are no forbearances to sue, consents, judgments, orders or similar obligations, other than the License Agreements, that do or may: (i) restrict the rights of the Company and any Subsidiary to use or enforce any Intellectual Property Rights; (ii) restrict the conduct of the business of the Company and any Subsidiary in order to accommodate a third party’s Intellectual Property Rights; or (iii) grant any third party any right with respect to any Company Intellectual Property Rights.

          (e) No Infringement by Company. Except as set forth on Section 4.20(e) of the Disclosure Schedule: (i) to the knowledge of the Company, there are no allegations, claims or notices to the effect that the conduct of the business of the Company or any Subsidiary, or any act, product or service thereof, has, does or may infringe, misappropriate or otherwise violate the Intellectual Property Rights of any third party or constitute unfair competition or unfair trade practices; and (ii) neither the Company nor any Subsidiary has obtained opinions or memoranda of counsel relating to infringement, validity or enforceability of any third party Intellectual Property Rights.

          (f) No Third Party Infringers. To the knowledge of the Company, no third party has infringed or misappropriated, or is likely to infringe or misappropriate, any Company Intellectual Property Rights.

          (g) Validity and Enforceability. To the knowledge of the Company: (i) the Company Intellectual Property Rights are subsisting, in full force and effect, are valid and enforceable, and (in the case of Company Registered Intellectual Property Rights) have not expired or been cancelled or abandoned, except where such expiration, cancellation or

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abandonment is consistent with the exercise of reasonable business judgment; (ii) neither the Company nor any Subsidiary has done, or failed to do, any act or thing which may prejudice the validity or enforceability of any Company Intellectual Property Rights; (iii) all necessary registration, maintenance and renewal fees currently due have been made, and all necessary documents, recordations and certificates have been filed, for the purposes of maintaining such Registered Company Intellectual Property Rights; and (iv) each of the patents and patent applications within the Company Registered Intellectual Property Rights has been prosecuted in compliance with all applicable rules, policies, and procedures of the United States Patent and Trademark Office or applicable foreign patent agencies

          (h) Third Party Developers. All Technology developed by a third party (including any current or former employee of the Company or any Subsidiary) for the Company or any Subsidiary: (i) was developed pursuant to a written agreement with such third party covering such Technology; and (ii) the Company and the Subsidiary, pursuant to such agreement, have either: (x) obtained sole ownership of, and the sole right to enforce, all Intellectual Property Rights arising therefrom; or (y) obtained a valid and unrestricted right to exploit all Intellectual Property Rights relating thereto.

          (i) Trade Secrets. Except as set forth on Section 4.20(j) of the Disclosure Schedule: (i) the Company and the Subsidiaries have taken all necessary steps to protect their trade secrets, and any trade secrets of third parties provided thereto, according to the laws of the applicable jurisdictions where such trade secrets are developed, practiced or disclosed; (ii) the Company and the Subsidiaries have used commercially reasonable efforts to enforce a policy requiring parties having access to such trade secrets to execute a written agreement which provides reasonable protection for such trade secrets and which does not allow use or disclosure

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of such trade secrets by the recipient upon the expiration of any specified period of time; (iii) except pursuant to such agreements, there has been no disclosure by the Company or any Subsidiary of any such trade secrets; and (iv) to the knowledge of the Company, no party to any such agreement is in breach thereof.

     SECTION 4.21 Accounting or Audit Irregularities. Except as set forth in Section 4.21 of the Disclosure Schedule, from June 30, 2001 to the date hereof, none of the Company, any Subsidiary or, to the Company’s knowledge, any director, officer or auditor of the Company or any Subsidiary, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether made in writing or made orally to any director, officer or auditor of the Company or any Subsidiary, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices. No attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company’s Board of Directors or any committee thereof or to any director or officer of the Company. From June 30, 2004 to the date hereof, there have been no internal investigations regarding accounting or revenue recognition discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer, general counsel or similar legal officer, the Company’s Board of Directors or any committee thereof.

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     SECTION 4.22 Accounts Receivable. All accounts receivable of the Company and its Subsidiaries reflected on the 2004 Balance Sheet or arising thereafter have arisen from bona fide transactions in the ordinary course of business consistent with past practices and in accordance with SEC regulations and GAAP applied on a consistent basis and are not subject to valid defenses, setoffs or counterclaims. The Company’s reserve for contractual allowances and doubtful accounts is adequate and has been calculated in a manner consistent with past practices. Since June 30, 2004, neither the Company nor any of its Subsidiaries has modified or changed in any material respect its sales practices or methods including, without limitation, such practices or methods in accordance with which the Company or any of its Subsidiaries sell goods, fill orders or record sales.

     SECTION 4.23 Inventory. The inventories of the Company and each Subsidiary, whether or not shown on the 2004 Balance Sheet or thereafter acquired by the Company or any Subsidiary, consisted of items of a quantity and quality usable or salable in the ordinary course of business, consistent with past practice. Since the date of the 2004 Balance Sheet, the Company and the Subsidiaries have continued to replenish inventories in a normal and customary manner consistent with past practices. Neither the Company nor any Subsidiary has received written or oral notice that it will experience in the foreseeable future any material difficulty in obtaining, in the desired quantity and quality and at a reasonable price and upon reasonable terms and conditions, the products it distributes. The values at which inventories are carried reflect the inventory valuation policy of the Company and the Subsidiaries, which is consistent with its past practice

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and in accordance with GAAP applied on a consistent basis. Since the date of the 2004 Balance Sheet, due provision has been made on the books of the Company and the Subsidiaries in the ordinary course of business, consistent with past practice and in accordance with GAAP applied on a consistent basis, to provide for all slow-moving, obsolete, or unusable inventories and such inventory reserves are adequate to provide for such slow-moving, obsolete or unusable inventory and inventory shrinkage. As of the date hereof, the Company’s and the Subsidiaries’ inventory on hand and commitments to purchase inventory do not exceed, in the aggregate, an amount greater than $600,000,000.

     SECTION 4.24 Healthcare Regulatory and FDA Compliance.

          (a) Each of the Company and the Subsidiaries is and has been conducted in material compliance with all applicable Laws (including, without limitation, Laws relating to Medicare, Medicaid and confidentiality of health information).

          (b) Except as set forth on Section 4.24(b) of the Disclosure Schedule, none of the Company, its Subsidiaries or their respective officers, directors, or employees has been charged with or, to the knowledge of the Company, is now under investigation with respect to a violation (with respect to Company and the Subsidiaries) of any applicable Law, including without limitation any Medicare, Medicaid or other Federal Health Care Program-related offense.

          (c) Except as set forth on Section 4.24(c) of the Disclosure Schedule, neither the Company nor any Subsidiary is a party to, or bound by, any order or corporate integrity agreement or other formal or informal agreement with any Governmental Authority. Each of the Company and the Subsidiaries has filed all material reports required to be filed with any Governmental Authority, and all such reports are accurate and complete in all material respects.

          (d) None of the Company, any Subsidiary or any of their respective officers, directors or employees (i) has been debarred, excluded or suspended from participation in Medicare, Medicaid or other Federal Health Care Program (as defined under the Social Security

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Act, as amended); (ii) has had a civil monetary penalty assessed against it, him or her under Section 1128A of the Social Security Act; or (iii) is currently listed on the General Services Administration published list of parties excluded from federal procurement programs and non-procurement programs.

          (e) None of the Company, any Subsidiary or any of their respective officers, directors or employees has engaged in any activity which is in violation of the federal Medicare or federal or state Medicaid statutes, Sections 1128, 1128A, 1128B, 1128C or 1877 of the Social Security Act (42 U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b, 1320a-7c and 1395nn), the federal TRICARE statute (10 U.S.C. § 1071 et seq.), the False Claims Act (31 U.S.C. § 3729 et seq.), the False Statements Accountability Act (18 U.S.C. § 1001), the Program Fraud Civil Remedies Act (31 U.S.C. § 3801 et seq.), the anti-fraud and related provisions of the Health Insurance Portability and Accountability Act of 1996 (e.g., 18 U.S.C. §§ 1035 and 1347), or related regulations or other federal or state laws and regulations, including, but not limited to, the following: (A) knowingly and willfully offering, paying, soliciting or receiving any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or kind (1) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by any Federal Health Care Program (as defined under the Social Security Act, as amended); or (2) in return for purchasing, leasing, or ordering, or arranging, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part by any Federal Health Care Program (as defined under the Social Security Act, as amended); or (B) any other activity which violates any state or federal law relating to prohibiting fraudulent, abusive or unlawful practices connected in any way with

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the provision of health care items or services or the billing for such items or services provided to a beneficiary of any Federal Health Care Program (as defined under the Social Security Act, as amended).

          (f) To the knowledge of the Company, no person has filed or threatened to file against the Company or any Subsidiary an action under any federal or state whistleblower statute, including, without limitation, under the federal False Claims Act (31 U.S.C. § 3730).

          (g) The business and operations of each of the Company and each Subsidiary are in compliance in all material respects with all applicable Laws relating to patient or individual health care information, including, without limitation, the Administrative Simplification requirements of HIPAA.

          (h) Each of the Company and each Subsidiary is in compliance, in all material respects, with all applicable statutes, rules, regulations, standards, guidelines, policies and orders (including, without limitation, with respect to radioactive, hazardous or toxic pharmaceuticals) administered or issued by the U.S. Food and Drug Administration (the “FDA”) and by all other applicable federal, state or local entities regulating any drug, medical device, biologic, radioactive, hazardous or toxic pharmaceuticals or any other item regulated under such or similar laws. The Company has no knowledge of any act or omission that would furnish a reasonable basis for the FDA or other federal, state or local governmental entity to issue to the Company or any Subsidiary a Warning Letter, untitled letter, Section 305 notice or other similar communication that calls, or may call, regulatory compliance into question.

     SECTION 4.25 Secondary Markets.

          (a) The Company has provided to Parent a list of all persons from whom the Company or a Subsidiary has purchased any Drugs, other than the manufacturer thereof, since

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July 1, 2003. The Company and its Subsidiaries have received all Documentation with respect to Drugs purchased from persons other than the manufacturer thereof that is required by applicable Law, has authenticated such Documentation in accordance with applicable Law and has retained such Documentation or copies thereof in accordance with Applicable Law.

