10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For quarter ended June 30, 2002

[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ____________ to __________

Commission file number 1-13252

McKESSON CORPORATION
(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	94-3207296 (IRS Employer Identification No.)
One Post Street, San Francisco, California (Address of principal executive offices)	94104 (Zip Code)

(415) 983-8300
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]      No [    ]

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at August 6, 2002
Common stock, $0.01 par value	290,031,568 shares

1

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		FINANCIAL NOTES
	Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Market for the Registrant’s Common Stock and Related Shareholder Matters
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Exhibit 3.1
Exhibit 3.2
Exhibit 99.1
Exhibit 99.2

McKESSON CORPORATION

TABLE OF CONTENTS

Item		Page
PART I.  FINANCIAL INFORMATION
1.	Condensed Financial Statements
	Consolidated Balance Sheets June 30, 2002 and March 31, 2002	3
	Consolidated Statements of Operations Quarters ended June 30, 2002 and 2001	4
	Consolidated Statements of Cash Flows Quarters ended June 30, 2002 and 2001	5
	Financial Notes	6-12
2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition Financial Review	13-21
3.	Quantitative and Qualitative Disclosures about Market Risk	22
PART II.  OTHER INFORMATION
1.	Legal Proceedings	22
4.	Submission of Matters to a Vote of Security Holders	22
5.	Market for the Registrants Common Stock and Related Stockholder Matters	23
6.	Exhibits and Reports on Form 8-K	23
	Signatures	24

2

McKESSON CORPORATION

PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
(Unaudited)

			June 30, 2002			March 31, 2002
ASSETS
Current Assets
	Cash and equivalents		$	289.8		$	557.9
	Marketable securities available for sale			11.6			5.1
	Receivables			4,197.1			4,001.5
	Inventories			6,178.3			6,011.5
	Prepaid expenses and other			118.2			122.7
		Total		10,795.0			10,698.7
Property, Plant and Equipment, net				583.3			594.7
Capitalized Software Held for Sale				119.7			118.4
Notes Receivable				248.2			237.7
Goodwill and Other Intangibles				1,112.3			1,115.7
Other Assets				607.3			558.8
		Total Assets	$	13,465.8		$	13,324.0
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
	Drafts and accounts payable		$	6,345.0		$	6,336.7
	Deferred revenue			379.6			388.1
	Current portion of long-term debt			141.5			141.2
	Other			688.2			722.0
		Total		7,554.3			7,588.0
Postretirement Obligations and Other Noncurrent Liabilities				331.4			311.4
Long-Term Debt				1,286.6			1,288.4
McKesson Corporation — Obligated Mandatorily Redeemable Convertible Preferred Securities of Subsidiary Grantor Trust Whose Sole Assets are Junior Subordinated Debentures of McKesson Corporation				196.2			196.1
Other Commitments and Contingent Liabilities
Stockholders’ Equity
	Preferred stock, $0.01 par value, 100.0 shares authorized, no shares issued or outstanding			—			—
	Common stock, $0.01 par value, 400.0 shares authorized, 289.9 and 287.9 issued and outstanding at June 30, 2002 and March 31, 2002			2.9			2.9
	Additional paid-in capital			1,872.8			1,831.0
	Other			(92.4	)		(94.9	)
	Retained earnings			2,457.2			2,357.2
	Accumulated other comprehensive losses			(71.4	)		(81.6	)
	ESOP notes and guarantees			(71.5	)		(74.5	)
	Treasury shares, at cost			(0.3	)		—
		Total Stockholders’ Equity		4,097.3			3,940.1
		Total Liabilities and Stockholders’ Equity	$	13,465.8		$	13,324.0

See Financial Notes.

3

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)

		Quarters Ended June 30,
		2002			2001
Revenues		$	13,628.0		$	11,656.3
Cost of Sales			12,875.5			10,995.6
Gross Profit			752.5			660.7
Operating Expenses			548.7			501.9
Loss on Sales of Businesses, Net			—			18.4
Operating Income			203.8			140.4
Interest Expense			(30.9	)		(27.0	)
Other Income, Net			10.0			7.7
Income Before Income Taxes and Dividends on Preferred Securities of Subsidiary Trust			182.9			121.1
Income Taxes			(64.1	)		(14.2	)
Dividends on Preferred Securities of Subsidiary Trust, Net of Tax Benefit			(1.5	)		(1.5	)
Net Income		$	117.3		$	105.4
Earnings Per Common Share
	Diluted	$	0.39		$	0.36
	Basic		0.41			0.37
Dividends Declared Per Common Share			0.06			0.06
Weighted Average Shares
	Diluted		301.0			295.5
	Basic		288.4			283.9

See Financial Notes.

4

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

			Quarters Ended June 30,
			2002			2001
Operating Activities
Net income			$	117.3		$	105.4
Adjustments to reconcile to net cash used by operating activities
	Depreciation			27.5			29.4
	Amortization			23.2			21.8
	Provision for bad debts			20.0			13.2
	Deferred taxes on income			5.9			11.4
	Loss on sales of businesses, net			—			18.4
	Other non-cash items			5.7			3.6
		Total		199.6			203.2
Effects of changes in:
	Receivables			(192.9	)		31.5
	Inventories			(155.4	)		(774.7	)
	Accounts and drafts payable			(5.0	)		254.7
	Deferred revenue			(7.5	)		(47.9	)
	Other			(41.2	)		(61.1	)
		Total		(402.0	)		(597.5	)
		Net cash used by continuing operations		(202.4	)		(394.3	)
Discontinued operations				(0.6	)		(0.1	)
		Net cash used by operating activities		(203.0	)		(394.4	)
Investing Activities
Property acquisitions				(26.5	)		(17.3	)
Capitalized software expenditures				(39.1	)		(41.8	)
Notes receivable issuances, net				(10.4	)		(5.4	)
Acquisitions of businesses, less cash and short-term investments acquired				(1.9	)		(7.0	)
Other				(6.4	)		13.1
		Net cash used by investing activities		(84.3	)		(58.4	)
Financing Activities
Proceeds from issuance of debt				—			245.0
Repayment of debt				(4.5	)		(13.1	)
Dividends paid on convertible preferred securities of subsidiary trust				(2.5	)		(2.5	)
Capital stock transactions
	Issuances			39.4			28.9
	ESOP notes and guarantees			3.0			8.2
	Dividends paid			(17.3	)		(17.1	)
	Other			1.1			—
		Net cash provided by financing activities		19.2			249.4
Net decrease in cash and equivalents				(268.1	)		(203.4	)
Cash and equivalents at beginning of period				557.9			433.7
Cash and equivalents at end of period			$	289.8		$	230.3

See Financial Notes.

5

McKESSON CORPORATION

FINANCIAL NOTES
(Unaudited)

1. Interim Financial Statements

     In our opinion, these unaudited condensed consolidated financial statements include all adjustments necessary for a fair presentation of the Company’s financial position as of June 30, 2002, and the results of operations and cash flows for the quarters ended June 30, 2002 and 2001.

     The results of operations for the quarters ended June 30, 2002 and 2001 are not necessarily indicative of the results that may be expected for the entire year. These interim financial statements should be read in conjunction with the annual audited financial statements, accounting policies and financial notes included in our 2002 consolidated financial statements previously filed with the Securities and Exchange Commission. Certain prior period amounts have been reclassified to conform to the current period presentation.

     The Company’s fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references to a particular year shall mean the Company’s fiscal year.

2. New Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” which addresses financial accounting requirements for retirement obligations associated with tangible long-lived assets. SFAS No. 143 will become effective for 2004. We are evaluating what impact, if any, SFAS No. 143 may have on the consolidated financial statements.

     In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” that replaces SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” SFAS No. 144 requires that long-lived assets to be disposed of by sale, including those of discontinued operations, be measured at the lower of carrying amount or fair value less cost to sell. Discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not yet been incurred. Except for those provisions of this accounting standard whose implementation extends to the end of 2003, we have adopted SFAS No. 144 as of April 1, 2002. As the provisions were generally to be applied prospectively, the adoption did not have a material impact on our consolidated financial statements. In addition, the adoption of the remaining provisions is not expected to have a material impact on our consolidated financial statements.

     In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which replaces Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity.” SFAS No. 146 requires that liabilities associated with exit or disposal activities be recognized when they are incurred. Under EITF Issue No. 94-3, a liability for exit costs is recognized at the date of a commitment to an exit plan. SFAS No. 146 also requires that the liability be measured and recorded at fair value. Accordingly, the adoption of this standard may affect the timing of recognizing future restructuring costs as well as the amounts recognized. We will adopt the provisions of SFAS No. 146, for restructuring activities initiated after December 31, 2002.

3. Acquisitions, Investments and Divestitures

     On May 16, 2002, the Company and Quintiles Transnational Corporation formed a joint venture, Verispan, L.L.C. (“Verispan”). Verispan is a provider of patient-level data delivered in near real time as well as a supplier of other healthcare information. We have an approximate 46% equity interest in the joint venture. Contributions of $12.1 million to the joint venture consisted of $7.7 million in net assets from a Pharmaceutical Solutions segment business and $4.4 million in cash, and are subject to adjustment. We have also committed to provide additional aggregate cash contributions of $9.4 million and to purchase a total of $15.0 million in services from the joint venture through 2007. No gain or loss was recognized as a result of this transaction.

6

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

     On July 5, 2002, we completed our purchase of 98.1% of the outstanding stock of A.L.I. Technologies Inc. (“A.L.I.”), of Vancouver, British Columbia, Canada, by means of a cash tender offer. The purchase price of approximately $350 million (representing the cash tender offer less cash and equivalents purchased) was initially financed through excess cash and short-term debt. We are presently reviewing the valuation of the net assets acquired and we expect a substantial portion of the purchase price to be allocated to goodwill. In addition, we are currently in the process of acquiring the remaining 1.9% of outstanding shares of A.L.I. A.L.I. provides medical imaging solutions which are designed to streamline access to diagnostic information, automate clinical workflow and eliminate the need for film.

     During the quarter ended June 30, 2001, we sold two businesses from our Information Solutions segment. We recognized a net pre-tax loss of $18.4 million and an after-tax gain of the same amount. For accounting purposes, the net assets of one of these businesses were written down in 2001 in connection with the restructuring of a former business segment. The tax benefit could not be recognized until the first quarter of 2002, when the sale of the business was completed.

4. Special Charges (Credit)

     We incurred the following special charges (credit):

	Quarters Ended June 30,
(In millions)	2002			2001
Securities litigation costs incurred	$	0.1		$	0.6
Loss on investments, net		2.6			2.3
Loss on sales of businesses, net (Financial Note 3)		—			18.4
Restructuring and related asset impairments (Financial Note 5)		4.5			(0.9	)
Other		5.1			3.2
Total pre-tax special charges		12.3			23.6
Income tax benefit		(4.3	)		(38.7	)
Total after-tax special charges (credit)	$	8.0		$	(15.1	)
Diluted loss (credit) per share attributable to special charges	$	0.03		$	(0.05	)

     Securities litigation costs: During the quarters ended June 30, 2002 and 2001, we incurred expenses of $0.1 million and $0.6 million, net of estimated insurance recoveries, in connection with the securities litigation arising out of the 1999 restatement of our historical consolidated financial statements (See Financial Note 12). The restatement was the result of improper accounting practices at HBO & Company (“HBOC”), which we acquired in a January 1999 pooling of interests transaction.

     Loss on investments, net: During the quarters ended June 30, 2002 and 2001, we recorded other-than-temporary impairment losses of $2.6 million and $2.3 million on equity and venture capital investments as a result of declines in the market values of these investments.

     Other: For the quarter ended June 30, 2002, other charges of $5.1 million represent severance costs for workforce reductions in our Pharmaceutical Solutions, Medical-Surgical Solutions and Corporate segments. For the quarter ended June 30, 2001, other charges of $3.2 million pertain to the write-off of purchased software in our Information Solutions segment.

7

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

     To reflect the items discussed above, these charges were recorded within the condensed consolidated statements of operations, as follows:

	Quarters Ended June 30,
(In millions)	2002		2001
Operating expenses	$	9.7	$	2.9
Loss on sales of businesses, net		—		18.4
Other income, net		2.6		2.3
Total pre-tax special charges	$	12.3	$	23.6

     Special charges by business segment are disclosed in Financial Note 13.

5. Restructuring and Related Asset Impairments

     We recorded net charges for restructuring activities of $3.5 million and related asset impairments of $1.0 million during the quarter ended June 30, 2002. Of these amounts, $2.5 million pertains to the announced closure of a Pharmaceutical Solutions segment distribution center and includes severance, exit costs and asset impairments. Approximately 65 employees were given termination notices as a result of this restructuring activity. Restructuring charges for the first quarter of 2003 also includes $2.0 million in additional facility closure costs, reflecting a change in estimated costs associated with a Pharmaceutical Solutions segment’s prior year restructuring activity.

     During the quarter ended June 30, 2001, we recorded a net reversal of prior years’ restructuring expenses of $0.9 million, primarily reflecting a change in estimated costs to complete those activities.

     In connection with 2003 and 2002 restructuring activities, approximately 985 employees, mainly in distribution, delivery and associated back-office functions, were given termination notices, and 30 distribution centers were to be closed and 8 were to be opened. As of June 30, 2002, 314 employees had been terminated, and 15 distribution centers were closed and 5 were opened. A large portion of these activities pertain to our Medical-Surgical segment; and we are currently re-evaluating our plans to restructure this segment’s distribution center network. The revised plan, which may require adjustments to previously recorded restructuring charges, should be completed in the second quarter of 2003 and fully implemented by early next fiscal year.

     The following table summarizes the activity related to restructuring liabilities for the quarter ending June 30, 2002:

	Pharmaceutical						Medical-Surgical						Information
	Solutions						Solutions						Solutions						Corporate
				Exit-						Exit-						Exit-						Exit-
(In millions)	Severance			Related			Severance			Related			Severance			Related			Severance			Related			Total
Balance, March 31, 2002	$	1.2		$	4.4		$	10.9		$	14.3		$	5.6		$	4.5		$	16.8		$	0.3		$	58.0
Current period expenses		0.9			0.6			—			—			—			—			—			—			1.5
Adjustment to prior year’s expenses		—			2.0			—			—			—			—			—			—			2.0
Total expenses		0.9			2.6			—			—			—			—			—			—			3.5
Cash expenditures		(0.6	)		(0.5	)		(3.1	)		(0.7	)		(1.6	)		(0.3	)		(1.1	)		(0.3	)		(8.2	)
Balance, June 30, 2002	$	1.5		$	6.5		$	7.8		$	13.6		$	4.0		$	4.2		$	15.7		$	—		$	53.3

     Accrued restructuring liabilities are included in other liabilities in the accompanying condensed consolidated balance sheets. The remaining balances at June 30, 2002 for the Pharmaceutical Solutions and Medical-Surgical Solutions segments relate primarily to the consolidation of certain distribution centers and includes severance, costs for preparing facilities for disposal, lease costs and property taxes required subsequent to termination of operations. Restructuring liabilities for the Information Solutions segment primarily represent accrued severance and contract liabilities. Corporate accrued severance primarily pertains to retirement costs. With the exception of the retirement costs, which are anticipated to be paid in 2005, substantially all other accrued restructuring amounts are anticipated to be paid by the end of 2003.

8

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

     In addition to the above restructuring activities, we are still managing a 2001/2000 restructuring plan associated with customer settlements for our discontinuance of overlapping and nonstrategic products and other product development projects within our Information Solutions segment. Customer settlement allowances, which are included as a reduction of accounts receivable in the accompanying condensed consolidated balance sheets, were reduced by $1.7 million and $0.1 million in cash and non-cash settlements during the first quarter of 2003 to $131.6 million at June 30, 2002 from $133.4 million at March 31, 2002. Total cash and non-cash settlements of $31.9 million and $71.7 million have been incurred since the inception of the restructuring plan. While the timing of the final resolution of these settlements is uncertain, we believe that additional allowances, if any, will not have a material adverse effect on our financial position, results of operations or cash flows.

6. Goodwill and Other Intangible Assets

     Changes in the carrying amount of goodwill for the quarter ended June 30, 2002, are as follows:

	Pharmaceutical			Medical-Surgical		Information
(In millions)	Solutions			Solutions		Solutions			Total
Balance, March 31, 2002	$	303.9		$	689.4	$	29.0		$	1,022.3
Goodwill acquired		0.5			—		—			0.5
Other adjustments		(0.6	)		—		(0.6	)		(1.2	)
Balance, June 30, 2002	$	303.8		$	689.4	$	28.4		$	1,021.6

     Information regarding other intangible assets is as follows:

	June 30,			March 31,
(In millions)	2002			2002
Customer lists	$	88.7		$	88.1
Technology		42.8			44.1
Trademarks and other		22.1			22.5
Total intangibles		153.6			154.7
Accumulated amortization		(62.9	)		(61.3	)
Intangibles, net	$	90.7		$	93.4

     Amortization expense of other intangible assets was $3.9 million and $3.5 million for the quarters ended June 30, 2002 and 2001. As of June 30, 2002, estimated future annual amortization expense of other intangible assets is $15.4 million, $15.3 million, $15.5 million, $10.0 million and $9.9 million in the respective years 2003 through 2007.

