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 September 30, 2003

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

     Indicate by check mark whether the registrant is an accelerated filer. Yes x No o

     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 October 27, 2003
Common stock, $0.01 par value	291,414,921 shares

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
	Item 4. Evaluation of Disclosure Controls and Procedures
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Exhibit 3.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

McKESSON CORPORATION

TABLE OF CONTENTS

Item				Page
		PART I. FINANCIAL INFORMATION
1.        Condensed Financial Statements
	Consolidated Balance Sheets
	September 30, 2003 and March 31, 2003				3
	Consolidated Statements of Operations
	Quarter and six months ended September 30, 2003 and 2002				4
	Consolidated Statements of Cash Flows
	Six months ended September 30, 2003 and 2002				5
	Financial Notes				6-14
2.         Management’s Discussion and Analysis of Results of Operations and Financial Condition Financial Review					15-22
3.         Quantitative and Qualitative Disclosures about Market Risk					23
4.         Evaluation of Disclosure Controls and Procedures					23
			PART II. OTHER INFORMATION
1.         Legal Proceedings					23
4.         Submission of Matters to a Vote of Security Holders					23
6.         Exhibits and Reports on Form 8-K					24
Signatures					24

2

McKESSON CORPORATION

PART I. FINANCIAL INFORMATION

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

			September 30,			March 31,
			2003			2003
ASSETS
Current Assets
	Cash and equivalents		$	261.6		$	522.0
	Marketable securities available for sale			15.1			11.5
	Receivables, net			4,945.2			4,594.7
	Inventories			6,944.4			6,022.5
	Prepaid expenses and other			97.3			102.9
		Total		12,263.6			11,253.6
Property, Plant and Equipment, net				591.8			593.7
Capitalized Software Held for Sale				126.7			131.1
Notes Receivable				189.9			248.6
Goodwill and Other Intangibles				1,455.0			1,449.5
Other Assets				748.6			676.9
		Total Assets	$	15,375.6		$	14,353.4
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
	Drafts and accounts payable		$	7,221.9		$	6,630.7
	Deferred revenue			379.2			459.7
	Short-term borrowings			135.0			—
	Current portion of long-term debt			16.4			10.2
	Other			863.9			873.8
		Total		8,616.4			7,974.4
Postretirement Obligations and Other Noncurrent Liabilities				439.9			363.5
Long-Term Debt				1,275.8			1,290.7
McKesson Corporation — Obligated Mandatorily Redeemable Convertible Preferred Securities of Subsidiary Grantor Trust Whose Sole Assets are Junior Subordinated Debentures of McKesson Corporation				196.5			196.3
Other Commitments and Contingent Liabilities (Note 11)
Stockholders’ Equity
	Preferred stock, $0.01 par value, 100.0 shares authorized, no shares issued or outstanding			—			—
	Common stock, $0.01 par value Shares authorized: 800.0; shares issued: 2004 - 295.3 and 2003 - 292.3			2.9			2.9
	Additional paid-in capital			2,000.3			1,921.2
	Other			(75.7	)		(89.5	)
	Retained earnings			3,120.8			2,843.3
	Accumulated other comprehensive losses			(36.6	)		(59.1	)
	ESOP notes and guarantees			(55.9	)		(61.7	)
	Treasury shares, at cost, 2004 - 3.9 and 2003 - 1.1			(108.8	)		(28.6	)
		Total Stockholders’ Equity		4,847.0			4,528.5
		Total Liabilities and Stockholders’ Equity	$	15,375.6		$	14,353.4

See Financial Notes.

3

McKESSON CORPORATION

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

			Quarter Ended						Six Months Ended
			September 30,						September 30,
			2003			2002			2003			2002
Revenues			$	16,810.1		$	13,690.3		$	33,334.3		$	27,313.5
Cost of Sales				15,998.4			12,951.0			31,736.1			25,823.4
Gross Profit				811.7			739.3			1,598.2			1,490.1
Operating Expenses				585.3			519.3			1,121.0			1,065.6
Operating Income				226.4			220.0			477.2			424.5
Interest Expense				(26.7	)		(29.7	)		(53.2	)		(60.6	)
Other Income, Net				15.1			4.1			27.0			14.1
Income From Continuing Operations Before Income Taxes and Dividends on Preferred Securities of Subsidiary Trust				214.8			194.4			451.0			378.0
Income Taxes				(56.7	)		(64.4	)		(135.8	)		(128.7	)
Dividends on Preferred Securities of Subsidiary Trust, Net of Tax Benefit				(1.6	)		(1.6	)		(3.1	)		(3.1	)
Income (Loss) After Income Taxes
	Continuing Operations			156.5			128.4			312.1			246.2
	Discontinued Operations			—			(3.6	)		—			(4.1	)
Net Income			$	156.5		$	124.8		$	312.1		$	242.1
Earnings Per Common Share
	Diluted
	Continuing Operations		$	0.53		$	0.43		$	1.05		$	0.83
	Discontinued Operations			—			(0.01	)		—			(0.01	)
		Total Diluted	$	0.53		$	0.42		$	1.05		$	0.82
	Basic
	Continuing Operations		$	0.54		$	0.44		$	1.08		$	0.85
	Discontinued Operations			—			(0.01	)		—			(0.01	)
		Total Basic	$	0.54		$	0.43		$	1.08		$	0.84
Dividends Declared Per Common Share			$	0.06		$	0.06		$	0.12		$	0.12
Weighted Average Shares
	Diluted			300.3			299.0			299.2			300.0
	Basic			289.9			289.2			289.9			288.8

See Financial Notes.

4

McKESSON CORPORATION

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

			Six Months Ended
			September 30,
			2003			2002
Operating Activities
Income from continuing operations			$	312.1		$	246.2
Adjustments to reconcile to net cash provided (used) by operating activities:
	Depreciation			49.5			52.2
	Amortization			58.4			48.6
	Provision for bad debts			39.8			47.0
	Deferred taxes on income			126.0			13.9
	Other non-cash items			(20.4	)		(0.4	)
		Total		565.4			407.5
Effects of changes in:
	Receivables			(376.9	)		(438.0	)
	Inventories			(900.0	)		24.3
	Drafts and accounts payable			554.6			31.2
	Deferred revenue			(48.4	)		(37.9	)
	Taxes			(38.2	)		30.5
	Other			(44.9	)		(42.7	)
		Total		(853.8	)		(432.6	)
		Net cash used by continuing operations		(288.4	)		(25.1	)
Discontinued operations				—			(0.4	)
		Net cash used by operating activities		(288.4	)		(25.5	)
Investing Activities
Property acquisitions				(46.5	)		(53.7	)
Capitalized software expenditures				(95.4	)		(88.8	)
Acquisitions of businesses, less cash and equivalents acquired				(7.3	)		(355.3	)
Notes receivable issuances, net				26.0			(18.9	)
Proceeds from sale of notes receivable				35.2			—
Other				17.7			(3.2	)
		Net cash used by investing activities		(70.3	)		(519.9	)
Financing Activities
Proceeds from issuance of debt				135.0			282.0
Repayment of debt				(6.8	)		(6.0	)
Dividends paid on convertible preferred securities of subsidiary trust				(5.0	)		(5.0	)
Capital stock transactions
	Issuances			57.6			46.7
	Share repurchases			(75.3	)		—
	ESOP notes and guarantees			5.8			3.8
	Dividends paid			(34.8	)		(34.6	)
	Other			21.8			1.0
		Net cash provided by financing activities		98.3			287.9
Net decrease in cash and cash equivalents				(260.4	)		(257.5	)
Cash and cash equivalents at beginning of period				522.0			557.8
Cash and cash equivalents at end of period			$	261.6		$	300.3

See Financial Notes.

5

McKESSON CORPORATION

FINANCIAL NOTES
(Unaudited)

1. Significant Accounting Policies

     Basis of Presentation. 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 September 30, 2003, and the results of operations for the quarter and six months ended September 30, 2003 and 2002 and cash flows for the six months ended September 30, 2003 and 2002.

     The results of operations for the quarter and six months ended September 30, 2003 and 2002 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 2003 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.

     New Accounting Pronouncements. In May 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 clarifies the definition of a liability as currently defined in FASB Concepts Statement No. 6, “Elements of Financial Statements,” as well as other planned revisions. This statement requires a financial instrument that embodies an obligation of an issuer to be classified as a liability. In addition, the statement establishes standards for the initial and subsequent measurement of these financial instruments and disclosure requirements. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and for all other matters, at the beginning of our second quarter of 2004. The adoption of this standard did not have a material impact on our consolidated financial statements.

     In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends SFAS No. 133 for decisions made by the FASB’s Derivatives Implementation Group, other FASB projects dealing with financial instruments, and in response to implementation issues raised in relation to the application of the definition of a derivative. This statement is generally effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of this standard did not have a material impact on our consolidated financial statements.

     In January 2003, the FASB issued Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities.” This interpretation clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” in determining whether a reporting entity should consolidate certain legal entities, including partnerships, limited liability companies, or trusts, among others, collectively defined as variable interest entities (“VIEs”). This interpretation applies to VIEs created or obtained after January 31, 2003, and as of July 1, 2003 (subsequently delayed until financial statements issued after December 15, 2003), to VIEs in which an enterprise holds a variable interest that it acquired before February 1, 2003. As currently proposed, FIN No. 46 is not anticipated to have a material impact on our consolidated financial statements, however, it may affect the consolidation of one of the Company’s VIEs, the McKesson Financing Trust, as described in Financial Note 8.

     In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.” This statement amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. We adopted the disclosure provisions of this standard, as discussed below under Employee Stock-Based Compensation. We are currently assessing the fair value approach under SFAS No. 123 and the transitional provisions of SFAS No. 148.

6

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

     In November 2002, the FASB reached a consensus regarding Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” EITF Issue No. 00-21 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services, and/or rights to use assets. The guidance provided by EITF Issue No. 00-21 is effective for contracts entered into on or after July 1, 2003. The adoption of this statement did not have a material effect on our consolidated financial statements.

     In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” which addresses financial accounting requirements for retirement obligations associated with tangible long-lived assets. In May 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements 4, 44, 64, Amendment to FASB Statement No. 13, and Technical Corrections as of April 2002.” SFAS No. 145 amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. SFAS Nos. 143 and 145 were effective commencing April 1, 2003 and did not have a material impact on our consolidated financial statements.

     Employee Stock-Based Compensation. We account for our employee stock-based compensation plans using the intrinsic value method under Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” Had compensation cost for our employee stock-based compensation been recognized based on the fair value method, consistent with the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” net income and earnings per share would have been as follows:

	Quarter Ended						Six Months Ended
	September 30,						September 30,
(In millions, except per share amounts)	2003			2002			2003			2002
Net income, as reported	$	156.5		$	124.8		$	312.1		$	242.1
Compensation expense, net of tax:
APB Opinion No. 25 expense included in net income		2.0			0.4			2.8			1.4
SFAS No. 123 expense		(23.8	)		(40.0	)		(50.5	)		(80.1	)
Pro forma net income	$	134.7		$	85.2		$	264.4		$	163.4
Earnings per share:
Diluted — as reported	$	0.53		$	0.42		$	1.05		$	0.82
Diluted — pro forma		0.45			0.29			0.89			0.56
Basic — as reported		0.54			0.43			1.08			0.84
Basic — pro forma		0.46			0.29			0.91			0.57

2. Acquisitions and Divestiture

     In the second quarter of 2003, we acquired the outstanding stock of A.L.I. Technologies Inc. (“A.L.I.”) for an aggregate cash purchase price of $347.0 million. A.L.I. provides digital medical imaging solutions which are designed to streamline access to diagnostic information, automate clinical workflow and eliminate the need for film purchase and storage. The acquisition of A.L.I. complemented our Horizon Clinicals™ offering by incorporating medical images into a computerized patient record. Approximately $328 million of A.L.I.’s purchase price was assigned to goodwill, none of which is deductible for tax purposes. The aggregate purchase price was financed through cash and short-term borrowings. The results of A.L.I.’s operations have been included in the consolidated financial statements within our Information Solutions segment since its acquisition date.

7

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

     During the six months ended September 30, 2003 and 2002, our Pharmaceutical Solutions segment completed several smaller acquisitions. Pro forma results of operations have not been presented for these acquisitions, nor the acquisition of A.L.I., as the effects were not material to the condensed consolidated financial statements on either an individual or aggregate basis.

     In September 2002, we sold the net assets of a marketing fulfillment business which was previously included in our Pharmaceutical Solutions segment. Net proceeds from the sale of this business were $4.5 million. The disposition resulted in an after-tax loss of $3.7 million or $0.01 per diluted share which was recorded in the second quarter of 2003.

3. 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 similarly 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.

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

		Quarter Ended				Six Months Ended
		September 30,				September 30,
(In millions, except per share amounts)		2003		2002		2003		2002
Income from continuing operations		$	156.5	$	128.4	$	312.1	$	246.2
Dividends on preferred securities of subsidiary trust, net of tax benefit			1.6		1.6		3.1		3.1
Income from continuing operations — diluted		$	158.1	$	130.0	$	315.2	$	249.3
Weighted average common shares outstanding:
Basic			289.9		289.2		289.9		288.8
Effect of dilutive securities:
	Options to purchase common stock		4.5		3.9		3.3		5.3
	Trust convertible preferred securities		5.4		5.3		5.4		5.3
	Restricted stock		0.5		0.6		0.6		0.6
Diluted			300.3		299.0		299.2		300.0
Earnings per common share from continuing operations:
	Basic	$	0.54	$	0.44	$	1.08	$	0.85
	Diluted	$	0.53	$	0.43	$	1.05	$	0.83

     Approximately 38.4 million and 34.5 million stock options were excluded from the computations of diluted net earnings per share for the quarters ended September 30, 2003 and 2002 as their exercise price was higher than the Company’s average stock price. For the six months ended September 30, 2003 and 2002, the number of stock options excluded was 31.8 million and 27.3 million.

8

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

4. Restructuring Activities

     We recorded net charges for restructuring activities of $0.5 million and $1.8 million during the quarter and six months ended September 30, 2003. These charges pertain to the consolidation of our Corporate enterprise-wide information network support departments and the closure of a distribution center in our Pharmaceutical Solutions segment. These charges were partly offset by reversals of accruals pertaining to prior year programs from all three of our operating segments. Approximately 167 employees were provided termination notices as a result of our 2004 restructuring initiatives of which 143 were terminated at September 30, 2003.

     During the quarter and six months ended September 30, 2002, we recorded net reductions in severance and exit-related accruals of $10.9 million and $7.4 million, and restructuring-related asset impairments of $0.3 million and $1.3 million. The net reductions in the accruals were the result of a modification to our Medical-Surgical Solutions segment’s distribution center strategy. Results for the six months ended September 30, 2002 also included $4.5 million of restructuring charges associated with the planned closure of a pharmaceutical distribution center and additional facility closure costs for a prior year restructuring plan.

     The following table summarizes restructuring activities for the six months ended September 30, 2003:

	Pharmaceutical						Medical-Surgical						Information
	Solutions						Solutions						Solutions						Corporate
				Exit-						Exit-						Exit-
(In millions)	Severance			Related			Severance			Related			Severance			Related			Severance			Total
Balance, March 31, 2003	$	—		$	8.1		$	1.7		$	4.0		$	0.9		$	3.0		$	14.0		$	31.7
Current period expenses		0.2			0.2			—			—			—			—			3.6			4.0
Adjustment to prior years’ expenses		—			(0.8	)		(0.3	)		(0.9	)		(0.1	)		(0.1	)		—			(2.2	)
Total expenses		0.2			(0.6	)		(0.3	)		(0.9	)		(0.1	)		(0.1	)		3.6			1.8
Cash expenditures		(0.2	)		(1.1	)		(0.2	)		(1.1	)		(0.7	)		(0.6	)		(3.8	)		(7.7	)
Balance, September 30, 2003	$	—		$	6.4		$	1.2		$	2.0		$	0.1		$	2.3		$	13.8		$	25.8

     In addition to the above restructuring activities, we are still managing a 2001/2000 restructuring plan associated with customer settlements for the 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, decreased to $63.4 million at September 30, 2003 from $86.9 million at March 31, 2003. Reductions in the allowance were due to a reversal of $19.7 million of the allowance into operating expenses in the second quarter of 2004 due to favorable settlements and continued negotiations with affected customers, and $0.5 million and $3.3 million of cash and non-cash settlements. Total cash and non-cash settlements of $43.7 million and $86.1 million have been incurred since the inception of the restructuring plan. Although the timing and final outcome of remaining customer settlements cannot be determined, we believe that any additional liability and related expenditures will not have a material adverse effect on our financial position, results of operations or cash flows.