          (b) The Company has provided to Parent a list of all wholesale distributors (as such term is defined in the Federal Prescription Drug Marketing Act) to whom the Company or a Subsidiary has sold any Drug since July 1, 2003. The Company and its Subsidiaries have provided all Documentation, if any, regarding the sale of such Drugs as required by and in accordance with applicable Law.

     SECTION 4.26 Customers. Section 4.26(a) of the Disclosure Schedule sets forth a list of the top 20 customers (by dollar volume and excluding national accounts and dock-to-dock sales) of the Company and the Subsidiaries for the twelve (12)-month period ended March 31, 2005 and Section 4.26(b) of the Disclosure Schedule sets for a list of the top 20 customers (by dollar volume and including only national accounts and dock-to-dock sales) of the Company and the Subsidiaries for the twelve (12)-month period ended March 31, 2005. No such customer has canceled or otherwise terminated, or communicated to the Company or any Subsidiary that it intends to cancel or otherwise terminate, its relationship with the Company and/or any Subsidiary, or has decreased materially its usage of the services or products of the Company or any Subsidiary, and to the Company’s knowledge, no such customer intends to cancel or otherwise terminate its relationship with the Company or any Subsidiary or to decrease materially its usage of the services or products of the Company or any Subsidiary; provided, however, that after the date hereof, no such cancellation, termination, communication or decrease

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shall result in a breach of this Section 4.26 unless such cancellation, termination, communication or decrease would reasonably be expected to have a Material Adverse Effect.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER

     Parent and Purchaser hereby, jointly and severally, represent and warrant to the Company that:

     SECTION 5.01 Corporate Organization. Each of Parent and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted.

     SECTION 5.02 Authority Relative to This Agreement. Each of Parent and Purchaser has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by Parent and Purchaser and the consummation by Parent and Purchaser of the Transactions have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of Parent or Purchaser are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the filing and recordation of appropriate merger documents as required by Delaware Law). This Agreement has been duly and validly executed and delivered by Parent and Purchaser and, assuming due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of each of Parent and Purchaser enforceable against each of Parent and Purchaser in accordance with its terms except that (i) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect,

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affecting creditors’ rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

     SECTION 5.03 No Conflict; Required Filings and Consents.

          (a) The execution and delivery of this Agreement by Parent and Purchaser do not, and the performance of this Agreement by Parent and Purchaser will not, (i) conflict with or violate the Certificate of Incorporation or By-laws of either Parent or Purchaser, (ii) assuming that all consents, approvals, authorizations and other actions described in Section 5.03(b) have been obtained and all filings and obligations described in Section 5.03(b) have been made, conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Parent or Purchaser or by which any property or asset of either of them is bound or affected, or (iii) result in any breach of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of Parent or Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or Purchaser is a party or by which Parent or Purchaser or any property or asset of either of them is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, would not reasonably be expected to prevent or materially delay consummation of the Transactions or otherwise would not reasonably be expected to prevent Parent and Purchaser from performing their material obligations under this Agreement.

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          (b) The execution and delivery of this Agreement by Parent and Purchaser do not, and the performance of this Agreement by Parent and Purchaser will not, require any consent, approval, authorization or permit of, or filing with, or notification to, any Governmental Authority on the part of Parent or Purchaser, except for (i) compliance with any applicable requirements of the Exchange Act, (ii) any filings as may be required under Delaware Law in connection with the Merger, (iii) filings, permits, authorizations, consents and approvals as may be required under the HSR Act, (iv) the filing with the SEC and the Nasdaq of (A) the Schedule TO, (B) the Proxy Statement if stockholder approval is required by law, (C) the information required by Rule 14f-1 under the Exchange Act and (D) such reports under Section 13(a) of the Exchange Act as may be required in connection with this Agreement and the Transactions, (v) such filings and approvals as may be required by any applicable state securities or blue sky laws, and (vi) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, individually or in the aggregate, would not reasonably be expected to prevent or materially delay consummation of the Transactions, or otherwise would not reasonably be expected to prevent Parent or Purchaser from performing their material obligations under this Agreement.

     SECTION 5.04 Financing. Parent has and will have through the Effective Time access to sufficient funds to permit Purchaser to consummate all the Transactions, including, without limitation, acquiring all the outstanding Shares in the Offer and the Merger.

     SECTION 5.05 Offer Documents; Proxy Statement. The Offer Documents shall not, at the time the Offer Documents are filed with the SEC or are first published, sent or given to stockholders of the Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make

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the statements made therein, in the light of the circumstances under which they were made, not misleading. The information supplied by Parent for inclusion in the Proxy Statement shall not, at the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of the Company, or at the time of the Stockholders’ Meeting, contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not false or misleading, or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders’ Meeting which shall have become false or misleading. Notwithstanding the foregoing, Parent and Purchaser make no representation or warranty with respect to any information supplied by the Company or any of its representatives for inclusion in any of the foregoing documents or the Offer Documents. The Offer Documents shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder.

     SECTION 5.06 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Parent or Purchaser.

     SECTION 5.07 Absence of Litigation. There is no Action pending or, to the knowledge of Parent and the Purchaser, threatened against Parent or the Purchaser, or any property or asset of Parent or the Purchaser, before any Governmental Authority that seeks to materially delay or prevent the consummation of any Transaction. Neither Parent nor the Purchaser nor any property or asset of Parent or the Purchaser is subject to any continuing order of, consent decree, settlement agreement or similar written agreement with, or, to the knowledge of Parent or the Purchaser, continuing investigation by, any Governmental Authority, or any

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order, writ, judgment, injunction, decree, determination or award of any Governmental Authority that, individually or in the aggregate, would reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would reasonably be expected to prevent or materially delay Parent or the Purchaser from performing their material obligations under this Agreement.

     SECTION 5.08 Company Stock. Each of Parent and Purchaser is not, nor at any time during the last three (3) years has it been, an “interested stockholder” of the Company as defined in Section 203 of Delaware Law. Each of Parent and Purchaser does not own (directly or indirectly, beneficially or of record) and is not a party to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of, in each case, any shares of capital stock of the Company (other than as contemplated by this Agreement).

ARTICLE VI

CONDUCT OF BUSINESS PENDING THE MERGER

     SECTION 6.01 Conduct of Business by the Company Pending the Merger. The Company covenants and agrees that, except (a) as expressly contemplated by this Agreement and Section 6.01 of the Disclosure Schedule, (b) in the ordinary course of business consistent with past practice which would not require the approval of the Board or (c) as agreed in writing by Parent, after the date hereof, the Company shall use its commercially reasonable efforts to preserve substantially intact the business organization of the Company and the Subsidiaries, to keep available the services of the current officers, employees and consultants of the Company and the Subsidiaries and to preserve the current relationships of the Company and the Subsidiaries with customers, suppliers and other persons with which the Company or any Subsidiary has significant business relations, and neither the Company nor any Subsidiary shall, directly or indirectly, do, or propose to do, any of the following:

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          (c) amend or otherwise change or modify its Certificate of Incorporation or By-laws or equivalent organizational documents;

          (d) issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of any class of capital stock of the Company or any Subsidiary, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company or any Subsidiary (except for the issuance of a maximum of 1,808,636 Shares issuable pursuant to options, restricted stock or other equity awards outstanding on the date hereof under the Company Stock Plans and other agreements), or (ii) any assets of the Company or any Subsidiary, except in the ordinary course of business and in a manner consistent with past practice;

          (e) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock except for cash dividends paid in amounts and at times consistent with past practice;

          (f) reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its capital stock;

          (g) (i) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets or any other business combination) any corporation, partnership, other business organization or any division thereof, any real property or any material amount of assets; (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, except in the ordinary course of business and consistent with past

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practice; (iii) enter into, amend, modify or terminate any derivative, swap or hedging arrangement or Contract; (iv) enter into any Contract or agreement other than in the ordinary course of business and consistent with past practice; (v) authorize, or make any commitment with respect to, any single capital expenditure which is in excess of $250,000 or capital expenditures which are, in the aggregate, in excess of $1,000,000 for the Company and the Subsidiaries taken as a whole; or (vi) enter into, amend or modify any Contract, commitment or arrangement with respect to any matter set forth in this Section 6.01(g), except, with respect to matters described in clauses (ii) or (iv) of this Section 6.01(g) in the ordinary course of business and consistent with past practice;

          (h) hire or terminate any employee except in the ordinary course of business consistent with past practice or increase the salary, bonus or other compensation payable or to become payable or the benefits (including, fringe benefits or perquisites) provided to its current or former directors, officers, other employees or consultants, except for increases in the ordinary course of business and consistent with past practice in salaries or wages of employees of the Company or any Subsidiary who are not directors or officers of the Company, or grant or increase any bonus, incentive compensation, retention payments, severance change-in-control or termination pay to, or enter into, amend or modify any employment, consulting, change-in-control or severance agreement with, any current or former director, officer, other employee or consultant of the Company or of any Subsidiary, or establish, adopt, enter into, amend or modify (including any amendment or modification that increases or accelerates payment or requires any funding), except as required by Law, any collective bargaining or other Contract with a labor union, bonus, profit-sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, change-in-control, severance or

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other plan, program, agreement, trust, fund, policy or arrangement for the benefit of any current or former director, officer, other employee or consultant;

          (i) take any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice, with respect to accounting policies or procedures, except as required by GAAP as advised by the Company’s regular independent public accountants;

          (j) make any tax election or settle or compromise any material United States federal, state or local income tax liability;

          (k) enter into, amend, modify or consent to the termination of any Material Contract, or amend, waive, modify or consent to the termination of the Company’s or any Subsidiary’s rights thereunder, other than in the ordinary course of business and consistent with past practice;

          (l) redeem the Rights or amend, modify or take any action under the Rights Plan (except as contemplated by Section 4.16);

          (m) settle, compromise or make any payment with respect to any material Action, other than in the ordinary course of business consistent with past practice;

          (n) enter into, amend or modify any contract with any officer or director of the Company or any stockholder of the Company holding five percent (5%) or more of the Company’s outstanding Shares;

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          (o) take any action that would reasonably be expected to cause any of the representations and warranties of the Company contained in this Agreement that is qualified as to materiality or Material Adverse Effect to not be true and correct in any respect or any such representation or warranty that is not so qualified to not be true and correct in any material respect; or

          (p) announce an intention, enter into any formal or informal agreement or otherwise make a commitment, to do any of the foregoing.