7. Short-Term Borrowings and Hedging Activities

     We renewed our committed revolving receivables sale facility aggregating $850 million on June 14, 2002 under substantially similar terms to those previously in place.

     In order to hedge a portion of our fixed interest rate debt with variable interest rates, in April 2002, we entered into two interest rate swap agreements. The first agreement exchanges a fixed interest rate of 8.91% per annum to LIBOR plus 4.155%, on a notional amount of $100 million and matures in February 2005. The second agreement exchanges a fixed interest rate of 6.30% per annum to LIBOR plus 1.575%, on a notional amount of $150 million and matures in March 2005. These agreements are designated as fair value hedges and are intended to reduce our effective interest rate.

9

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

8. Convertible Preferred Securities

     In February 1997, our wholly-owned subsidiary trust issued 4 million shares of preferred securities to the public and 123,720 common securities to us, which are convertible at the holder’s option into McKesson Corporation common stock. The proceeds of such issuances were invested by the trust in $206,186,000 aggregate principal amount of our 5% Convertible Junior Subordinated Debentures due 2027 (the “Debentures”). The Debentures represent the sole assets of the trust. The Debentures mature on June 1, 2027, bear interest at the rate of 5%, payable quarterly, and are redeemable by us at 102.5% of the principal amount.

     Holders of the securities are entitled to cumulative cash distributions at an annual rate of 5% of the liquidation amount of $50 per security. Each preferred security is convertible at the rate of 1.3418 shares of McKesson Corporation common stock, subject to adjustment in certain circumstances. The preferred securities will be redeemed upon repayment of the Debentures and are callable by us at 102.5% of the liquidation amount.

     We have guaranteed, on a subordinated basis, distributions and other payments due on the preferred securities (the “Guarantee”). The Guarantee, when taken together with our obligations under the Debentures, and in the indenture pursuant to which the Debentures were issued, and our obligations under the Amended and Restated Declaration of Trust governing the subsidiary trust, provides a full and unconditional guarantee of amounts due on the preferred securities.

     The Debentures and related trust investment in the Debentures have been eliminated in consolidation and the preferred securities reflected as outstanding in the accompanying consolidated financial statements.

9. Stockholders’ Equity

     On July 31, 2002, our stockholders approved an amendment to the Company’s Restated Certificate of Incorporation to increase authorized common stock from 400.0 million to 800.0 million shares. Also on that date, our stockholders approved an increase in common stock available for issuance under the Employee Stock Purchase Plan from 6.1 million to 11.1 million shares, and our Board of Directors approved an increase in common stock available for issuance in the form of nonqualified stock options under the broad-based 1999 Stock Option Plan and Restricted Stock Plan from 32.7 million (of which approximately 3 million remained available for issuance) to 45.2 million shares.

10. Comprehensive Income

     Comprehensive income is as follows:

		Quarters Ended June 30,
(In millions)		2002			2001
Net income		$	117.3		$	105.4
Unrealized loss on marketable securities and investments			(1.3	)		(2.6	)
Net gain (loss) on derivative instruments			(0.4	)		2.2
Foreign currency translation adjustments			11.9			2.0
	Comprehensive income	$	127.5		$	107.0

11. Earnings Per Share

     Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is computed similar to basic earnings per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.

10

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

     The computations for basic and diluted earnings per share are as follows:

		Quarters Ended June 30,
(In millions, except per share amounts)		2002		2001
Net income		$	117.3	$	105.4
	Dividends on preferred securities of subsidiary trust, net of tax benefit		1.5		1.5
Net income— diluted		$	118.8	$	106.9
Weighted average common shares outstanding:
Basic			288.4		283.9
Effect of dilutive securities:
	Options to purchase common stock		6.6		5.8
	Trust convertible preferred securities		5.4		5.4
	Restricted stock		0.6		0.4
Diluted			301.0		295.5
Earnings per common share:
	Basic	$	0.41	$	0.37
	Diluted	$	0.39	$	0.36

12. Litigation

     In our annual report on Form 10-K for the year ended March 31, 2002, we reported on numerous legal proceedings arising out of our announcement on April 28, 1999 regarding accounting improprieties at HBOC, now known as McKesson Information Solutions, Inc. Since that report:

     By order dated June 12, 2002, the Honorable Ronald M. Whyte of the Northern District of California granted McKesson’s request for the entry of final judgment in McKesson HBOC, Inc. v. New York State Common Retirement Fund, Inc. et al., (N.D. Cal. No. C01-20021 RMW). McKesson has appealed the District Court’s dismissal of this action to the United States Court of Appeals for the Ninth Circuit and its opening brief on that appeal is currently due on August 15, 2002.

     On June 3, 2002, Judge Whyte consolidated the previously reported Chang v. McKesson HBOC, Inc. et al., (N.D. Cal. No. C-00-20030 RMW), with the previously reported Adams v. McKesson Information Solutions, Inc., (N.D. Cal. No. C-02-0685 RMW).

     On June 19, 2002, the Honorable Donald S. Mitchell of the California Superior Court in San Francisco issued orders denying McKesson’s motions to strike, sustaining in part and denying in part McKesson’s and HBOC’s demurrers, and granting plaintiffs leave to amend all causes of action in the previously reported actions The State of Oregon, By and Through the Oregon Public Employees Retirement Board v. McKesson HBOC, Inc. et al., (S.F. Supr. Ct. No. 307619), Minnesota State Board of Investment v. McKesson HBOC, Inc. et al., (S.F. Supr. Ct No. 311747), and Utah State Board of Investment v. McKesson HBOC, Inc. et al., (S.F. Supr. Ct. No. 311269). Plaintiffs filed an amended complaint on August 1, 2002.

     On May 8, 2002, an action was filed in Georgia State Court, Fulton County, under the caption James Gilbert v. McKesson Corp., et al., (Case No. 02VS032502C). The plaintiff asserts claims for common law fraud, fraudulent conveyance and conversion in connection with certain Company stock options held by the plaintiff at the time of the April 28, 1999 announcement. The Gilbert action names as defendants the Company, HBOC, Albert Bergonzi and Jay Gilbertson. The plaintiff seeks compensatory damages of approximately $2 million, as well as unspecified general, special and punitive damages, and costs of suit, including attorneys’ fees. The Company and HBOC filed their respective answers on June 24, 2002. The Company and HBOC also filed motions to Stay and to Dismiss.

     The previously reported Adler v. McKesson HBOC, Inc. et al., (No. 99-C-7980-3), which was pending in a Georgia state court and involved claims for common law fraud and fraudulent conveyance brought against

11

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

McKesson and HBOC by a former HBOC shareholder, has been settled and was dismissed with prejudice on July 17, 2002, and that resolution had no material impact on the Company.

     McKesson does not believe it is feasible to predict or determine the outcome or resolution of the accounting litigation proceedings, or to estimate the amounts of, or potential range of, loss with respect to those proceedings. In addition, the timing of the final resolution of these proceedings is uncertain. The range of possible resolutions of these proceedings could include judgments against the Company or settlements that could require substantial payments by the Company, which could have a material adverse impact on McKesson’s financial position, results of operations and cash flows.

13. Segment Information

     Our operating segments consist of Pharmaceutical Solutions, Medical-Surgical Solutions and Information Solutions. We evaluate the performance of our operating segments based on operating profit before interest expense and income taxes. Our Corporate segment includes expenses associated with Corporate functions and projects, and certain employee benefits. Corporate expenses are allocated to the operating segments to the extent that these items can be directly attributable to the segment.

     Financial information relating to our segments is as follows:

		Quarters Ended June 30,
(In millions)		2002			2001
Revenues
Pharmaceutical Solutions		$	12,690.7		$	10,735.0
Medical-Surgical Solutions			682.9			675.1
Information Solutions			254.4			246.2
	Total	$	13,628.0		$	11,656.3
Operating profit (loss)
Pharmaceutical Solutions		$	218.3		$	171.0
Medical-Surgical Solutions			18.2			25.9
Information Solutions			18.5			(11.1	)
	Total		255.0			185.8
Corporate			(41.2	)		(37.7	)
Interest expense			(30.9	)		(27.0	)
Income before income taxes and dividends on preferred securities of subsidiary trust		$	182.9		$	121.1
Special charges (credit) included in operating profit (loss)
Pharmaceutical Solutions		$	6.8		$	0.1
Medical-Surgical Solutions			1.2			(1.1	)
Information Solutions			—			21.7
Corporate			4.3			2.9
	Total	$	12.3		$	23.6

			June 30,		March 31,
(In millions)			2002		2002
Segment assets, at period end
Pharmaceutical Solutions			$	10,579.3	$	10,185.5
Medical-Surgical Solutions				1,469.4		1,485.6
Information Solutions				690.1		674.8
		Total		12,738.8		12,345.9
Corporate
	Cash and equivalents, and marketable securities			301.4		563.0
	Other			425.6		415.1
		Total	$	13,465.8	$	13,324.0

12

McKESSON CORPORATION

FINANCIAL REVIEW
(Unaudited)

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

Financial Overview

		Quarters Ended June 30,
(In millions, except per share data)		2002		2001		Change
Revenues
	Excluding Sales to Customers’ Warehouses	$	10,130.9	$	8,549.8		18	%
	Sales to Customers’ Warehouses		3,497.1		3,106.5		13
Total Revenues		$	13,628.0	$	11,656.3		17
As Reported — U.S. GAAP Operating Profit(1)		$	255.0	$	185.8		37
	Net Income		117.3		105.4		11
	Diluted Earnings Per Share		0.39		0.36		8
Pro Forma(2)
	Operating Profit		263.0		206.5		27
	Net Income		125.3		90.3		39
	Diluted Earnings Per Share		0.42		0.31		35

(1)	Operating profit is defined as earnings before interest expense and income taxes for our three business segments, and before Corporate expenses.
(2)	Pro forma financial results exclude the impact of special charges (credit).

     As reported under U.S. generally accepted accounting principles (“U.S. GAAP”), net income increased 11% to $117.3 million in the first quarter of 2003 compared to the same period a year ago, and diluted earnings per share increased $0.03 to $0.39. Revenues increased 17% to $13.6 billion for the first quarter of 2003 as compared to the first quarter of 2002. U.S. GAAP financial results include pre-tax special charges of $12.3 million and $23.6 million for the quarters ended June 30, 2002 and 2001. After income taxes, these charges amounted to a loss of $8.0 million or $0.03 per diluted share, and a credit of $15.1 million or $0.05 per diluted share for the first quarter of 2003 and 2002.

     We provide pro forma financial data, which excludes special charges and credits, as an alternative for understanding our results. We believe such discussion is the most informative representation of recurring and non-recurring, non-transactional-related operating results. These measures are not in accordance with, or an alternative for, U.S. GAAP and may be different from pro forma measures used by other companies.

     Pro forma net income and net income per diluted share increased 39% and 35% to $125.3 million and $0.42 in the first quarter of 2003, compared to the same period a year ago. The increase was driven by revenue growth and operating margin expansion in our Pharmaceutical Solutions segment, as well as an increase in the operating profit of our Information Solutions segment.

     The following discussion regarding our financial results excludes special charges. Special charges are discussed in detail commencing on page 17, which includes a reconciliation of pro forma financial results to those reported under U.S. GAAP.

13

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FINANCIAL REVIEW (Continued)
(Unaudited)

Results of Operations

     Revenues:

				Quarters Ended June 30,
(In millions)				2002		2001		Change
Pharmaceutical Solutions
	Pharmaceutical Distribution & Services
		U.S. Healthcare		$	8,374.2	$	6,916.0		21	%
		U.S. Healthcare Sales to Customers’ Warehouses			3,497.1		3,106.5		13
			Total U.S. Healthcare		11,871.3		10,022.5		18
		International			819.4		712.5		15
			Total Pharmaceutical Solutions		12,690.7		10,735.0		18
Medical-Surgical Solutions					682.9		675.1		1
Information Solutions
	Software				45.1		45.4		(1	)
	Services				190.3		183.0		4
	Hardware				19.0		17.8		7
			Total Information Solutions		254.4		246.2		3
Total Revenues				$	13,628.0	$	11,656.3		17
Revenues, Excluding Sales to Customers’ Warehouses:
Pharmaceutical Solutions				$	9,193.6	$	7,628.5		21
Medical-Surgical Solutions					682.9		675.1		1
Information Solutions					254.4		246.2		3
	Total			$	10,130.9	$	8,549.8		18

     Revenues for the first quarter of 2003 grew by 17% to $13.6 million compared to the first quarter of 2002. The increase was due to our Pharmaceutical Solutions segment, which accounted for over 92% of consolidated revenues.

     Increases in U.S. healthcare revenues, excluding sales to customers’ warehouses, were due to market growth rates, as well as the impact of agreements that took effect in the first quarter a year ago for new pharmaceutical business that was previously shipped direct or outside the distribution channel. Market growth rates reflect growing drug utilization and price increases which are offset in part by the increased use of generics. Our retail chain customers, which account for 42% of U.S. pharmaceutical distribution revenues, also experienced increased revenue growth. In the second quarter of 2003, U.S. pharmaceutical distribution growth rate is expected to be near the projected U.S. market growth rate of the low-teens as new business added late in the first quarter a year ago is anniversaried. The second quarter of 2003 will also include an additional selling day.

     U.S. healthcare sales to customers’ warehouses during the quarter ended June 30, 2002 increased over the comparable prior year period, mainly as a result of growth from existing customers. Sales to customers’ warehouses represent large volume sales of pharmaceuticals to major self-warehousing drugstore chains whereby we act as an intermediary in the order and subsequent delivery of products directly from the manufacturer to the customers’ warehouses. These sales provide a benefit to our customers in that they can use one source for both their direct store-to-store business and their warehouse business.

     International pharmaceutical revenues, which are derived from our Canadian operations, increased reflecting the growth in the utilization of drug therapy, greater sales to our existing customers and the benefit from one additional selling day this quarter as compared to last year.

     Medical-Surgical Solutions segment revenues increased marginally as growth in sales to the primary and extended care customer bases was almost fully offset by a decline in revenues for acute care products. The segment’s decline in its acute care business reflects the competitive environment in which it operates and the continued self-warehousing strategy by a major customer.

14

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

     Information Solutions segment revenues increased 3%, or 6% excluding revenues from a business that was sold in July 2001. Most of the revenues from this business were in the services line. Software revenues were flat while service revenues increased as a result of additional maintenance agreements.

     As of June 30, 2002, backlog for our Information Solutions segment, which includes firm contracts for maintenance fees, implementation and software contracts, and outsourcing agreements, was $2.04 billion compared to $2.06 billion at March 31, 2002 and $1.51 billion a year ago. The increase in backlog from June 30, 2001 was primarily due to a ten-year, $480 million outsourcing contract to provide a standardized, fully automated human resources and payroll system for the National Health Service of England and Wales, which was entered into during the third quarter of 2002.

     Gross Profit:

			Quarters Ended June 30,
(In millions)			2002			2001			Change
Pro forma Gross Profit
	Pharmaceutical Solutions		$	495.4		$	410.3			21	%
	Medical-Surgical Solutions			131.5			133.0			(1	)
	Information Solutions			125.6			117.4			7
		Total	$	752.5		$	660.7			14
Pro forma Gross Profit Margin(1)
	Pharmaceutical Solutions			5.39	%		5.38	%		1	bp
	Medical-Surgical Solutions			19.26			19.70			(44	)
	Information Solutions			49.37			47.68			169
		Total		7.43			7.73			(30	)

(1) Excludes sales to customers’ warehouses.

     As a percentage of revenues, excluding sales to customers’ warehouses, pro forma gross profit margin decreased, primarily reflecting a higher proportion of revenues attributable to our U.S. pharmaceutical distribution business, which has lower margins both relative to the other product lines within the segment as well as to other segments, partially offset by an improvement in gross margins from our Information Solutions segment. Pharmaceutical Solutions segment gross margin increased one basis point (“bp”), reflecting the benefit of increased sales of generic drugs with higher margins and product sourcing profits on branded pharmaceuticals partially offset by a decline in the selling margin to customers.

     We exclude sales to customers’ warehouses in analyzing our gross and operating profits and operating expenses as a percentage of revenues as these revenues from bulk shipments to warehouses have a significantly lower gross margin compared to traditional direct store delivery sales because of their low cost-to-serve model. These sales do, however, contribute positively to our cash flows due to favorable timing between the customer payment and the payment to the supplier.