5. Income Taxes

     During the quarter ended September 30, 2003, we recorded an income tax benefit of $15.3 million relating to favorable tax settlements with the U.S. Internal Revenue Service. These settlements pertain to amended tax returns for the years ended December 31, 1997 and 1998 filed by our subsidiary, McKesson Information Solutions Inc. formerly known as HBO & Company. The benefit of these tax assets was not previously recognized by the Company.

9

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

6. Goodwill and Other Intangible Assets

     Changes in the carrying amount of goodwill for the six months ended September 30, 2003 are as follows:

	Pharmaceutical		Medical-Surgical		Information
(In millions)	Solutions		Solutions		Solutions		Total
Balance, March 31, 2003	$	307.1	$	686.5	$	360.6	$	1,354.2
Goodwill acquired		5.2		—		—		5.2
Translation adjustments		1.8		—		6.8		8.6
Balance, September 30, 2003	$	314.1	$	686.5	$	367.4	$	1,368.0

     Information regarding other intangibles is as follows:

		September 30,			March 31,
(In millions)		2003			2003
Customer lists		$	90.3		$	89.9
Technology			59.2			58.7
Trademarks and other			21.9			21.5
	Total other intangibles, gross		171.4			170.1
Accumulated amortization			(84.4	)		(74.8	)
	Total other intangibles, net	$	87.0		$	95.3

     Amortization expense of other intangibles was $5.1 million and $9.7 million for the quarter and six months ended September 30, 2003 and $4.6 million and $8.5 million for the comparable prior year periods. The weighted average remaining amortization periods for customer lists, technology and trademarks and other intangible assets at September 30, 2003 were: 7.2 years, 4.7 years and 4.9 years. As of September 30, 2003, estimated future annual amortization expense of these assets is as follows: $19.0 million, $17.8 million, $13.1 million, $12.8 million and $9.8 million for 2004 through 2008, and $10.4 million thereafter. At September 30, 2003, there were $13.8 million of other intangibles not subject to amortization.

7. Financing Activities

     In September 2003, we renegotiated our 364-day revolving credit agreement. With the exception that the facility was increased by $100.0 million to $650.0 million, the terms of the new agreement are substantially similar to those previously in place. The renewed facility expires in September 2004.

     In June 2003, we renewed our committed revolving receivables sale facility under substantially similar terms to those previously in place with the exception that the facility was increased by $150.0 million to $1.1 billion. The renewed facility expires in June 2004.

     At September 30, 2003, $135.0 million of short-term borrowings were outstanding and $200.0 million was utilized under the revolving receivables sale facility. At March 31, 2003, no amounts were outstanding or utilized under any of our facilities. In addition, at September 30, 2003, we sold customer lease receivables from our Pharmaceutical Solutions segment for cash proceeds of $35.2 million. The sale of these receivables resulted in a pre-tax gain of $2.5 million which is included in Other Income in the condensed consolidated statement of operations.

10

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

8. Convertible Preferred Securities

     In February 1997, the McKesson Financing Trust (the “Trust”), a business trust sponsored by the Company, issued four 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 an annual rate of 5%, payable quarterly, and are currently redeemable by us at 102.0% 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 on or after March 4, 2000, in whole or in part, initially at 103.5% of the liquidation preference per share, and thereafter at prices declining at 0.5% per annum to 100% of the liquidation preference on and after March 4, 2007 plus, in each case, accumulated, accrued and unpaid distributions, if any, to the redemption date.

     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 investments in the Debentures have historically been eliminated in consolidation and the preferred securities reflected as outstanding in the accompanying condensed consolidated financial statements. However, under the currently proposed FIN No. 46 (see Financial Note 1), the Company would no longer consolidate its investment in the Trust as it would not be designated as the Trust’s primary beneficiary. In accordance with this accounting standard, the Company would recognize the Debentures as long-term debt on its consolidated balance sheets in lieu of the preferred securities. Additionally, dividends on the preferred securities would be recharacterized as interest expense in the consolidated statement of operations. These changes would be adopted on a retroactive basis and are not anticipated to have a material impact on our consolidated financial statements, including diluted earnings per share.

9. Stockholders’ Equity

     In 2001, the Company’s Board of Directors approved a program to repurchase up to $250.0 million of the Company’s common stock. During the six months ended September 30, 2003, we repurchased 2.6 million shares having an aggregate cost of $75.3 million. Since the inception of this program, we have repurchased 7.0 million shares having an aggregate cost of $209.9 million. The repurchased shares will be used for general corporate purposes. On October 30, 2003, the Company’s Board of Directors approved a new program to repurchase up to $250.0 million of additional common stock of the company.

     Comprehensive income is as follows:

		Quarter Ended						Six Months Ended
		September 30,						September 30,
(In millions)		2003			2002			2003		2002
Net income		$	156.5		$	124.8		$	312.1	$	242.1
Unrealized gain (loss) on marketable securities and investments			0.2			—			0.2		(1.3	)
Net loss on derivative instruments			—			(0.7	)		—		(1.1	)
Foreign currency translation adjustments			(11.2	)		(14.6	)		22.3		(2.7	)
	Comprehensive income	$	145.5		$	109.5		$	334.6	$	237.0

11

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

10. Financial Guarantees and Warranties

     Financial Guarantees. We have agreements with certain of our customers’ financial institutions under which we have guaranteed the repurchase of inventory at a discount in the event these customers are unable to meet certain obligations to those financial institutions. Among other requirements, these inventories must be in resalable condition. We have also guaranteed loans, credit facilities and the payment of leases for some customers; and we are a secured lender for substantially all of these guarantees. Customer guarantees range from one to ten years and were primarily provided to facilitate financing for certain strategic customers. At September 30, 2003, the maximum amounts of inventory repurchase guarantees and other customer guarantees were approximately $160 million and $62 million of which approximately $9 million had been accrued for these guarantees.

     During the second quarter of 2004, one of our Pharmaceutical Solutions customers announced its bankruptcy. Accordingly, we reviewed all amounts owed to us from this customer as well as financial guarantees provided to third parties in favor of this customer, and as a result, we increased our provision for doubtful accounts by $30.0 million.

     At September 30, 2003, we had commitments to provide $5.4 million of cash contributions and $10.6 million of other commitments to our equity-held investments, for which no amounts had been accrued. In addition, our banks and insurance companies have issued $67.2 million of standby letters of credit and surety bonds on our behalf in order to meet the security requirements for statutory licenses and permits, court and fiduciary obligations, and our workers’ compensation and automotive liability programs.

     Our software license agreements generally include certain provisions for indemnifying customers against liabilities if our software products infringe on a third party’s intellectual property rights. To date, we have not incurred any material costs as a result of such indemnification agreements and have not accrued any liabilities related to such obligations.

     In conjunction with certain transactions, primarily divestitures, we may provide routine indemnification agreements (such as retention of previously existing environmental, tax and employee liabilities) whose terms vary in duration and often are not explicitly defined. Where appropriate, obligations for such indemnifications are recorded as liabilities. Because the amounts of these indemnification obligations often are not explicitly stated, the overall maximum amount of these commitments cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, we have historically not made significant payments as a result of these indemnification provisions.

     Warranties. In the normal course of business, we provide certain warranties and indemnification protection for our products and services. For example, we provide warranties that the pharmaceutical and medical-surgical products we distribute are in compliance with the Food, Drug and Cosmetic Act and other applicable laws and regulations. We have received the same warranties from our suppliers, who customarily are the manufacturers of the products. In addition, we have indemnity obligations to our customers for these products, which have also been provided to us from our suppliers, either through express agreement or by operation of law.

     We also provide warranties regarding the performance of software and automation products we sell. Our liability under these warranties is to bring the product into compliance with previously agreed upon specifications. For software products, this may result in additional project costs and are reflected in our estimates used for the percentage-of-completion method of accounting for software installation services within these contracts. In addition, most of our customers who purchase our software and automation products also purchase annual maintenance agreements. Revenue from these maintenance agreements is recognized on a straight-line basis over the contract period and the cost of servicing product warranties is charged to expense when claims become estimable. Accrued warranty costs were not material to the consolidated balance sheets.

12

McKESSON CORPORATION

FINANCIAL NOTES (Continued)
(Unaudited)

11. Litigation

     In our annual report on Form 10-K for the year ended March 31, 2003, and in our quarterly report on Form 10-Q for the quarter ended June 30, 2003, we reported on numerous legal proceedings including, but not limited to, those arising out of our announcement on April 28, 1999 regarding accounting improprieties at HBO & Company (“HBOC”), now known as McKesson Information Solutions Inc. (the “Accounting Litigation”). Since the date of those reports the only significant developments in legal proceedings involving the Company were as follows:

Accounting Litigation

     In the previously reported action captioned In re McKesson HBOC, Inc. Securities Litigation, (N.D. Cal. Case No. C-99-20743-RMW) (the “Consolidated Action”), the parties are currently discussing a modification of the briefing and hearing schedule on the motion for class certification filed by lead plaintiff New York State Common Retirement Fund (“NYSCRF”).

     On August 13, 2003, the U.S. Court of Appeals for the Ninth Circuit affirmed Judge Whyte’s January 9, 2002, order dismissing our counterclaim against NYSCRF in the previously-reported action captioned McKesson HBOC, Inc. v. New York State Common Retirement Fund, Inc. et al., (N.D. Cal. Case No. C01-20021-RWM) (9th Cir. Nos. 02-15301, 02-16272).

     On August 29, 2003, Judge Whyte held a hearing on McKesson’s and HBOC’s motions to dismiss the consolidated and amended complaint in the previously-reported action captioned: In re McKesson HBOC, Inc. ERISA Litigation, (N.D. Cal. Case No. C-02-0685-RMW). Judge Whyte has not yet issued a ruling on that motion.

     On August 22, 2003, the court in the previously-reported action captioned Curran Partners, L.P. v. McKesson HBOC, Inc. et al., (Georgia State Court, Fulton County No. 00 VS 010801) granted our motion to stay the Curran action in favor of the Consolidated Action. However, in September 2003, the court lifted the stay and transferred the action to the judge presiding over the previously-reported action captioned Suffolk Partners L.P. et al v. McKesson HBOC, Inc. et al, (Georgia State Court, Fulton County No. 00VS010469A).

     On September 24, 2003, plaintiff Arlene Ash requested an order dismissing her from the case without prejudice and without any remuneration for herself or her attorneys in the previously reported action, Ash, et. al. v. McCall, (Civil Action No. 17132) filed in the Delaware Court of Chancery. Three other plaintiffs will remain in the case if Ash’s request is granted. On October 2, 2003, the three remaining plaintiffs filed a motion for leave to file a Fourth Amended Complaint.

     In the previously reported action captioned, Derdiger v. Tallman et. al., (Civil Action No. 17276), filed in the Delaware Court of Chancery, on August 4, 2003, the court issued an order dismissing the class action claims brought on behalf of persons other than the named plaintiff Howard Derdiger without prejudice in favor of the prior pending Consolidated Action pending in the U.S. District Court for the Northern District of California. The parties thereafter dismissed plaintiff Howard Derdiger’s individual claims with prejudice pursuant to a settlement.

     We do 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

McKESSON CORPORATION

FINANCIAL NOTES (Concluded)
(Unaudited)

Other Litigation, Investigations and Claims

     The U.S. Attorney’s Office for the Southern District of Illinois is conducting an industry-wide civil and criminal investigation into the marketing, sale and Medicare reimbursement of enteral nutritional products (“Products”). As previously disclosed, the U.S. Attorney’s Office has indicated that the Company and two of our employees are subjects of the investigation. Since the date of our last periodic report, the U.S. Attorney’s Office announced indictments of these two employees on charges of mail fraud, conspiracy, and violation of the anti-kickback statute. The two employees have been placed on leave pending resolution of the charges. As previously reported, the Products are sold, and the individuals are employed by the extended care business conducted by McKesson Medical-Surgical Minnesota Supply Inc., an indirect subsidiary of the Company. The Company remains a subject of the government’s investigation and we are continuing to cooperate with the U.S. Attorney’s Office.

12. 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 segments.

     Financial information relating to our segments is as follows:

		Quarter Ended						Six Months Ended
		September 30,						September 30,
(In millions)		2003			2002			2003			2002
Revenues
Pharmaceutical Solutions		$	15,823.0		$	12,730.6		$	31,397.9		$	25,416.5
Medical-Surgical Solutions			689.9			684.2			1,374.3			1,367.1
Information Solutions			297.2			275.5			562.1			529.9
	Total	$	16,810.1		$	13,690.3		$	33,334.3		$	27,313.5
Operating profit
Pharmaceutical Solutions		$	220.0		$	227.2		$	473.1		$	446.2
Medical-Surgical Solutions			21.6			12.7			43.3			30.9
Information Solutions			42.6			24.9			63.3			43.4
	Total		284.2			264.8			579.7			520.5
Corporate (1)			(42.7	)		(40.7	)		(75.5	)		(81.9	)
Interest expense			(26.7	)		(29.7	)		(53.2	)		(60.6	)
Income from continuing operations before income taxes and dividends on preferred securities of subsidiary trust		$	214.8		$	194.4		$	451.0		$	378.0

			September 30,		March 31,
(In millions)			2003		2003
Segment assets, at period end
Pharmaceutical Solutions			$	12,052.7	$	10,837.7
Medical-Surgical Solutions				1,480.0		1,450.2
Information Solutions				1,107.0		1,089.8
		Total		14,639.7		13,377.7
Corporate
	Cash, cash equivalents, and marketable securities			276.7		533.5
	Other			459.2		442.2
		Total	$	15,375.6	$	14,353.4

(1) The six months ended September 30, 2003 includes an $8.5 million gain on the sale of a surplus property.

14

McKESSON CORPORATION

FINANCIAL REVIEW
(Unaudited)

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

Financial Overview

		Quarter Ended							Six Months Ended
		September 30,							September 30,
(In millions, except per share data)		2003		2002		Change			2003		2002		Change
Revenues
	Excluding Sales to Customers’ Warehouses	$	11,752.5	$	10,282.0		14	%	$	23,112.3	$	20,408.1		13	%
	Sales to Customers’ Warehouses		5,057.6		3,408.3		48			10,222.0		6,905.4		48
Total		$	16,810.1	$	13,690.3		23		$	33,334.3	$	27,313.5		22
Income from Continuing Operations Before Income Taxes		$	214.8	$	194.4		10	%	$	451.0	$	378.0		19	%
Net Income		$	156.5	$	124.8		25		$	312.1	$	242.1		29
Diluted Earnings Per Share		$	0.53	$	0.42		26		$	1.05	$	0.82		28

     Revenues for the second quarter of 2004 grew 23% to $16.8 billion, net income increased 25% to $156.5 million and diluted earnings per share increased 26% to $0.53 compared to the same period a year ago. For the six months ended September 30, 2003, revenue increased 22% to $33.3 billion, net income increased 29% to $312.1 million and diluted earnings per share increased 28% to $1.05 compared to the first half of 2003. Excluding the items noted below, increases in net income and diluted earnings per share reflect growth in revenue and operating profit in our Pharmaceutical Solutions and Information Solutions segments and improved operating profit in our Medical-Surgical Solutions segment.

     Results for the quarter and six months ended September 30, 2003 included the following significant items:

• a $30.0 million bad debt provision within our Pharmaceutical Solutions segment as a result of a customer filing for bankruptcy,

• severance charges of $9.8 million related to a workforce reduction primarily in our Information Solutions International business,

• a $19.7 million credit for the reversal of a portion of customer settlement reserves also within our Information Solutions segment, and

• a $15.3 million benefit for favorable tax settlements.

     Results for the quarter and six months ended September 30, 2002 included the following significant items: $11.0 million of additional bad debt reserves, which were almost fully offset by a $10.9 million reversal of prior year’s accrued restructuring reserves within our Medical-Surgical Solutions segment.