ARTICLE VII

ADDITIONAL AGREEMENTS

     SECTION 7.01 Stockholders’ Meeting.

          (a) If required by applicable law in order to consummate the Merger, the Company, acting through the Board, shall, in accordance with applicable law and the Company’s Certificate of Incorporation and By-laws, (i) duly call, give notice of, convene and hold an annual or special meeting of its stockholders as promptly as practicable following consummation of the Offer for the purpose of considering and taking action on this Agreement and the Transactions (the “Stockholders’ Meeting”) and (ii) (A) except as provided in Section 7.04(c), include in the Proxy Statement, and not subsequently withdraw or modify in any manner adverse to Purchaser or Parent, the recommendation of the Board that the stockholders of the Company approve and adopt this Agreement and the Transactions and (B) use all reasonable efforts to obtain such approval and adoption. At the Stockholders’ Meeting, Parent and Purchaser shall cause all Shares then owned by them and their subsidiaries to be voted in favor of the approval and adoption of this Agreement and the Transactions.

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          (b) Notwithstanding the foregoing, in the event that Purchaser shall acquire at least ninety percent (90%) of the then outstanding Shares, the parties shall take all necessary and appropriate action to cause the Merger to become effective, in accordance with Section 253 of Delaware Law, as promptly as reasonably practicable after such acquisition, without a meeting of the stockholders of the Company.

     SECTION 7.02 Proxy Statement. If approval of the Company’s stockholders is required by applicable law to consummate the Merger, promptly following consummation of the Offer, the Company shall file the Proxy Statement with the SEC under the Exchange Act, and shall use all reasonable efforts to have the Proxy Statement cleared by the SEC. Parent, Purchaser and the Company shall cooperate with each other in the preparation of the Proxy Statement, and the Company shall notify Parent of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to Parent promptly copies of all correspondence between the Company or any representative of the Company and the SEC. The Company shall give Parent and its counsel the opportunity to review the Proxy Statement, including all amendments and supplements thereto, prior to its being filed with the SEC and shall give Parent and its counsel the opportunity to review all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of the Company, Parent and Purchaser agrees to use all reasonable efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement and all required amendments and supplements thereto to be mailed to the holders of Shares entitled to vote at the Stockholders’ Meeting at the earliest practicable time.

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     SECTION 7.03 Access to Information; Confidentiality.

          (a) From the date hereof until the Effective Time, the Company shall, and shall cause the Subsidiaries and the officers, directors, employees, auditors and agents of the Company and the Subsidiaries to, afford the officers, employees and agents of Parent and Purchaser access at all reasonable times to the officers, employees, agents, properties, offices, plants and other facilities, books and records of the Company and each Subsidiary, shall furnish Parent and Purchaser with such financial, operating and other data and information as Parent or Purchaser, through its officers, employees or agents, may reasonably request and shall provide access to the inventories of the Company and take all action to facilitate the physical inventory inspection contemplated by clause (l) of Annex A.

          (b) All information obtained by Parent or Purchaser pursuant to this Section 7.03 shall be kept confidential in accordance with the confidentiality agreement, dated March 24, 2005, as subsequently amended (the “Confidentiality Agreement”), between Parent and the Company.

     SECTION 7.04 No Solicitation of Transactions.

          (a) The Company shall, and shall cause its Subsidiaries and each of their respective affiliates, directors, officers, employees, agents and representatives (including any investment banker, financial advisor, attorney, accountant or other representative retained by the Company or any of its Subsidiaries) to immediately cease any discussions or negotiations with any other parties that may be ongoing with respect to the possibility or consideration of any Acquisition Proposal. From the date of this Agreement through the Effective Time, the Company shall not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit any of its or its Subsidiaries’ directors, officers or employees or any investment banker, financial

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advisor, attorney, accountant or other representative retained by it or any of its Subsidiaries to, directly or indirectly through another person, (i) solicit, initiate or encourage (including by way of furnishing information or assistance), or take any other action designed to facilitate or encourage any inquiries or the making of any proposal that constitutes, or is reasonably likely to lead to, any Acquisition Proposal, (ii) participate in any discussions or negotiations regarding, or provide any nonpublic information or data to any person relating to, any Acquisition Proposal or (iii) make or authorize any statement, recommendation or solicitation in support of, or execute or enter into, or propose to execute or enter into, any letter of intent, agreement in principle, merger agreement, acquisition agreement, option agreement or other similar agreement related to, any Acquisition Proposal. Any violation of the foregoing restrictions by any representative of the Company or any of its Subsidiaries, whether or not such representative is so authorized and whether or not such representative is purporting to act on behalf of the Company or otherwise, shall be deemed to be a breach of this Agreement by the Company.

          (b) Notwithstanding the foregoing, until the consummation of the Offer the Board shall be permitted to engage in discussions and negotiations with, or provide nonpublic information or data to, any person in response to an unsolicited, bona fide written Acquisition Proposal by such person first made after the date of this Agreement that did not result from a breach of this Section 7.04 which the Board concludes in good faith (after consultation with outside counsel and its financial advisor) constitutes or would reasonably be expected to lead to a Superior Proposal, only (1) if and only to the extent that the Board reasonably determines in good faith (after consultation with outside legal counsel) that it is required to do so in order to comply with its fiduciary duties under applicable law, (2) if, prior to furnishing such information to or entering into negotiations or discussions with such person, the Company enters into a

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confidentiality agreement with such person having provisions that are no less restrictive to such person than those applicable to Parent and contained in the Confidentiality Agreement and (3) if the Company complies with all of the terms of this Section 7.04. The Company shall notify Parent as promptly as practicable (and in no event later than 24 hours) after receipt of any Acquisition Proposal, or any request for nonpublic information relating to the Company or any of its Subsidiaries by any person or that informs the Company or any of its Subsidiaries that it is considering making, or has made, an Acquisition Proposal, or any inquiry from any person seeking to have discussions or negotiations with the Company relating to a possible Acquisition Proposal. Such notice shall be made orally and confirmed in writing, and shall indicate the identity of the person making the Acquisition Proposal, inquiry or request and the material terms and conditions of any inquiries, proposals or offers (including a copy thereof if in writing and any related documentation or correspondence). The Company shall also notify Parent, in writing, as promptly as practicable (and in no event later than 24 hours prior to) any meeting of the Board called to consider any Acquisition Proposal or any such inquiry or to consider providing nonpublic information to any person. The Company shall notify Parent, in writing, of any decision of the Board as to whether to consider such Acquisition Proposal or inquiry or to enter into discussions or negotiations concerning any Acquisition Proposal or to provide nonpublic information or data to any person, which notice shall be given as promptly as practicable after such meeting (and in any event no later than 24 hours after such determination was reached and 24 hours prior to entering into any discussions or negotiations or providing any nonpublic information or data to any person). The Company agrees that it shall keep Parent informed of the status and terms of any such inquiries, proposals, offers, discussions or negotiations on a current basis, including by: delivering a copy of all documentation and

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correspondence relating thereto promptly upon receipts thereof, delivering to Parent the information delivered to such person to the extent such information was not previously provided to Parent and providing Parent with 24 hours prior notice of each Board meeting called to discuss or consider any Acquisition Proposal.

     (c) The Board shall not (i) withdraw, modify or change, in a manner adverse to Parent or Purchaser, the Board’s recommendation to accept the Offer or (ii) approve, enter into or recommend that stockholders approve or accept a Superior Proposal unless, prior to the consummation of the Offer, the Board determines in good faith after consultation with the Company’s financial advisors and outside legal counsel, that an Acquisition Proposal constitutes a Superior Proposal and that failure to do so would result in a reasonable likelihood of a breach of the fiduciary duties of the Board under applicable law, in which case, the Board may (subject to this and the following sentences) withdraw, modify or change, in a manner adverse to Parent or Purchaser, the Board’s recommendation and take and disclose to the stockholders of the Company a position with respect to the Superior Proposal and, to the extent applicable, comply with Rule 14e-2 promulgated under the Exchange Act with respect to such Superior Proposal by disclosing such withdrawn, modified or changed Board recommendation and any recommendation with respect to such Superior Proposal in connection with a tender or exchange offer for the Company’s securities, provided that: (1) the Company shall have notified Parent, in writing no later than five (5) Business Days’ prior to the Board’s withdrawing or changing its recommendation, that the Board has determined (after consultation with its financial advisors and outside legal counsel) that the Acquisition Proposal constitutes a Superior Proposal and that Board intends to withdraw or change its recommendation with respect to the Offer or approve, recommend, or enter into an agreement with respect to, the Superior Proposal, which notice shall

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include the identity of the person making the Superior Proposal and a copy of the final terms of the Superior Proposal; (2) during such five (5) Business Day period, the Board shall have given due consideration to any proposals made by Parent to adjust the Offer and the Transactions; and (3) the Board shall have determined (A) after consultation with its financial advisor, that any such proposal made by or on behalf of Parent is less favorable to the stockholders of the Company than the Superior Proposal and (B) after consultation with outside legal counsel, it would result in a reasonable likelihood that the Board would breach its fiduciary duties to the stockholders of the Company under applicable law if it failed to withdraw or change its recommendation with respect to the Offer and the Transactions or failed to approve or enter into the Superior Proposal or recommend that the stockholders of the Company accept or approve the Superior Proposal. The Board shall not, in connection with any such withdrawal, modification or change of its recommendation, take any action to change the approval of the Board for purposes of causing any state takeover statute or other state law or the Rights Agreement to be applicable to the transactions contemplated hereby, including this Agreement, the Offer and the Merger, provided, however, that this sentence shall not prohibit the Company from withdrawing, modifying or changing its recommendation or approving or entering into or recommending any Superior Proposal under the circumstances and subject to the conditions set forth in this Section 7.04(c). Nothing contained in this Section 7.04 shall prohibit the Company or its Subsidiaries from taking and disclosing to its stockholders a position as required by Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act; provided, however, that compliance with such rules shall not in any way limit or modify the effect that any action taken pursuant to such rules has under any other provision of this Agreement.

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          (d) The Company agrees that (i) it will, and will cause its Subsidiaries and their respective officers, directors, agents, representatives and advisors to, cease immediately and terminate any and all existing activities, discussions or negotiations with any third parties conducted heretofore with respect to any Acquisition Proposal, and (ii) it will not release any third party from, or waive any provisions of, any confidentiality or standstill agreement to which it or any its Subsidiaries is a party with respect to any Acquisition Proposal.