15

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

     Operating Expenses, Other Income and Operating Profit:

			Quarters Ended June 30,
(In millions)			2002			2001			Change
Pro Forma Operating Expenses
	Pharmaceutical Solutions		$	280.6		$	249.9			12	%
	Medical-Surgical Solutions			112.3			108.6			3
	Information Solutions			107.5			107.3			—
	Corporate			38.6			33.2			16
		Total	$	539.0		$	499.0			8
Pro Forma Other Income
	Pharmaceutical Solutions		$	10.3		$	10.7			(4	)
	Medical-Surgical Solutions			0.2			0.4			(50	)
	Information Solutions			0.4			0.5			(20	)
	Corporate			1.7			(1.6	)		—
		Total	$	12.6		$	10.0			26
Pro Forma Operating Profit
	Pharmaceutical Solutions		$	225.1		$	171.1			32
	Medical-Surgical Solutions			19.4			24.8			(22	)
	Information Solutions			18.5			10.6			75
		Total		263.0			206.5			27
Corporate Expenses				(36.9	)		(34.8	)		6
Interest Expense				(30.9	)		(27.0	)		14
		Pro forma income before income taxes	$	195.2		$	144.7			35
Pro Forma Operating Expenses as a Percentage of Revenues(1)
	Pharmaceutical Solutions			3.05	%		3.28	%		(23	)bp
	Medical-Surgical Solutions			16.44			16.09			35
	Information Solutions			42.26			43.58			(132	)
Pro Forma Operating Profit Margin(1)
	Pharmaceutical Solutions			2.45	%		2.24	%		21
	Medical-Surgical Solutions			2.84			3.67			(83	)
	Information Solutions			7.27			4.31			296
		Total		2.60			2.42			18

(1) Excludes sales to customers’ warehouses.

     Operating profit is computed as gross profit, less operating expenses, plus other income for our three business segments. Pro forma operating profit increased 27% to $263.0 million driven by continued strong revenue growth and operating margin expansion in our Pharmaceutical Solutions segment.

     Excluding sales to customers’ warehouses, Pharmaceutical Solutions segment pro forma operating profit as a percentage of revenues increased reflecting better gross margins, expense leverage and productivity enhancements in our U.S. pharmaceutical distribution business. Improvements in our Canadian and Mexican pharmaceutical distribution and Health Solutions products and services also contributed to higher operating profit.

     Medical-Surgical Solutions segment’s decrease in pro forma operating profit as a percentage of revenues was primarily due to additional operating expenses associated with the segment’s restructuring activities (duplicate payroll, transportation and warehouse costs as the segment consolidates distribution centers), system upgrades and margin pressures. In connection with segment management changes, we are currently re-evaluating our plan to restructure our distribution center network announced in the second quarter of 2002. The revised plan, which may require adjustments to previously recorded restructuring charges, should be completed in the second quarter of 2003 and fully implemented by early next fiscal year.

16

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

     Information Solutions segment’s pro forma operating profit increased primarily reflecting improved customer support activity, better control of expenses and the elimination of almost $2 million in losses from a sold business.

     Pro forma Corporate expenses, net of other income, increased reflecting higher benefit and insurance costs partially offset by lower costs associated with the receivable sales program and the elimination of losses associated with our share of our investment in Health Nexis LLC. In the third quarter of 2002, Health Nexis LLC merged with another company which significantly diluted our percentage ownership in the combined organization. As a result, we changed from the equity to the cost method of accounting for this investment.

     Interest Expense: Interest expense for the quarter ended June 30, 2002 grew $3.9 million to $30.9 million primarily due to an increase in our average borrowings. Interest expense for the first quarter of 2003 reflects the issuance of $400.0 million 7.75% notes partially offset by the retirement of $175.0 million 6.875% notes, which occurred in the fourth quarter of 2002.

     In order to hedge a portion of our fixed interest rate debt with variable interest rates, in the first quarter of 2003, we entered into two interest rate swap agreements. The first agreement exchanges a fixed interest rate of 8.91% per annum to LIBOR plus 4.155%, on a notional amount of $100 million and matures in February 2005. The second agreement exchanges a fixed interest rate of 6.30% per annum to LIBOR plus 1.575%, on a notional amount of $150 million and matures in March 2005. These agreements are designated as fair value hedges and are intended to reduce our effective interest rate.

     Income Taxes: The effective income tax rate excluding special charges was 35.0% and 36.6%, for the quarters ended June 30, 2002 and 2001. The reduction in our effective tax rate was the result of certain tax planning initiatives.

     Weighted Average Diluted Shares Outstanding: Diluted earnings per share were calculated based on an average number of shares outstanding of 301.0 million and 295.5 million for the quarters ended June 30, 2002 and 2001.

     Special Charges (Credit):

     We incurred the following special charges (credit):

	Quarters Ended June 30,
(In millions)	2002			2001
Securities litigation costs incurred	$	0.1		$	0.6
Loss on investments, net		2.6			2.3
Loss on sales of businesses, net		—			18.4
Restructuring and related asset impairments		4.5			(0.9	)
Other, net		5.1			3.2
Total pre-tax special charges		12.3			23.6
Income tax benefit		(4.3	)		(38.7	)
Total after-tax special charges (credit)	$	8.0		$	(15.1	)
Diluted loss (credit) per share attributable to special charges	$	0.03		$	(0.05	)

     Securities Litigation Costs: During the quarters ended June 30, 2002 and 2001, we incurred expenses of $0.1 million and $0.6 million, net of estimated insurance recoveries, in connection with the securities litigation arising out of the 1999 restatement of our historical consolidated financial statements. The restatement was the result of improper accounting practices at HBO & Company, which we acquired in a January 1999 pooling of interests transaction.

     Loss on Investments, net: During the quarters ended June 30, 2002 and 2001, we recorded other-than-temporary impairment losses of $2.6 million and $2.3 million on equity and joint venture investments as a result of significant declines in the market values of these investments.

17

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

     Loss on Sales of Businesses, net: During the first quarter of 2002, we sold two businesses from our Information Solutions segment for a net pre-tax loss of $18.4 million.

     Restructuring Activities: We recorded net charges for restructuring of $3.5 million and related asset impairments of $1.0 million during the quarter ended June 30, 2002. Of these amounts, $2.5 million pertains to the announced closure of a Pharmaceutical Solutions segment distribution center and includes severance, exit costs and asset impairments. Approximately 65 employees were given termination notices as a result of this restructuring activity. Restructuring charges for the first quarter of 2003 also includes $2.0 million in additional facility closure costs, reflecting a change in estimated costs associated with a prior year’s restructuring activity within the Pharmaceutical Solutions segment.

     During the quarter ended June 30, 2001, we recorded a net reversal of prior years’ restructuring expenses of $0.9 million, primarily reflecting a change in estimated costs to complete those activities.

     In connection with 2003 and 2002 restructuring activities, approximately 985 employees, mainly in distribution, delivery and associated back-office functions, were given termination notices, and 30 distribution centers were to be closed and 8 were to be opened. As of June 30, 2002, 314 employees had been terminated, and 15 distribution centers were closed and 5 were opened. A large portion of these activities pertain to our Medical-Surgical segment; and as previously discussed, we are currently evaluating our plans to restructure this segment’s distribution center network. The revised plan should be completed in the second quarter of 2003 and fully implemented by early next fiscal year.

     In addition to the above restructuring activities, we are still managing a 2001/2000 restructuring plan associated with customer settlements for our discontinuance of overlapping and nonstrategic products and other product development projects within our Information Solutions segment. Customer settlement allowances, which are included as a reduction of accounts receivable in the accompanying condensed consolidated balance sheets, were reduced by $1.7  million and $0.1 million in cash and non-cash settlements during the first quarter of 2003 to $131.6 million at June 30, 2002 from $133.4 million at March 31, 2002. Total cash and non-cash settlements of $31.9 million and $71.7 million have been incurred since the inception of the restructuring plan. While the timing of the final resolution of these settlements is uncertain, we believe that additional allowances, if any, will not have a material adverse effect on our financial position, results of operations or cash flows.

     Refer to Financial Note 5, “Restructuring and Related Asset Impairments,” of the accompanying condensed consolidated financial statements for further discussions regarding our restructuring activities.

     Other Charges, net: For the quarter ended June 30, 2002, other charges of $5.1 million represent severance costs for workforce reductions in our Pharmaceutical Solutions, Medical-Surgical Solutions and Corporate segments. For the quarter ended June 30, 2001, other charges of $3.2 million pertain to the write-off of purchased software in our Information Solutions segment.

     Income Taxes on Special Charges: Income taxes on special charges are generally recorded at our annual effective tax rate. For accounting purposes, a tax benefit on the net assets of one of the businesses written down in connection with the restructuring of a former business segment in 2001 was not recognized until the first quarter of 2002, when the sale of the business was completed.

18

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

     Additional information regarding our special charges (credit) is as follows:

		Quarters Ended June 30,
(In millions)		2002		2001
By Business Segment
Pharmaceutical Solutions		$	6.8	$	0.1
Medical-Surgical Solutions			1.2		(1.1	)
Information Solutions			—		21.7
	Sub-total		8.0		20.7
Corporate			4.3		2.9
	Total	$	12.3	$	23.6
By Statement of Operations Classification
Operating expenses		$	9.7	$	2.9
Loss on sales of businesses, net			—		18.4
Other income, net			2.6		2.3
Total pre-tax special charges		$	12.3	$	23.6

     A reconciliation of pro forma operating profit to net income as reported under U.S. GAAP is as follows:

			Quarters Ended June 30,
(In millions)			2002			2001
Total pro forma operating profit			$	263.0		$	206.5
Special charges				(8.0	)		(20.7	)
Operating profit — U.S. GAAP				255.0			185.8
Corporate
	Excluding special charges			(36.9	)		(34.8	)
	Special charges			(4.3	)		(2.9	)
		Total Corporate expenses		(41.2	)		(37.7	)
Interest expense				(30.9	)		(27.0	)
Income before income taxes and dividends on preferred securities of subsidiary trust				182.9			121.1
Income taxes
	Before special charges			(68.4	)		(52.9	)
	Benefit on special charges			4.3			38.7
		Total income taxes		(64.1	)		(14.2	)
Dividends on preferred securities of subsidiary trust, net of tax benefit				(1.5	)		(1.5	)
Net income — U.S. GAAP			$	117.3		$	105.4

Acquisitions, Investments and Divestitures

     On May 16, 2002, the Company and Quintiles Transnational Corporation formed a joint venture, Verispan, L.L.C. (“Verispan”). Verispan is a provider of patient-level data delivered in near real time as well as a supplier of other healthcare information. We have an approximate 46% equity interest in the joint venture. The initial contribution to the joint venture of $12.1 million consisted of $7.7 million in net assets from a Pharmaceutical Solutions’ business and $4.4 million in cash, and is subject to adjustment. We have also committed to provide additional aggregate cash contributions of $9.4 million and to purchase a total of $15.0 million in services from the joint venture through 2007.

     On July 5, 2002, we completed our purchase of 98.1% of the outstanding stock of A.L.I. Technologies Inc. (“A.L.I.”), of Vancouver, British Columbia, Canada, by means of a cash tender offer. The purchase price of approximately $350 million (representing the cash tender offer less cash and equivalents purchased) was initially financed through excess cash and short-term debt. We are presently reviewing the valuation of the net assets acquired and we expect a substantial portion of the purchase price to be allocated to goodwill. In addition, we are currently in the process of acquiring the remaining 1.9% of outstanding shares of A.L.I. A.L.I. provides medical

19

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

imaging solutions, which are designed to streamline access to diagnostic information, automate clinical workflow and eliminate the need for film.

Financial Condition, Liquidity, and Capital Resources

     Net cash flow used by operating activities was $203.0 million and $394.4 million during the quarters ended June 30, 2002 and 2001. The decrease in net cash flow used in operating activities is primarily due to improved inventory management and a decrease in investment inventory, partially offset by a decrease in drafts and accounts payable. Last year’s first quarter cash flows from operations reflect the sale of $375.0 million of trade accounts receivable, which reduced accounts receivable and increased cash balances. There was no such sale of accounts receivable at the end of the first quarter of 2003.

     Net cash used by investing activities was $84.3 million and $58.4 million during the quarters ended June 30, 2002 and 2001. Investing activities for the first quarter of 2003 include an increase in capital expenditures and other investments. Net cash provided by financing activities was $19.2 million and $249.4 million for the first quarters of 2003 and 2002. First quarter 2002 financing activities reflect short-term borrowings of $245.0 million to support working capital requirements.

Selected Measures of Liquidity and Capital Resources

	June 30,			March 31,
(In millions)	2002			2002
Cash and equivalents and marketable securities	$	301.4		$	563.0
Operating working capital		3,650.8			3,288.2
Debt, net of cash and equivalents and marketable securities		1,126.7			866.6
Debt to capital ratio		25.0	%		25.7	%
Ratio of net debt to net capital employed		20.8	%		17.3	%
Return on committed capital		22.2	%		21.8	%

     Our Pharmaceutical Solutions segment requires a substantial investment in operating working capital (receivables and inventories net of related payables). Operating working capital is susceptible to large variations during the year as a result of inventory purchase patterns and seasonal demands. Inventory purchase activity is a function of sales activity, new customer build-up requirements and the desired level of investment inventory. Consolidated operating working capital at June 30, 2002 was greater than that of March 31, 2002, as a result of our higher sales volume. No trade receivables were sold at June 30, 2002 or March 31, 2002.

     The ratio of net debt to net capital employed at June 30, 2002 increased from March 31, 2002, reflecting the increase in net debt to fund internal growth. Return on committed capital improved to 22.2% on June 30, 2002 from 21.8% at March 31, 2002, as growth in our operating profit exceeded the growth in working capital needed to fund the increase in revenues.

     On July 31, 2002, our stockholders approved an amendment to the Company’s Restated Certificate of Incorporation to increase authorized common stock from 400.0 million to 800.0 million shares. Increases in the authorized common stock provide us with greater flexibility for stock splits, stock dividends, issuances under employee benefit and incentive plans, financings, corporate mergers and acquisitions, and other general corporate matters.

Credit Resources

     Working capital requirements are primarily funded by cash, short-term borrowings and our receivables sale facility. We have a 364-day revolving credit agreement that allows for short-term borrowings of up to $1.075 billion which expires in October 2002, and a $400.0 million five-year revolving credit facility which expires in October 2003. These facilities are primarily intended to support our commercial paper borrowings. We also have a

20

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

committed revolving receivables sale facility aggregating $850 million, which we renewed on June 14, 2002 under substantially similar terms to those previously in place. At June 30, 2002 and March 31, 2002, we had no short-term borrowings, no borrowings under the revolving credit facilities, and no borrowing equivalents under the revolving receivables sale facility. We anticipate renewing our 364-day revolving credit facility prior to its expiration.

     Our various borrowing facilities and long-term debt are subject to certain covenants. Our principal debt covenant is our debt to capital ratio, which cannot exceed 56.5%. If we exceed this ratio, repayment of debt outstanding under the revolving credit facility and $335.0 million of term debt could be accelerated. At June 30, 2002, this ratio was 25.0% and we were in compliance with our other financial covenants. A reduction in our credit ratings or the lack of compliance with our covenants could result in a negative impact on our ability to finance our operations through our credit facilities, as well as the issuance of additional debt at the interest rates then currently available.

     We have $125.0 million of term debt that matures in November 2002. Funds necessary for future debt maturities and our other cash requirements are expected to be met by existing cash balances, cash flows from operations, existing credit sources and other capital market transactions.

New Accounting Pronouncements

     See Financial Note 2, “New Accounting Pronouncements,” on page 6 of the accompanying condensed consolidated financial statements.

FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

     In addition to historical information, management’s discussion and analysis includes certain forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Some of the forward-looking statements can be identified by use of forward-looking words such as “believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” “approximates,” “intends,” “plans,” or “estimates,” or the negative of these words, or other comparable terminology. The discussion of financial trends, strategy, plans or intentions may also include forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. Factors that could cause actual results to differ materially include, but are not limited to, the following:

• the resolution or outcome of pending shareholder litigation regarding the 1999 restatement of our historical financial statements;

• the changing U.S. healthcare environment, including potential mandated benefits, changes in private and governmental reimbursement or in the delivery systems for healthcare products and services;

• the ability to successfully market both new and existing products domestically and internationally;

• changes in management personnel;

• changes in manufacturers’ pricing, sales or distribution policies;

• substantial defaults in payment or a material reduction in purchases by large customers;

• challenges in integrating our software products, or the slowing or deferral of demand for these products;

• the malfunction or failure of our segments’ information systems for any extended period of time;

• our ability to successfully identify, consummate and integrate acquired businesses; and

• changes in generally accepted accounting principles.

     These and other risks and uncertainties are described herein or in our Forms 10-K, 10-Q, 8-K and other public documents filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after this date or to reflect the occurrence of unanticipated events.