15

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

Results of Operations

     Revenues:

			Quarter Ended							Six Months Ended
			September 30,							September 30,
(In millions)			2003		2002		Change			2003		2002		Change
Pharmaceutical Solutions
	Pharmaceutical Distribution & Services
		U.S. Healthcare	$	9,695.4	$	8,504.7		14	%	$	19,061.9	$	16,874.1		13	%
		Canada		1,070.0		817.6		31			2,114.0		1,637.0		29
		Total Direct Revenue		10,765.4		9,322.3		15			21,175.9		18,511.1		14
		U.S. Healthcare Sales to Customers’ Warehouses		5,057.6		3,408.3		48			10,222.0		6,905.4		48
		Total Pharmaceutical Solutions		15,823.0		12,730.6		24			31,397.9		25,416.5		24
Medical-Surgical Solutions				689.9		684.2		1			1,374.3		1,367.1		1
Information Solutions
	Software			62.0		50.7		22			111.0		95.8		16
	Services			207.9		199.1		4			403.0		389.4		3
	Hardware			27.3		25.7		6			48.1		44.7		8
		Total Information Solutions		297.2		275.5		8			562.1		529.9		6
Total Revenues			$	16,810.1	$	13,690.3		23		$	33,334.3	$	27,313.5		22
Total Revenues Excluding Sales to Customers Warehouses			$	11,752.5	$	10,282.0		14	%	$	23,112.3	$	20,408.1		13	%

     Revenues increased by 23% to $16.8 billion and 22% to $33.3 billion during the quarter and six months ended September 30, 2003 compared to the same periods a year ago. The increase was largely due to growth in our Pharmaceutical Solutions segment, which accounted for over 94% of consolidated revenues.

     Increases in U.S. healthcare revenues, excluding sales to customers’ warehouses, primarily reflect market growth rates and increased institutional and independent pharmacy distribution business. Market growth rates reflect growing drug utilization and price increases, which are offset in part by the increased use of lower priced generics.

     Canadian pharmaceutical distribution revenues increased primarily reflecting market growth rates, a decline in the number of manufacturers engaged in direct distribution and increased sales to customers, combined with favorable foreign exchange rates. On a constant currency basis, second quarter and first half 2004 revenues from our Canadian operations would have increased approximately 15% compared to the same periods a year ago.

     U.S. healthcare sales to customers’ warehouses increased over the comparable prior period primarily as a result of several new customer agreements. Sales to customers’ warehouses represent large volume sales of pharmaceuticals to major self-warehousing drugstore chains where 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.

     Medical-Surgical Solutions segment revenues increased nominally as growth in our primary and extended care sector base was almost fully offset by a decline in revenues in the acute care sector.

     Information Solutions segment revenues increased reflecting the sale of products and related services from our Horizon Clinicals^TM offerings including Horizon Medical Imaging^TM and our core Clinical suite of products including Horizon Expert Orders^TM. Year-to-date increases in our medical imaging products are in part also due to our July 2002 purchase of A.L.I. Technologies Inc. (“A.L.I.”). Additional information regarding the purchase of A.L.I. is contained in Financial Note 2, “Acquisitions and Divestiture,” of our unaudited condensed financial statements contained in Part I of this Quarterly Report on Form 10-Q.

16

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

     Gross Profit:

			Quarter Ended									Six Months Ended
			September 30,									September 30,
(In millions)			2003			2002			Change			2003			2002			Change
Gross Profit
	Pharmaceutical Solutions		$	527.3		$	481.5			10	%	$	1,058.6		$	975.2			9	%
	Medical-Surgical Solutions			133.9			128.1			5			262.7			259.6			1
	Information Solutions			150.5			129.7			16			276.9			255.3			8
		Total	$	811.7		$	739.3			10		$	1,598.2		$	1,490.1			7
Gross Profit Margin
	Pharmaceutical Solutions			3.33	%		3.78	%		(45	)bp		3.37	%		3.84	%		(47	)bp
	Medical-Surgical Solutions			19.41			18.72			69			19.12			18.99			13
	Information Solutions			50.64			47.08			356			49.26			48.18			108
		Total		4.83			5.40			(57	)		4.79			5.46			(67	)
Gross Profit Margin, Excluding Sales to Customers’ Warehouses Pharmaceutical Solutions				4.90	%		5.17	%		(27	)		5.00	%		5.27	%		(27	)
		Total		6.91			7.19			(28	)		6.91			7.30			(39	)

     Gross profit for the second quarter and first half of 2004 increased 10% and 7%. As a percentage of revenues, excluding sales to customers’ warehouses, gross profit margin decreased 28 basis points and 39 basis points primarily reflecting a higher proportion of revenues attributable to our Pharmaceutical Solutions segment, which has lower margins relative to our other segments and a decline in the Pharmaceutical Solutions segment’s gross margin primarily reflecting a decrease in our U.S. Pharmaceutical distribution business. These decreases were offset in part by improvements in our Medical-Surgical Solutions and Information Solutions segments. Gross margins for our U.S. Pharmaceutical distribution business were impacted by lower product sourcing and selling margins, which were partially offset by the benefit of increased sales of generic drugs with higher margins.

     We provide financial ratios (gross margins, operating expenses, and segment operating profit margins as a percentage of revenues) which exclude sales to customers’ warehouses 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 to us and our payment to the supplier.

     Our Pharmaceutical Solutions segment uses the last-in, first-out (“LIFO”) method of accounting for the majority of its inventories, which results in cost of sales that more closely reflects replacement cost than do other accounting methods, thereby mitigating the effects of inflation and deflation on gross profit. The practice in the Pharmaceutical Solutions distribution business is to pass on to customers published price changes from suppliers. Manufacturers generally provide us with price protection, which prevents inventory losses. Price declines on many generic pharmaceutical products in this segment over the last few years have moderated the effects of inflation in other product categories, which resulted in minimal overall price changes in those years.

17

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

     Operating Expenses and Other Income:

			Quarter Ended									Six Months Ended
			September 30,									September 30,
(In millions)			2003			2002			Change			2003			2002			Change
Operating Expenses
	Pharmaceutical Solutions		$	317.7		$	260.6			22	%	$	603.7		$	545.6			11	%
	Medical-Surgical Solutions			112.8			115.5			(2	)		220.8			229.0			(4	)
	Information Solutions			108.6			105.9			3			214.8			213.4			1
	Corporate			46.2			37.3			24			81.7			77.6			5
		Total	$	585.3		$	519.3			13		$	1,121.0		$	1,065.6			5
Operating Expenses as a Percentage of Revenues
	Pharmaceutical Solutions			2.01	%		2.05	%		(4	)bp		1.92	%		2.15	%		(23	)bp
	Medical-Surgical Solutions			16.35			16.88			(53	)		16.07			16.75			(68	)
	Information Solutions			36.54			38.44			(190	)		38.21			40.27			(206	)
		Total		3.48			3.79			(31	)		3.36			3.90			(54	)
Operating Expenses, Excluding Sales to Customers’ Warehouses, as a Percentage of Revenues
	Pharmaceutical Solutions			2.95	%		2.80	%		15			2.85	%		2.95	%		(10	)
		Total		4.98			5.05			(7	)		4.85			5.22			(37	)
Other Income (Loss)
	Pharmaceutical Solutions		$	10.4		$	6.3			65	%	$	18.2		$	16.6			10	%
	Medical-Surgical Solutions			0.5			0.1			400			1.4			0.3			367
	Information Solutions			0.7			1.1			(36	)		1.2			1.5			(20	)
	Corporate			3.5			(3.4	)		—			6.2			(4.3	)		—
		Total	$	15.1		$	4.1			268		$	27.0		$	14.1			91

     Operating expenses increased 13% and 5% in the second quarter and first half of 2004 compared to the same periods a year ago. Operating expenses as a percentage of revenues, excluding sales to customers’ warehouses, decreased mainly due to productivity improvements in back-office and field operations. In addition, operating expenses for 2004 include a $30.0 million bad debt provision, $9.8 million in severance charges and a credit of $19.7 million pertaining to the reversal of our customer settlement reserves. For the six months ended September 30, 2003, operating expenses also include an $8.5 million gain on the sale of a surplus property. Other income increased primarily reflecting a decrease in investment losses, higher interest income and a gain on the sale of lease receivables.

     Segment Operating Profit and Corporate Expenses:

			Quarter Ended									Six Months Ended
			September 30,									September 30,
(In millions)			2003			2002			Change			2003			2002			Change
Segment Operating Profit (1)
	Pharmaceutical Solutions		$	220.0		$	227.2			(3	)%	$	473.1		$	446.2			6	%
	Medical-Surgical Solutions			21.6			12.7			70			43.3			30.9			40
	Information Solutions			42.6			24.9			71			63.3			43.4			46
		Total		284.2			264.8			7			579.7			520.5			11
Corporate Expenses				(42.7	)		(40.7	)		5			(75.5	)		(81.9	)		(8	)
Interest Expense				(26.7	)		(29.7	)		(10	)		(53.2	)		(60.6	)		(12	)
Income from Continuing Operations Before Income Taxes			$	214.8		$	194.4			10		$	451.0		$	378.0			19

(1) Segment operating profit includes gross profit, net of operating expenses and other income for our three business segments.

18

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

		Quarter Ended									Six Months Ended
		September 30,									September 30,
		2003			2002			Change			2003			2002			Change
Segment Operating Profit Margin
	Pharmaceutical Solutions		1.39	%		1.78	%		(39	)bp		1.51	%		1.76	%		(25	)bp
	Medical-Surgical Solutions		3.13			1.86			127			3.15			2.26			89
	Information Solutions		14.33			9.04			529			11.26			8.19			307
Segment Operating Profit Margin for Pharmaceutical Solutions, Excluding Sales to Customers’ Warehouses			2.04	%		2.44	%		(40	)		2.23	%		2.41	%		(18	)

     Excluding sales to customers’ warehouses, operating profit as a percentage of revenues decreased in our Pharmaceutical Solutions segment primarily reflecting a $30.0 million bad debt provision for a customer which filed for bankruptcy and a decline in gross margins, offset in part by productivity improvements in operations. As a result of our strategy to market many of the Company’s products together as integrated solutions for our customers, we now sell several of this segment’s Automation business’ products with the sale and installation of products from other McKesson business units. Consequently, installations have become more complex and necessitated that business to modify its customer contracting approach which will lead to a deferral of revenue until customer installation for new contracts entered into on or after October 1, 2003. Prior to this date, this business recognized revenue for its products primarily upon delivery.

     Medical-Surgical Solutions segment’s operating profit as a percentage of revenues increased largely reflecting improvements in gross profit and reductions in operating expenses. The segment has begun to realize benefits of more efficient operations as a result of its previous restructuring programs. Operating profit for 2003 included an increase in bad debt expense of approximately $11.0 million which was almost fully offset by $10.9 million in reversals of prior year’s restructuring accruals as a result of a modification to the segment’s distribution center network consolidation plan.

     During the second quarter of 2004, one of the Medical-Surgical segment’s significant acute care customers indicated to us that we were unlikely to retain their business. As a result, revenues for this business are anticipated to decrease commencing towards the end of fiscal 2004. The segment is currently evaluating its cost structure in light of this development and anticipates initiating a restructuring program in the third quarter of 2004 in order to reduce expenses. These expense reductions are expected to mitigate the impact of the transition of this business on operating profit, exclusive of any restructuring charges.

     Information Solutions segment’s operating profit as a percentage of revenues increased primarily reflecting greater sales of clinical software applications which have higher margins and the benefit of a reversal of $19.7 million of customer settlement reserves due to favorable settlements and continued negotiations with affected customers. These increases were offset in part by severance charges of $9.8 million primarily in the segment’s international business as well as additional operating costs to support the increase in revenues.

     Corporate expenses, including other income, increased 5% and decreased 8% during the quarter and six months ended September 30, 2003 compared to the same periods a year ago. Expenses for 2004 reflect additional legal costs associated with our pending securities litigation and severance costs for the restructuring of our enterprise-wide information network support departments. These expenses were partially offset by a decrease in impairment losses related to certain venture investments. Results for the six months ended September 30, 2003 also includes an $8.5 million gain on the sale of a surplus property.

     Interest Expense: Interest expense decreased due to lower average borrowings and interest rates. Lower average borrowings reflect the repayment of $125.0 million of 6.55% notes in November 2002.

19

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

     Income Taxes: During the quarter ended September 30, 2003, we recorded an income tax benefit of $15.3 million relating to favorable tax settlements with the U.S. Internal Revenue Service. These settlements pertain to amended tax returns for the years ended December 31, 1997 and 1998 filed by our subsidiary, McKesson Information Solutions Inc. formerly known as HBO & Company. The benefit of these tax assets was not previously recognized by the Company. Excluding this tax benefit, the effective income tax rate for the six months ended September 30, 2003 was 33.5% compared to 34.0% for the same period a year ago. The reduction in our effective income tax rate was primarily the result of a higher proportion of income being attributable to foreign countries that have lower income tax rates.

     Discontinued Operations: Net loss from discontinued operations of $3.6 million and $4.1 million for the quarter and six months ended September 30, 2002 primarily reflects the loss on disposition of a marketing fulfillment business which we sold in September 2002.

     Weighted Average Diluted Shares Outstanding: Diluted earnings per share were calculated based on an average number of diluted shares outstanding of 300.3 million and 299.0 million for the second quarters of 2004 and 2003 and 299.2 million and 300.0 million for the six months ended September 30, 2003 and 2002.

Financial Condition, Liquidity, and Capital Resources

     Net cash flow used for operating activities during the six months ended September 30, 2003 and 2002 was $288.4 million and $25.5 million. Operating activities for 2004 reflect increased inventories, receivables and drafts and accounts payable balances required to support our revenue growth. The growth in inventories is also due to seasonal investment purchases. In addition, at September 30, 2003, $200.0 million was utilized under our accounts receivable sales facility.

     Net cash used by investing activities was $70.3 million and $519.9 million during the six months ended September 30, 2003 and 2002. Investing activities for 2004 include $35.2 million of proceeds from the sale of customer lease receivables. Results for 2003 include $347.0 million of cash paid for the acquisition of A.L.I. Net cash provided by financing activities was $98.3 million and $287.9 million in the first half of 2004 and 2003. Financing activities for 2004 include the repurchase of 2.6 million shares of our common stock for $75.3 million in connection with our stock repurchase program. This program allows us to repurchase up to $250.0 million of shares of our common stock in open market or private transactions and since the inception of this program, we have repurchased 7.0 million shares having an aggregate cost of $209.9 million. The repurchased shares will be used for general corporate purposes. Financing activities for 2004 also includes the repayment of $21.8 million of employee loans. On October 30, 2003, the Company’s Board of Directors approved a new program to repurchase up to $250.0 million of additional common stock of the company.

Selected Measures of Liquidity and Capital Resources:

	September 30,
(In millions)	2003			March 31, 2003
Cash, cash equivalents and marketable securities	$	276.7		$	533.5
Working capital		3,647.2			3,279.2
Debt net of cash, cash equivalents and marketable securities		1,150.0			767.4
Debt to capital ratio (1)		22.1	%		21.6	%
Net debt to net capital employed (2)		18.6	%		14.0	%
Return on stockholders’ equity (3)		13.8	%		13.3	%

(1)	Ratio is computed as debt divided by debt plus convertible preferred securities and stockholders’ equity.
(2)	Ratio is computed as debt, net of cash, cash equivalents and marketable securities (“net debt”), divided by net debt plus convertible preferred securities and stockholders’ equity.
(3)	Ratio is computed as net income divided by a five-quarter average of stockholders’ equity.

20

McKESSON CORPORATION

FINANCIAL REVIEW (Continued)
(Unaudited)

     Working capital primarily includes receivables inventories, drafts and accounts payable and deferred revenue. Our Pharmaceutical Solutions segment requires a substantial investment in working capital which 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 working capital increased primarily as a result of our higher sales volume.

     The ratio of net debt to net capital employed increased primarily reflecting our investment in working capital. Return on stockholders’ equity increased primarily reflecting growth in our operating income in excess of the growth in working capital and other investments needed to fund the increase in revenue.

Credit Resources

     We fund our working capital requirements primarily with cash, short-term borrowings and our receivables sale facility. In September 2003, we renegotiated our 364-day revolving credit agreement. With the exception that the facility was increased by $100.0 million to $650.0 million, the terms of the new agreement are substantially similar to those previously in place. This renewed facility expires in September 2004. We have a three-year $550.0 million revolving credit facility that expires in September 2005. These facilities are primarily intended to support our commercial paper borrowings. We also have a $1.1 billion revolving receivables sale facility, which was renewed in June 2003, the terms of which are substantially similar to those previously in place with the exception that the facility was increased by $150.0 million. At September 30, 2003, $135.0 million of short-term borrowings were outstanding and $200.0 million was utilized under the revolving receivables sale facility. At March 31, 2003, no amounts were outstanding or utilized under these facilities.