     SECTION 7.05 Employee Benefits Matters. Parent agrees that from and after the Effective Time, Parent shall cause the Surviving Corporation to honor in accordance with their terms the employment contracts of the Company set forth in Section 7.05 of the Disclosure Schedule. Employees of the Surviving Corporation and its subsidiaries will be provided with employee benefits that are in the aggregate no less favorable than those employee benefits that are provided to similarly situated employees of Parent and its subsidiaries. Employees of the Company or any Subsidiary shall receive credit for purposes of eligibility to participate and vesting (but not for benefit accruals, determination of levels of benefits or any other purposes) under any employee benefit plan, program or arrangement established or maintained by the Surviving Corporation or any of its subsidiaries for service accrued or deemed accrued prior to the Effective Time with the Company or any Subsidiary to the same extent such service was taken into account for such purposes under comparable Plans prior to the Effective Time; provided, however, that such crediting of service shall not operate to duplicate any benefit or the funding of any such benefit. Notwithstanding the foregoing, nothing in this Section 7.05 nor any other provision of this Agreement shall limit the ability or right of the Parent or the Surviving Corporation and their subsidiaries to terminate the employment of any of their respective employees after the Effective Time or to terminate or amend any Plan. Prior to the Effective

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Time, if requested by Parent, the Company shall terminate the Company’s Code Section 401(k) plan (the “Company 401(k) Plan”) in accordance with all provisions of applicable law, and each participant in the Company 401(k) Plan shall have the right to receive a distribution of such participant’s account balance in the Company 401(k) Plan (subject to, and in accordance with, the provisions of the plan and applicable law).

     SECTION 7.06 Directors’ and Officers’ Indemnification and Insurance.

          (a) In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, including any such claim, action, suit, proceeding or investigation in which any person who is now, or has been at any time prior to the date of this Agreement, or who becomes prior to the Effective Time, a director or officer of the Company or any of its Subsidiaries (the “Indemnified Parties”) is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that he is or was a director or officer of the Company or any of its Subsidiaries or (ii) this Agreement or any of the Transactions, whether in any case asserted or arising before or after the Effective Time, the parties hereto agree to cooperate and use their best efforts to defend against and respond thereto. It is understood and agreed that after the Effective Time, Parent shall and shall cause the Surviving Corporation to, indemnify and hold harmless, to the fullest extent permitted by law, each such Indemnified Party against any losses, claims, damages, liabilities, costs, expenses (including advances of reasonable attorney’s fees and expenses prior to the final disposition of any claim, suit, proceeding or investigation to each Indemnified Party to the fullest extent permitted by law upon receipt of any undertaking required by applicable law), judgments, fines and amounts paid in settlement in connection with any such threatened or actual claim, action, suit, proceeding or investigation, and in the event of any such threatened or actual claim,

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action, suit, proceeding or investigation (whether asserted or arising before or after the Effective Time), the Indemnified Parties may retain counsel reasonably satisfactory to them after consultation with Parent; provided, however, that: (1) Parent shall have the right to assume the defense thereof and upon such assumption Parent shall not be liable to any Indemnified Party for any legal expenses of other counsel or any other expenses subsequently incurred by any Indemnified Party in connection with the defense thereof, except that if Parent elects not to assume such defense or counsel for the Indemnified Parties reasonably advises that there are (under applicable standards of professional conduct) issues which raise conflicts of interest between Parent and the Indemnified Parties, the Indemnified Parties may retain counsel reasonably satisfactory to them after consultation with Parent, and Parent shall pay the reasonable fees and expenses of such counsel for the Indemnified Parties; (2) Parent shall in all cases be obligated pursuant to this paragraph to pay for only one firm or counsel and any necessary local counsel for all Indemnified Parties except that if counsel for the Indemnified Parties reasonably advises that there are (under applicable standards of professional conduct) issues which raise conflicts of interest among one or more of the Indemnified Parties, Parent will be obligated to pay for separate counsel such Indemnified Parties as to which there are conflicts; (3) Parent shall not be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld or delayed); and (4) Parent shall have no obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final and nonappealable, that indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. It is agreed and understood that Parent’s agreement to provide the indemnification contemplated hereunder is no way intended to expand the scope of the

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indemnification obligations beyond that which a corporation would be permitted to provide to its own officers or directors under Delaware Law. Any Indemnified Party wishing to claim Indemnification under this Section 7.06, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify Parent thereof, provided that the failure to so notify Parent shall not affect the obligations of Parent under this Section 7.06 except to the extent such failure to notify prejudices Parent. Parent’s obligations under this Section 7.06 shall continue in full force and effect for a period of six (6) years from the Effective Time; provided, however, that all rights to indemnification in respect of any claim (a “Claim”) asserted or made within such period shall continue until the final disposition of such Claim.

          (b) Parent shall cause the Surviving Corporation to maintain in effect for a period of six (6) years from the Effective Time the current directors’ and officers’ liability insurance policy maintained by the Company (provided that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are not less advantageous than such current policy) covering the persons serving as officers and directors of the Company on the date of this Agreement with respect to acts or omissions occurring prior to the Effective Time which were committed by such officers and directors in their capacity as such; provided, however, that in no event shall Parent be required to expend on an annual basis more than three hundred percent (300%) of the current amount expended by the Company (the “Insurance Amount”) to maintain or procure insurance coverage; and further provided that if Parent is unable to maintain or obtain the insurance called for by this Section 7.06(b) Parent shall use all reasonable efforts to obtain as much comparable insurance as is available for the Insurance Amount; and provided, further, that notwithstanding the foregoing, the obligations under this Section 7.06(b) may be satisfied if the Surviving Corporation purchases a “tail” policy

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under the Company’s existing directors’ and officers’ insurance policy that (i) has an effective term of six (6) years from the Effective Time, (ii) covers those persons who are officers and directors of the Company on the date of this Agreement, for actions and omissions occurring on or prior to the Effective Time and (iii) contains terms and conditions (including without limitation coverage amounts) that are at least as favorable in the aggregate as the terms and conditions of the Company’s directors’ and officers’ insurance policy in effect on the date hereof.

          (c) Until six years from the Effective Time, unless otherwise required by applicable law, the certificate of incorporation and bylaws of the Surviving Corporation shall contain provisions no less favorable with respect to the elimination of liability of directors and the indemnification of directors and officers (including as to advancement of expenses) than are set forth in the Restated Certificate of Incorporation and Bylaws of the Company, as in effect on the date hereof.

          (d) In the event the Parent, Surviving Corporation or any of their successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or Surviving Company or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of the Parent or the Surviving Corporation, as the case may be, assume the obligations set forth in this Section 7.06.

          (e) The provisions of this Section 7.06 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives and

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shall not be deemed exclusive of any other rights to which an Indemnified Party is entitled, whether pursuant to law, contract or otherwise.

     SECTION 7.07 Notification of Certain Matters. The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, of (a) the occurrence, or non-occurrence, of any event the occurrence or non-occurrence of which reasonably would reasonably be expected to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect and (b) any failure of the Company, Parent or Purchaser, as the case may be, to comply with or satisfy any covenant or agreement required to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 7.07 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice.

     SECTION 7.08 Further Action; Reasonable Efforts.

          (a) Upon the terms and subject to the conditions hereof, each of the parties hereto shall (i) make promptly (and in any event within five (5) Business Days after execution of this Agreement) its respective filings, and thereafter make any other required submissions, under the HSR Act with respect to the Transactions and (ii) use all reasonable efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the Transactions, including, without limitation, using all reasonable efforts to obtain all Permits, consents, approvals, authorizations, qualifications and orders of Governmental Authorities and parties to contracts with the Company and the Subsidiaries as are necessary for the consummation of the Transactions and to fulfill the conditions to the Offer and the Merger. In case, at any time after the Effective Time, any further action is necessary or desirable to carry out

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the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall use all reasonable efforts to take all such action. Parent or the Purchaser will pay all filing fees associated with the HSR submission.

          (b) Each of the parties hereto agrees to cooperate and use all reasonable efforts to vigorously contest and resist any Action, including administrative or judicial Action, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) that is in effect and that restricts, prevents or prohibits consummation of the Transactions, including, without limitation, by vigorously pursuing all available avenues of administrative and judicial appeal.

     SECTION 7.09 Public Announcements. Parent, Purchaser and the Company agree that no public release or announcement concerning the Transactions, the Offer or the Merger shall be issued by any party without the prior consent of the other party (which consent shall not be unreasonably withheld), except as such release or announcement may be required by Law or the rules or regulations of any United States securities exchange or Nasdaq, in which case the party required to make the release or announcement shall use its reasonable efforts to allow the other party time to comment on such release or announcement in advance of such issuance.

ARTICLE VIII

CONDITIONS TO THE MERGER

     SECTION 8.01 Conditions to the Merger. The obligations of each party to effect the Merger shall be subject to the satisfaction or waiver in writing, at or prior to the Effective Time, of the following conditions:

          (a) Stockholder Approval. If and to the extent required by Delaware Law, this Agreement and the Transactions shall have been approved and adopted by the affirmative vote of the stockholders of the Company;

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          (b) HSR Act. Any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated;

          (c) No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the acquisition of Shares by Parent or Purchaser or any affiliate of either of them illegal or otherwise restricting, preventing or prohibiting consummation of the Transactions; and

          (d) Offer. Purchaser or its permitted assignee shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer.