21

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     We believe there has been no material change in our exposure to risks associated with fluctuations in interest and foreign currency exchange rates discussed in our 2002 Annual Report on Form 10-K.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     See Financial Note 12 of our unaudited condensed consolidated financial statements contained in Part I of this Quarterly Report on Form 10-Q.

Item 4. Submission of Matters to a Vote of Security Holders

     The Company’s Annual Meeting of Stockholders was held on July 31, 2002. The following matters were voted upon at the meeting and the stockholder votes on each such matter are briefly described below:

The Board of Directors’ nominees for directors as listed in the proxy statement were each elected to serve for a three-year term. The vote was as follows:

	Votes For		Votes Withheld
Marie L. Knowles		254,640,413		5,199,243
Richard F. Syron		254,582,100		5,257,556
Jane E. Shaw		251,613,573		8,226,083

The proposal to approve the Amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 400 million to 800 million received the following vote:

Votes For	Votes Against		Votes Abstained
227,992,623		30,323,755		1,523,278

The proposal to amend the Employee Stock Purchase Plan to increase the number of shares available under the plan received the following vote:

Votes For	Votes Against		Votes Abstained
226,063,641		32,041,467		1,734,548

The proposal to amend the Amended and Restated Long Term Incentive Plan received the following vote:

Votes For	Votes Against		Votes Abstained
242,338,523		15,136,828		2,364,305

The proposal to ratify the appointment of Deloitte & Touche LLP as our independent auditors for the year ending March 31, 2003 received the following vote:

Votes For	Votes Against		Votes Abstained
247,457,651		10,439,131		1,942,874

22

McKESSON CORPORATION

Item 5. Market for the Registrant’s Common Stock and Related Shareholder Matters

     The Company has become aware of an error in the table captioned “Equity Compensation Plan Information” on page 31 of the proxy statement relating to the Company’s 2002 Annual Meeting of Stockholders held on July 31, 2002. The weighted-average exercise price of outstanding options, warrants and rights under equity compensation plans approved by security holders was $47.96 as of March 31, 2002 (not $13.82 as set forth in such table), and the weighted-average exercise price of outstanding options, warrants and rights under equity compensation plans not approved by security holders was $34.38 as of March 31, 2002 (not $13.73 as set forth in such table). The Company believes that this error was not material. The correct weighted-average exercise prices were included in a footnote to the Company’s financial statements which appears in Note 17, “Stockholders’ Equity”, of the Company’s Form 10-K filed on June 12, 2002.

     The equity compensation plans referred to in such table as being approved by security holders include the 1973 Stock Purchase Plan, the 1994 Stock Option and Restricted Stock Plan, the 1997 Non-Employee Directors’ Equity Compensation and Deferral Plan and the Employee Stock Purchase Plan (“ESPP”) (not including the additional 5.0 million shares approved by stockholders at the 2002 Annual Meeting of Shareholders for inclusion in the ESPP). The equity compensation plans referred to in such table as not being approved by security holders are the broad-based 1999 Stock Option and Restricted Stock Plan (not including the additional 12.5 million shares approved by the Board of Directors on July 31, 2002), the 1998 Canadian Stock Incentive Plan, the 1999 Executive Stock Purchase Plan, a small assumed sharesave scheme (similar to the ESPP) in the United Kingdom with fewer than 25,000 shares remaining and two other stock option plans.

Item 6. Exhibits and Reports on Form 8-K

(a)	Exhibits
	The exhibits identified below are incorporated by reference herein as an exhibit to this report:
	Exhibit 3.1 Certificate of Amendment of Restated Certificate of Incorporation of the Company as filed with the Delaware Secretary of State on August 1, 2002
	Exhibit 3.2 Restated Certificate of Incorporation of the Company as filed with the Delaware Secretary of State on November 9, 2001.
	Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b)	Reports on Form 8-K
	There were no reports on Form 8-K filed during the three months ended June 30, 2002.
	The following report on Form 8-K was filed after June 30, 2002:
	Form 8-K dated and filed July 10, 2002 relating to the completion of our tender offer to acquire A.L.I. Technologies on July 5, 2002.

23

McKESSON CORPORATION

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	McKesson Corporation
Dated: August 9, 2002	By	/s/ William R. Graber
		William R. Graber Senior Vice President and Chief Financial Officer
	By	/s/ Nigel A. Rees
		Nigel A. Rees Vice President and Controller