     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 any debt outstanding under the revolving credit facility and $335.0 million of term debt could be accelerated. At September 30, 2003, this ratio was 22.1% and we are in compliance with our other covenants. A reduction in our credit ratings or the lack of compliance with our covenants could negatively impact our ability to finance operations through our credit facilities, or issue additional debt at the interest rates currently available.

     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

     New accounting pronouncements are described in Financial Note 1, “Significant Accounting Policies,” to the accompanying condensed consolidated financial statements. These new accounting pronouncements may impact our financial results.

21

McKESSON CORPORATION

FINANCIAL REVIEW (Concluded)
(Unaudited)

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 and section 21E of the Securities Exchange Act of 1934, as amended. 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. Among the factors that could cause actual results to differ materially are 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;

• consolidation of competitors, suppliers and customers and the development of large, sophisticated purchasing groups;

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

• changes in customer mix;

• timing and amounts of ongoing customer settlements;

• changes in manufacturers’ pricing, selling, inventory, distribution or supply policies or practices;

• substantial defaults in payment by large customers;

• material reduction in purchases or the loss of a large customer or supplier relationship;

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

• the malfunction or failure of our segments’ information systems;

• tax legislation initiatives;

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

• changes in generally accepted accounting principles; and

• general economic and market conditions.

     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.

22

McKESSON CORPORATION

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 2003 Annual Report on Form 10-K.

Item 4. Evaluation of Disclosure Controls and Procedures

     Our Chief Executive Officer and our Chief Financial Officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e)) as of the end of the period covered by this quarterly report, have concluded that our disclosure controls and procedures are effective based on their evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

     There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     See Financial Note 11, “Litigation,” 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 Shareholders was held on July 30, 2003. 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
Alton F. Irby III		227,851,021		26,594,882
James V. Napier		224,434,389		30,011,514

The term of the following directors continued after the meeting:

Marie L. Knowles	John H. Hammergren
Jane E. Shaw	M. Christine Jacobs
Richard F. Syron	Robert W. Matschullat

The proposal to ratify the appointment of Deloitte & Touche LLP as our independent auditors for the year ending March 31, 2004 received the following vote:

Votes For	Votes Against		Votes Abstained
219,024,759		33,481,368		1,939,776

The stockholder proposal regarding severance payments to senior executives received the following vote:

Votes For	Votes Against		Votes Abstained		Broker Non-votes
146,090,409		68,540,284		4,267,833		35,547,377

23

McKESSON CORPORATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit 3.2 Amended and Restated By-Laws of the Company dated as of July 30, 2003.

Exhibit 31.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1 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

Form 8-K dated July 24, 2003 relating to a press release announcing the Company’s preliminary financial results for its first quarter of fiscal year 2004.

Form 8-K dated October 23, 2003 relating to a press release announcing the Company’s preliminary financial results for its second quarter of fiscal year 2004.

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: October 30, 2003	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-3.2 3 f93287exv3w2.txt EXHIBIT 3.2 Exhibit 3.2 AMENDED AND RESTATED BY-LAWS OF MCKESSON CORPORATION A DELAWARE CORPORATION AS AMENDED THROUGH JULY 30, 2003 ================================================================================ TABLE OF CONTENTS

Page ---- ARTICLE I Offices......................................................................1 Section 1 Registered Office............................................................1 Section 2 Other Offices................................................................1 ARTICLE II Stockholders' Meetings.......................................................1 Section 1 Place of Meetings............................................................1 Section 2 Annual Meetings..............................................................1 Section 3 Special Meetings.............................................................1 Section 4 Notice of Meetings...........................................................2 Section 5 Quorum.......................................................................2 Section 6 Voting Rights................................................................3 Section 7 Voting Procedures and Inspectors of Elections................................3 Section 8 List of Stockholders.........................................................4 Section 9 Stockholder Proposals at Annual Meetings.....................................4 Section 10 Nominations of Persons for Election to the Board of Directors................5 ARTICLE III Directors....................................................................6 Section 1 General Powers...............................................................6 Section 2 Number and Term of Office; Removal...........................................6 Section 3 Election of Directors........................................................7 Section 4 Vacancies....................................................................7 Section 5 Resignations.................................................................7 Section 6 Annual Meetings..............................................................7 Section 7 Regular Meetings.............................................................7 Section 8 Special Meetings; Notice.....................................................7 Section 9 Quorum and Manner of Acting..................................................8 Section 10 Consent in Writing...........................................................8 Section 11 Committees...................................................................8 Section 12 Telephone Meetings...........................................................9 Section 13 Compensation.................................................................9 Section 14 Interested Directors.........................................................9 Section 15 Directors Elected by Special Class or Series................................10 ARTICLE IV Officers....................................................................10 Section 1 Designation of Officers.....................................................10 Section 2 Term of Office; Resignation; Removal........................................10 Section 3 Vacancies...................................................................10 Section 4 Authority of Officers.......................................................10 Section 5 Divisional Titles...........................................................11 Section 6 Salaries....................................................................11 ARTICLE V Execution of Corporate Instruments and Voting of Securities Owned by the Corporation....................................11 Section 1 Execution of Instruments....................................................11 Section 2 Voting of Securities Owned by the Corporation...............................11

i

Page ---- ARTICLE VI Shares of Stock and Other Securities........................................11 Section 1 Form and Execution of Certificates..........................................11 Section 2 Lost Certificates...........................................................12 Section 3 Transfers...................................................................12 Section 4 Fixing Record Dates.........................................................12 Section 5 Registered Stockholders.....................................................12 Section 6 Regulations.................................................................12 Section 7 Other Securities of the Corporation.........................................13 ARTICLE VII Corporate Seal..............................................................13 ARTICLE VIII Indemnification of Officers, Directors, Employees and Agents................13 Section 1 Power to Indemnify in Actions, Suits or Proceedings other Than Those by or in the Right of the Corporation.........................13 Section 2 Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation .......................................14 Section 3 Authorization of Indemnification ...........................................14 Section 4 Good Faith Defined .........................................................14 Section 5 Indemnification by a Court .................................................14 Section 6 Expenses Payable in Advance ................................................15 Section 7 Nonexclusivity of Indemnification and Advancement of Expenses ..............15 Section 8 Insurance...................................................................15 Section 9 Certain Definitions.........................................................15 Section 10 Survival of Indemnification and Advancement of Expenses ....................16 Section 11 Limitation on Indemnification ..............................................16 Section 12 Indemnification of Employees and Agents.....................................16 Section 13 Effect of Amendment ........................................................16 Section 14 Authority to Enter into Indemnification Agreements .........................16 ARTICLE IX Notices.....................................................................16 ARTICLE X Amendments..................................................................17