ARTICLE IX

TERMINATION, AMENDMENT AND WAIVER

     SECTION 9.01 Termination. This Agreement may be terminated and the Merger and the other Transactions may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the Transactions by the stockholders of the Company:

          (a) By mutual written consent of each of Parent, Purchaser and the Company duly authorized by the Boards of Directors of Parent, Purchaser and the Company; or

          (b) By Parent, Purchaser or the Company if (i) the Effective Time shall not have occurred on or before January 8, 2006, at any time thereafter; provided, however, that the right to terminate this Agreement under this Section 9.01(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date or (ii) any Governmental Authority shall have enacted, issued, promulgated, enforced or entered any injunction, order, decree or ruling (whether temporary, preliminary or permanent) which has become final and

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nonappealable and has the effect of making consummation of the Offer or the Merger illegal or otherwise preventing or prohibiting consummation of the Offer or the Merger; or

          (c) By Parent if due to an occurrence or circumstance that would result in a failure to satisfy any condition set forth in Annex A hereto, Purchaser shall have (A) failed to commence the Offer within ten (10) Business Days following the date of this Agreement, (B) terminated the Offer or the Offer shall have expired in accordance with its terms, in each case, without Purchaser having accepted any Shares for payment thereunder or (C) failed to accept Shares for payment pursuant to the Offer within ninety (90) days following the commencement of the Offer (provided, however, that the applicable time period specified in clause (C) above shall be extended until the earlier to occur of (x) the fifth Business Day following the expiration or termination of any applicable waiting period under the HSR Act and, if there is a Dispute pending and continuing, the expiration of the Dispute Resolution Period and (y) January 8, 2006), unless such action or inaction under clauses (A), (B) or (C) shall have been caused by or resulted from the failure of Parent or Purchaser to perform, in any material respect, any of their material covenants or agreements contained in this Agreement, or the material breach by Parent or Purchaser of any of their material representations or warranties contained in this Agreement; or

          (d) By Parent, if prior to the purchase of Shares pursuant to the Offer, (i) the Board shall have failed to include in the Schedule 14D-9 or the Proxy Statement, its approval or recommendation of this Agreement, the Offer, the Merger or any other Transaction, (ii) the Board or any committee thereof shall have withdrawn or modified in a manner adverse to Purchaser or Parent its approval or recommendation of this Agreement, the Offer, the Merger or any other Transaction, (iii) the Company shall have exercised a right with respect to a Superior

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Proposal referenced in Section 7.04 and shall, directly or through its representatives, continue discussions with any third party concerning a Superior Proposal for more than ten (10) days after the date of receipt of such Superior Proposal, (iv) an Acquisition Proposal that is publicly disclosed shall have been commenced, publicly proposed or communicated to the Company which contains a proposal as to price (without regard to whether such proposal specifies a specific price or a range of potential prices) and the Company shall not have rejected such proposal within ten (10) Business Days of its receipt or, if sooner, the date its existence first becomes publicly disclosed, (v) any person other than Parent or Purchaser shall have become the beneficial owner of more than fifteen percent (15%) of the Shares (either on a primary or a fully-diluted basis) and shall have become “Acquiring Person” as defined in Rights Agreement, (vi) the Board shall have recommended or approved any Acquisition Proposal, (vii) the Company shall have breached any of its obligations under Section 7.04 of this Agreement that results in a person making an Acquisition Proposal, (viii) the Company shall have materially breached its obligations under this Agreement by reason of a failure to file the Schedule 14D-9 in accordance with Section 2.02, or (ix) the Board shall have resolved to do any of the foregoing; or

          (e) By the Company, upon approval of the Board, if Purchaser shall have (A) failed to commence the Offer within ten (10) Business Days following the date of this Agreement, (B) terminated the Offer or the Offer shall have expired in accordance with its terms, in each case, without Purchaser having accepted any Shares for payment thereunder or (C) failed to accept Shares for payment pursuant to the Offer within ninety (90) days following the commencement of the Offer (provided, however, that the applicable time period specified in Clause (C) above shall be extended until the earlier to occur of (x) the fifth Business Day following the expiration or termination of any applicable waiting period under the HSR Act and,

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if there is a Dispute pending and continuing, the expiration of the Dispute Resolution Period and (y) January 8, 2006), unless such action or inaction under Clauses (A), (B) or (C) shall have been caused by or resulted from the failure of the Company to perform, in any material respect, any of its material covenants or agreements contained in this Agreement or the material breach by the Company of any of its material representations or warranties contained in this Agreement; or

          (f) By the Company, upon approval of the Board, if prior to the purchase of any Shares pursuant to the Offer, the Board determines in good faith that failure to do so would result in a reasonable likelihood of a breach of its fiduciary duties under applicable law (after consultation with outside legal counsel) in order to enter into a definitive written agreement with respect to a Superior Proposal, provided that: (i) the Company shall have complied in all respects with Section 7.04 (including, without limitation, Section 7.04(c) and (ii) the Company has made full payment of all amounts due to Parent and Purchaser under Section 9.03.

     SECTION 9.02 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 9.01, this Agreement shall forthwith become void, and there shall be no liability on the part of any party hereto, except (a) as set forth in Section 9.03 and (b) nothing herein shall relieve any party from liability for any breach hereof prior to the date of such termination; provided, however, that the Confidentiality Agreement shall survive any termination of this Agreement.

     SECTION 9.03 Fees and Expenses.

          (a) In the event that:

     (i) any person shall have commenced, publicly proposed or communicated to the Company an Acquisition Proposal that is publicly disclosed or any person has publicly proposed or communicated to the

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Company an intention (whether or not conditional) to make an Acquisition Proposal and (A) the Offer shall have remained open for at least 20 Business Days, (B) the Minimum Condition shall not have been satisfied, (C) this Agreement shall have been terminated pursuant to Section 9.01(b) or 9.01(c) and (D) the Company enters into an agreement with respect to an Acquisition Proposal, or an Acquisition Proposal is consummated, in each case within twelve (12)-months after such termination of this Agreement;

     (ii) this Agreement is terminated pursuant to clauses (i), (ii), (iii), (v), (vi) or (viii) of Section 9.01(d) or 9.01(f); or

     (iii) this Agreement is terminated (A) pursuant to clauses (iv), (vii) or (ix) of Section 9.01(d) and (B) the Company enters into an agreement with respect to an Acquisition Proposal or an Acquisition Proposal is consummated, in each case within twelve (12) months after such termination of this Agreement.

then, in any such event, the Company shall pay Parent promptly (but in no event later than the day the first of such events shall have occurred) a fee of $10.21 million (the “Fee”), which amount shall be payable in immediately available funds.

          (b) Except as set forth in Section 7.08(a) and this Section 9.03, all costs and expenses incurred in connection with this Agreement and the Transactions shall be paid by the party incurring such expenses, whether or not any Transaction is consummated.

     SECTION 9.04 Amendment. This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to

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the Effective Time; provided, however, that, after the approval and adoption of this Agreement and the Transactions by the stockholders of the Company, no amendment may be made that would reduce the amount or change the type of consideration into which each Share shall be converted upon consummation of the Merger. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.

     SECTION 9.05 Waiver. At any time prior to the Effective Time, any party hereto may (a) extend the time for the performance of any obligation or other act of any other party hereto, (b) waive any inaccuracy in the representations and warranties of any other party contained herein or in any document delivered pursuant hereto and (c) waive compliance with any agreement of any other party or any condition to its own obligations contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. Failure to take any action to terminate this Agreement pursuant to Section 9.01, if such termination is permitted pursuant thereto, shall not give rise to an inference that a party entitled to so terminate this Agreement has waived its right to do so.

ARTICLE X

GENERAL PROVISIONS

     SECTION 10.01 Nonsurvival of Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant hereto shall survive the Effective Time, provided that this Section 10.01 shall not limit any covenant or agreement of the parties, which covenants and agreements shall survive in accordance with their terms.

     SECTION 10.02 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be delivered by hand or sent by telecopy or by registered or certified mail (postage prepaid, return receipt requested) or express mail or

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reputable overnight courier service to the respective parties and shall be deemed given when so delivered by hand or telecopied, or if mailed, three (3) days after mailing (one business day in the case of overnight mail or overnight courier service) at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.02):

If to Parent or Purchaser: McKesson Corporation One Post Street San Francisco, California 94104
Attention:	General Counsel
Telephone:	(415) 983-8300
Facsimile:	(415) 983-8826
with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 1100 Palo Alto, California 94301
Attention:	Kenton J. King, Esq.
Telephone:	(650) 470-4500
Facsimile:	(650) 470-4570
If to the Company: D&K Healthcare Resources, Inc. 8235 Forsyth Boulevard St. Louis, Missouri 63105
Attention:	J. Hord Armstrong, III
Telephone:	(888) 727-3485
Facsimile:	(314) 727-1943
with a copy to: Armstrong Teasdale LLP One Metropolitan Square, Suite 2600 211 North Broadway St. Louis, Missouri 63102
Attention:	John Gillis, Esq.
Telephone:	(314) 342-8007
Facsimile:	(314) 612-2248

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     SECTION 10.03 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent possible.

     SECTION 10.04 Entire Agreement; Assignment. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement shall not be assigned (whether pursuant to a merger, by operation of law or otherwise), except that Parent and Purchaser may assign all or any of their rights and obligations hereunder to any affiliate of Parent, provided that no such assignment shall relieve the assigning party of its obligations hereunder if such assignee does not perform such obligations.

     SECTION 10.05 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, other than the first sentence of Section 7.05 and Section 7.06 (which are intended to be for the benefit of the persons covered thereby and may be enforced by such persons). Without limiting the foregoing, it is expressly

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understood and agreed that the provisions of Section 7.05 (other than the first sentence of Section 7.05) are statements of intent and, except as provided above, no employee of the Company or the Surviving Corporation or any other person (including any party hereto) shall have any rights or remedies, including rights of enforcement, with respect thereto and no such employee of the Company or the Surviving Corporation or other person is or is intended to be a third-party beneficiary thereof.

     SECTION 10.06 Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

     SECTION 10.07 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State. Each of the parties hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the Court of Chancery of the State of Delaware, and any appellate court thereof, for any litigation arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby, to the extent the Court of Chancery has jurisdiction over the claims alleged in such litigation, or, if the Court of Chancery does not have jurisdiction over the claims alleged in such litigation, the courts of the State of Delaware and of the United States of America located in the State of Delaware, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such litigation except in such courts, (ii) waives any objection to the laying of venue of any such litigation in such Delaware courts and (iii) agrees not to plead or claim in any Delaware court that such litigation brought therein has been brought in an inconvenient

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forum. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.02. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

     SECTION 10.08 Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.08.