24 EX-3.1 3 f83291exv3w1.txt EXHIBIT 3.1 Exhibit 3.1 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF McKESSON CORPORATION - -------------------------------------------------------------------------------- Pursuant to Sections 222 and 242 of the General Corporation Law of the State of Delaware - -------------------------------------------------------------------------------- McKesson Corporation (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: At a meeting of the Board of Directors of the Corporation duly called and held on May 29, 2002, resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation of the Corporation, declaring such amendment to be advisable and directing that such amendment be submitted to the stockholders of the Corporation for approval at its Annual Meeting of Stockholders to be held on July 31, 2002. Such resolutions recommended that the first paragraph of Article IV of the Restated Certificate of Incorporation of the Corporation be amended and restated in its entirety as follows: "The total number of shares of stock of all classes which the Corporation has authority to issue is 900,000,000 shares, divided into 100,000,000 shares of Preferred Stock, par value $0.01 per share (herein called the "Series Preferred Stock") and 800,000,000 shares of Common Stock, par value $0.01 per share (herein called "Common Stock"). The aggregate par value of all shares is $9,000,000." SECOND: At the Annual Meeting of Stockholders of the Corporation duly called and held on July 31, 2002, the affirmative vote of a majority of the votes permitted to be cast by the holders of the outstanding shares of the Corporation's common stock, par value $0.01 per share, was obtained in favor of such amendment with respect to Article IV. 1 THIRD: That the foregoing amendment was duly adopted in accordance with the provisions of Sections 222 and 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, McKesson Corporation has caused this Certificate to be executed in its corporate name this 31st day of July, 2002. McKESSON CORPORATION By: /s/ Ivan D. Meyerson -------------------------------- Name: Ivan D. Meyerson Title: Senior Vice President, General Counsel and Corporate Secretary 2 EX-3.2 4 f83291exv3w2.txt EXHIBIT 3.2 EXHIBIT 3.2 RESTATED CERTIFICATE OF INCORPORATION OF MCKESSON CORPORATION (DULY ADOPTED IN ACCORDANCE WITH SECTION 245 OF THE DELAWARE GENERAL CORPORATION LAW) ORIGINALLY INCORPORATED ON JULY 7, 1994 UNDER THE NAME SP VENTURES, INC. (RESTATES AND INTEGRATES ONLY) ARTICLE I. The name of the Corporation is McKesson Corporation. ARTICLE II. The address of the registered office of the Corporation within the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington 19808, County of New Castle. The name of the registered agent of the Corporation at such address is The Prentice-Hall Corporation System, Inc. ARTICLE III. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE IV. The total number of shares of stock of all classes which the Corporation has authority to issue is 900,000,000 shares, divided into 100,000,000 shares of Preferred Stock, par value $0.01 per share (herein called the `Series Preferred Stock') and 800,000,000 shares of Common Stock, par value $0.01 per share (herein called `Common Stock'). The aggregate par value of all shares is $9,000,000. 1 The Board of Directors of the Corporation is expressly authorized, as shall be stated and expressed in the resolution or resolutions it adopts, subject to limitations prescribed by law and the provisions of this Article IV, to provide for the issuance of the shares of Series Preferred Stock in one or more class or series, in addition to the shares thereof specifically provided for in this Article IV, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such distinctive designations, powers, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, including without limitation, the authority to provide that any such class or series may be (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments; or (v) subject to the terms and amounts of any sinking fund provided for the purchase or redemption of the shares of such series; all as may be stated in such resolution or resolutions.The number of authorized shares of Series Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Series Preferred Stock, as the case may be, or of any series thereof, unless a vote of any such holders is required pursuant to the provisions of this Article IV or the certificate or certificates establishing any additional series of such stock. A description of each class of the Corporation's stock, with the powers, designations, preferences and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions thereof, is as follows: I. SERIES PREFERRED STOCK A. GENERAL PROVISIONS RELATING TO ALL SERIES 1. The Board of Directors shall have authority to classify and reclassify any unissued shares of the Series Preferred Stock from time to time by setting or changing in any one or more respects the powers, designations, preferences and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions of the Series Preferred Stock. Subject to the foregoing, the power of the Board of Directors to classify and reclassify any of the shares of Series Preferred Stock shall include, without limitation, subject to the provisions of this Certificate of Incorporation, authority to classify or reclassify any unissued shares of such stock into one or more series of Series Preferred Stock, and to divide and classify shares of any series into one or more series of Series Preferred Stock by determining, fixing or altering one or more of the following: (a) The distinctive designation of such series and the number of shares to constitute such series; provided that, unless otherwise prohibited by the terms of such or any other series, the number of shares of any series may be decreased by the Board of Directors in connection with any classification or reclassification of unissued shares and the number of shares of such series may be increased by the Board of Directors in connection with any such classification or reclassification, and any shares of any series which have been redeemed, purchased, otherwise acquired or converted into shares of Common Stock or any other series shall remain part of the authorized Series Preferred Stock and be subject to classification and reclassification as provided in this Section. 2 (b) Whether or not and, if so, the rates, amounts and times at which, and the conditions under which, dividends shall be payable on shares of such series, whether any such dividends shall rank senior or junior to or on a parity with the dividends payable on any other series of Series Preferred Stock, and the status of any such dividends as cumulative, cumulative to a limited extent or non-cumulative and as participating or non-participating. (c) Whether or not shares of such series shall have voting rights, in addition to any voting rights provided by law and, if so, the terms of such voting rights. (d) Whether or not shares of such series shall have conversion or exchange privileges and, if so, the terms and conditions thereof, including provision for adjustment of the conversion or exchange rate in such events or at such times as the Board of Directors shall determine. (e) Whether or not shares of such series shall be subject to redemption and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; and whether or not there shall be any sinking fund or purchase account in respect thereof, and if so, the terms thereof. (f) The rights of the holders of shares of such series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, which rights may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and whether such rights shall rank senior or junior to or on a parity with such rights of any other series of Series Preferred Stock. (g) Whether or not there shall be any limitations applicable, while shares of such series are outstanding, upon the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for purchase or redemption of, any stock of the Corporation, or upon any other action of the Corporation, including action under this Section, and, if so, the terms and conditions thereof. (h) Any other powers, designations, preferences and relative, participating, optional and other rights, if any, and any other qualifications, limitations and restrictions, on the shares of such series, not inconsistent with law and this Certificate of Incorporation. 2. For the purposes hereof and of any certificate providing for the classification or reclassification of any shares of Series Preferred Stock or of any other charter document of the Corporation (unless otherwise provided in any such certificate or document), any class or series of stock of the Corporation shall be deemed to rank: (a) Prior to a particular class or series of stock if the holders of such class or classes or series shall be entitled to the receipt of dividends or of amounts distributable in the event of any liquidation, dissolution or winding up, as the case may be, in preference to or with priority over the holders of such particular class or series of stock; (b) On a parity with a particular class or series of stock, whether or not the dividend rates, dividend payment dates, voting rights or redemption or liquidation prices per share thereof, be different from those of such particular class or series of stock, if the rights of holders of such class or classes or series to the receipt of dividends or of amounts distributable in event of any liquidation, dissolution or winding up, as the case may be, shall be neither (i) in preference to, or with priority over, nor (ii) subject or subordinate to, the rights of holders of such particular class or series of stock in respect of the receipt of dividends or of amounts distributable in the event of any liquidation, dissolution or winding up of the Corporation, as the case may be; and 3 (c) Junior to a particular class or series of stock if the rights of the holders of such class or classes or series shall be subject or subordinate to the rights of the holders of such particular class or series of stock in respect of the receipt of dividends or of amounts distributable in the event of any liquidation, dissolution or winding up, as the case may be. B. SERIES A JUNIOR PARTICIPATING PREFERRED STOCK 1. DESIGNATION AND AMOUNT. The shares of this series shall be designated as "Series A Junior Participating Preferred Stock" and the number of shares constituting such series shall initially be 10,000,000, par value $0.01 per share, such number of shares to be subject to increase or decrease by action of the Board of Directors as evidenced by a certificate or certificates evidencing such change. 2. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first business day of January, April, July and October in each year (each such date being referred to herein as a "Series A Quarterly Dividend Payment Date"), commencing on the first Series A Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $10.00 or (ii) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Series A Quarterly Dividend Payment Date, or, with respect to the first Series A Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Corporation shall at any time after November 1, 1994 (the "Rights Declaration Date') (A) declare any dividend on Common Stock payable in shares of Common Stock, (B) subdivide the outstanding Common Stock, or (C) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (a) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Series A Quarterly Dividend Payment Date and the next subsequent Series A Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Series A Quarterly Dividend Payment Date. (c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Series A Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Series A Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Series A Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Series A Quarterly Dividend Payment Date, in either of 4 which events such dividends shall begin to accrue and be cumulative from such Series A Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. 3. VOTING RIGHTS. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights: (a) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (c)(i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period') which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Series Preferred Stock, (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors. (ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(c) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Series Preferred Stock, if any, to increase, in certain cases, the authorized number of Directors shall be exercised unless the holders of ten percent (10%) in number of shares of Series Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Series Preferred Stock of such voting right. At any meeting at which the holders of Series Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Series Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the 5 holders of the Series Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Series Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock. (iii) Unless the holders of Series Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Series Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Series Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Series Preferred Stock are entitled to vote pursuant to this paragraph (c)(iii) shall be given to each holder of record of Series Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Series Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (c)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders. (iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Series Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (A) the Directors so elected by the holders of Series Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (B) any vacancy in the Board of Directors may (except as provided in paragraph (c)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this paragraph (c) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (B) of the preceding sentence. (v) Immediately upon the expiration of a default period, (A) the right of the holders of Series Preferred Stock as a class to elect Directors shall cease, (B) the term of any Directors elected by the holders of Series Preferred Stock as a class shall terminate, and (C) the number of Directors shall be such number as may be provided for in this Certificate of Incorporation or the By-laws of the Corporation irrespective of any increase made pursuant to the provisions of paragraph (c)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in this Certificate of Incorporation or the By-laws of the Corporation). Any vacancies in the Board of Directors effected by the provisions of clauses (B) and (C) in the preceding sentence may be filled by a majority of the remaining Directors. (d) Except as set forth herein or as otherwise required by applicable law, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 6 4. CERTAIN RESTRICTIONS. (a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; (iv) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. 5. REACQUIRED SHARES. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Series Preferred Stock and may be reissued as part of a new series of Series Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (a) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full 7 amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (b) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (c) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (a) declare any dividend on Common Stock payable in shares of Common Stock, (b) subdivide the outstanding Common Stock, or (c) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 8. NO REDEMPTION. The shares of Series A Junior Participating Preferred Stock shall not be redeemable. 9. RANKING. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Corporation's Series Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. 8 10. AMENDMENT. This Certificate of Incorporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class. 11. FRACTIONAL SHARES. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. II. COMMON STOCK A. DIVIDENDS. SUBJECT TO ALL OF THE RIGHTS OF THE SERIES PREFERRED STOCK, DIVIDENDS may be paid upon the Common Stock as and when declared by the Board of Directors out of funds legally available for the payment of dividends. B. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, and after the holders of the Series Preferred Stock shall have been paid in full amounts to which they respectively shall be entitled, or an amount sufficient to pay the aggregate amount to which such holders shall be entitled shall have been deposited in trust with a bank or trust company having its principal office in the Borough of Manhattan, City, County and State of New York, having a capital, undivided profits and surplus aggregating at least $5,000,000, for the benefit of the holders of the Series Preferred Stock, the remaining net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock. C. VOTING RIGHTS. Except as otherwise expressly provided with respect to the Series Preferred Stock and except as otherwise may be required by law, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes and each holder of Common Stock shall be entitled to one vote for each share held. ARTICLE V. A. BOARD OF DIRECTORS OF THE CORPORATION. 1. GENERAL PROVISIONS. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. The exact number of directors shall be fixed from time to time by, or in the manner provided in, the By-Laws of the Corporation and may be increased or decreased as therein provided. Directors of the Corporation need not be elected by ballot unless required by the By-Laws. 2. CLASSIFICATION OF BOARD OF DIRECTORS. The directors shall be divided into three classes. Each such class shall consist, as nearly as may be possible, of one-third of the total number of directors, and any remaining directors shall be included within such group or groups as the Board of Directors shall designate. At the annual meeting of stockholders in 1994, a class of directors shall be elected for a one-year term, a class of directors for a two-year term and a class of directors for a three-year term. At each succeeding annual meeting of stockholders, beginning in 1995, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. A director may be removed from office for cause only and, subject to such removal, death, resignation, retirement or disqualification, shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and qualify. No alteration, amendment or repeal of this Article V or the By-Laws of the 9 Corporation shall be effective to shorten the term of any director holding office at the time of such alteration, amendment or repeal, to permit any such director to be removed without cause, or to increase the number of directors in any class or in the aggregate from that existing at the time of such alteration, amendment or repeal until the expiration of the terms of office of all directors then holding office, unless (i) in the case of this Article V, such alteration, amendment or repeal has been approved by the holders of all shares of stock entitled to vote thereon, or (ii) in the case of the By-Laws, such alteration, amendment or repeal has been approved by either the holders of all shares entitled to vote thereon or by a vote of a majority of the entire Board of Directors. 3. DIRECTORS APPOINTED BY A SPECIFIC CLASS OF STOCKHOLDERS. To the extent that any holders of any class or series of stock other than Common Stock issued by the Corporation shall have the separate right, voting as a class or series, to elect directors, the directors elected by such class or series shall be deemed to constitute an additional class of directors and shall have a term of office for one year or such other period as may be designated by the provisions of such class or series providing such separate voting right to the holders of such class or series of stock, and any such class of directors shall be in addition to the classes designated above. ARTICLE VI. A. GENERAL PROVISIONS. The following provisions are hereby adopted for the purpose of defining, limiting and regulating the powers of the Corporation and of its directors and stockholders: 1. AMENDMENTS TO THE CERTIFICATE OF INCORPORATION. Subject to the provisions of applicable law, the Corporation reserves the right from time to time to make any amendment to its Certificate of Incorporation, now or hereafter authorized by law, including any amendment which alters the contract rights as expressly set forth therein, of any outstanding stock. 2. AMENDMENTS TO THE BY-LAWS. The Board of Directors is expressly authorized to adopt, alter and repeal the By-Laws of the Corporation in whole or in part at any regular or special meeting of the Board of Directors, by vote of a majority of the entire Board of Directors. Except where this Certificate of Incorporation otherwise requires a higher vote, the By-Laws may also be adopted, altered or repealed in whole or in part at any annual or special meeting of the stockholders by the affirmative vote of three-fourths of the shares of the Corporation outstanding and entitled to vote thereon. 3. NO PREEMPTIVE RIGHTS. No holder of any class of stock of the Corporation, whether now or hereafter authorized or outstanding, shall have any preemptive, preferential or other right to subscribe for or purchase any class of the Corporation's stock, whether now or hereafter authorized or outstanding, which it may at any time issue or sell, or to subscribe for or purchase any notes, debentures, bonds or other securities which it may at any time issue or sell, whether or not the same be convertible into or exchangeable for or carry options or warrants to purchase shares of any class of the Corporation's stock or other securities, or to receive or purchase any warrants or options which may be issued or granted evidencing the right to purchase any such stock or other securities, it being intended by this Section 3 that all preemptive rights of any kind applicable to securities of the Corporation are eliminated. 4. VOTE REQUIRED TO TAKE ACTION; ACTION BY WRITTEN CONSENT. Except as otherwise provided in this Certificate of Incorporation and except as otherwise provided by applicable law, the Corporation may take or authorize any action upon the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter thereof. Action shall be taken by stockholders of the Corporation only at annual or special meetings of stockholders, and stockholders may act in lieu of a meeting only by unanimous written consent. 10 5. COMPENSATION OF DIRECTORS. The Board of Directors may determine from time to time the amount and type of compensation which shall be paid to its members for service on the Board of Directors. The Board of Directors shall also have the power, in its discretion, to provide for and to pay to directors rendering services to the Corporation not ordinarily rendered by directors, as such, special compensation appropriate to the value of such services, as determined by the Board from time to time. 6. INTERESTED TRANSACTIONS. Any director or officer individually, or any partnership of which any director or officer may be a member, or any corporation or association of which any director or officer may be an officer, director, trustee, employee or stockholder, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the Corporation, and in the absence of fraud no contract or other transaction shall be thereby affected or invalidated. Any director of the Corporation who is so interested, or who is also a director, officer, trustee, employee or stockholder of such other corporation or association or a member of such partnership which is so interested, may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize any such contract or transaction, and may vote thereat to authorize any such contract or transaction, with like force and effect as if he were not such director, officer, trustee, employee or stockholder of such other corporation or association or not so interested or a member of a partnership so interested; provided that in case a director, or a partnership, corporation or association of which a director is a member, officer, director, trustee or employee is so interested, such fact shall be disclosed or shall have been known to the Board of Directors or a majority thereof. This paragraph shall not be construed to invalidate any such contract or transaction which would otherwise be valid under the common and statutory law applicable thereto. 7. INDEMNIFICATION. The Corporation shall indemnify (a) its directors to the fullest extent permitted by the laws of the State of Delaware now or hereafter in force, including the advancement of expenses under the procedures provided by such laws, (b) all of its officers to the same extent as it shall indemnify its directors, and (c) its officers who are not directors to such further extent as shall be authorized by the Board of Directors and be consistent with law. Subject only to any limitations prescribed by the laws of the State of Delaware now or hereafter in force, the foregoing shall not limit the authority of the Corporation to indemnify the directors, officers and other employees and agents of this Corporation consistent with law and shall not be deemed to be exclusive of any rights to which those indemnified may be entitled as a matter of law or under any resolution, By-Law provision, or agreement. 8. COURT-ORDERED MEETINGS OF CREDITORS AND/OR STOCKHOLDERS. Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as such court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which such application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. 9. LIABILITY OF DIRECTORS. To the fullest extent permitted by Delaware statutory or decisional law, as amended or interpreted, no director of this Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. This Section 9 does not affect the availability of equitable remedies for breach of fiduciary duties. 11 ARTICLE VII. A. VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS 1. VOTING REQUIREMENTS. In addition to any vote otherwise required by law or this Certificate of Incorporation, a Business Combination (such term, and certain other capitalized terms referred to in this Article VII, as defined in Section 3 of this Article VII) shall be recommended by the Board of Directors and approved by the affirmative vote of at least: (a) 80 percent of the votes entitled to be cast by outstanding shares of voting stock of the Corporation, voting together as a single voting group; and (b) Two-thirds of the votes entitled to be cast by holders of voting stock other than voting stock held by an Interested Stockholder who is (or whose Affiliate is) a party to the Business Combination or an Affiliate or Associate of the Interested Stockholder, voting together as a single voting group. 2. WHEN VOTING REQUIREMENTS NOT APPLICABLE. (a) The vote required by Section 1 of this Article VII does not apply to a Business Combination if each of the following conditions is met: (i) The aggregate amount of the cash and the Market Value as of the Valuation Date of consideration other than cash to be received per share by holders of common stock in such Business Combination is at least equal to the highest of the following: (A) The highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of common stock of the same class or series acquired by it: (x) within the 2 year period immediately prior to the Announcement Date of the proposal of the Business Combination; or (y) in the transaction in which it became an Interested Stockholder, whichever is higher; or (B) The Market Value per share of common stock of the same class or series on the Announcement Date or on the Determination Date, whichever is higher; or (C) The price per share equal to the Market Value per share of common stock of the same class or series determined pursuant to subparagraph (i)(B) of this paragraph (a), multiplied by the fraction of: (x) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of common stock of the same class or series acquired by it within the 2 year period immediately prior to the Announcement Date, over (y) the Market Value per share of common stock of the same class or series on the first day in such 2 year period on which the Interested Stockholder acquired any shares of common stock. (ii) The aggregate amount of the cash and the Market Value as of the Valuation Date of consideration other than cash to be received per share by holders of shares of any class or series of outstanding stock other than Common Stock is at least equal to the highest of the following (whether or not the Interested Stockholder has previously acquired any shares of a particular class or series of stock): (A) The highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of such class of stock acquired by it: (x) within the 2 year period immediately prior to the Announcement Date of the proposal of the Business Combination; or (y) in the transaction in which it became an Interested Stockholder, whichever is higher; or 12 (B) The highest preferential amount per share to which the holders of shares of such class of stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; or (C) The Market Value per share of such class of stock on the Announcement Date or on the Determination Date, whichever is higher; or (D) The price per share equal to the Market Value per share of such class of stock determined pursuant to subparagraph (ii)(B) of this paragraph (a), multiplied by the fraction of: (x) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of any class of Voting Stock acquired by it within the 2 year period immediately prior to the Announcement Date, over (y) the Market Value per share of the same class of voting stock on the first day in such 2 year period on which the Interested Stockholder acquired any shares of the same class of Voting Stock. (iii) The consideration to be received by holders of any class or series of outstanding stock is to be in cash or in the same form as the Interested Stockholder has previously paid for shares of the same class or series of stock. If the Interested Stockholder has paid for shares of any class of stock with varying forms of consideration, the form of consideration for such class of stock shall be either cash or the form used to acquire the largest number of shares of such class or series of stock previously acquired by it. (iv) After the Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (A) There shall have been: (x) no reduction in the annual rate of dividends paid on any class or series of stock of the Corporation that is not preferred stock (except as necessary to reflect any subdivision of the stock); (y) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the stock; and (z) the Interested Stockholder did not become the beneficial owner of any additional shares of stock of the Corporation except as part of the transaction which resulted in such Interested Stockholder becoming an Interested Stockholder or by virtue of proportionate stock splits or stock dividends. (B) The provisions of subparagraphs (x) and (y) of subparagraph (iv)(A) do not apply if no Interested Stockholder or an Affiliate or Associate of the Interested Stockholder voted as a director of the Corporation in a manner inconsistent with such subsubparagraphs and the Interested Stockholder, within 10 days after any act or failure to act inconsistent with such sub-subparagraphs, notifies the Board of Directors of the Corporation in writing that the Interested Stockholder disapproves thereof and requests in good faith that the Board of Directors rectify such act or failure to act. (v) After the Interested Stockholder has become an Interested Stockholder, the Interested Stockholder may not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation or any of its Subsidiaries, whether in anticipation of or in connection with such Business Combination or otherwise. (b) The requirements of Section 1 of this Article VII do not apply to Business Combinations that, as to specifically identified Interested Stockholders or their Affiliates, have been approved or exempted therefrom by resolution of the Board of Directors of the Corporation at any time prior to the time that the Interested Stockholder first became an Interested Stockholder. If the Board of Directors so provides, the resolution shall be subject to approval of the stockholders in the manner and by the vote specified in the resolution. 13 3. DEFINITIONS. In this Article VII, the following words have the meanings indicated: (a) "Affiliate," including the term "affiliated person," means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified person (b) "Announcement Date" means the first general public announcement of the proposal or intention to make a proposal of the Business Combination or its first communication generally to stockholders of the Corporation, whichever is earlier; (c) "Associate," when used to indicate a relationship with any person, means: (i) Any corporation or organization (other than the Corporation or a Subsidiary of the Corporation) of which such person is an officer, director, or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of Equity Securities; (ii) Any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) Any relative or spouse of such person, or any relative of such spouse, who has the same home as such person or who is a director or officer of the Corporation or any of its Affiliates. (d) "Beneficial Owner," when used with respect to any Voting Stock, means a person: (i) That, individually or with any of its Affiliates or Associates, beneficially owns Voting Stock, directly or indirectly; or (ii) That, individually or with any of its Affiliates or Associates, has: (A) The right to acquire Voting Stock (whether such right is exercisable immediately or only after the passage of time), 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 Voting Stock pursuant to any agreement, arrangement, or understanding; or (iii) That has any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting or disposing of Voting Stock with any other person that beneficially owns, or whose Affiliates or Associates beneficially own, directly or indirectly, such shares of Voting Stock. (e) "Business Combination" means: (i) Unless the merger, consolidation, or share exchange does not alter the contract rights of the stock as expressly set forth in this Certificate of Incorporation or change or convert in whole or in part the outstanding shares of stock of the Corporation, any merger or consolidation of the Corporation or any Subsidiary with (A) any Interested Stockholder or (B) any other corporation (whether or not itself an Interested Stockholder) which is, or after the merger or consolidation, would be, an Affiliate of an Interested Stockholder that was an Interested Stockholder prior to the transaction. (ii) Any sale, lease, transfer or other disposition, other than in the ordinary course of business, in one transaction or a series of transactions in any 1 2-month period, to any Interested Stockholder or any Affiliate of any Interested Stockholder (other than the Corporation or any of its Subsidiaries) of any assets of the Corporation or any Subsidiary 14 having, measured at the time the transaction or transactions are approved by the Board of Directors of the Corporation, an aggregate book value as of the end of the Corporation's most recently ended fiscal quarter of 10 percent or more of the total Market Value of the outstanding stock of the Corporation or of its net worth as of the end of its most recently ended fiscal quarter; (iii) The issuance or transfer by the Corporation, or any Subsidiary, in one transaction or a series of transactions, of any Equity Securities of the Corporation or any Subsidiary which have an aggregate Market Value of 5 percent or more of the total Market Value of the outstanding stock of the Corporation to any Interested Stockholder or any Affiliate of any Interested Stockholder (other than the Corporation or any of its Subsidiaries) except pursuant to the exercise of warrants or rights to purchase securities offered pro rata to all holders of the Corporation's voting stock or any other method affording substantially proportionate treatment to the holders of Voting Stock; (iv) The adoption of any plan or proposal for the liquidation or dissolution of the Corporation in which anything other than cash will be received by an Interested Stockholder or any Affiliate of any Interested Stockholder; or (v) Any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation, of the Corporation with any of its Subsidiaries which has the effect, directly or indirectly, in one transaction or a series of transactions, of increasing by 5 percent or more of the total number of outstanding shares, the proportionate amount of the outstanding shares of any class of Equity Securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder. (f) "Common Stock" means any stock other than preferred or preference stock. (g) "Control," including the terms "controlling," "controlled by" and "under common control with," means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise, and the beneficial ownership of 10 percent or more of the votes entitled to be cast by a corporation's voting stock creates a presumption of control. (h) "Determination Date" means the date on which an Interested Stockholder first became an Interested Stockholder; (i) "Equity Security" means: (i) Any stock or similar security, certificate of interest, or participation in any profit sharing agreement, voting trust certificate, or certificate of deposit for an equity security; (ii) Any security convertible, with or without consideration, into an equity security, or any warrant or other security carrying any right to subscribe to or purchase an equity security; or (iii) Any put, call, straddle, or other option or privilege of buying an equity security from or selling an equity security to another without being bound to do so. 15 (j) "Interested Stockholder" means any person (other than the Corporation or any Subsidiary) that: (i)(A) Is the beneficial owner, directly or indirectly, of 10 percent or more of the voting power of the outstanding voting stock of the Corporation; or (B) Is an Affiliate of the Corporation and at any time within the 2 year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10 percent or more of the Voting Power of the then outstanding voting stock of the Corporation. (ii) For the purpose of determining whether a person is an Interested Stockholder, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned by the person through application of subsection (d) of this section but may not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (k) "Market Value" means: (i) In the case of stock, the highest closing sale price during the 30 day period immediately preceding the date in question of a share of such stock on the composite tape for New York Stock Exchange listed stocks, or, if such stock is not quoted on the composite tape, on the New York Stock Exchange, or if such stock is not listed on such exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30 day period preceding the date in question on the National Association of Securities Dealers, Inc. automated quotations system or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of Directors of the Corporation in good faith; and (ii) In the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board of Directors of the Corporation in good faith. (l) "Subsidiary" means any corporation of which voting stock having a majority of the votes entitled to be cast is owned, directly or indirectly, by the Corporation. (m) "Valuation Date" means: (i) For a Business Combination voted upon by stockholders, the later of the day prior to the date of the stockholders' vote or the day 20 days prior to the consummation of the Business Combination; and (ii) For a Business Combination not voted upon by stockholders, the date of the consummation of the Business Combination. (n) "Voting Stock means shares of capital stock of the Corporation entitled to vote generally in the election of directors. 16 IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of Incorporation to be executed and attested to by its duly authorized officers this 1st day of August, 2002. McKESSON CORPORATION By: /s/ Ivan D. Meyerson ---------------------------------- Ivan D. Meyerson Senior Vice President, General Counsel and Corporate Secretary Attest: /s/ Glenette E. Babb - -------------------------------- Glenette E. Babb Assistant Secretary 17 EX-99.1 5 f83291exv99w1.txt EXHIBIT 99.1 McKESSON CORPORATION EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of McKesson Corporation (the "Company") on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John H. Hammergren, Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company /s/ John H. Hammergren - ------------------------------- JOHN H. HAMMERGREN Chief Executive Officer August 9, 2002 This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended. EX-99.2 6 f83291exv99w2.txt EXHIBIT 99.2 McKESSON CORPORATION EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of McKesson Corporation (the "Company") on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William R. Graber, Chief Financial Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company /s/ William R. Graber - ------------------------------- WILLIAM R. GRABER Chief Financial Officer August 9, 2002 This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----

EX-3.1

                                                                     Exhibit 3.1


                            CERTIFICATE OF AMENDMENT
                                       OF
                                    RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                              McKESSON CORPORATION


- --------------------------------------------------------------------------------

                       Pursuant to Sections 222 and 242 of
                       the General Corporation Law of the
                                State of Delaware

- --------------------------------------------------------------------------------


        McKesson Corporation (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:

        FIRST: At a meeting of the Board of Directors of the Corporation duly
called and held on May 29, 2002, resolutions were duly adopted setting forth a
proposed amendment to the Restated Certificate of Incorporation of the
Corporation, declaring such amendment to be advisable and directing that such
amendment be submitted to the stockholders of the Corporation for approval at
its Annual Meeting of Stockholders to be held on July 31, 2002. Such resolutions
recommended that the first paragraph of Article IV of the Restated Certificate
of Incorporation of the Corporation be amended and restated in its entirety as
follows:

                     "The total number of shares of stock of all classes which
             the Corporation has authority to issue is 900,000,000 shares,
             divided into 100,000,000 shares of Preferred Stock, par value $0.01
             per share (herein called the "Series Preferred Stock") and
             800,000,000 shares of Common Stock, par value $0.01 per share
             (herein called "Common Stock"). The aggregate par value of all
             shares is $9,000,000."