ii AMENDED AND RESTATED BY-LAWS OF MCKESSON CORPORATION A DELAWARE CORPORATION ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The address of the registered office of Corporation within the State of Delaware is 2711 Centerville Road, City of 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. SECTION 2. OTHER OFFICES. The Corporation shall also have and maintain an office or principal place of business at One Post Street, San Francisco, California and may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDERS' MEETINGS SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders of the Corporation shall be held at such place, either within or without the State of Delaware, as may be designated from time to time by the Board of Directors, or, if not so designated, then at the office of the Corporation required to be maintained pursuant to Section 2 of ARTICLE I hereof. SECTION 2. ANNUAL MEETINGS. The annual meetings of stockholders of the Corporation for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors, or, if not so designated, then at 10:00 a.m. on the last Wednesday in July in each year if not a legal holiday, and, if a legal holiday, at the same hour and place on the next succeeding day not a holiday. SECTION 3. SPECIAL MEETINGS. Special Meetings of the stockholders of the Corporation may be called, for any purpose or purposes, by the Chairman of the Board or the President or the Board of Directors at any time. Stockholders may not call Special Meetings of the stockholders of the Corporation. 1 SECTION 4. NOTICE OF MEETINGS. (A) Except as otherwise provided by law or the Certificate of Incorporation, written notice of each meeting of stockholders, specifying the place, date and hour and purpose or purposes of the meeting, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote thereat, directed to his address as it appears upon the books of the Corporation; except that where the matter to be acted on is a merger or consolidation of the Corporation or a sale, lease or exchange of all or substantially all of its assets, such notice shall be given not less than 20 nor more than 60 days prior to such meeting. (B) If at any meeting action is proposed to be taken which, if taken, would entitle stockholders fulfilling the requirements of Section 262(d) of the Delaware General Corporation Law to an appraisal of the fair value of their shares, the notice of such meeting shall contain a statement of that purpose and to that effect and shall be accompanied by a copy of that statutory section. (C) When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken unless the adjournment is for more than thirty days, or unless after the adjournment a new record date is fixed for the adjourned meeting, in which event a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. (D) Notice of the time, place and purpose of any meeting of stockholders may be waived in writing, either before or after such meeting, and to the extent permitted by law, will be waived by any stockholder by his attendance thereat, in person or by proxy. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given. (E) Unless and until voted, every proxy shall be revocable at the pleasure of the person who executed it or of his legal representatives or assigns, except in those cases where an irrevocable proxy permitted by statute has been given. SECTION 5. QUORUM. At all meetings of stockholders, except where otherwise provided by law, the Certificate of Incorporation, or these By-Laws, the presence, in person or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. Shares, the voting of which at said meeting has been enjoined, or which for any reason cannot be lawfully voted at such meeting, shall not be counted to determine a quorum at said meeting. In the absence of a quorum any meeting of stockholders may be adjourned, from time to time, by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. At such adjourned meeting at which a quorum is present or represented any business may be transacted which might have been transacted at the original meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, all action taken by the holders of a majority of the voting power represented at any meeting at which a quorum is present shall be valid and binding upon the Corporation. In the event that at any meeting at which the holders of more than one class or series of the Corporation's capital stock are entitled to vote as a class, a quorum of any such class or series is lacking, the holders of any class or series represented by a quorum may proceed with the transaction of the business to be 2 transacted by that class or series, and if such business is the election of directors, the director whose successors shall not have been elected shall continue in office until their successors shall have been duly elected and shall have qualified. SECTION 6. VOTING RIGHTS. (A) Except as otherwise provided by law, only persons in whose names shares entitled to vote stand on the stock records of the Corporation on the record date for determining the stockholders entitled to vote at said meeting shall be entitled to vote at such meeting. Shares standing in the names of two or more persons shall be voted or represented in accordance with the determination of the majority of such persons, or, if only one of such persons is present in person or represented by proxy, such person shall have the right to vote such shares and such shares shall be deemed to be represented for the purpose of determining a quorum. (B) Every person entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his duly authorized agent, which proxy shall be filed with the Secretary of the Corporation at or before the meeting at which it is to be used. Said proxy so appointed need not be a stockholder. No proxy shall be voted on after three years from its date unless the proxy provides for a longer period. (C) Without limiting the manner in which a stockholder may authorize another person or persons to act for him as proxy pursuant to subsection (b) of this Section, the following shall constitute a valid means by which a stockholder may grant such authority: (1)A stockholder may execute a writing authorizing another person or persons to act for him as proxy. Execution may be accomplished by the stockholder or his authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature. (2)A stockholder may authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied. (D) Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to subsection (c) of this Section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. SECTION 7. VOTING PROCEDURES AND INSPECTORS OF ELECTIONS. (A) The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is 3 able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability. (B) The inspectors shall (i) ascertain the number of shares outstanding and the voting power of each, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. (C) The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise. (D) In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Section 212(c)(2) of the Delaware General Corporation Law, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification pursuant to subsection (b)(v) of this Section shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable. (E) The provisions of this Section 7 shall not apply to any annual meeting of stockholders held prior to the annual meeting of stockholders to be held in 1995. SECTION 8. LIST OF STOCKHOLDERS. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held and which place shall be specified in the notice of the meeting, or, if not specified, at the place where said meeting is to be held, and the list shall be produced and kept at the time and place of meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 9. STOCKHOLDER PROPOSALS AT ANNUAL MEETINGS. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, otherwise properly brought before the meeting by or at the direction of the Board of Directors or otherwise properly 4 brought before the meeting by a stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 9. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting, (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the stockholder, (iv) a description of all arrangements or understandings between the stockholder and any other person or persons (including their names) in connection with the proposal of such business by the stockholder and any material interest of the stockholder in such business, and (v) a representation that the stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 9, provided, however, that nothing in this Section 9 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting in accordance with said procedure. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 9, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. SECTION 10. NOMINATIONS OF PERSONS FOR ELECTION TO THE BOARD OF DIRECTORS. In addition to any other applicable requirements, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors or by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 10 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 10. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. Such stockholder's notice shall set forth (a) 5 as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the Corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the stockholder, (iii) a description of all arrangements or understandings between the stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by the stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in such notice and (v) any other information relating to the stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee being named as a nominee and to serve as a director if elected. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein. These provisions shall not apply to nomination of any persons entitled to be separately elected by holders of preferred stock. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS. The property, affairs and business of the Corporation shall be managed under the direction of its Board of Directors, which may exercise all of the powers of the Corporation, except such as are by law or by the Certificate of Incorporation or by these By-Laws expressly conferred upon or reserved to the stockholders. SECTION 2. NUMBER AND TERM OF OFFICE; REMOVAL. The number of directors of the Corporation shall be fixed from time to time by these By-Laws but in no event shall be less than three (3). Until these By-Laws are further amended, the number of directors shall be eight (8). 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 initial 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, 6 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 these By-Laws 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 such alteration, amendment or repeal has been approved by either the holders of all shares of stock entitled to vote thereon or by a vote of a majority of the entire Board of Directors. The provisions of this Section 2 shall not apply to directors governed by Section 15 of this ARTICLE III. SECTION 3. ELECTION OF DIRECTORS. At each meeting of the stockholders for the election of directors, the directors to be elected at such meeting shall be elected by a plurality of votes given at such election. SECTION 4. VACANCIES. Any vacancy occurring in the Board of Directors for any cause other than by reason of an increase in the number of directors may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum, or by the stockholders. Any vacancy occurring by reason of an increase in the number of directors may be filled by action of a majority of the entire Board of Directors or by the stockholders. A director elected by the Board of Directors to fill a vacancy shall be elected to hold office until the expiration of the term for which he was elected and until his successor shall have been elected and shall have qualified. A director elected by the stockholders to fill a vacancy shall be elected to hold office until the expiration of the term for which he was elected and until his successor shall have been elected and shall have qualified. The provisions of this Section 4 shall not apply to directors governed by Section 15 of this ARTICLE III. SECTION 5. RESIGNATIONS. A director may resign at any time by giving written notice to the Board of Directors or to the Secretary. Such resignation shall take effect at the time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6. ANNUAL MEETINGS. The Board of Directors, as constituted following the vote of stockholders at any meeting of the stockholders for the election of directors, may hold its first meeting for the purpose of organization and the transaction of business, if a quorum be present, immediately after such meeting and at the same place, and notice of such meeting need not be given. Such first meeting may be held at any other time and place specified in a notice given as hereinafter provided for special meetings of the Board of Directors or in a consent and waiver of notice thereof signed by all the directors. SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such places and times as may be fixed from time to time by resolution of the Board. SECTION 8. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board or the President and shall be called by the Secretary upon the written request of any three directors and each special meeting shall be held at such place and time as shall be specified in the notice thereof. At least twenty-four (24) hours' notice of each such special meeting shall be given to each director personally or sent to him addressed to his residence or usual place 7 of business by telephone, telegram or facsimile transmission, or at least 120 hours' notice of each such special meeting shall be given to each director by letter sent to him addressed as aforesaid or on such shorter notice and by such means as the person or persons calling such meeting may deem reasonably necessary or appropriate in light of the circumstances. Any notice by letter or telegram shall be deemed to be given when deposited in the United States mail so addressed or when duly deposited at an appropriate office for transmission by telegram, as the case may be. Such notice need not state the business to be transacted at or the purpose or purposes of such special meeting. No notice of any such special meeting of the Board of Directors need be given to any director who attends in person or who, in writing executed and filed with the records of the meeting, either before or after the holding thereof, waives such notice. No notice need be given of an adjourned meeting of the Board of Directors. SECTION 9. QUORUM AND MANNER OF ACTING. A majority of the total number of directors, but in no event less than two directors, shall constitute a quorum for the transaction of business at any annual, regular or special meeting of the Board of Directors. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws, the act of a majority of the directors present at any meeting, at which a quorum is present, shall be the act of the Board of Directors. In the absence of a quorum, a majority of the directors present may adjourn the meeting from time to time until a quorum be had. SECTION 10. CONSENT IN WRITING. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting, if a written consent to such action is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or such committee. SECTION 11. COMMITTEES. (A) Executive Committee. The Board of Directors may, by resolution passed by a majority of a quorum of the Board, appoint an Executive Committee of not less than three members, each of whom shall be a director. The Executive Committee, to the extent permitted by law, shall have and may exercise when the Board of Directors is not in session all powers of the Board in the management of the business and affairs of the Corporation, including, without limitation, the power and authority to declare a dividend or to authorize the issuance of stock, except such Committee shall not have the power or authority (i) to approve, adopt, or recommend to stockholders any action or matter required by the Delaware General Corporation Law to be submitted for stockholder approval; or (ii) to adopt, amend, or repeal any By-Law of the Corporation. (B) Other Committees. The Board of Directors may, by resolution passed by a majority of a quorum of the Board, from time to time appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committee, but in no event shall any such committee have the powers denied to the Executive Committee in these By-Laws. (C) Term. The members of all committees of the Board of Directors shall serve a term coexistent with that of the Board of Directors which shall have appointed such committee. The Board, subject to the provisions of subsections (a) or (b) of this Section 11, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee; provided, that no committee shall consist of less than one member. The membership of a committee member shall terminate on the date of his death or voluntary resignation, but the Board may at any time for any reason remove any individual 8 committee member and the Board may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. (D) Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 11 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter; special meetings of any such committee may be held at the principal office of the Corporation required to be maintained pursuant to Section 2 of ARTICLE I hereof; or at any place which has been designated from time to time by resolution of such committee or by written consent of all members thereof, and may be called by any director who is a member of such committee, upon written notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of written notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time after the meeting and will be waived by any director by attendance thereat. A majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee. SECTION 12. TELEPHONE MEETINGS. The Board of Directors or any committee thereof may participate in a meeting by means of a conference telephone or similar communications equipment if all members of the Board or of such committee, as the case may be, participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. SECTION 13. COMPENSATION. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors and/or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 14. INTERESTED DIRECTORS. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. 9 SECTION 15. DIRECTORS ELECTED BY SPECIAL CLASS OR SERIES. 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 referred to in Section 2 of this ARTICLE III. Any directors so elected shall be subject to removal in such manner as may be provided by law or by the Certificate of Incorporation of this Corporation. The provisions of Sections 2 and 4 of this ARTICLE III do not apply to directors governed by this Section 15. ARTICLE IV OFFICERS SECTION 1. DESIGNATION OF OFFICERS. The officers of the Corporation, who shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders, shall be a Chairman of the Board, a President, one or more Vice Presidents, a Treasurer, a Secretary and a Controller. The Board of Directors from time to time may choose such other officers as it shall deem appropriate. Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by law. The Chairman of the Board and the President shall be chosen from among the directors; the other officers need not be directors. SECTION 2. TERM OF OFFICE; RESIGNATION; REMOVAL. The term of office of each officer shall be until the first meeting of the Board of Directors following the next annual meeting of stockholders and until his successor is elected and shall have qualified, or until his death, resignation or removal, whichever is sooner. Any officer may resign at any time by giving written notice to the Board of Directors or to the Secretary. Such resignation shall take effect at the time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any officer may be removed at any time either with or without cause by the Board of Directors. SECTION 3. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause, may be filled for the unexpired portion of the term by the Board of Directors. SECTION 4. AUTHORITY OF OFFICERS. Subject to the power of the Board of Directors in its discretion to change and redefine the duties of the officers of the Corporation by resolution in such manner as it may from time to time determine, the duties of the officers of the Corporation shall be as follows: (A) Chairman of the Board. The Chairman of the Board shall preside at meetings of the stockholders and the Board of Directors. Subject to the direction of the Board of Directors, he shall generally manage the affairs of the Board and perform such other duties as are assigned by the Board. (B) President. The President shall be the Chief Executive Officer of the Corporation, and shall execute all the powers and perform all the duties usual to such office. Subject to the direction of the Board of Directors, he shall have the responsibility for the general management of the affairs of the Corporation. The President shall perform such other duties as may be prescribed or assigned to him from time to time by the Board of Directors. 10 (C) Other Officers. The other officers of the Corporation shall have such powers and shall perform such duties as generally pertain to their respective offices, as well as such powers and duties as the Board of Directors, the Executive Committee or the Chief Executive Officer may prescribe. SECTION 5. DIVISIONAL TITLES. Any one of the Chief Executive Officer, President, or Vice President Human Resources and Administration (each one an "Appointing Person"), may from time to time confer upon any employee of a division of the Corporation the title of President, Vice President, Treasurer or Secretary of such division or any other divisional title or titles deemed appropriate. Any such titles so conferred may be discontinued and withdrawn at any time by any one Appointing Person. Any employee of a division designated by such a divisional title shall have the powers and duties with respect to such division as shall be prescribed by the Appointing Person. The conferring, withdrawal or discontinuance of divisional titles shall be in writing and shall be filed with the Secretary of the Corporation. SECTION 6. SALARIES. The salaries and other compensation of the principal officers of the Corporation shall be fixed from time to time by the Board of Directors. ARTICLE V EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION SECTION 1. EXECUTION OF INSTRUMENTS. The Board of Directors may in its discretion determine the method and designate the signatory officer or officers or other person or persons, to execute any corporate instrument or document, or to sign the corporate name without limitation, except where otherwise provided by law, and such execution or signature shall be binding upon the Corporation. All checks and drafts drawn on banks or other depositories on funds to the credit of the Corporation or in special accounts of the Corporation, shall be signed by such person or persons as the Treasurer or such other person designated by the Board of Directors for that purpose shall authorize so to do. SECTION 2. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and other securities of other corporations and business entities owned or held by the Corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized to do so by resolution of the Board of Directors. ARTICLE VI SHARES OF STOCK AND OTHER SECURITIES SECTION 1. FORM AND EXECUTION OF CERTIFICATES. Certificates for the shares of stock of the Corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman of the Board (if there be such an officer appointed), or by the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the Corporation. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such 11 officer, transfer agent, or registrar at the date of issue. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. SECTION 2. LOST CERTIFICATES. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to indemnify the Corporation in such manner as it shall require and/or to give the Corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. SECTION 3. TRANSFERS. Transfers of record of shares of stock of the Corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a certificate or certificates for a like number of shares, properly endorsed. SECTION 4. FIXING RECORD DATES. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed; (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. SECTION 6. REGULATIONS. The Board of Directors may make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the stock and 12 other securities of the Corporation, and may appoint transfer agents and registrars of any class of stock or other securities of the Corporation. SECTION 7. OTHER SECURITIES OF THE CORPORATION. All bonds, debentures and other corporate securities of the Corporation, other than stock certificates, may be signed by the Chairman of the Board (if there be such an officer appointed), or the President or any Vice President or such other person as may be authorized by the Board of Directors and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signature of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the Corporation, or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security or whose facsimile signature shall appear thereon shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the Corporation. ARTICLE VII CORPORATE SEAL The corporate seal shall consist of a die bearing the name of the Corporation and the state and date of its incorporation. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this ARTICLE VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director or officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to 13 any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. The right to indemnification conferred in this ARTICLE VIII shall be a contract right. SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this ARTICLE VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under this ARTICLE VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or Section 2 of this ARTICLE VIII, as the case may be. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. To the extent, however, that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case. SECTION 4. GOOD FAITH DEFINED. For purposes of any determination under Section 3 of this ARTICLE VIII, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to him by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term "another enterprise" as used in this Section 4 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Sections 1 or 2 of this ARTICLE VIII, as the case may be. SECTION 5. INDEMNIFICATION BY A COURT. Notwithstanding any contrary determination in the specific case under Section 3 of this ARTICLE VIII, and notwithstanding the absence of any determination thereunder, any director or officer may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Sections 1 and 2 of this ARTICLE 14 VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because he has met the applicable standards of conduct set forth in Sections 1 or 2 of this ARTICLE VIII, as the case may be. Neither a contrary determination in the specific case under Section 3 of this ARTICLE VIII nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 5 shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application. SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses incurred by a director or officer in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this ARTICLE VIII. SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The indemnification and advancement of expenses provided by or granted pursuant to this ARTICLE VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any By-Law, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Sections 1 and 2 of this ARTICLE VIII shall be made to the fullest extent permitted by law. The provisions of this ARTICLE VIII shall not be deemed to preclude the indemnification of any person who is not specified in Sections 1 or 2 of this ARTICLE VIII but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise. SECTION 8. INSURANCE. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this ARTICLE VIII. SECTION 9. CERTAIN DEFINITIONS. For purposes of this ARTICLE VIII, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this ARTICLE VIII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. For purposes of this ARTICLE VIII, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee 15 benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this ARTICLE VIII. SECTION 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The indemnification and advancement of expenses provided by, or granted pursuant to, this ARTICLE VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 11. LIMITATION ON INDEMNIFICATION. Notwithstanding anything contained in this ARTICLE VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 5 hereof), the Corporation shall not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation. SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this ARTICLE VIII to directors and officers of the Corporation. SECTION 13. EFFECT OF AMENDMENT. Any amendment, repeal or modification of this ARTICLE VIII shall not (a) adversely affect any right or protection of any director or officer existing at the time of such amendment, repeal or modification, or (b) apply to the indemnification of any such person for liability, expense, or loss stemming from actions or omissions occurring prior to such amendment, repeal, or modification. SECTION 14. AUTHORITY TO ENTER INTO INDEMNIFICATION AGREEMENTS. The Corporation may enter into indemnification agreements with the directors and officers of the Corporation, including, without limitation, any indemnification agreement in substantially the form set forth in Exhibit 1 attached to these By-Laws. ARTICLE IX NOTICES Whenever, under any provisions of these By-Laws, notice is required to be given to any stockholder, the same shall be given in writing, timely and duly deposited in the United States Mail, postage prepaid, and addressed to his last known post office address as shown by the stock record of the Corporation or its transfer agent. Any notice required to be given to any director may be given by any of the methods stated in Section 8 of ARTICLE III hereof, except that such notice other than one which is delivered personally, shall be sent to such address or (in the case of facsimile telecommunication) facsimile telephone number as such director shall have disclosed in writing to the Secretary of the Corporation, or, in the absence of such filing, to the last known post office address of such director. If no address of a stockholder or director be known, such notice may be sent to the office of the Corporation required to be maintained pursuant to Section 2 of ARTICLE I hereof. An affidavit of mailing, executed by a duly authorized and competent employee of the Corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stockholder or stockholders, director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall be conclusive evidence of the statements therein contained. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing and all notices given by telegram or other means of electronic transmission shall be deemed to have been given as at the sending time recorded by the telegraph company or other electronic transmission 16 equipment operator transmitting the same. It shall not be necessary that the same method of giving be employed in respect of all directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any director may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him in the manner above provided, shall not be affected or extended in any manner by the failure of such a stockholder or such director to receive such notice. Whenever any notice is required to be given under the provisions of this statutes or of the Certificate of Incorporation, or of these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or By-Laws of the Corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. ARTICLE X AMENDMENTS 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 ARTICLE V of the Certificate of Incorporation of the Corporation 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. CERTIFICATE OF SECRETARY The undersigned, Senior Vice President, General Counsel and Secretary of McKesson Corporation a Delaware corporation, hereby certifies that the foregoing is a full, true and correct copy of the By-Laws of said Corporation, with all amendments to date of this Certificate. WITNESS the signature of the undersigned and the seal of the Corporation this 30th day of July, 2003. /s/ Ivan D. Meyerson ---------------------------------------------------- Ivan D. Meyerson Senior Vice President, General Counsel and Secretary 17 EXHIBIT 1 INDEMNIFICATION AGREEMENT AGREEMENT, effective as of ______, _______, between McKesson Corporation, a Delaware corporation (the "Company"), and ______________ (the "Indemnitee"). WHEREAS, it is essential to the Company to retain and attract as directors and officers the most capable persons available. WHEREAS, Indemnitee is a director/officer of the Company; WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors of public companies in today's environment; WHEREAS, the Certificate of Incorporation and the By-laws of the Company require the Company to indemnify and advance expenses to its directors to the fullest extent permitted by law and the Indemnitee has been serving and continues to serve as a director or officer of the Company in part in reliance on such Certificate of Incorporation and By-laws; WHEREAS, in recognition of Indemnitee's need for substantial protection against personal liability in order to enhance Indemnitee's continued service to the Company in an effective manner and Indemnitee's reliance on the aforesaid Certificate of Incorporation and By-laws, and in part to provide Indemnitee with specific contractual assurance that the protection promised by such Certificate of Incorporation and By-laws will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of such Certificate of Incorporation and By-laws or any change in the composition of the Company's Board of Directors or acquisition transaction relating to the Company), and in order to induce Indemnitee to continue to provide services to the Company as a director or officer thereof, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company's directors' and officers' liability insurance policies. NOW, THEREFORE, in consideration of the premises and of Indemnitee continuing to serve the Company directly or, at its request, with another enterprise, and intending to be legally bound hereby, the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. (A) Change in Control: shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with 1 any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company's assets. (B) Expense: include attorneys' fees and all other costs, expenses and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Proceeding relating to any Indemnifiable Event. (C) Indemnifiable Event: any event or occurrence that takes place either prior to or after the execution of this Agreement, related to the fact that Indemnitee is or was a director or an officer of the Company, or while a director or officer is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity. (D) Potential Change in Control: shall be deemed to have occurred if (i) the Company enters into an agreement or arrangement, the consummation of which would result in the occurrence of Change in Control; (ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute Change in Control; (iii) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company's then outstanding Voting Securities, increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such person on the date hereof; or (iv) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (E) Proceeding: any threatened, pending or completed action, suit or proceeding, or any inquiry, hearing or investigation, whether conducted by the Company or any other party, that Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other. (F) Reviewing Party: any appropriate person or body consisting of a member or members of the Company's Board of Directors or any other person or body appointed by the Board (including the special, independent counsel referred to in Section 3) who is not a party to the particular Proceeding with respect to which Indemnitee is seeking indemnification. (G) Voting Securities: any securities of the Company which vote generally in the election of directors. 2 2. AGREEMENT TO INDEMNIFY. (A) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by law, as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Proceeding and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement (including the creation of the Trust). Notwithstanding anything in this Agreement to the contrary and except as provided in Section 5, prior to a Change in Control Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Proceeding initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Proceeding. If so requested by Indemnitee, the Company shall advance (within ten business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"). (B) Notwithstanding the foregoing, (i) the obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the special, independent counsel referred to in Section 3 hereof is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 2(a) shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon. If there has not been a Change in Control the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the special, independent counsel referred to in Section 3 hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in the States of California or Delaware having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. 3. CHANGE IN CONTROL. The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control) then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or under applicable law or the Company's Certificate of Incorporation or By-Laws now or hereafter in effect relating to indemnification for Indemnifiable Events, the Company shall seek legal advice only from special, independent counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company or the Indemnitee (other than in connection with such matters) within the last five years. Such independent counsel shall not include any person who, under the 3 applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the special, independent counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or the engagement of special, independent counsel pursuant hereto. 4. ESTABLISHMENT OF TRUST. In the event of a Potential Change in Control, the Company shall, upon written request by Indemnitee, create a Trust for the benefit of the Indemnitee and from time to time upon written request of Indemnitee shall fund such Trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred in connection with investigating, preparing for and defending any Proceeding relating to an Indemnifiable event, and any and all judgments, fines, penalties and settlement amounts of any and all Proceedings relating to an Indemnifiable Event from time to time actually paid or claimed, reasonably anticipated or proposed to be paid. The amount or amounts to be deposited in the Trust pursuant to the foregoing funding obligation shall be determined by the Reviewing Party, in any case in which the special, independent counsel referred to above is involved. The terms of the Trust shall provide that upon a Change in Control (i) the Trust shall not be revoked or the principal thereof invaded, without the written consent of the Indemnitee, (ii) the Trustee shall advance, within ten business days of a request by the Indemnitee, any and all Expenses to the Indemnitee (and the Indemnitee hereby agrees to reimburse the Trust under the circumstances under which the Indemnitee would be required to reimburse the Company under Section 2(b) of this Agreement), (iii) the Trust shall continue to be funded by the Company in accordance with the funding obligation set forth above, (iv) the Trustee shall promptly pay to the Indemnitee all amounts for which the Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise, and (v) all unexpended funds in such Trust shall revert to the Company upon a final determination by the Reviewing Party or a court of competent jurisdiction, as the case may be, that the Indemnitee has been fully indemnified under the terms of this Agreement. The Trustee shall be chosen by the Indemnitee. Nothing in this Section 4 shall relieve the Company of any of its obligations under this Agreement. All income earned on the assets held in the Trust shall be reported as income by the Company for federal, state, local and foreign tax purposes. 5. INDEMNIFICATION FOR EXPENSES INCURRED IN ENFORCING THIS AGREEMENT. The Company shall indemnify Indemnitee against any and all expenses (including attorneys' fees), and, if requested by Indemnitee, shall (within ten business days of such request) advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any claim asserted against or action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or under applicable law or the Company's Certificate of Incorporation or By-laws now or hereafter in effect relating to indemnification for Indemnifiable Events and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be. 4 6. PARTIAL INDEMNITY. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Proceeding but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Proceedings relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith. 7. DEFENSE TO INDEMNIFICATION, BURDEN OF PROOF AND PRESUMPTIONS. It shall be a defense to any action brought by the Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for expenses incurred in defending a Proceeding in advance of its final disposition where the required undertaking has been tendered to the Company) that the Indemnitee has not met the standards of conduct that make it permissible under the Delaware General Corporation Law for the Company to indemnify the Indemnitee for the amount claimed. In connection with any determination by the Reviewing Party or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder, the burden of proving such a defense shall be on the Company. Neither the failure of the Company (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action by the Indemnitee that indemnification of the claimant is proper under the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Company (including its Board of Directors, independent legal counsel, or its stockholders) that the Indemnitee had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. 8. NON-EXCLUSIVITY. The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Certificate of Incorporation or By-laws or the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Certificate of Incorporation and By-laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. 9. LIABILITY INSURANCE. To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director or officer. 10. PERIOD OF LIMITATIONS. No legal action shall be brought and no cause of action shall be asserted by or on behalf of the Company or any affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, or such longer period as may be required by state law under the circumstances, and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such period; provided, 5 however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern. 11. AMENDMENT OF THIS AGREEMENT. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 12. SUBROGATION. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 13. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, By-law or otherwise) of the amounts otherwise indemnifiable hereunder. 14. SETTLEMENT OF CLAIMS. The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without the Company's written consent. The Company shall not settle any action or claim in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent. Neither the Company nor the Indemnitee will unreasonably withhold their consent to any proposed settlement. The Company shall not be liable to indemnify the Indemnitee under this Agreement with regard to any judicial award if the Company was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action. 15. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director or officer of the Company or of any other enterprise at the Company's request. 16. SEVERABILITY. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 6 17. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the _______________ day of __________________, 20___. McKESSON CORPORATION By: ______________________ Name: Title: ______________________ [Indemnitee] 7 EX-31.1 4 f93287exv31w1.txt EXHIBIT 31.1 MCKESSON CORPORATION EXHIBIT 31.1 CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, John H. Hammergren, certify that: 1. I have reviewed this quarterly report on Form 10-Q of McKesson Corporation (the "Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) for the Registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors: (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: October 30, 2003 /s/ John H. Hammergren ------------------------------------- JOHN H. HAMMERGREN Chairman and Chief Executive Officer EX-31.2 5 f93287exv31w2.txt EXHIBIT 31.2 MCKESSON CORPORATION EXHIBIT 31.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, William R. Graber, certify that: 1. I have reviewed this quarterly report on Form 10-Q of McKesson Corporation (the "Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) for the Registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors: (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: October 30, 2003 /s/ William R. Graber ------------------------------- WILLIAM R. GRABER Senior Vice President and Chief Financial Officer EX-32.1 6 f93287exv32w1.txt EXHIBIT 32.1 MCKESSON CORPORATION EXHIBIT 32.1 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 quarter ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacities and on the dates indicated below, each hereby 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 their knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange 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 October 30, 2003 /s/ William R. Graber - ------------------------------- WILLIAM R. GRABER Chief Financial Officer October 30, 2003 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. A signed original of this written statement required by Section 906 has been provided to McKesson Corporation and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----