     SECTION 10.09 Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

     SECTION 10.10 Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in two or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

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     IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

MCKESSON CORPORATION
By:	/s/ Marc E. Owen
Name: Marc E. Owen
Title:   Executive Vice President Corporate
Strategy and Business Development
SPIRIT ACQUISITION CORPORATION
By:	/s/ Kristina Veaco
Name: Kristina Veaco
Title:   Vice President and Secretary
D&K HEALTHCARE RESOURCES, INC.
By:	/s/ J. Hord Armstrong, III
Name: J. Hord Armstrong, III
Title:   Chairman and Chief Executive Officer

ANNEX A

Conditions to the Offer

     Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept for payment any Shares tendered pursuant to the Offer, and may extend, terminate or amend the Offer, if (i) immediately prior to the expiration of the Offer, the Minimum Condition shall not have been satisfied, (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated prior to the expiration of the Offer, or (iii) at any time on or after the date of this Agreement and prior to the expiration of the Offer, any of the following conditions shall exist:

      (a) there shall have been instituted any Action by any Governmental Entity (i) challenging or seeking to make illegal, materially delay, or otherwise, directly or indirectly, restrain or prohibit or make materially more costly, the making of the Offer, the acceptance for payment of any Shares by Parent, Purchaser or any other affiliate of Parent, or the purchase of Shares, or the consummation of any other Transaction, or seeking to obtain material damages in connection with any Transaction; (ii) seeking to prohibit or limit materially the ownership or operation by the Company, Parent or any of their subsidiaries of all or any of the business or assets of the Company, Parent or any of their subsidiaries that is material to either Parent and its subsidiaries or the Company and the Subsidiaries, in either case, taken as a whole, or to compel the Company, Parent or any of their subsidiaries, as a result of the Transactions, to dispose of or to hold separate all or any portion of the business or assets of the Company, Parent or any of their subsidiaries that is material to either Parent and its subsidiaries or the Company and the Subsidiaries, in each case, taken as a whole; (iii) seeking to impose or confirm any limitation on the ability of Parent, Purchaser or any

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other affiliate of Parent to exercise effectively full rights of ownership of any Shares, including, without limitation, the right to vote any Shares acquired by Purchaser pursuant to the Offer or otherwise on all matters properly presented to the Company’s stockholders, including, without limitation, the approval and adoption of this Agreement and the Transactions; (iv) seeking to require divestiture by Parent, Purchaser or any other affiliate of Parent of any Shares; or (v) which, individually or in the aggregate, otherwise would reasonably be expected to prevent or materially delay consummation of the Offer or the Merger or otherwise would reasonably be expected to prevent or materially delay the Company from performing its obligations under this Agreement or would reasonably be expected to have a Material Adverse Effect;

            (b) any Governmental Authority shall have issued an order, decree, injunction or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting or materially delaying or preventing the Transactions and such order, decree, injunction, ruling or other action shall have become final and non-appealable;

            (c) there shall have been any statute, rule, regulation, legislation or interpretation enacted, promulgated, amended or issued applicable to (i) Parent, the Company or any subsidiary or affiliate of Parent or the Company or (ii) any Transaction, by any United States or Governmental Authority with appropriate jurisdiction, other than the routine application of the waiting period provisions of the HSR Act to the Offer or the Merger, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above;

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            (d) since the date of the Merger Agreement, any Material Adverse Effect, or any occurrence, circumstance or event that is reasonably likely to result in a Material Adverse Effect, shall have occurred;

            (e) there shall have occurred (i) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (ii) any limitation (whether or not mandatory) by any United States Governmental Entity on the extension of credit generally by banks or other financial institutions, or (iii) in the case of either of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof;

            (f) any representation or warranty of the Company in the Agreement that is qualified as to materiality or Material Adverse Effect shall not be true and correct in any respect or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case as if such representation or warranty was made as of such time on or after the date of this Agreement;

            (g) the Company shall have failed to perform, in any material respect, any obligation or to comply, in any material respect, with any agreement or covenant of the Company to be performed or complied with by it under the Agreement; provided Parent shall have given notice to the Company in reasonable detail of such failure to perform or comply and, if such failure is capable of cure within thirty (30) days, the Company shall not have cured any such failure capable of cure within thirty (30) days after receipt of such notice;

            (h) the Board of Directors or any committee thereof shall have (i) withdrawn, or modified or changed in a manner adverse to the Transactions, to Parent or to Purchaser (including by amendment of the Schedule 14D-9), its recommendation of the Offer, this

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Agreement, or the Merger, (ii) recommended any Acquisition Proposal, (iii) taken a neutral position or made no recommendation with respect to another proposal or offer (other than by Parent or Purchaser) after a reasonable amount of time (and in no event more than ten (10) Business Days following receipt thereof) has elapsed for the Board or any committee thereof to review and make a recommendation with respect thereto or (iv) resolved to do any of the foregoing;

            (i) the Purchaser shall have failed to receive a certificate executed by the Company’s President or a Vice President of the Company on behalf of the Company, dated as of the scheduled expiration of the Offer, to the effect that the conditions set forth in paragraphs (f), (g), (i), and (l) of this Annex A have not occurred;

            (j) the Agreement shall have been terminated in accordance with its terms;

            (k) Purchaser and the Company shall have agreed in writing that Purchaser shall terminate the Offer or postpone the acceptance for payment of Shares thereunder; or

            (l) the useable and saleable (and not expired or short-dated) inventories of the eighty percent (80%) Items of the Company and the Subsidiaries, taken as a whole, as determined by Parent after physical inspection thereof and valued in accordance with GAAP consistently applied with the past practices of the Company, have a realizable value (net of reserves) more than five percent (5%) less than the carrying value of the inventories of the eighty percent (80%) Items of the Company and its Subsidiaries, taken as whole, reflected on the consolidated balance sheet of the Company and its Subsidiaries dated as of the date of such physical inspection of the inventory; provided, however, that (A) Parent shall have conducted its physical inspection as promptly as practicable and in any event within five (5) Business Days after the later of (x) the date of this Agreement and (y) the date Parent shall

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have been given full access to the facilities of the Company and the Subsidiaries required by Parent to conduct the physical inspection of the inventories contemplated by this clause (the “Completion Date”), (B) if Parent shall have determined that this condition has not been satisfied, Parent shall have notified the Company of such determination within five (5) Business Days after the Completion Date, which notice shall include Parent’s calculations and a detailed explanation of the basis upon which Parent contends the condition has not been satisfied and (C) if the Company shall have notified Parent within two (2) Business Days after Parent’s notice that the Company disputes (a “Dispute”) Parent’s calculations, the Firm shall not have determined (which determination shall be final and binding upon the parties), after review the positions of Parent and the Company with respect to the Dispute and the performance of appropriate testing procedures (as reasonably determined by the Firm) and in any event within thirty (30) calendar days (the “Dispute Resolution Period”) after its acceptance of its selection, that this condition has been satisfied, (it being understood that Parent and the Company will promptly provide to the Firm all information it reasonably requests to assist it to reach its determination and will instruct the Firm to endeavor to make its determination as promptly as practicable),

which, in the reasonable judgment of Parent or Purchaser, in any such case, and regardless of the circumstances (including action or inaction by Parent or Purchaser) giving rise to such condition, makes it inadvisable to proceed with the Offer and/or with such acceptance for payment of the Shares; provided, however, that Purchaser may not terminate the Offer on the basis of a condition that exists as a result of a breach by Parent or Purchaser of their respective obligations under this Agreement.

A-5

     The foregoing conditions are for the sole benefit of Parent and Purchaser, may be waived by Parent or Purchaser, in whole or in part, at any time and from time to time in the sole discretion of Parent or Purchaser. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time-to-time.

A-6

EX-99.11

EXHIBIT 99.11
EXHIBIT (d)(2)

EXECUTION COPY

STOCKHOLDER SUPPORT AGREEMENT

            STOCKHOLDER SUPPORT AGREEMENT (this “Agreement”), dated July 8, 2005, by and among McKesson Corporation, a Delaware corporation (“Parent”), Spirit Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Parent (“Purchaser”), and certain stockholders of the Company (as defined below) set forth on Schedule 1 hereto (each a “Stockholder” and, collectively the “Stockholders”).

            WHEREAS, each Stockholder is, as of the date hereof, the record and beneficial owner of the number of shares of common stock, par value $0.01 per share (the “Common Stock”), of D&K Healthcare Resources, Inc., a Delaware corporation (the “Company”), set forth opposite the name of such Stockholder on Schedule 1 hereto;

            WHEREAS, Parent, Purchaser and the Company have entered into an Agreement and Plan of Merger, dated as of the date hereof (the “Merger Agreement”), which provides, among other things, for Purchaser to conduct a tender offer for all of the issued and outstanding shares of the Common Stock (the “Offer”) and the merger of Purchaser with and into the Company with the Company continuing as the surviving corporation (the “Merger”) upon the terms and subject to the conditions set forth in the Merger Agreement (capitalized terms used herein without definition shall have the respective meanings specified in the Merger Agreement); and

            WHEREAS, as a condition to the willingness of Parent and Purchaser to enter into the Merger Agreement and as an inducement and in consideration therefor, the Stockholders have agreed to enter into this Agreement.

            NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein and in the Merger Agreement, and intending to be legally bound hereby, the parties hereto agree as follows:

            SECTION 1. Representations and Warranties of the Stockholders. Each Stockholder hereby represents and warrants to Parent and Purchaser, severally and not jointly, as follows:

                  (a) Such Stockholder (i) is the record and beneficial owner of the shares of Common Stock and options to acquire Common Stock (as may be adjusted from time to time pursuant to Section 6, the “Shares”) set forth opposite his name on Schedule 1 to this Agreement and (ii) except as set forth on Schedule 1, neither holds nor has any beneficial ownership interest in any option or warrant to acquire shares of Common Stock or other right or security convertible into or exercisable or exchangeable for shares of Common Stock.

                  (b) Such Stockholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby.

                  (c) This Agreement has been validly executed and delivered by such Stockholder and constitutes the legal, valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought.

                  (d) Neither the execution and delivery of this Agreement nor the consummation by such Stockholder of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which such Stockholder is a party or by which such Stockholder or such Stockholder’s assets are bound. The consummation by such Stockholder of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to such Stockholder.

                  (e) The Shares and the certificates representing the Shares owned by such Stockholder are now, and at all times during the term hereof will be, held by such Stockholder, or by a nominee or custodian for the benefit of such Stockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, options, rights, understandings or arrangements or any other encumbrances or restrictions whatsoever on title, transfer, or exercise of any rights of a stockholder in respect of such Shares (collectively, “Encumbrances”), except for any such Encumbrances arising hereunder and restrictions applicable to employees stock options and restricted stock grants pursuant to the terms of such options and grants.