        SECOND: At the Annual Meeting of Stockholders of the Corporation duly
called and held on July 31, 2002, the affirmative vote of a majority of the
votes permitted to be cast by the holders of the outstanding shares of the
Corporation's common stock, par value $0.01 per share, was obtained in favor of
such amendment with respect to Article IV.

                                        1


        THIRD: That the foregoing amendment was duly adopted in accordance with
the provisions of Sections 222 and 242 of the General Corporation Law of the
State of Delaware.

               IN WITNESS WHEREOF, McKesson Corporation has caused this
Certificate to be executed in its corporate name this 31st day of July, 2002.

                                        McKESSON CORPORATION

                                        By: /s/ Ivan D. Meyerson
                                           --------------------------------
                                        Name:  Ivan D. Meyerson
                                        Title: Senior Vice President, General
                                               Counsel and Corporate Secretary

                                       2

EX-3.2

                                                                     EXHIBIT 3.2

                                    RESTATED

                          CERTIFICATE OF INCORPORATION

                                       OF

                              MCKESSON CORPORATION

                 (DULY ADOPTED IN ACCORDANCE WITH SECTION 245 OF

                           THE DELAWARE GENERAL CORPORATION LAW)

                     ORIGINALLY INCORPORATED ON JULY 7, 1994
                        UNDER THE NAME SP VENTURES, INC.

                         (RESTATES AND INTEGRATES ONLY)

                                   ARTICLE I.

The name of the Corporation is McKesson Corporation.

                                   ARTICLE II.

The address of the registered office of the Corporation within the State of
Delaware is 2711 Centerville Road, Suite 400, Wilmington 19808, County of New
Castle. The name of the registered agent of the Corporation at such address is
The Prentice-Hall Corporation System, Inc.

                                  ARTICLE III.

The purpose of the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.

                                   ARTICLE IV.

The total number of shares of stock of all classes which the Corporation has
authority to issue is 900,000,000 shares, divided into 100,000,000 shares of
Preferred Stock, par value $0.01 per share (herein called the `Series Preferred
Stock') and 800,000,000 shares of Common Stock, par value $0.01 per share
(herein called `Common Stock'). The aggregate par value of all shares is
$9,000,000.


                                       1


The Board of Directors of the Corporation is expressly authorized, as shall be
stated and expressed in the resolution or resolutions it adopts, subject to
limitations prescribed by law and the provisions of this Article IV, to provide
for the issuance of the shares of Series Preferred Stock in one or more class or
series, in addition to the shares thereof specifically provided for in this
Article IV, and by filing a certificate pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix for each such class or series such
voting powers, full or limited, or no voting powers, and such distinctive
designations, powers, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof,
including without limitation, the authority to provide that any such class or
series may be (i) subject to redemption at such time or times and at such price
or prices; (ii) entitled to receive dividends (which may be cumulative or
non-cumulative) at such rates, on such conditions, and at such times, and
payable in preference to, or in relation to, the dividends payable on any other
class or classes or any other series; (iii) entitled to such rights upon the
dissolution of, or upon any distribution of the assets of, the Corporation; (iv)
convertible into, or exchangeable for, shares of any other class or classes of
stock, or of any other series of the same or any other class or classes of
stock, of the Corporation at such price or prices or at such rates of exchange
and with such adjustments; or (v) subject to the terms and amounts of any
sinking fund provided for the purchase or redemption of the shares of such
series; all as may be stated in such resolution or resolutions.The number of
authorized shares of Series Preferred Stock may be increased or decreased (but
not below the number of shares thereof then outstanding) by the affirmative vote
of the holders of a majority of the Common Stock, without a vote of the holders
of the Series Preferred Stock, as the case may be, or of any series thereof,
unless a vote of any such holders is required pursuant to the provisions of this
Article IV or the certificate or certificates establishing any additional series
of such stock.

A description of each class of the Corporation's stock, with the powers,
designations, preferences and relative, participating, optional and other
rights, if any, and the qualifications, limitations and restrictions thereof, is
as follows:

        I.     SERIES PREFERRED STOCK

A. GENERAL PROVISIONS RELATING TO ALL SERIES

1. The Board of Directors shall have authority to classify and reclassify any
unissued shares of the Series Preferred Stock from time to time by setting or
changing in any one or more respects the powers, designations, preferences and
relative, participating, optional and other rights, if any, and the
qualifications, limitations and restrictions of the Series Preferred Stock.
Subject to the foregoing, the power of the Board of Directors to classify and
reclassify any of the shares of Series Preferred Stock shall include, without
limitation, subject to the provisions of this Certificate of Incorporation,
authority to classify or reclassify any unissued shares of such stock into one
or more series of Series Preferred Stock, and to divide and classify shares of
any series into one or more series of Series Preferred Stock by determining,
fixing or altering one or more of the following:

    (a) The distinctive designation of such series and the number of shares to
    constitute such series; provided that, unless otherwise prohibited by the
    terms of such or any other series, the number of shares of any series may be
    decreased by the Board of Directors in connection with any classification or
    reclassification of unissued shares and the number of shares of such series
    may be increased by the Board of Directors in connection with any such
    classification or reclassification, and any shares of any series which have
    been redeemed, purchased, otherwise acquired or converted into shares of
    Common Stock or any other series shall remain part of the authorized Series
    Preferred Stock and be subject to classification and reclassification as
    provided in this Section.


                                       2


    (b) Whether or not and, if so, the rates, amounts and times at which, and
    the conditions under which, dividends shall be payable on shares of such
    series, whether any such dividends shall rank senior or junior to or on a
    parity with the dividends payable on any other series of Series Preferred
    Stock, and the status of any such dividends as cumulative, cumulative to a
    limited extent or non-cumulative and as participating or non-participating.

    (c) Whether or not shares of such series shall have voting rights, in
    addition to any voting rights provided by law and, if so, the terms of such
    voting rights.

    (d) Whether or not shares of such series shall have conversion or exchange
    privileges and, if so, the terms and conditions thereof, including provision
    for adjustment of the conversion or exchange rate in such events or at such
    times as the Board of Directors shall determine.

    (e) Whether or not shares of such series shall be subject to redemption and,
    if so, the terms and conditions of such redemption, including the date or
    dates upon or after which they shall be redeemable and the amount per share
    payable in case of redemption, which amount may vary under different
    conditions and at different redemption dates; and whether or not there shall
    be any sinking fund or purchase account in respect thereof, and if so, the
    terms thereof.

    (f) The rights of the holders of shares of such series upon the liquidation,
    dissolution or winding up of the affairs of, or upon any distribution of the
    assets of, the Corporation, which rights may vary depending upon whether
    such liquidation, dissolution or winding up is voluntary or involuntary and,
    if voluntary, may vary at different dates, and whether such rights shall
    rank senior or junior to or on a parity with such rights of any other series
    of Series Preferred Stock.

    (g) Whether or not there shall be any limitations applicable, while shares
    of such series are outstanding, upon the payment of dividends or making of
    distributions on, or the acquisition of, or the use of moneys for purchase
    or redemption of, any stock of the Corporation, or upon any other action of
    the Corporation, including action under this Section, and, if so, the terms
    and conditions thereof.

    (h) Any other powers, designations, preferences and relative, participating,
    optional and other rights, if any, and any other qualifications, limitations
    and restrictions, on the shares of such series, not inconsistent with law
    and this Certificate of Incorporation.

2. For the purposes hereof and of any certificate providing for the
classification or reclassification of any shares of Series Preferred Stock or of
any other charter document of the Corporation (unless otherwise provided in any
such certificate or document), any class or series of stock of the Corporation
shall be deemed to rank:

    (a) Prior to a particular class or series of stock if the holders of such
    class or classes or series shall be entitled to the receipt of dividends or
    of amounts distributable in the event of any liquidation, dissolution or
    winding up, as the case may be, in preference to or with priority over the
    holders of such particular class or series of stock;

    (b) On a parity with a particular class or series of stock, whether or not
    the dividend rates, dividend payment dates, voting rights or redemption or
    liquidation prices per share thereof, be different from those of such
    particular class or series of stock, if the rights of holders of such class
    or classes or series to the receipt of dividends or of amounts distributable
    in event of any liquidation, dissolution or winding up, as the case may be,
    shall be neither (i) in preference to, or with priority over, nor (ii)
    subject or subordinate to, the rights of holders of such particular class or
    series of stock in respect of the receipt of dividends or of amounts
    distributable in the event of any liquidation, dissolution or winding up of
    the Corporation, as the case may be; and


                                       3


    (c) Junior to a particular class or series of stock if the rights of the
    holders of such class or classes or series shall be subject or subordinate
    to the rights of the holders of such particular class or series of stock in
    respect of the receipt of dividends or of amounts distributable in the event
    of any liquidation, dissolution or winding up, as the case may be.

B. SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

1. DESIGNATION AND AMOUNT. The shares of this series shall be designated as
"Series A Junior Participating Preferred Stock" and the number of shares
constituting such series shall initially be 10,000,000, par value $0.01 per
share, such number of shares to be subject to increase or decrease by action of
the Board of Directors as evidenced by a certificate or certificates evidencing
such change.

2. DIVIDENDS AND DISTRIBUTIONS.

    (a) The holders of shares of Series A Junior Participating Preferred Stock
    shall be entitled to receive, when, as and if declared by the Board of
    Directors out of funds legally available for the purpose, quarterly
    dividends payable in cash on the first business day of January, April, July
    and October in each year (each such date being referred to herein as a
    "Series A Quarterly Dividend Payment Date"), commencing on the first Series
    A Quarterly Dividend Payment Date after the first issuance of a share or
    fraction of a share of Series A Junior Participating Preferred Stock, in an
    amount per share (rounded to the nearest cent) equal to the greater of (i)
    $10.00 or (ii) subject to the provision for adjustment hereinafter set
    forth, 100 times the aggregate per share amount of all cash dividends, and
    100 times the aggregate per share amount (payable in kind) of all non-cash
    dividends or other distributions other than a dividend payable in shares of
    Common Stock or a subdivision of the outstanding shares of Common Stock (by
    reclassification or otherwise), declared on the Common Stock since the
    immediately preceding Series A Quarterly Dividend Payment Date, or, with
    respect to the first Series A Quarterly Dividend Payment Date, since the
    first issuance of any share or fraction of a share of Series A Junior
    Participating Preferred Stock. In the event the Corporation shall at any
    time after November 1, 1994 (the "Rights Declaration Date') (A) declare any
    dividend on Common Stock payable in shares of Common Stock, (B) subdivide
    the outstanding Common Stock, or (C) combine the outstanding Common Stock
    into a smaller number of shares, then in each such case the amount to which
    holders of shares of Series A Junior Participating Preferred Stock were
    entitled immediately prior to such event under clause (ii) of the preceding
    sentence shall be adjusted by multiplying such amount by a fraction the
    numerator of which is the number of shares of Common Stock outstanding
    immediately after such event and the denominator of which is the number of
    shares of Common Stock that were outstanding immediately prior to such
    event.

    (b) The Corporation shall declare a dividend or distribution on the Series A
    Junior Participating Preferred Stock as provided in paragraph (a) above
    immediately after it declares a dividend or distribution on the Common Stock
    (other than a dividend payable in shares of Common Stock); provided that, in
    the event no dividend or distribution shall have been declared on the Common
    Stock during the period between any Series A Quarterly Dividend Payment Date
    and the next subsequent Series A Quarterly Dividend Payment Date, a dividend
    of $10.00 per share on the Series A Junior Participating Preferred Stock
    shall nevertheless be payable on such subsequent Series A Quarterly Dividend
    Payment Date.

    (c) Dividends shall begin to accrue and be cumulative on outstanding shares
    of Series A Junior Participating Preferred Stock from the Series A Quarterly
    Dividend Payment Date next preceding the date of issue of such shares of
    Series A Junior Participating Preferred Stock, unless the date of issue of
    such shares is prior to the record date for the first Series A Quarterly
    Dividend Payment Date, in which case dividends on such shares shall begin to
    accrue from the date of issue of such shares, or unless the date of issue is
    a Series A Quarterly Dividend Payment Date or is a date after the record
    date for the determination of holders of shares of Series A Junior
    Participating Preferred Stock entitled to receive a quarterly dividend and
    before such Series A Quarterly Dividend Payment Date, in either of


                                       4


    which events such dividends shall begin to accrue and be cumulative from
    such Series A Quarterly Dividend Payment Date. Accrued but unpaid dividends
    shall not bear interest. Dividends paid on the shares of Series A Junior
    Participating Preferred Stock in an amount less than the total amount of
    such dividends at the time accrued and payable on such shares shall be
    allocated pro rata on a share-by-share basis among all such shares at the
    time outstanding. The Board of Directors may fix a record date for the
    determination of holders of shares of Series A Junior Participating
    Preferred Stock entitled to receive payment of a dividend or distribution
    declared thereon, which record date shall be no more than 30 days prior to
    the date fixed for the payment thereof.

3. VOTING RIGHTS. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:

    (a) Subject to the provision for adjustment hereinafter set forth, each
    share of Series A Junior Participating Preferred Stock shall entitle the
    holder thereof to 100 votes on all matters submitted to a vote of the
    stockholders of the Corporation. In the event the Corporation shall at any
    time after the Rights Declaration Date (i) declare any dividend on Common
    Stock payable in shares of Common Stock, (ii) subdivide the outstanding
    Common Stock, or (iii) combine the outstanding Common Stock into a smaller
    number of shares, then in each such case the number of votes per share to
    which holders of shares of Series A Junior Participating Preferred Stock
    were entitled immediately prior to such event shall be adjusted by
    multiplying such number by a fraction the numerator of which is the number
    of shares of Common Stock outstanding immediately after such event and the
    denominator of which is the number of shares of Common Stock that were
    outstanding immediately prior to such event.

    (b) Except as otherwise provided herein or by law, the holders of shares of
    Series A Junior Participating Preferred Stock and the holders of shares of
    Common Stock shall vote together as one class on all matters submitted to a
    vote of stockholders of the Corporation.

    (c)(i) If at any time dividends on any Series A Junior Participating
       Preferred Stock shall be in arrears in an amount equal to six (6)
       quarterly dividends thereon, the occurrence of such contingency shall
       mark the beginning of a period (herein called a "default period') which
       shall extend until such time when all accrued and unpaid dividends for
       all previous quarterly dividend periods and for the current quarterly
       dividend period on all shares of Series A Junior Participating Preferred
       Stock then outstanding shall have been declared and paid or set apart for
       payment. During each default period, all holders of Series Preferred
       Stock, (including holders of the Series A Junior Participating Preferred
       Stock) with dividends in arrears in an amount equal to six (6) quarterly
       dividends thereon, voting as a class, irrespective of series, shall have
       the right to elect two (2) Directors.

       (ii) During any default period, such voting right of the holders of
       Series A Junior Participating Preferred Stock may be exercised initially
       at a special meeting called pursuant to subparagraph (iii) of this
       Section 3(c) or at any annual meeting of stockholders, and thereafter at
       annual meetings of stockholders, provided that neither such voting right
       nor the right of the holders of any other series of Series Preferred
       Stock, if any, to increase, in certain cases, the authorized number of
       Directors shall be exercised unless the holders of ten percent (10%) in
       number of shares of Series Preferred Stock outstanding shall be present
       in person or by proxy. The absence of a quorum of the holders of Common
       Stock shall not affect the exercise by the holders of Series Preferred
       Stock of such voting right. At any meeting at which the holders of Series
       Preferred Stock shall exercise such voting right initially during an
       existing default period, they shall have the right, voting as a class, to
       elect Directors to fill such vacancies, if any, in the Board of Directors
       as may then exist up to two (2) Directors or, if such right is exercised
       at an annual meeting, to elect two (2) Directors. If the number which may
       be so elected at any special meeting does not amount to the required
       number, the holders of the Series Preferred Stock shall have the right to
       make such increase in the number of Directors as shall be necessary to
       permit the election by them of the required number. After the


                                       5


       holders of the Series Preferred Stock shall have exercised their right to
       elect Directors in any default period and during the continuance of such
       period, the number of Directors shall not be increased or decreased
       except by vote of the holders of Series Preferred Stock as herein
       provided or pursuant to the rights of any equity securities ranking
       senior to or pari passu with the Series A Junior Participating Preferred
       Stock.