EX-3.2

                                                                     Exhibit 3.2
                                   AMENDED AND

                                    RESTATED

                                     BY-LAWS

                                       OF

                              MCKESSON CORPORATION

                             A DELAWARE CORPORATION

                        AS AMENDED THROUGH JULY 30, 2003

================================================================================

                                TABLE OF CONTENTS



                                                                                                         Page
                                                                                                         ----
                                                                                                
ARTICLE I                     Offices......................................................................1
         Section 1            Registered Office............................................................1
         Section 2            Other Offices................................................................1

ARTICLE II                    Stockholders' Meetings.......................................................1
         Section 1            Place of Meetings............................................................1
         Section 2            Annual Meetings..............................................................1
         Section 3            Special Meetings.............................................................1
         Section 4            Notice of Meetings...........................................................2
         Section 5            Quorum.......................................................................2
         Section 6            Voting Rights................................................................3
         Section 7            Voting Procedures and Inspectors of Elections................................3
         Section 8            List of Stockholders.........................................................4
         Section 9            Stockholder Proposals at Annual Meetings.....................................4
         Section 10           Nominations of Persons for Election to the Board of Directors................5

ARTICLE III                   Directors....................................................................6
         Section 1            General Powers...............................................................6
         Section 2            Number and Term of Office; Removal...........................................6
         Section 3            Election of Directors........................................................7
         Section 4            Vacancies....................................................................7
         Section 5            Resignations.................................................................7
         Section 6            Annual Meetings..............................................................7
         Section 7            Regular Meetings.............................................................7
         Section 8            Special Meetings; Notice.....................................................7
         Section 9            Quorum and Manner of Acting..................................................8
         Section 10           Consent in Writing...........................................................8
         Section 11           Committees...................................................................8
         Section 12           Telephone Meetings...........................................................9
         Section 13           Compensation.................................................................9
         Section 14           Interested Directors.........................................................9
         Section 15           Directors Elected by Special Class or Series................................10

ARTICLE IV                    Officers....................................................................10
         Section 1            Designation of Officers.....................................................10
         Section 2            Term of Office; Resignation; Removal........................................10
         Section 3            Vacancies...................................................................10
         Section 4            Authority of Officers.......................................................10
         Section 5            Divisional Titles...........................................................11
         Section 6            Salaries....................................................................11

ARTICLE V                Execution of Corporate Instruments and Voting
                                of Securities Owned by the Corporation....................................11
         Section 1            Execution of Instruments....................................................11
         Section 2            Voting of Securities Owned by the Corporation...............................11



                                        i



                                                                                                         Page
                                                                                                         ----
                                                                                                
ARTICLE VI                    Shares of Stock and Other Securities........................................11
         Section 1            Form and Execution of Certificates..........................................11
         Section 2            Lost Certificates...........................................................12
         Section 3            Transfers...................................................................12
         Section 4            Fixing Record Dates.........................................................12
         Section 5            Registered Stockholders.....................................................12
         Section 6            Regulations.................................................................12
         Section 7            Other Securities of the Corporation.........................................13

ARTICLE VII                   Corporate Seal..............................................................13

ARTICLE VIII                  Indemnification of Officers, Directors, Employees and Agents................13
         Section 1            Power to Indemnify in Actions, Suits or Proceedings other
                                 Than Those by or in the Right of the Corporation.........................13
         Section 2            Power to Indemnify in Actions, Suits or Proceedings by
                                or in the Right of the Corporation .......................................14
         Section 3            Authorization of Indemnification ...........................................14
         Section 4            Good Faith Defined .........................................................14
         Section 5            Indemnification by a Court .................................................14
         Section 6            Expenses Payable in Advance ................................................15
         Section 7            Nonexclusivity of Indemnification and Advancement of Expenses ..............15
         Section 8            Insurance...................................................................15
         Section 9            Certain Definitions.........................................................15
         Section 10           Survival of Indemnification and Advancement of Expenses ....................16
         Section 11           Limitation on Indemnification ..............................................16
         Section 12           Indemnification of Employees and Agents.....................................16
         Section 13           Effect of Amendment ........................................................16
         Section 14           Authority to Enter into Indemnification Agreements .........................16

ARTICLE IX                    Notices.....................................................................16

ARTICLE X                     Amendments..................................................................17



                                       ii

                                   AMENDED AND

                                    RESTATED

                                     BY-LAWS

                                       OF

                              MCKESSON CORPORATION

                             A DELAWARE CORPORATION



                                    ARTICLE I

                                     OFFICES

SECTION 1. REGISTERED OFFICE. The address of the registered office of
Corporation within the State of Delaware is 2711 Centerville Road, City of
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.

SECTION 2. OTHER OFFICES. The Corporation shall also have and maintain an office
or principal place of business at One Post Street, San Francisco, California and
may also have offices at such other places, both within and without the State of
Delaware, as the Board of Directors may from time to time determine or the
business of the Corporation may require.

                                   ARTICLE II

                             STOCKHOLDERS' MEETINGS

SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders of the Corporation
shall be held at such place, either within or without the State of Delaware, as
may be designated from time to time by the Board of Directors, or, if not so
designated, then at the office of the Corporation required to be maintained
pursuant to Section 2 of ARTICLE I hereof.

SECTION 2. ANNUAL MEETINGS. The annual meetings of stockholders of the
Corporation for the purpose of election of directors and for such other business
as may lawfully come before it, shall be held on such date and at such time as
may be designated from time to time by the Board of Directors, or, if not so
designated, then at 10:00 a.m. on the last Wednesday in July in each year if not
a legal holiday, and, if a legal holiday, at the same hour and place on the next
succeeding day not a holiday.

SECTION 3. SPECIAL MEETINGS. Special Meetings of the stockholders of the
Corporation may be called, for any purpose or purposes, by the Chairman of the
Board or the President or the Board of Directors at any time. Stockholders may
not call Special Meetings of the stockholders of the Corporation.


                                       1

SECTION 4. NOTICE OF MEETINGS.

(A) Except as otherwise provided by law or the Certificate of Incorporation,
written notice of each meeting of stockholders, specifying the place, date and
hour and purpose or purposes of the meeting, shall be given not less than 10 nor
more than 60 days before the date of the meeting to each stockholder entitled to
vote thereat, directed to his address as it appears upon the books of the
Corporation; except that where the matter to be acted on is a merger or
consolidation of the Corporation or a sale, lease or exchange of all or
substantially all of its assets, such notice shall be given not less than 20 nor
more than 60 days prior to such meeting.

(B) If at any meeting action is proposed to be taken which, if taken, would
entitle stockholders fulfilling the requirements of Section 262(d) of the
Delaware General Corporation Law to an appraisal of the fair value of their
shares, the notice of such meeting shall contain a statement of that purpose and
to that effect and shall be accompanied by a copy of that statutory section.

(C) When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken unless the adjournment is for more
than thirty days, or unless after the adjournment a new record date is fixed for
the adjourned meeting, in which event a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.

(D) Notice of the time, place and purpose of any meeting of stockholders may be
waived in writing, either before or after such meeting, and to the extent
permitted by law, will be waived by any stockholder by his attendance thereat,
in person or by proxy. Any stockholder so waiving notice of such meeting shall
be bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.

(E) Unless and until voted, every proxy shall be revocable at the pleasure of
the person who executed it or of his legal representatives or assigns, except in
those cases where an irrevocable proxy permitted by statute has been given.


SECTION 5. QUORUM. At all meetings of stockholders, except where otherwise
provided by law, the Certificate of Incorporation, or these By-Laws, the
presence, in person or by proxy duly authorized, of the holders of a majority of
the outstanding shares of stock entitled to vote shall constitute a quorum for
the transaction of business. Shares, the voting of which at said meeting has
been enjoined, or which for any reason cannot be lawfully voted at such meeting,
shall not be counted to determine a quorum at said meeting.

In the absence of a quorum any meeting of stockholders may be adjourned, from
time to time, by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. At such
adjourned meeting at which a quorum is present or represented any business may
be transacted which might have been transacted at the original meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these By-Laws,
all action taken by the holders of a majority of the voting power represented at
any meeting at which a quorum is present shall be valid and binding upon the
Corporation.

In the event that at any meeting at which the holders of more than one class or
series of the Corporation's capital stock are entitled to vote as a class, a
quorum of any such class or series is lacking, the holders of any class or
series represented by a quorum may proceed with the transaction of the business
to be


                                       2

transacted by that class or series, and if such business is the election of
directors, the director whose successors shall not have been elected shall
continue in office until their successors shall have been duly elected and shall
have qualified.

SECTION 6. VOTING RIGHTS.

(A) Except as otherwise provided by law, only persons in whose names shares
entitled to vote stand on the stock records of the Corporation on the record
date for determining the stockholders entitled to vote at said meeting shall be
entitled to vote at such meeting. Shares standing in the names of two or more
persons shall be voted or represented in accordance with the determination of
the majority of such persons, or, if only one of such persons is present in
person or represented by proxy, such person shall have the right to vote such
shares and such shares shall be deemed to be represented for the purpose of
determining a quorum.

(B) Every person entitled to vote or execute consents shall have the right to do
so either in person or by an agent or agents authorized by a written proxy
executed by such person or his duly authorized agent, which proxy shall be filed
with the Secretary of the Corporation at or before the meeting at which it is to
be used. Said proxy so appointed need not be a stockholder. No proxy shall be
voted on after three years from its date unless the proxy provides for a longer
period.

(C) Without limiting the manner in which a stockholder may authorize another
person or persons to act for him as proxy pursuant to subsection (b) of this
Section, the following shall constitute a valid means by which a stockholder may
grant such authority:

      (1)A stockholder may execute a writing authorizing another person or
      persons to act for him as proxy. Execution may be accomplished by the
      stockholder or his authorized officer, director, employee or agent signing
      such writing or causing his or her signature to be affixed to such writing
      by any reasonable means including, but not limited to, by facsimile
      signature.

      (2)A stockholder may authorize another person or persons to act for him as
      proxy by transmitting or authorizing the transmission of a telegram,
      cablegram, or other means of electronic transmission to the person who
      will be the holder of the proxy or to a proxy solicitation firm, proxy
      support service organization or like agent duly authorized by the person
      who will be the holder of the proxy to receive such transmission, provided
      that any such telegram, cablegram or other means of electronic
      transmission must either set forth or be submitted with information from
      which it can be determined that the telegram, cablegram or other
      electronic transmission was authorized by the stockholder. If it is
      determined that such telegrams, cablegrams or other electronic
      transmissions are valid, the inspectors or, if there are no inspectors,
      such other persons making that determination shall specify the information
      upon which they relied.

(D) Any copy, facsimile telecommunication or other reliable reproduction of the
writing or transmission created pursuant to subsection (c) of this Section may
be substituted or used in lieu of the original writing or transmission for any
and all purposes for which the original writing or transmission could be used,
provided that such copy, facsimile telecommunication or other reproduction shall
be a complete reproduction of the entire original writing or transmission.

SECTION 7.  VOTING PROCEDURES AND INSPECTORS OF ELECTIONS.

(A) The Corporation shall, in advance of any meeting of stockholders, appoint
one or more inspectors to act at the meeting and make a written report thereof.
The Corporation may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is


                                       3

able to act at a meeting of stockholders, the person presiding at the meeting
shall appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability.

(B) The inspectors shall (i) ascertain the number of shares outstanding and the
voting power of each, (ii) determine the shares represented at a meeting and the
validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares represented at the meeting, and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of the duties of
the inspectors.

(C) The date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting shall be announced at
the meeting. No ballot, proxies or votes, nor any revocations thereof or changes
thereto, shall be accepted by the inspectors after the closing of the polls
unless the Court of Chancery upon application by a stockholder shall determine
otherwise.

(D) In determining the validity and counting of proxies and ballots, the
inspectors shall be limited to an examination of the proxies, any envelopes
submitted with those proxies, any information provided in accordance with
Section 212(c)(2) of the Delaware General Corporation Law, ballots and the
regular books and records of the Corporation, except that the inspectors may
consider other reliable information for the limited purpose of reconciling
proxies and ballots submitted by or on behalf of banks, brokers, their nominees
or similar persons which represent more votes than the holder of a proxy is
authorized by the record owner to cast or more votes than the stockholder holds
of record. If the inspectors consider other reliable information for the limited
purpose permitted herein, the inspectors at the time they make their
certification pursuant to subsection (b)(v) of this Section shall specify the
precise information considered by them including the person or persons from whom
they obtained the information, when the information was obtained, the means by
which the information was obtained and the basis for the inspectors' belief that
such information is accurate and reliable.

(E) The provisions of this Section 7 shall not apply to any annual meeting of
stockholders held prior to the annual meeting of stockholders to be held in
1995.