            SECTION 2. Representations and Warranties of Parent and Purchaser. Each of Parent and Purchaser hereby, jointly and severally, represents and warrants to the Stockholders as follows:

                  (a) Each of Parent and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and each of Parent and Purchaser has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement.

                  (b) This Agreement has been duly authorized, executed and delivered by each of Parent and Purchaser, and constitutes the legal, valid and binding obligation of each of Parent and Purchaser, enforceable against each of them in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable

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defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought.

            SECTION 3. Tender of the Shares. Each Stockholder hereby agrees that (a) he shall tender his Shares (other than unexercised options and other than any shares of restricted stock that have not vested as of the date of determination under the terms of any restricted stock grant agreement between the Company and such Stockholder) into the Offer as promptly as practicable, and in any event no later than the fifth business day, following the commencement of the Offer pursuant to Section 2.01 of the Merger Agreement, free and clear of all Encumbrances (except for any such Encumbrances arising hereunder) and (b) he shall not withdraw any Shares so tendered unless the Offer is terminated or has expired without Purchaser purchasing all shares of Common Stock validly tendered in the Offer.

            SECTION 4. Transfer of the Shares.

                  (a) Prior to the termination of this Agreement, except as otherwise provided herein or as consented to in writing by Parent, none of the Stockholders shall, and, if applicable, shall cause each of their subsidiaries not to: (a) transfer, assign, sell, gift-over, pledge or otherwise dispose (whether by sale, liquidation, dissolution, dividend or distribution) of, create or suffer to exist any Encumbrances (except for any such Encumbrances arising hereunder) on, or consent to any of the foregoing (“Transfer”) with respect to, any or all of the Shares or any right or interest therein; (b) enter into any contract, option or other agreement, arrangement or understanding with respect to any Transfer; (c) grant any proxy, power-of-attorney or other authorization or consent with respect to any of the Shares; (d) deposit any of the Shares into a voting trust, or enter into a voting agreement or arrangement with respect to any of the Shares or (e) directly or indirectly take or cause the taking of any other action that would in any way restrict, limit or interfere with the performance of such Stockholder’s obligations hereunder or the transactions contemplated hereby.

                  (b) Each Stockholder agrees, if requested by Parent, to surrender to the Company, or to the transfer agent for the Company, certificates evidencing the Shares, and shall cause the Company or the transfer agent for the Company to place the following legend on any and all certificates evidencing the Shares:

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT CERTAIN STOCKHOLDER SUPPORT AGREEMENT, DATED AS OF JULY 8, 2005, BY AND AMONG MCKESSON CORPORATION, SPIRIT ACQUISITION CORPORATION AND CERTAIN STOCKHOLDERS OF D&K HEALTHCARE RESOURCES, INC. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS AND PROVISIONS OF SUCH

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AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER.

                  (c) Upon receipt of payment in full for any of its Shares tendered pursuant to the Offer, each Stockholder agrees that any and all rights incident to its ownership of Shares (including any rights to recover amounts, if any, that may be determined to be due to any stockholder or former stockholders of the Company), including but not limited to rights arising out of such Stockholder’s ownership of such Shares prior to the transfer of such Shares to Purchaser pursuant to the Offer, shall be transferred to Purchaser.

            SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.

                  (a) Each Stockholder hereby irrevocably grants to, and appoints, Parent and any designee thereof, such Stockholder’s proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Stockholder, to vote the Shares, or to grant a consent or approval in respect of the Shares, in connection with any meeting of the stockholders of the Company or any action by written consent in lieu of a meeting of stockholders of the Company (i) in favor of the Merger or any other transaction pursuant to which Parent proposes to acquire the Company, whether by tender offer, merger, or otherwise, in which stockholders of the Company would receive consideration per share of Common Stock equal to or greater than the consideration to be received by such stockholders in the Offer and the Merger, and/or (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including, but not limited to, any other extraordinary corporate transaction, including, a merger, acquisition, sale, consolidation, reorganization or liquidation involving the Company and a third party, or any other proposal of a third party to acquire the Company.

                  (b) Such Stockholder represents that any proxies heretofore given in respect of the Shares, if any, are revocable, and hereby revokes such proxies.

                  (c) Such Stockholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Stockholder under this Agreement. Such Stockholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in this Section or in Section 9, is intended to be irrevocable in accordance with the provisions of Section 212 of the Delaware General Corporations Law (“DGCL”). If for any reason the proxy granted herein is not irrevocable, then such Stockholder agrees to vote his or its Shares in accordance with Section 5(a) above as instructed by Parent in writing. The parties agree that the foregoing is a voting agreement created under Section 218 of the DGCL.

            SECTION 6. Certain Events.

            In the event of any change in the Common Stock by reason of a stock dividend, stock split, split-up, recapitalization, reorganization, business combination,

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consolidation, exchange of shares, or any similar transaction or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by any Stockholder (whether through the exercise of any options, warrants or other rights to purchase shares of Common Stock or otherwise): (a) the number of Shares owned by such Stockholder shall be adjusted appropriately and (b) this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by each of the Stockholders.

            SECTION 7. Non-Solicitation.

            Each Stockholder agrees that it shall immediately cease and cause to be terminated all existing activities, discussions or negotiations with any persons with respect to the possibility or consideration of any Acquisition Proposal. Such Stockholder shall not and shall not authorize or permit its representatives (including, without limitation, investment bankers, financial advisors, attorneys, accountants or other representatives (collectively, the “Representatives”)) to directly or indirectly (i) solicit, initiate or encourage (including by way of furnishing information or assistance), or take any other action to facilitate or encourage any inquiries or the making of any proposal that constitutes, or is reasonably likely to lead to, any Acquisition Proposal, (ii) participate in any discussions or negotiations regarding, or provide any nonpublic information or data to any person relating to, any Acquisition Proposal or (iii) enter into any agreement with respect to any Acquisition Proposal. Any violation of the foregoing restrictions by any of the Stockholders or their respective Representatives, whether or not such Stockholder or Representative is so authorized by the Company or by any other Stockholder and whether or not such Stockholder or Representative is purporting to act on behalf of the Company, any Stockholder or Stockholders or otherwise, shall be deemed to be a breach of this Agreement by each Stockholder. It is understood that this Section 7 limits the rights of each Stockholder only to the extent that such Stockholder is acting in such Stockholder’s capacity as a stockholder. Nothing herein shall be construed as preventing a Stockholder who is an officer or director of the Company from fulfilling the obligations of such office (including, subject to the limitations contained in Section 7.04 of the Merger Agreement, the performance of obligations required by the fiduciary obligations of such Stockholder acting solely in his or her capacity as an officer or director).

            SECTION 8. Further Assurances. Each Stockholder shall, upon request of Parent or Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent or Purchaser to be necessary or desirable to carry out the provisions hereof and to vest in Parent the power to vote the Shares as contemplated by Section 5.

            SECTION 9. Termination. This Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (a) six months following the termination of the Merger Agreement in accordance with its terms or (b) the Effective Time; provided, however, that Sections 8 and 10 shall survive any termination of this Agreement.

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            SECTION 10. Expenses. All fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees, costs and expenses.

            SECTION 11. Public Announcements. Parent, Purchaser and Stockholder agree that no public release or announcement with respect to this Agreement or the transactions contemplated hereby shall be issued by any party without the prior consent of the other parties (which consent shall not be unreasonably withheld), except as such release or announcement may be required by Law or the rules or regulations of any United States securities exchange or Nasdaq, in which case the party required to make the release or announcement shall use its reasonable efforts to allow the other parties time to comment on such release or announcement in advance of such issuance.

            SECTION 12. Miscellaneous.

                  (a) Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be delivered by hand or sent by telecopy or by registered or certified mail (postage prepaid, return receipt requested) or express mail or reputable overnight courier service to the respective parties and shall be deemed given when so delivered by hand or telecopied, or if mailed, three days after mailing (one business day in the case of overnight mail or overnight courier service) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 12):

If to any of the Stockholders, at the address set forth opposite the name of such Stockholder on Schedule 1 hereto:

with a copy to:

Armstrong Teasdale LLP

One Metropolitan Square, Suite 2600

211 North Broadway

St. Louis, Missouri 63102

Attention: John Gillis, Esq.

Telephone: (314) 342-8007

Facsimile: (314) 612-2248

and

If to Parent or Purchaser, to:

McKesson Corporation

One Post Street

San Francisco, California 94104

Attention: General Counsel

Telephone: (415) 983-8300

Facsimile: (415) 983-8826

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with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

525 University Avenue, Suite 1100

Palo Alto, California 94301

Attention: Kenton J. King, Esq.

Telephone:(650) 470-4500

Facsimile:(650) 470-4570

                  (b) Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

                  (c) Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in two or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

                  (d) Entire Agreement; Assignment. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement shall not be assigned (whether pursuant to a merger, by operation of law or otherwise), except that Parent and Purchaser may assign all or any of their rights and obligations hereunder to any affiliate of Parent, provided that no such assignment shall relieve the assigning party of its obligations hereunder if such assignee does not perform such obligations. Any assignment made in violation of this Section 12(d) shall be void.

                  (e) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State. Each of the parties hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the Court of Chancery of the State of Delaware, and any appellate court thereof, for any litigation arising out of or relating to this Agreement or the transactions contemplated hereby, to the extent the Court of Chancery has jurisdiction over the claims alleged in such litigation, or, if the Court of Chancery does not have jurisdiction over the claims alleged in such litigation, the courts of the State of Delaware and of the United States of America located in the State of Delaware, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such litigation except in such courts, (ii) waives any objection to the laying of venue of any such litigation in such Delaware courts and (iii) agrees not to plead or claim in any Delaware court that such litigation brought therein has been brought in an inconvenient forum. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 12. Nothing

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in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by Law.

                  (f) Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.

                  (g) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the fullest extent possible.

                  (h) Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

                  (i) Amendment. No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party.

                  (j) Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

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            IN WITNESS WHEREOF, Parent, Purchaser and the Stockholders have caused this Agreement to be duly executed and delivered as of the date first written above.