       (iii) Unless the holders of Series Preferred Stock shall, during an
       existing default period, have previously exercised their right to elect
       Directors, the Board of Directors may order, or any stockholder or
       stockholders owning in the aggregate not less than ten percent (10%) of
       the total number of shares of Series Preferred Stock outstanding,
       irrespective of series, may request, the calling of a special meeting of
       the holders of Series Preferred Stock, which meeting shall thereupon be
       called by the President, a Vice-President or the Secretary of the
       Corporation. Notice of such meeting and of any annual meeting at which
       holders of Series Preferred Stock are entitled to vote pursuant to this
       paragraph (c)(iii) shall be given to each holder of record of Series
       Preferred Stock by mailing a copy of such notice to him at his last
       address as the same appears on the books of the Corporation. Such meeting
       shall be called for a time not earlier than 20 days and not later than 60
       days after such order or request or in default of the calling of such
       meeting within 60 days after such order or request, such meeting may be
       called on similar notice by any stockholder or stockholders owning in the
       aggregate not less than ten percent (10%) of the total number of shares
       of Series Preferred Stock outstanding. Notwithstanding the provisions of
       this paragraph (c)(iii), no such special meeting shall be called during
       the period within 60 days immediately preceding the date fixed for the
       next annual meeting of the stockholders.

       (iv) In any default period, the holders of Common Stock, and other
       classes of stock of the Corporation if applicable, shall continue to be
       entitled to elect the whole number of Directors until the holders of
       Series Preferred Stock shall have exercised their right to elect two (2)
       Directors voting as a class, after the exercise of which right (A) the
       Directors so elected by the holders of Series Preferred Stock shall
       continue in office until their successors shall have been elected by such
       holders or until the expiration of the default period, and (B) any
       vacancy in the Board of Directors may (except as provided in paragraph
       (c)(ii) of this Section 3) be filled by vote of a majority of the
       remaining Directors theretofore elected by the holders of the class of
       stock which elected the Director whose office shall have become vacant.
       References in this paragraph (c) to Directors elected by the holders of a
       particular class of stock shall include Directors elected by such
       Directors to fill vacancies as provided in clause (B) of the preceding
       sentence.

       (v) Immediately upon the expiration of a default period, (A) the right of
       the holders of Series Preferred Stock as a class to elect Directors shall
       cease, (B) the term of any Directors elected by the holders of Series
       Preferred Stock as a class shall terminate, and (C) the number of
       Directors shall be such number as may be provided for in this Certificate
       of Incorporation or the By-laws of the Corporation irrespective of any
       increase made pursuant to the provisions of paragraph (c)(ii) of this
       Section 3 (such number being subject, however, to change thereafter in
       any manner provided by law or in this Certificate of Incorporation or the
       By-laws of the Corporation). Any vacancies in the Board of Directors
       effected by the provisions of clauses (B) and (C) in the preceding
       sentence may be filled by a majority of the remaining Directors.

    (d) Except as set forth herein or as otherwise required by applicable law,
    holders of Series A Junior Participating Preferred Stock shall have no
    special voting rights and their consent shall not be required (except to the
    extent they are entitled to vote with holders of Common Stock as set forth
    herein) for taking any corporate action.


                                       6


4. CERTAIN RESTRICTIONS.

    (a) Whenever quarterly dividends or other dividends or distributions payable
    on the Series A Junior Participating Preferred Stock as provided in Section
    2 are in arrears, thereafter and until all accrued and unpaid dividends and
    distributions, whether or not declared, on shares of Series A Junior
    Participating Preferred Stock outstanding shall have been paid in full, the
    Corporation shall not

       (i) declare or pay dividends on, make any other distributions on, or
       redeem or purchase or otherwise acquire for consideration any shares of
       stock ranking junior (either as to dividends or upon liquidation,
       dissolution or winding up) to the Series A Junior Participating Preferred
       Stock;

       (ii) declare or pay dividends on or make any other distributions on any
       shares of stock ranking on a parity (either as to dividends or upon
       liquidation, dissolution or winding up) with the Series A Junior
       Participating Preferred Stock, except dividends paid ratably on the
       Series A Junior Participating Preferred Stock and all such parity stock
       on which dividends are payable or in arrears in proportion to the total
       amounts to which the holders of all such shares are then entitled;

       (iii) redeem or purchase or otherwise acquire for consideration shares of
       any stock ranking on a parity (either as to dividends or upon
       liquidation, dissolution or winding up) with the Series A Junior
       Participating Preferred Stock, provided that the Corporation may at any
       time redeem, purchase or otherwise acquire shares of any such parity
       stock in exchange for shares of any stock of the Corporation ranking
       junior (either as to dividends or upon dissolution, liquidation or
       winding up) to the Series A Junior Participating Preferred Stock;

       (iv) purchase or otherwise acquire for consideration any shares of Series
       A Junior Participating Preferred Stock, or any shares of stock ranking on
       a parity with the Series A Junior Participating Preferred Stock, except
       in accordance with a purchase offer made in writing or by publication (as
       determined by the Board of Directors) to all holders of such shares upon
       such terms as the Board of Directors, after consideration of the
       respective annual dividend rates and other relative rights and
       preferences of the respective series and classes, shall determine in good
       faith will result in fair and equitable treatment among the respective
       series or classes.

    (b) The Corporation shall not permit any subsidiary of the Corporation to
    purchase or otherwise acquire for consideration any shares of stock of the
    Corporation unless the Corporation could, under paragraph (a) of this
    Section 4, purchase or otherwise acquire such shares at such time and in
    such manner.

5. REACQUIRED SHARES. Any shares of Series A Junior Participating Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Series Preferred Stock and may be reissued as part of a new
series of Series Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.

6. LIQUIDATION, DISSOLUTION OR WINDING UP.

    (a) Upon any liquidation (voluntary or otherwise), dissolution or winding up
    of the Corporation, no distribution shall be made to the holders of shares
    of stock ranking junior (either as to dividends or upon liquidation,
    dissolution or winding up) to the Series A Junior Participating Preferred
    Stock unless, prior thereto, the holders of shares of Series A Junior
    Participating Preferred Stock shall have received $100 per share, plus an
    amount equal to accrued and unpaid dividends and distributions thereon,
    whether or not declared, to the date of such payment (the "Series A
    Liquidation Preference"). Following the payment of the full


                                       7


    amount of the Series A Liquidation Preference, no additional distributions
    shall be made to the holders of shares of Series A Junior Participating
    Preferred Stock unless, prior thereto, the holders of shares of Common Stock
    shall have received an amount per share (the "Common Adjustment") equal to
    the quotient obtained by dividing (i) the Series A Liquidation Preference by
    (ii) 100 (as appropriately adjusted as set forth in subparagraph C below to
    reflect such events as stock splits, stock dividends and recapitalizations
    with respect to the Common Stock) (such number in clause (ii), the
    "Adjustment Number"). Following the payment of the full amount of the Series
    A Liquidation Preference and the Common Adjustment in respect of all
    outstanding shares of Series A Junior Participating Preferred Stock and
    Common Stock, respectively, holders of Series A Junior Participating
    Preferred Stock and holders of shares of Common Stock shall receive their
    ratable and proportionate share of the remaining assets to be distributed in
    the ratio of the Adjustment Number to 1 with respect to such Preferred Stock
    and Common Stock, on a per share basis, respectively.

    (b) In the event, however, that there are not sufficient assets available to
    permit payment in full of the Series A Liquidation Preference and the
    liquidation preferences of all other series of preferred stock, if any,
    which rank on a parity with the Series A Junior Participating Preferred
    Stock, then such remaining assets shall be distributed ratably to the
    holders of such parity shares in proportion to their respective liquidation
    preferences. In the event, however, that there are not sufficient assets
    available to permit payment in full of the Common Adjustment, then such
    remaining assets shall be distributed ratably to the holders of Common
    Stock.

    (c) In the event the Corporation shall at any time after the Rights
    Declaration Date (i) declare any dividend on Common Stock payable in shares
    of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
    combine the outstanding Common Stock into a smaller number of shares, then
    in each such case the Adjustment Number in effect immediately prior to such
    event shall be adjusted by multiplying such Adjustment Number by a fraction
    the numerator of which is the number of shares of Common Stock outstanding
    immediately after such event and the denominator of which is the number of
    shares of Common Stock that were outstanding immediately prior to such
    event.

7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of Series A Junior
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(a) declare any dividend on Common Stock payable in shares of Common Stock, (b)
subdivide the outstanding Common Stock, or (c) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Junior Participating Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

8. NO REDEMPTION. The shares of Series A Junior Participating Preferred Stock
shall not be redeemable.

9. RANKING. The Series A Junior Participating Preferred Stock shall rank junior
to all other series of the Corporation's Series Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.


                                       8


10. AMENDMENT. This Certificate of Incorporation shall not be further amended in
any manner which would materially alter or change the powers, preferences or
special rights of the Series A Junior Participating Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of two-thirds
or more of the outstanding shares of Series A Junior Participating Preferred
Stock, voting separately as a class.

11. FRACTIONAL SHARES. Series A Junior Participating Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Junior Participating Preferred Stock.

        II.    COMMON STOCK

A. DIVIDENDS. SUBJECT TO ALL OF THE RIGHTS OF THE SERIES PREFERRED STOCK,
DIVIDENDS may be paid upon the Common Stock as and when declared by the Board of
Directors out of funds legally available for the payment of dividends.

B. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, and after the
holders of the Series Preferred Stock shall have been paid in full amounts to
which they respectively shall be entitled, or an amount sufficient to pay the
aggregate amount to which such holders shall be entitled shall have been
deposited in trust with a bank or trust company having its principal office in
the Borough of Manhattan, City, County and State of New York, having a capital,
undivided profits and surplus aggregating at least $5,000,000, for the benefit
of the holders of the Series Preferred Stock, the remaining net assets of the
Corporation shall be distributed pro rata to the holders of the Common Stock.

C. VOTING RIGHTS. Except as otherwise expressly provided with respect to the
Series Preferred Stock and except as otherwise may be required by law, the
Common Stock shall have the exclusive right to vote for the election of
directors and for all other purposes and each holder of Common Stock shall be
entitled to one vote for each share held.

                                   ARTICLE V.

A. BOARD OF DIRECTORS OF THE CORPORATION.

1. GENERAL PROVISIONS. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. The exact number of
directors shall be fixed from time to time by, or in the manner provided in, the
By-Laws of the Corporation and may be increased or decreased as therein
provided. Directors of the Corporation need not be elected by ballot unless
required by the By-Laws.

2. CLASSIFICATION OF BOARD OF DIRECTORS. The directors shall be divided into
three classes. Each such class shall consist, as nearly as may be possible, of
one-third of the total number of directors, and any remaining directors shall be
included within such group or groups as the Board of Directors shall designate.
At the annual meeting of stockholders in 1994, a class of directors shall be
elected for a one-year term, a class of directors for a two-year term and a
class of directors for a three-year term. At each succeeding annual meeting of
stockholders, beginning in 1995, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, but in no case shall a decrease in the number of
directors shorten the term of any incumbent director. A director may be removed
from office for cause only and, subject to such removal, death, resignation,
retirement or disqualification, shall hold office until the annual meeting for
the year in which his term expires and until his successor shall be elected and
qualify. No alteration, amendment or repeal of this Article V or the By-Laws of
the


                                       9


Corporation shall be effective to shorten the term of any director holding
office at the time of such alteration, amendment or repeal, to permit any such
director to be removed without cause, or to increase the number of directors in
any class or in the aggregate from that existing at the time of such alteration,
amendment or repeal until the expiration of the terms of office of all directors
then holding office, unless (i) in the case of this Article V, such alteration,
amendment or repeal has been approved by the holders of all shares of stock
entitled to vote thereon, or (ii) in the case of the By-Laws, such alteration,
amendment or repeal has been approved by either the holders of all shares
entitled to vote thereon or by a vote of a majority of the entire Board of
Directors.

3. DIRECTORS APPOINTED BY A SPECIFIC CLASS OF STOCKHOLDERS. To the extent that
any holders of any class or series of stock other than Common Stock issued by
the Corporation shall have the separate right, voting as a class or series, to
elect directors, the directors elected by such class or series shall be deemed
to constitute an additional class of directors and shall have a term of office
for one year or such other period as may be designated by the provisions of such
class or series providing such separate voting right to the holders of such
class or series of stock, and any such class of directors shall be in addition
to the classes designated above.

                                   ARTICLE VI.

A. GENERAL PROVISIONS. The following provisions are hereby adopted for the
purpose of defining, limiting and regulating the powers of the Corporation and
of its directors and stockholders:

1. AMENDMENTS TO THE CERTIFICATE OF INCORPORATION. Subject to the provisions of
applicable law, the Corporation reserves the right from time to time to make any
amendment to its Certificate of Incorporation, now or hereafter authorized by
law, including any amendment which alters the contract rights as expressly set
forth therein, of any outstanding stock.

2. AMENDMENTS TO THE BY-LAWS. The Board of Directors is expressly authorized to
adopt, alter and repeal the By-Laws of the Corporation in whole or in part at
any regular or special meeting of the Board of Directors, by vote of a majority
of the entire Board of Directors. Except where this Certificate of Incorporation
otherwise requires a higher vote, the By-Laws may also be adopted, altered or
repealed in whole or in part at any annual or special meeting of the
stockholders by the affirmative vote of three-fourths of the shares of the
Corporation outstanding and entitled to vote thereon.

3. NO PREEMPTIVE RIGHTS. No holder of any class of stock of the Corporation,
whether now or hereafter authorized or outstanding, shall have any preemptive,
preferential or other right to subscribe for or purchase any class of the
Corporation's stock, whether now or hereafter authorized or outstanding, which
it may at any time issue or sell, or to subscribe for or purchase any notes,
debentures, bonds or other securities which it may at any time issue or sell,
whether or not the same be convertible into or exchangeable for or carry options
or warrants to purchase shares of any class of the Corporation's stock or other
securities, or to receive or purchase any warrants or options which may be
issued or granted evidencing the right to purchase any such stock or other
securities, it being intended by this Section 3 that all preemptive rights of
any kind applicable to securities of the Corporation are eliminated.

4. VOTE REQUIRED TO TAKE ACTION; ACTION BY WRITTEN CONSENT. Except as otherwise
provided in this Certificate of Incorporation and except as otherwise provided
by applicable law, the Corporation may take or authorize any action upon the
affirmative vote of the majority of shares present in person or represented by
proxy at the meeting and entitled to vote on the subject matter thereof. Action
shall be taken by stockholders of the Corporation only at annual or special
meetings of stockholders, and stockholders may act in lieu of a meeting only by
unanimous written consent.


                                       10


5. COMPENSATION OF DIRECTORS. The Board of Directors may determine from time to
time the amount and type of compensation which shall be paid to its members for
service on the Board of Directors. The Board of Directors shall also have the
power, in its discretion, to provide for and to pay to directors rendering
services to the Corporation not ordinarily rendered by directors, as such,
special compensation appropriate to the value of such services, as determined by
the Board from time to time.

6. INTERESTED TRANSACTIONS. Any director or officer individually, or any
partnership of which any director or officer may be a member, or any corporation
or association of which any director or officer may be an officer, director,
trustee, employee or stockholder, may be a party to, or may be pecuniarily or
otherwise interested in, any contract or transaction of the Corporation, and in
the absence of fraud no contract or other transaction shall be thereby affected
or invalidated. Any director of the Corporation who is so interested, or who is
also a director, officer, trustee, employee or stockholder of such other
corporation or association or a member of such partnership which is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation which shall authorize any
such contract or transaction, and may vote thereat to authorize any such
contract or transaction, with like force and effect as if he were not such
director, officer, trustee, employee or stockholder of such other corporation or
association or not so interested or a member of a partnership so interested;
provided that in case a director, or a partnership, corporation or association
of which a director is a member, officer, director, trustee or employee is so
interested, such fact shall be disclosed or shall have been known to the Board
of Directors or a majority thereof. This paragraph shall not be construed to
invalidate any such contract or transaction which would otherwise be valid under
the common and statutory law applicable thereto.