SECTION 8. LIST OF STOCKHOLDERS. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least 10 days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at said
meeting, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held and
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where said meeting is to be held, and the list shall be
produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present.

SECTION 9. STOCKHOLDER PROPOSALS AT ANNUAL MEETINGS. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, otherwise properly
brought before the meeting by or at the direction of the Board of Directors or
otherwise properly


                                       4

brought before the meeting by a stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 9 and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 9. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice to the
Secretary must be delivered to or mailed and received at the principal executive
offices of the Corporation, not less than 90 days nor more than 120 days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within 30 days before or after such anniversary
date, notice by the stockholder in order to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure of
the date of the annual meeting was made, whichever first occurs. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting, (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and record address
of the stockholder proposing such business, (iii) the class or series and number
of shares of capital stock of the Corporation which are owned beneficially or of
record by the stockholder, (iv) a description of all arrangements or
understandings between the stockholder and any other person or persons
(including their names) in connection with the proposal of such business by the
stockholder and any material interest of the stockholder in such business, and
(v) a representation that the stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.

Notwithstanding anything in the By-Laws to the contrary, no business shall be
conducted at the annual meeting except in accordance with the procedures set
forth in this Section 9, provided, however, that nothing in this Section 9 shall
be deemed to preclude discussion by any stockholder of any business properly
brought before the annual meeting in accordance with said procedure.

The Chairman of an annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 9, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.

SECTION 10. NOMINATIONS OF PERSONS FOR ELECTION TO THE BOARD OF DIRECTORS. In
addition to any other applicable requirements, only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors, by any nominating committee or person appointed by the
Board of Directors or by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 10 and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 10. Such nominations, other than those made
by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice to the Secretary must be delivered to or mailed and
received at the principal executive offices of the Corporation not less than 90
days nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting is called for a date that is not within 30 days before
or after such anniversary date, notice by the stockholder in order to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs. Such stockholder's notice shall set forth (a)


                                       5

as to each person whom the stockholder proposes to nominate for election or
re-election as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of the Corporation which are
beneficially owned by the person and (iv) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Section 14 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder; and (b) as to the stockholder giving the notice, (i) the name and
record address of the stockholder, (ii) the class or series and number of shares
of capital stock of the Corporation which are owned beneficially or of record by
the stockholder, (iii) a description of all arrangements or understandings
between the stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s) are to be
made by the stockholder, (iv) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons named in
such notice and (v) any other information relating to the stockholder that would
be required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for the election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee being named as a nominee and to serve as a director if
elected. The Corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the Corporation to determine the
eligibility of such proposed nominee to serve as a director of the Corporation.
No person shall be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth herein. These provisions
shall not apply to nomination of any persons entitled to be separately elected
by holders of preferred stock.

The Chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.

                                   ARTICLE III

                                    DIRECTORS

SECTION 1. GENERAL POWERS. The property, affairs and business of the Corporation
shall be managed under the direction of its Board of Directors, which may
exercise all of the powers of the Corporation, except such as are by law or by
the Certificate of Incorporation or by these By-Laws expressly conferred upon or
reserved to the stockholders.

SECTION 2. NUMBER AND TERM OF OFFICE; REMOVAL. The number of directors of the
Corporation shall be fixed from time to time by these By-Laws but in no event
shall be less than three (3). Until these By-Laws are further amended, the
number of directors shall be eight (8). 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 initial 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,


                                       6

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 these By-Laws 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 such alteration, amendment or repeal has been approved by either
the holders of all shares of stock entitled to vote thereon or by a vote of a
majority of the entire Board of Directors. The provisions of this Section 2
shall not apply to directors governed by Section 15 of this ARTICLE III.

SECTION 3. ELECTION OF DIRECTORS. At each meeting of the stockholders for the
election of directors, the directors to be elected at such meeting shall be
elected by a plurality of votes given at such election.

SECTION 4. VACANCIES. Any vacancy occurring in the Board of Directors for any
cause other than by reason of an increase in the number of directors may be
filled by a majority of the remaining members of the Board of Directors,
although such majority is less than a quorum, or by the stockholders. Any
vacancy occurring by reason of an increase in the number of directors may be
filled by action of a majority of the entire Board of Directors or by the
stockholders. A director elected by the Board of Directors to fill a vacancy
shall be elected to hold office until the expiration of the term for which he
was elected and until his successor shall have been elected and shall have
qualified. A director elected by the stockholders to fill a vacancy shall be
elected to hold office until the expiration of the term for which he was elected
and until his successor shall have been elected and shall have qualified. The
provisions of this Section 4 shall not apply to directors governed by Section 15
of this ARTICLE III.

SECTION 5. RESIGNATIONS. A director may resign at any time by giving written
notice to the Board of Directors or to the Secretary. Such resignation shall
take effect at the time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.

SECTION 6. ANNUAL MEETINGS. The Board of Directors, as constituted following the
vote of stockholders at any meeting of the stockholders for the election of
directors, may hold its first meeting for the purpose of organization and the
transaction of business, if a quorum be present, immediately after such meeting
and at the same place, and notice of such meeting need not be given. Such first
meeting may be held at any other time and place specified in a notice given as
hereinafter provided for special meetings of the Board of Directors or in a
consent and waiver of notice thereof signed by all the directors.

SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held without notice at such places and times as may be fixed from time to time
by resolution of the Board.

SECTION 8. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of Directors
may be called at any time by the Chairman of the Board or the President and
shall be called by the Secretary upon the written request of any three directors
and each special meeting shall be held at such place and time as shall be
specified in the notice thereof. At least twenty-four (24) hours' notice of each
such special meeting shall be given to each director personally or sent to him
addressed to his residence or usual place


                                       7

of business by telephone, telegram or facsimile transmission, or at least 120
hours' notice of each such special meeting shall be given to each director by
letter sent to him addressed as aforesaid or on such shorter notice and by such
means as the person or persons calling such meeting may deem reasonably
necessary or appropriate in light of the circumstances. Any notice by letter or
telegram shall be deemed to be given when deposited in the United States mail so
addressed or when duly deposited at an appropriate office for transmission by
telegram, as the case may be. Such notice need not state the business to be
transacted at or the purpose or purposes of such special meeting. No notice of
any such special meeting of the Board of Directors need be given to any director
who attends in person or who, in writing executed and filed with the records of
the meeting, either before or after the holding thereof, waives such notice. No
notice need be given of an adjourned meeting of the Board of Directors.

SECTION 9. QUORUM AND MANNER OF ACTING. A majority of the total number of
directors, but in no event less than two directors, shall constitute a quorum
for the transaction of business at any annual, regular or special meeting of the
Board of Directors. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, the act of a majority of the directors
present at any meeting, at which a quorum is present, shall be the act of the
Board of Directors. In the absence of a quorum, a majority of the directors
present may adjourn the meeting from time to time until a quorum be had.

SECTION 10. CONSENT IN WRITING. Any action required or permitted to be taken at
any meeting of the Board of Directors or any committee thereof may be taken
without a meeting, if a written consent to such action is signed by all members
of the Board or of such committee, as the case may be, and such written consent
is filed with the minutes of proceedings of the Board or such committee.

SECTION 11.  COMMITTEES.

(A) Executive Committee. The Board of Directors may, by resolution passed by a
majority of a quorum of the Board, appoint an Executive Committee of not less
than three members, each of whom shall be a director. The Executive Committee,
to the extent permitted by law, shall have and may exercise when the Board of
Directors is not in session all powers of the Board in the management of the
business and affairs of the Corporation, including, without limitation, the
power and authority to declare a dividend or to authorize the issuance of stock,
except such Committee shall not have the power or authority (i) to approve,
adopt, or recommend to stockholders any action or matter required by the
Delaware General Corporation Law to be submitted for stockholder approval; or
(ii) to adopt, amend, or repeal any By-Law of the Corporation.

(B) Other Committees. The Board of Directors may, by resolution passed by a
majority of a quorum of the Board, from time to time appoint such other
committees as may be permitted by law. Such other committees appointed by the
Board of Directors shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committee, but in no
event shall any such committee have the powers denied to the Executive Committee
in these By-Laws.

(C) Term. The members of all committees of the Board of Directors shall serve a
term coexistent with that of the Board of Directors which shall have appointed
such committee. The Board, subject to the provisions of subsections (a) or (b)
of this Section 11, may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee; provided, that no
committee shall consist of less than one member. The membership of a committee
member shall terminate on the date of his death or voluntary resignation, but
the Board may at any time for any reason remove any individual


                                       8

committee member and the Board may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.

(D) Meetings. Unless the Board of Directors shall otherwise provide, regular
meetings of the Executive Committee or any other committee appointed pursuant to
this Section 11 shall be held at such times and places as are determined by the
Board of Directors, or by any such committee, and when notice thereof has been
given to each member of such committee, no further notice of such regular
meetings need be given thereafter; special meetings of any such committee may be
held at the principal office of the Corporation required to be maintained
pursuant to Section 2 of ARTICLE I hereof; or at any place which has been
designated from time to time by resolution of such committee or by written
consent of all members thereof, and may be called by any director who is a
member of such committee, upon written notice to the members of such committee
of the time and place of such special meeting given in the manner provided for
the giving of written notice to members of the Board of Directors of the time
and place of special meetings of the Board of Directors. Notice of any special
meeting of any committee may be waived in writing at any time after the meeting
and will be waived by any director by attendance thereat. A majority of the
authorized number of members of any such committee shall constitute a quorum for
the transaction of business, and the act of a majority of those present at any
meeting at which a quorum is present shall be the act of such committee.

SECTION 12. TELEPHONE MEETINGS. The Board of Directors or any committee thereof
may participate in a meeting by means of a conference telephone or similar
communications equipment if all members of the Board or of such committee, as
the case may be, participating in the meeting can hear each other at the same
time. Participation in a meeting by these means shall constitute presence in
person at the meeting.

SECTION 13. COMPENSATION. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors and/or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.

SECTION 14. INTERESTED DIRECTORS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or committee, and the Board of Directors or
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.


                                       9

SECTION 15. DIRECTORS ELECTED BY SPECIAL CLASS OR SERIES. 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 referred to in Section 2 of this ARTICLE III. Any directors so
elected shall be subject to removal in such manner as may be provided by law or
by the Certificate of Incorporation of this Corporation. The provisions of
Sections 2 and 4 of this ARTICLE III do not apply to directors governed by this
Section 15.

                                   ARTICLE IV

                                    OFFICERS

SECTION 1. DESIGNATION OF OFFICERS. The officers of the Corporation, who shall
be chosen by the Board of Directors at its first meeting after each annual
meeting of stockholders, shall be a Chairman of the Board, a President, one or
more Vice Presidents, a Treasurer, a Secretary and a Controller. The Board of
Directors from time to time may choose such other officers as it shall deem
appropriate. Any one person may hold any number of offices of the Corporation at
any one time unless specifically prohibited therefrom by law. The Chairman of
the Board and the President shall be chosen from among the directors; the other
officers need not be directors.

SECTION 2. TERM OF OFFICE; RESIGNATION; REMOVAL. The term of office of each
officer shall be until the first meeting of the Board of Directors following the
next annual meeting of stockholders and until his successor is elected and shall
have qualified, or until his death, resignation or removal, whichever is sooner.
Any officer may resign at any time by giving written notice to the Board of
Directors or to the Secretary. Such resignation shall take effect at the time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective. Any officer may be
removed at any time either with or without cause by the Board of Directors.

SECTION 3. VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause, may be filled for the unexpired
portion of the term by the Board of Directors.

SECTION 4. AUTHORITY OF OFFICERS. Subject to the power of the Board of Directors
in its discretion to change and redefine the duties of the officers of the
Corporation by resolution in such manner as it may from time to time determine,
the duties of the officers of the Corporation shall be as follows:

(A) Chairman of the Board. The Chairman of the Board shall preside at meetings
of the stockholders and the Board of Directors. Subject to the direction of the
Board of Directors, he shall generally manage the affairs of the Board and
perform such other duties as are assigned by the Board.

(B) President. The President shall be the Chief Executive Officer of the
Corporation, and shall execute all the powers and perform all the duties usual
to such office. Subject to the direction of the Board of Directors, he shall
have the responsibility for the general management of the affairs of the
Corporation. The President shall perform such other duties as may be prescribed
or assigned to him from time to time by the Board of Directors.


                                       10

(C) Other Officers. The other officers of the Corporation shall have such powers
and shall perform such duties as generally pertain to their respective offices,
as well as such powers and duties as the Board of Directors, the Executive
Committee or the Chief Executive Officer may prescribe.

SECTION 5. DIVISIONAL TITLES. Any one of the Chief Executive Officer, President,
or Vice President Human Resources and Administration (each one an "Appointing
Person"), may from time to time confer upon any employee of a division of the
Corporation the title of President, Vice President, Treasurer or Secretary of
such division or any other divisional title or titles deemed appropriate. Any
such titles so conferred may be discontinued and withdrawn at any time by any
one Appointing Person. Any employee of a division designated by such a
divisional title shall have the powers and duties with respect to such division
as shall be prescribed by the Appointing Person. The conferring, withdrawal or
discontinuance of divisional titles shall be in writing and shall be filed with
the Secretary of the Corporation.

SECTION 6. SALARIES. The salaries and other compensation of the principal
officers of the Corporation shall be fixed from time to time by the Board of
Directors.


                                    ARTICLE V

                       EXECUTION OF CORPORATE INSTRUMENTS
                AND VOTING OF SECURITIES OWNED BY THE CORPORATION

SECTION 1. EXECUTION OF INSTRUMENTS. The Board of Directors may in its
discretion determine the method and designate the signatory officer or officers
or other person or persons, to execute any corporate instrument or document, or
to sign the corporate name without limitation, except where otherwise provided
by law, and such execution or signature shall be binding upon the Corporation.
All checks and drafts drawn on banks or other depositories on funds to the
credit of the Corporation or in special accounts of the Corporation, shall be
signed by such person or persons as the Treasurer or such other person
designated by the Board of Directors for that purpose shall authorize so to do.

SECTION 2. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and other
securities of other corporations and business entities owned or held by the
Corporation for itself, or for other parties in any capacity, shall be voted,
and all proxies with respect thereto shall be executed, by the person authorized
to do so by resolution of the Board of Directors.

                                   ARTICLE VI

                      SHARES OF STOCK AND OTHER SECURITIES

SECTION 1. FORM AND EXECUTION OF CERTIFICATES. Certificates for the shares of
stock of the Corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by, or in the name of
the Corporation by, the Chairman of the Board (if there be such an officer
appointed), or by the President or any Vice President and by the Treasurer or
Assistant Treasurer or the Secretary or Assistant Secretary, certifying the
number of shares owned by him in the Corporation. Any or all of the signatures
on the certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued with the same effect as if
he were such


                                       11

officer, transfer agent, or registrar at the date of issue. If the Corporation
shall be authorized to issue more than one class of stock or more than one
series of any class, the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the Corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided in Section 202 of
the General Corporation Law of Delaware, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, a statement
that the Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.

SECTION 2. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
indemnify the Corporation in such manner as it shall require and/or to give the
Corporation a surety bond in such form and amount as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost or destroyed.

SECTION 3. TRANSFERS. Transfers of record of shares of stock of the Corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a certificate or
certificates for a like number of shares, properly endorsed.

SECTION 4. FIXING RECORD DATES. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than 60 nor less than 10 days before the date of such
meeting, nor more than 60 days prior to any other action. If no record date is
fixed: (1) the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held; (2) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is necessary, shall be the day on which the first
written consent is expressed; (3) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.

SECTION 5. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.

SECTION 6. REGULATIONS. The Board of Directors may make such rules and
regulations as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of the stock and


                                       12

other securities of the Corporation, and may appoint transfer agents and
registrars of any class of stock or other securities of the Corporation.

SECTION 7. OTHER SECURITIES OF THE CORPORATION. All bonds, debentures and other
corporate securities of the Corporation, other than stock certificates, may be
signed by the Chairman of the Board (if there be such an officer appointed), or
the President or any Vice President or such other person as may be authorized by
the Board of Directors and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Treasurer or an Assistant Treasurer; provided,
however, that where any such bond, debenture or other corporate security shall
be authenticated by the manual signature of a trustee under an indenture
pursuant to which such bond, debenture or other corporate security shall be
issued, the signature of the persons signing and attesting the corporate seal on
such bond, debenture or other corporate security may be the imprinted facsimile
of the signatures of such persons. Interest coupons appertaining to any such
bond, debenture or other corporate security, authenticated by a trustee as
aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the
Corporation, or such other person as may be authorized by the Board of
Directors, or bear imprinted thereon the facsimile signature of such person. In
case any officer who shall have signed or attested any bond, debenture or other
corporate security or whose facsimile signature shall appear thereon shall have
ceased to be such officer before the bond, debenture or other corporate security
so signed or attested shall have been delivered, such bond, debenture or other
corporate security nevertheless may be adopted by the Corporation and issued and
delivered as though the person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such officer of the
Corporation.