MCKESSON CORPORATION
By:	/s/ Marc E. Owen
Name: Marc E. Owen
Title:   Executive Vice President Corporate
Strategy and Business Development
SPIRIT ACQUISITION CORPORATION
By:	/s/ Kristina Veaco
Name: Kristina Veaco
Title:   Vice President and Secretary

STOCKHOLDER

/s/ Richard J. Ford

Please Print Name:

Richard J. Ford

Signature Page to Stockholders Agreement for Stockholders who are individuals

STOCKHOLDER

/s/ Harvey C. Jewett

Please Print Name:

Harvey C. Jewett

Signature Page to Stockholders Agreement for Stockholders who are individuals

STOCKHOLDER

/s/ Bryan H. Lawrence

Please Print Name:

Bryan H. Lawrence

Signature Page to Stockholders Agreement for Stockholders who are individuals

STOCKHOLDER

/s/ Mary Ann Van Lokeren

Please Print Name:

Mary Ann Van Lokeren

Signature Page to Stockholders Agreement for Stockholders who are individuals

STOCKHOLDER

/s/ J. Hord Armstrong, III

Please Print Name:

J. Hord Armstrong, III

Signature Page to Stockholders Agreement for Stockholders who are individuals

STOCKHOLDER

/s/ Martin D. Wilson

Please Print Name:

Martin D. Wilson

Signature Page to Stockholders Agreement for Stockholders who are individuals

STOCKHOLDER

/s/ Thomas S. Hilton

Please Print Name:

Thomas S. Hilton

Signature Page to Stockholders Agreement for Stockholders who are individuals

STOCKHOLDER

/s/ Richard A. Keffer

Please Print Name:

Richard A. Keffer

Signature Page to Stockholders Agreement for Stockholders who are individuals

STOCKHOLDER

/s/ Ed G. Petrella

Please Print Name:

Ed G. Petrella

Signature Page to Stockholders Agreement for Stockholders who are individuals

STOCKHOLDER

/s/ Brian G. Landry

Please Print Name:

Brian G. Landry

Signature Page to Stockholders Agreement for Stockholders who are individuals

STOCKHOLDER

/s/ Thomas F. Patton

Please Print Name:

Thomas F. Patton

The parties hereby acknowledge that Thomas F. Patton is a party to a proceeding which may result in his loss of beneficial ownership of all or a portion of such Stockholder’s Shares. For purposes of this Agreement, the parties hereby agree that references in this Agreement to such Stockholder’s Shares shall be deemed to be a reference to such Shares as such Stockholder’s beneficial ownership may be adjusted in the proceeding, and, for the avoidance of doubt, such Stockholder’s representations warranties and agreements in Section 1(e) of this Agreement are subject to the foregoing.

Agreed and acknowledged by:

MCKESSON CORPORATION

By:	/s/ Marc E. Owen
Name: Marc E. Owen
Title:   Executive Vice President Corporate
Strategy and Business Development

SPIRIT ACQUISITION CORPORATION

By:	/s/ Kristina Veaco
Name: Kristina Veaco
Title:   Vice President and Secretary

Signature Page to Stockholders Agreement for Stockholders who are individuals

SCHEDULE 1

D&K Healthcare Resources
Outstanding Options and Restricted Shares for Directors and Exec. Officers At July 8, 2005

					Owned
	Options		Restricted Shares		Shares
Richard Ford		35,000		—		14,500
Harvey Jewett		35,000		—		300,000
Bryan Lawrence		35,000		—		56,636
Thomas Patton		28,334		—		3,890
May Ann Van Lokeren		15,000		—		1,000
Hord Armstrong		370,000		116,150		532,294
Martin Wilson		292,332		80,380		10,500
Thomas Hilton		118,700		26,160		9,500
Richard Keffer		—		7,500		—
Ed Petrella		48,000		13,097		—
Brian Landry		95,000		13,709		7,000

For purposes of Section 12(a) of this Agreement, the address for each Stockholder on this Schedule 1 shall be:

D&K Healthcare Resources, Inc.
8235 Forsyth Boulevard
St. Louis, Missouri 63105

EX-99.12

EXHIBIT 99.12
EXHIBIT (d)(3)

March 24, 2005

D&K Healthcare Resources Inc.
8235 Forsyth Boulevard
St. Louis, MO 63105

     RE: Confidentiality Agreement

Ladies and Gentlemen:

In connection with the consideration of a possible transaction between McKESSON CORPORATION (“McKesson”) and D&K HEALTHCARE RESOURCES INC. (the “Company”), McKesson has requested information concerning the Company. As a condition to McKesson being furnished such information, McKesson agrees to treat any information concerning the Company (whether prepared by the Company, its advisors or otherwise and whether documentary, computerized or oral) which is furnished by or on behalf of the Company (herein collectively referred to as the “Evaluation Material”) in accordance with the provisions of this letter agreement (the “Agreement”) and to take or abstain from taking certain other actions herein set forth. The term “Evaluation Material” does not include information which (i) is already in McKesson’s possession, provided that such information is not known or should not reasonably have been known by such McKesson to be subject to another confidentiality agreement with or other obligation of secrecy to the Company or another party, or (ii) becomes generally available to the public other than as a result of a disclosure by McKesson or its directors, officers, employees, agents, or advisors (collectively “Representatives”) in violation hereof, or (iii) becomes available to McKesson on a nonconfidential basis from a source other than the Company or its Representatives, provided that such source is not known or should not reasonably have been known by McKesson to be bound by a confidentiality agreement with or other obligation of secrecy to the Company or another party, or (iv) is independently developed by McKesson without violating any of its obligations hereunder.

McKesson hereby agrees that the Evaluation Material furnished by or on behalf of the Company shall be used solely for the purpose of evaluating a possible transaction between McKesson and the Company (a “Transaction”), and that, except as required by applicable law, such information shall be kept confidential by McKesson and its Representatives; provided, however, that (i) any of such information may be disclosed only to the Representatives of McKesson who need to know such information for the purpose of evaluating any such possible Transaction (it being understood that such Representatives shall be informed by McKesson of the confidential nature of such information, shall agree to treat such information confidentially and McKesson shall be responsible for any breach of this Agreement by any of its Representatives), and (ii) any disclosure of such information may be made to which the Company consents in writing.

McKesson acknowledges and agrees that any unauthorized disclosure or misuse of the Evaluation Material or other non-compliance with the terms of this Agreement by McKesson could cause material irreparable damage to the Company, and that in addition to all other remedies which the Company may have, it shall be entitled to seek specific performance and injunctive or other equitable relief without the need to post a bond or other security. No delay or failure in exercising any right hereunder shall be

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D&K Healthcare Resources Inc.
Page 2 of 3

construed to be a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder or otherwise legally available.

Each party hereby acknowledges that it is aware, and that it will advise such Representatives who are informed as to the matters which are the subject of this Agreement, that the United States securities laws prohibit any person who has received from an issuer material, nonpublic information concerning the matters which are the subject of this Agreement from purchasing or selling securities of such issuer or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.

In addition, without the prior written consent of the other party, except as required by applicable law, neither party will, and will cause such Representatives not to, disclose to any person either the fact that discussions or negotiations are taking place concerning the Transaction between McKesson and the Company or any of the terms, conditions or other facts with respect to any such Transaction, including the status thereof.

In the event that McKesson or any of its Representatives receives a request to disclose all or any part of the information contained in the Evaluation Material under the terms of a subpoena or order issued by a court of competent jurisdiction or by a governmental body, McKesson agrees to (i) promptly notify the Company of the existence, terms and circumstances surrounding such a request so that it may seek an appropriate protective order and/or waive McKesson’s compliance with the provisions of this Agreement (and, if the Company seeks such an order, to provide such cooperation as the Company shall reasonably request) and (ii) if disclosure of such information is required in the opinion of McKesson’s counsel, disclose only such information it believes is legally required and exercise its best efforts to obtain an order or other reliable assurance that confidential treatment will be accorded the disclosed information, to the extent such assurances can be obtained.

Although the Company has endeavored to include in the Evaluation Material information known to it which it believes to be relevant for the purpose of McKesson’s investigation, it is agreed that neither the Company nor any of its Representatives have made or make any representation or warranty as to the accuracy or completeness of the Evaluation Material. It is agreed that neither the Company nor its Representatives shall have any liability to McKesson or any of its Representatives resulting from the use or content of the Evaluation Material except as may be included in any definitive agreement with respect to a Transaction.

If either party determines not to proceed with a Transaction, such party will promptly inform the other party. Each party acknowledges and agrees that neither of us has made any decision to pursue any Transaction and each party shall have the right in its sole discretion, without giving any reason therefor, at any time to terminate discussions with the other party concerning a possible Transaction, or to elect not to pursue any such Transaction. McKesson agrees, and agrees to cause its respective Representatives, as promptly as practicable following a request from the Company, to redeliver to the Company or destroy all written Evaluation Material and will not retain any copies, extracts or other reproductions in whole or in part of such written material. Upon request from the Company, all documents, memoranda, analyses, studies, summaries, data, notes and other writings whatsoever prepared by McKesson or its Representatives based on the information in the Evaluation Material shall be destroyed, and such destruction shall be certified in writing to the Company by an authorized officer supervising such destruction. Notwithstanding the foregoing, however, for record keeping and compliance purposes only, legal counsel for McKesson may retain one copy of Evaluation Material received from the Company in its files.

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D&K Healthcare Resources Inc.
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This Agreement shall remain in effect until the earlier of (i) two years from the date hereof and (ii) consummation of a Transaction.

This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Delaware. If any provision of this Agreement shall be held invalid, the remaining provisions shall not be so affected. In addition, if any amendment to any restriction would be necessary in order to ensure its validity, such restriction shall apply with such amendment or modification as may be necessary to make it valid and effective.

This Agreement contains the entire agreement between the parties concerning the subject matter hereof and supersedes all previous agreements, written or oral, relating to the subject matter hereof. No modifications of this Agreement or waiver of the terms and conditions hereof will be binding unless approved in writing by both of the parties hereto.

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall constitute the same agreement

Please confirm your agreement with the foregoing by signing and returning to the undersigned the duplicate copy of this Agreement enclosed herewith.

Very truly yours,

McKESSON CORPORATION

By:	/s/ Ivan D. Meyerson
Name:	Ivan D. Meyerson
Title:	Executive Vice President, General Counsel and Secretary

Accepted and Agreed, this ___day of
___2005

D&K HEALTHCARE RESOURCES INC.

By:	/s/ Marten D. Wilson
Name:	Marten D. Wilson
Title:	President and Chief Operating Officer

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