7. INDEMNIFICATION. The Corporation shall indemnify (a) its directors to the
fullest extent permitted by the laws of the State of Delaware now or hereafter
in force, including the advancement of expenses under the procedures provided by
such laws, (b) all of its officers to the same extent as it shall indemnify its
directors, and (c) its officers who are not directors to such further extent as
shall be authorized by the Board of Directors and be consistent with law.
Subject only to any limitations prescribed by the laws of the State of Delaware
now or hereafter in force, the foregoing shall not limit the authority of the
Corporation to indemnify the directors, officers and other employees and agents
of this Corporation consistent with law and shall not be deemed to be exclusive
of any rights to which those indemnified may be entitled as a matter of law or
under any resolution, By-Law provision, or agreement.

8. COURT-ORDERED MEETINGS OF CREDITORS AND/OR STOCKHOLDERS. Whenever a
compromise or arrangement is proposed between this Corporation and its creditors
or any class of them and/or between this Corporation and its stockholders or any
class of them, any court of equitable jurisdiction within the State of Delaware
may, on the application in a summary way of this Corporation or of any creditor
or stockholder thereof, or on the application of any receiver or receivers
appointed for this Corporation under the provisions of Section 291 of Title 8 of
the Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as such court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which such application has
been made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders, of this Corporation, as the case may
be, and also on this Corporation.

9. LIABILITY OF DIRECTORS. To the fullest extent permitted by Delaware statutory
or decisional law, as amended or interpreted, no director of this Corporation
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. This Section 9 does not
affect the availability of equitable remedies for breach of fiduciary duties.


                                       11


                                  ARTICLE VII.

A. VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS

1. VOTING REQUIREMENTS. In addition to any vote otherwise required by law or
this Certificate of Incorporation, a Business Combination (such term, and
certain other capitalized terms referred to in this Article VII, as defined in
Section 3 of this Article VII) shall be recommended by the Board of Directors
and approved by the affirmative vote of at least:

    (a) 80 percent of the votes entitled to be cast by outstanding shares of
    voting stock of the Corporation, voting together as a single voting group;
    and

    (b) Two-thirds of the votes entitled to be cast by holders of voting stock
    other than voting stock held by an Interested Stockholder who is (or whose
    Affiliate is) a party to the Business Combination or an Affiliate or
    Associate of the Interested Stockholder, voting together as a single voting
    group.

2. WHEN VOTING REQUIREMENTS NOT APPLICABLE.

    (a) The vote required by Section 1 of this Article VII does not apply to a
    Business Combination if each of the following conditions is met:

       (i) The aggregate amount of the cash and the Market Value as of the
       Valuation Date of consideration other than cash to be received per share
       by holders of common stock in such Business Combination is at least equal
       to the highest of the following:

           (A) The highest per share price (including any brokerage commissions,
           transfer taxes and soliciting dealers' fees) paid by the Interested
           Stockholder for any shares of common stock of the same class or
           series acquired by it: (x) within the 2 year period immediately prior
           to the Announcement Date of the proposal of the Business Combination;
           or (y) in the transaction in which it became an Interested
           Stockholder, whichever is higher; or

           (B) The Market Value per share of common stock of the same class or
           series on the Announcement Date or on the Determination Date,
           whichever is higher; or

           (C) The price per share equal to the Market Value per share of common
           stock of the same class or series determined pursuant to subparagraph
           (i)(B) of this paragraph (a), multiplied by the fraction of: (x) the
           highest per share price (including any brokerage commissions,
           transfer taxes and soliciting dealers' fees) paid by the Interested
           Stockholder for any shares of common stock of the same class or
           series acquired by it within the 2 year period immediately prior to
           the Announcement Date, over (y) the Market Value per share of common
           stock of the same class or series on the first day in such 2 year
           period on which the Interested Stockholder acquired any shares of
           common stock.

       (ii) The aggregate amount of the cash and the Market Value as of the
       Valuation Date of consideration other than cash to be received per share
       by holders of shares of any class or series of outstanding stock other
       than Common Stock is at least equal to the highest of the following
       (whether or not the Interested Stockholder has previously acquired any
       shares of a particular class or series of stock):

           (A) The highest per share price (including any brokerage commissions,
           transfer taxes and soliciting dealers' fees) paid by the Interested
           Stockholder for any shares of such class of stock acquired by it: (x)
           within the 2 year period immediately prior to the Announcement Date
           of the proposal of the Business Combination; or (y) in the
           transaction in which it became an Interested Stockholder, whichever
           is higher; or

                                       12

           (B) The highest preferential amount per share to which the holders of
           shares of such class of stock are entitled in the event of any
           voluntary or involuntary liquidation, dissolution or winding up of
           the Corporation; or

           (C) The Market Value per share of such class of stock on the
           Announcement Date or on the Determination Date, whichever is higher;
           or

           (D) The price per share equal to the Market Value per share of such
           class of stock determined pursuant to subparagraph (ii)(B) of this
           paragraph (a), multiplied by the fraction of: (x) the highest per
           share price (including any brokerage commissions, transfer taxes and
           soliciting dealers' fees) paid by the Interested Stockholder for any
           shares of any class of Voting Stock acquired by it within the 2 year
           period immediately prior to the Announcement Date, over (y) the
           Market Value per share of the same class of voting stock on the first
           day in such 2 year period on which the Interested Stockholder
           acquired any shares of the same class of Voting Stock.

       (iii) The consideration to be received by holders of any class or series
       of outstanding stock is to be in cash or in the same form as the
       Interested Stockholder has previously paid for shares of the same class
       or series of stock. If the Interested Stockholder has paid for shares of
       any class of stock with varying forms of consideration, the form of
       consideration for such class of stock shall be either cash or the form
       used to acquire the largest number of shares of such class or series of
       stock previously acquired by it.

       (iv) After the Interested Stockholder has become an Interested
       Stockholder and prior to the consummation of such Business Combination:

           (A) There shall have been: (x) no reduction in the annual rate of
           dividends paid on any class or series of stock of the Corporation
           that is not preferred stock (except as necessary to reflect any
           subdivision of the stock); (y) an increase in such annual rate of
           dividends as necessary to reflect any reclassification (including any
           reverse stock split), recapitalization, reorganization or any similar
           transaction which has the effect of reducing the number of
           outstanding shares of the stock; and (z) the Interested Stockholder
           did not become the beneficial owner of any additional shares of stock
           of the Corporation except as part of the transaction which resulted
           in such Interested Stockholder becoming an Interested Stockholder or
           by virtue of proportionate stock splits or stock dividends.

           (B) The provisions of subparagraphs (x) and (y) of subparagraph
           (iv)(A) do not apply if no Interested Stockholder or an Affiliate or
           Associate of the Interested Stockholder voted as a director of the
           Corporation in a manner inconsistent with such subsubparagraphs and
           the Interested Stockholder, within 10 days after any act or failure
           to act inconsistent with such sub-subparagraphs, notifies the Board
           of Directors of the Corporation in writing that the Interested
           Stockholder disapproves thereof and requests in good faith that the
           Board of Directors rectify such act or failure to act.

       (v) After the Interested Stockholder has become an Interested
       Stockholder, the Interested Stockholder may not have received the
       benefit, directly or indirectly (except proportionately as a
       stockholder), of any loans, advances, guarantees, pledges or other
       financial assistance or any tax credits or other tax advantages provided
       by the Corporation or any of its Subsidiaries, whether in anticipation of
       or in connection with such Business Combination or otherwise.

    (b) The requirements of Section 1 of this Article VII do not apply to
    Business Combinations that, as to specifically identified Interested
    Stockholders or their Affiliates, have been approved or exempted therefrom
    by resolution of the Board of Directors of the Corporation at any time prior
    to the time that the Interested Stockholder first became an Interested
    Stockholder. If the Board of Directors so provides, the resolution shall be
    subject to approval of the stockholders in the manner and by the vote
    specified in the resolution.


                                       13


3. DEFINITIONS. In this Article VII, the following words have the meanings
indicated:

    (a) "Affiliate," including the term "affiliated person," means a person that
    directly, or indirectly through one or more intermediaries, controls, or is
    controlled by, or is under common control with, a specified person

    (b) "Announcement Date" means the first general public announcement of the
    proposal or intention to make a proposal of the Business Combination or its
    first communication generally to stockholders of the Corporation, whichever
    is earlier;

    (c) "Associate," when used to indicate a relationship with any person,
    means:

       (i) Any corporation or organization (other than the Corporation or a
       Subsidiary of the Corporation) of which such person is an officer,
       director, or partner or is, directly or indirectly, the beneficial owner
       of 10 percent or more of any class of Equity Securities;

       (ii) Any trust or other estate in which such person has a substantial
       beneficial interest or as to which such person serves as trustee or in a
       similar fiduciary capacity; and

       (iii) Any relative or spouse of such person, or any relative of such
       spouse, who has the same home as such person or who is a director or
       officer of the Corporation or any of its Affiliates.

    (d) "Beneficial Owner," when used with respect to any Voting Stock, means a
person:

       (i) That, individually or with any of its Affiliates or Associates,
       beneficially owns Voting Stock, directly or indirectly; or

       (ii) That, individually or with any of its Affiliates or Associates, has:

           (A) The right to acquire Voting Stock (whether such right is
           exercisable immediately or only after the passage of time), 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 Voting Stock pursuant to any agreement,
           arrangement, or understanding; or

       (iii) That has any agreement, arrangement, or understanding for the
       purpose of acquiring, holding, voting or disposing of Voting Stock with
       any other person that beneficially owns, or whose Affiliates or
       Associates beneficially own, directly or indirectly, such shares of
       Voting Stock.

    (e) "Business Combination" means:

        (i) Unless the merger, consolidation, or share exchange does not alter
        the contract rights of the stock as expressly set forth in this
        Certificate of Incorporation or change or convert in whole or in part
        the outstanding shares of stock of the Corporation, any merger or
        consolidation of the Corporation or any Subsidiary with (A) any
        Interested Stockholder or (B) any other corporation (whether or not
        itself an Interested Stockholder) which is, or after the merger or
        consolidation, would be, an Affiliate of an Interested Stockholder that
        was an Interested Stockholder prior to the transaction.

        (ii) Any sale, lease, transfer or other disposition, other than in the
        ordinary course of business, in one transaction or a series of
        transactions in any 1 2-month period, to any Interested Stockholder or
        any Affiliate of any Interested Stockholder (other than the Corporation
        or any of its Subsidiaries) of any assets of the Corporation or any
        Subsidiary


                                       14


        having, measured at the time the transaction or transactions are
        approved by the Board of Directors of the Corporation, an aggregate book
        value as of the end of the Corporation's most recently ended fiscal
        quarter of 10 percent or more of the total Market Value of the
        outstanding stock of the Corporation or of its net worth as of the end
        of its most recently ended fiscal quarter;

        (iii) The issuance or transfer by the Corporation, or any Subsidiary, in
        one transaction or a series of transactions, of any Equity Securities of
        the Corporation or any Subsidiary which have an aggregate Market Value
        of 5 percent or more of the total Market Value of the outstanding stock
        of the Corporation to any Interested Stockholder or any Affiliate of any
        Interested Stockholder (other than the Corporation or any of its
        Subsidiaries) except pursuant to the exercise of warrants or rights to
        purchase securities offered pro rata to all holders of the Corporation's
        voting stock or any other method affording substantially proportionate
        treatment to the holders of Voting Stock;

        (iv) The adoption of any plan or proposal for the liquidation or
        dissolution of the Corporation in which anything other than cash will be
        received by an Interested Stockholder or any Affiliate of any Interested
        Stockholder; or

        (v) Any reclassification of securities (including any reverse stock
        split), or recapitalization of the Corporation, or any merger or
        consolidation, of the Corporation with any of its Subsidiaries which has
        the effect, directly or indirectly, in one transaction or a series of
        transactions, of increasing by 5 percent or more of the total number of
        outstanding shares, the proportionate amount of the outstanding shares
        of any class of Equity Securities of the Corporation or any Subsidiary
        which is directly or indirectly owned by any Interested Stockholder or
        any Affiliate of any Interested Stockholder.

    (f) "Common Stock" means any stock other than preferred or preference stock.

    (g) "Control," including the terms "controlling," "controlled by" and "under
    common control with," means the possession, directly or indirectly, of the
    power to direct or cause the direction of the management and policies of a
    person, whether through the ownership of voting securities, by contract, or
    otherwise, and the beneficial ownership of 10 percent or more of the votes
    entitled to be cast by a corporation's voting stock creates a presumption of
    control.

    (h) "Determination Date" means the date on which an Interested Stockholder
    first became an Interested Stockholder;

    (i) "Equity Security" means:

        (i) Any stock or similar security, certificate of interest, or
        participation in any profit sharing agreement, voting trust certificate,
        or certificate of deposit for an equity security;

        (ii) Any security convertible, with or without consideration, into an
        equity security, or any warrant or other security carrying any right to
        subscribe to or purchase an equity security; or

        (iii) Any put, call, straddle, or other option or privilege of buying an
        equity security from or selling an equity security to another without
        being bound to do so.


                                       15


    (j) "Interested Stockholder" means any person (other than the Corporation or
    any Subsidiary) that:

        (i)(A) Is the beneficial owner, directly or indirectly, of 10 percent
           or more of the voting power of the outstanding voting stock of the
           Corporation; or

          (B) Is an Affiliate of the Corporation and at any time within the 2
          year period immediately prior to the date in question was the
          beneficial owner, directly or indirectly, of 10 percent or more of the
          Voting Power of the then outstanding voting stock of the Corporation.

        (ii) For the purpose of determining whether a person is an Interested
        Stockholder, the number of shares of Voting Stock deemed to be
        outstanding shall include shares deemed owned by the person through
        application of subsection (d) of this section but may not include any
        other shares of Voting Stock which may be issuable pursuant to any
        agreement, arrangement, or understanding, or upon exercise of conversion
        rights, warrants or options, or otherwise.

    (k) "Market Value" means:

        (i) In the case of stock, the highest closing sale price during the 30
        day period immediately preceding the date in question of a share of such
        stock on the composite tape for New York Stock Exchange listed stocks,
        or, if such stock is not quoted on the composite tape, on the New York
        Stock Exchange, or if such stock is not listed on such exchange, on the
        principal United States securities exchange registered under the
        Securities Exchange Act of 1934 on which such stock is listed, or, if
        such stock is not listed on any such exchange, the highest closing bid
        quotation with respect to a share of such stock during the 30 day period
        preceding the date in question on the National Association of Securities
        Dealers, Inc. automated quotations system or any system then in use, or
        if no such quotations are available, the fair market value on the date
        in question of a share of such stock as determined by the Board of
        Directors of the Corporation in good faith; and

        (ii) In the case of property other than cash or stock, the fair market
        value of such property on the date in question as determined by the
        Board of Directors of the Corporation in good faith.

    (l) "Subsidiary" means any corporation of which voting stock having a
    majority of the votes entitled to be cast is owned, directly or indirectly,
    by the Corporation.

    (m) "Valuation Date" means:

        (i) For a Business Combination voted upon by stockholders, the later of
        the day prior to the date of the stockholders' vote or the day 20 days
        prior to the consummation of the Business Combination; and

        (ii) For a Business Combination not voted upon by stockholders, the date
        of the consummation of the Business Combination.

    (n) "Voting Stock means shares of capital stock of the Corporation entitled
    to vote generally in the election of directors.


                                       16


       IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate
of Incorporation to be executed and attested to by its duly authorized officers
this 1st day of August, 2002.

                                        McKESSON CORPORATION

                                        By:   /s/ Ivan D. Meyerson
                                              ----------------------------------
                                              Ivan D. Meyerson
                                              Senior Vice President, General
                                              Counsel and Corporate Secretary





Attest:


/s/ Glenette E. Babb
- --------------------------------
Glenette E. Babb
Assistant Secretary


                                       17

EX-99.1

                              McKESSON CORPORATION


                                                                    EXHIBIT 99.1


                           CERTIFICATION PURSUANT TO
                            18 U.S.C. SECTION 1350,
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of McKesson Corporation (the "Company")
on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, John H. Hammergren,
Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
to the best of my knowledge:


(1)     The Report fully complies with the requirements of section 13(a) or
        15(d) of the Securities Act of 1934; and

(2)     The information contained in the Report fairly presents, in all material
        respects, the financial condition and results of operations of the
        Company


/s/ John H. Hammergren
- -------------------------------
JOHN H. HAMMERGREN
Chief Executive Officer
August 9, 2002

This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for the purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.

EX-99.2

                              McKESSON CORPORATION


                                                                    EXHIBIT 99.2


                           CERTIFICATION PURSUANT TO
                            18 U.S.C. SECTION 1350,
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of McKesson Corporation (the "Company")
on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, William R. Graber,
Chief Financial Officer of the Company certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
to the best of my knowledge:

(1)     The Report fully complies with the requirements of section 13(a) or
        15(d) of the Securities Act of 1934; and

(2)     The information contained in the Report fairly presents, in all material
        respects, the financial condition and results of operations of the
        Company


/s/ William R. Graber
- -------------------------------
WILLIAM R. GRABER
Chief Financial Officer
August 9, 2002

This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for the purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.