                                   ARTICLE VII

                                 CORPORATE SEAL

      The corporate seal shall consist of a die bearing the name of the
Corporation and the state and date of its incorporation. Said seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.

                                  ARTICLE VIII

          INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS

SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE
BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this ARTICLE
VIII, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director or officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to


                                       13



any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful. The right to indemnification conferred in this ARTICLE
VIII shall be a contract right.

SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE
RIGHT OF THE CORPORATION. Subject to Section 3 of this ARTICLE VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.

SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under this
ARTICLE VIII (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the director or officer is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 or Section 2 of this
ARTICLE VIII, as the case may be. Such determination shall be made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders. To the extent, however, that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith, without
the necessity of authorization in the specific case.

SECTION 4. GOOD FAITH DEFINED. For purposes of any determination under Section 3
of this ARTICLE VIII, a person shall be deemed to have acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, or, with respect to any criminal action or proceeding, to
have had no reasonable cause to believe his conduct was unlawful, if his action
is based on the records or books of account of the Corporation or another
enterprise, or on information supplied to him by the officers of the Corporation
or another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records
given or reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section 4 shall not
be deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth in
Sections 1 or 2 of this ARTICLE VIII, as the case may be.

SECTION 5. INDEMNIFICATION BY A COURT. Notwithstanding any contrary
determination in the specific case under Section 3 of this ARTICLE VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this ARTICLE


                                       14

VIII. The basis of such indemnification by a court shall be a determination by
such court that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standards of conduct set forth
in Sections 1 or 2 of this ARTICLE VIII, as the case may be. Neither a contrary
determination in the specific case under Section 3 of this ARTICLE VIII nor the
absence of any determination thereunder shall be a defense to such application
or create a presumption that the director or officer seeking indemnification has
not met any applicable standard of conduct. Notice of any application for
indemnification pursuant to this Section 5 shall be given to the Corporation
promptly upon the filing of such application. If successful, in whole or in
part, the director or officer seeking indemnification shall also be entitled to
be paid the expense of prosecuting such application.

SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses incurred by a director or
officer in defending or investigating a threatened or pending action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation as
authorized in this ARTICLE VIII.

SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The
indemnification and advancement of expenses provided by or granted pursuant to
this ARTICLE VIII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-Law, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Sections 1 and 2 of
this ARTICLE VIII shall be made to the fullest extent permitted by law. The
provisions of this ARTICLE VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
ARTICLE VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware, or
otherwise.

SECTION 8. INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director or officer of the Corporation, or
is or was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power or the obligation to indemnify him against such liability
under the provisions of this ARTICLE VIII.

SECTION 9. CERTAIN DEFINITIONS. For purposes of this ARTICLE VIII, references to
"the Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers, so that any
person who is or was a director or officer of such constituent corporation, or
is or was a director or officer of such constituent corporation serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, shall stand in the same position under the
provisions of this ARTICLE VIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued. For purposes of this ARTICLE VIII, references
to "fines" shall include any excise taxes assessed on a person with respect to
an employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, such
director or officer with respect to an employee benefit plan, its participants
or beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee


                                       15

benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this ARTICLE VIII.

SECTION 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this ARTICLE VIII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.

SECTION 11. LIMITATION ON INDEMNIFICATION. Notwithstanding anything contained in
this ARTICLE VIII to the contrary, except for proceedings to enforce rights to
indemnification (which shall be governed by Section 5 hereof), the Corporation
shall not be obligated to indemnify any director or officer in connection with a
proceeding (or part thereof) initiated by such person unless such proceeding (or
part thereof) was authorized or consented to by the Board of Directors of the
Corporation.

SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may, to the
extent authorized from time to time by the Board of Directors, provide rights to
indemnification and to the advancement of expenses to employees and agents of
the Corporation similar to those conferred in this ARTICLE VIII to directors and
officers of the Corporation.

SECTION 13. EFFECT OF AMENDMENT. Any amendment, repeal or modification of this
ARTICLE VIII shall not (a) adversely affect any right or protection of any
director or officer existing at the time of such amendment, repeal or
modification, or (b) apply to the indemnification of any such person for
liability, expense, or loss stemming from actions or omissions occurring prior
to such amendment, repeal, or modification.

SECTION 14. AUTHORITY TO ENTER INTO INDEMNIFICATION AGREEMENTS. The Corporation
may enter into indemnification agreements with the directors and officers of the
Corporation, including, without limitation, any indemnification agreement in
substantially the form set forth in Exhibit 1 attached to these By-Laws.

                                   ARTICLE IX

                                     NOTICES

Whenever, under any provisions of these By-Laws, notice is required to be given
to any stockholder, the same shall be given in writing, timely and duly
deposited in the United States Mail, postage prepaid, and addressed to his last
known post office address as shown by the stock record of the Corporation or its
transfer agent. Any notice required to be given to any director may be given by
any of the methods stated in Section 8 of ARTICLE III hereof, except that such
notice other than one which is delivered personally, shall be sent to such
address or (in the case of facsimile telecommunication) facsimile telephone
number as such director shall have disclosed in writing to the Secretary of the
Corporation, or, in the absence of such filing, to the last known post office
address of such director. If no address of a stockholder or director be known,
such notice may be sent to the office of the Corporation required to be
maintained pursuant to Section 2 of ARTICLE I hereof. An affidavit of mailing,
executed by a duly authorized and competent employee of the Corporation or its
transfer agent appointed with respect to the class of stock affected, specifying
the name and address or the names and addresses of the stockholder or
stockholders, director or directors, to whom any such notice or notices was or
were given, and the time and method of giving the same, shall be conclusive
evidence of the statements therein contained. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing and
all notices given by telegram or other means of electronic transmission shall be
deemed to have been given as at the sending time recorded by the telegraph
company or other electronic transmission


                                       16

equipment operator transmitting the same. It shall not be necessary that the
same method of giving be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
The period or limitation of time within which any stockholder may exercise any
option or right, or enjoy any privilege or benefit, or be required to act, or
within which any director may exercise any power or right, or enjoy any
privilege, pursuant to any notice sent him in the manner above provided, shall
not be affected or extended in any manner by the failure of such a stockholder
or such director to receive such notice. Whenever any notice is required to be
given under the provisions of this statutes or of the Certificate of
Incorporation, or of these By-Laws, a waiver thereof in writing signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Whenever notice is required
to be given, under any provision of law or of the Certificate of Incorporation
or By-Laws of the Corporation, to any person with whom communication is
unlawful, the giving of such notice to such person shall not be required and
there shall be no duty to apply to any governmental authority or agency for a
license or permit to give such notice to such person. Any action or meeting
which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the Corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.

                                    ARTICLE X

                                   AMENDMENTS

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 ARTICLE V of the Certificate of Incorporation of the
Corporation 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.

CERTIFICATE OF SECRETARY

The undersigned, Senior Vice President, General Counsel and Secretary of
McKesson Corporation a Delaware corporation, hereby certifies that the foregoing
is a full, true and correct copy of the By-Laws of said Corporation, with all
amendments to date of this Certificate.

WITNESS the signature of the undersigned and the seal of the Corporation this
30th day of July, 2003.

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


                                       17

                                                                       EXHIBIT 1

                            INDEMNIFICATION AGREEMENT

AGREEMENT, effective as of ______, _______, between McKesson Corporation, a
Delaware corporation (the "Company"), and ______________ (the "Indemnitee").

WHEREAS, it is essential to the Company to retain and attract as directors and
officers the most capable persons available.

WHEREAS, Indemnitee is a director/officer of the Company;

WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors of public companies
in today's environment;

WHEREAS, the Certificate of Incorporation and the By-laws of the Company require
the Company to indemnify and advance expenses to its directors to the fullest
extent permitted by law and the Indemnitee has been serving and continues to
serve as a director or officer of the Company in part in reliance on such
Certificate of Incorporation and By-laws;

WHEREAS, in recognition of Indemnitee's need for substantial protection against
personal liability in order to enhance Indemnitee's continued service to the
Company in an effective manner and Indemnitee's reliance on the aforesaid
Certificate of Incorporation and By-laws, and in part to provide Indemnitee with
specific contractual assurance that the protection promised by such Certificate
of Incorporation and By-laws will be available to Indemnitee (regardless of,
among other things, any amendment to or revocation of such Certificate of
Incorporation and By-laws or any change in the composition of the Company's
Board of Directors or acquisition transaction relating to the Company), and in
order to induce Indemnitee to continue to provide services to the Company as a
director or officer thereof, the Company wishes to provide in this Agreement for
the indemnification of and the advancing of expenses to Indemnitee to the
fullest extent (whether partial or complete) permitted by law and as set forth
in this Agreement, and, to the extent insurance is maintained, for the continued
coverage of Indemnitee under the Company's directors' and officers' liability
insurance policies.

NOW, THEREFORE, in consideration of the premises and of Indemnitee continuing to
serve the Company directly or, at its request, with another enterprise, and
intending to be legally bound hereby, the parties hereto agree as follows:

1. CERTAIN DEFINITIONS.

      (A) Change in Control: shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing 20% or more of
the total voting power represented by the Company's then outstanding Voting
Securities, or (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof,
or (iii) the stockholders of the Company approve a merger or consolidation of
the Company with


                                       1

any other corporation, other than a merger or consolidation which would result
in the Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company (in one
transaction or a series of transactions) of all or substantially all of the
Company's assets.

      (B) Expense: include attorneys' fees and all other costs, expenses and
obligations paid or incurred in connection with investigating, defending, being
a witness in or participating in (including on appeal), or preparing to defend,
be a witness in or participate in any Proceeding relating to any Indemnifiable
Event.

      (C) Indemnifiable Event: any event or occurrence that takes place either
prior to or after the execution of this Agreement, related to the fact that
Indemnitee is or was a director or an officer of the Company, or while a
director or officer is or was serving at the request of the Company as a
director, officer, employee, trustee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise, or
by reason of anything done or not done by Indemnitee in any such capacity.

      (D) Potential Change in Control: shall be deemed to have occurred if (i)
the Company enters into an agreement or arrangement, the consummation of which
would result in the occurrence of Change in Control; (ii) any person (including
the Company) publicly announces an intention to take or to consider taking
actions which if consummated would constitute Change in Control; (iii) any
person, other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
who is or becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 10% or more of the combined voting power of the
Company's then outstanding Voting Securities, increases his beneficial ownership
of such securities by 5% or more over the percentage so owned by such person on
the date hereof; or (iv) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.

      (E) Proceeding: any threatened, pending or completed action, suit or
proceeding, or any inquiry, hearing or investigation, whether conducted by the
Company or any other party, that Indemnitee in good faith believes might lead to
the institution of any such action, suit or proceeding, whether civil, criminal,
administrative, investigative or other.

      (F) Reviewing Party: any appropriate person or body consisting of a member
or members of the Company's Board of Directors or any other person or body
appointed by the Board (including the special, independent counsel referred to
in Section 3) who is not a party to the particular Proceeding with respect to
which Indemnitee is seeking indemnification.

      (G) Voting Securities: any securities of the Company which vote generally
in the election of directors.


                                       2

2. AGREEMENT TO INDEMNIFY.

      (A) In the event Indemnitee was, is or becomes a party to or witness or
other participant in, or is threatened to be made a party to or witness or other
participant in, a Proceeding by reason of (or arising in part out of) an
Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest
extent permitted by law, as soon as practicable but in any event no later than
thirty days after written demand is presented to the Company, against any and
all Expenses, judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses, judgments, fines, penalties or
amounts paid in settlement) of such Proceeding and any federal, state, local or
foreign taxes imposed on the Indemnitee as a result of the actual or deemed
receipt of any payments under this Agreement (including the creation of the
Trust). Notwithstanding anything in this Agreement to the contrary and except as
provided in Section 5, prior to a Change in Control Indemnitee shall not be
entitled to indemnification pursuant to this Agreement in connection with any
Proceeding initiated by Indemnitee against the Company or any director or
officer of the Company unless the Company has joined in or consented to the
initiation of such Proceeding. If so requested by Indemnitee, the Company shall
advance (within ten business days of such request) any and all Expenses to
Indemnitee (an "Expense Advance").

      (B) Notwithstanding the foregoing, (i) the obligations of the Company
under Section 2(a) shall be subject to the condition that the Reviewing Party
shall not have determined (in a written opinion, in any case in which the
special, independent counsel referred to in Section 3 hereof is involved) that
Indemnitee would not be permitted to be indemnified under applicable law, and
(ii) the obligation of the Company to make an Expense Advance pursuant to
Section 2(a) shall be subject to the condition that, if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to be
so indemnified under applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; provided, however, that if Indemnitee has
commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, any
determination made by the Reviewing Party that Indemnitee would not be permitted
to be indemnified under applicable law shall not be binding and Indemnitee shall
not be required to reimburse the Company for any Expense Advance until a final
judicial determination is made with respect thereto (as to which all rights of
appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to
reimburse the Company for Expense Advances shall be unsecured and no interest
shall be charged thereon. If there has not been a Change in Control the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be the
special, independent counsel referred to in Section 3 hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law, Indemnitee shall have the right to commence
litigation in any court in the States of California or Delaware having subject
matter jurisdiction thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, and the Company hereby consents to
service of process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the Company and
Indemnitee.

3. CHANGE IN CONTROL. The Company agrees that if there is a Change in Control of
the Company (other than a Change in Control which has been approved by a
majority of the Company's Board of Directors who were directors immediately
prior to such Change in Control) then with respect to all matters thereafter
arising concerning the rights of Indemnitee to indemnity payments and Expense
Advances under this Agreement or any other agreement or under applicable law or
the Company's Certificate of Incorporation or By-Laws now or hereafter in effect
relating to indemnification for Indemnifiable Events, the Company shall seek
legal advice only from special, independent counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld), and
who has not otherwise performed services for the Company or the Indemnitee
(other than in connection with such matters) within the last five years. Such
independent counsel shall not include any person who, under the


                                       3

applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an
action to determine Indemnitee's rights under this Agreement. Such counsel,
among other things, shall render its written opinion to the Company and
Indemnitee as to whether and to what extent the Indemnitee would be permitted to
be indemnified under applicable law. The Company agrees to pay the reasonable
fees of the special, independent counsel referred to above and to indemnify
fully such counsel against any and all expenses (including attorneys' fees),
claims, liabilities and damages arising out of or relating to this Agreement or
the engagement of special, independent counsel pursuant hereto.

4. ESTABLISHMENT OF TRUST. In the event of a Potential Change in Control, the
Company shall, upon written request by Indemnitee, create a Trust for the
benefit of the Indemnitee and from time to time upon written request of
Indemnitee shall fund such Trust in an amount sufficient to satisfy any and all
Expenses reasonably anticipated at the time of each such request to be incurred
in connection with investigating, preparing for and defending any Proceeding
relating to an Indemnifiable event, and any and all judgments, fines, penalties
and settlement amounts of any and all Proceedings relating to an Indemnifiable
Event from time to time actually paid or claimed, reasonably anticipated or
proposed to be paid. The amount or amounts to be deposited in the Trust pursuant
to the foregoing funding obligation shall be determined by the Reviewing Party,
in any case in which the special, independent counsel referred to above is
involved. The terms of the Trust shall provide that upon a Change in Control (i)
the Trust shall not be revoked or the principal thereof invaded, without the
written consent of the Indemnitee, (ii) the Trustee shall advance, within ten
business days of a request by the Indemnitee, any and all Expenses to the
Indemnitee (and the Indemnitee hereby agrees to reimburse the Trust under the
circumstances under which the Indemnitee would be required to reimburse the
Company under Section 2(b) of this Agreement), (iii) the Trust shall continue to
be funded by the Company in accordance with the funding obligation set forth
above, (iv) the Trustee shall promptly pay to the Indemnitee all amounts for
which the Indemnitee shall be entitled to indemnification pursuant to this
Agreement or otherwise, and (v) all unexpended funds in such Trust shall revert
to the Company upon a final determination by the Reviewing Party or a court of
competent jurisdiction, as the case may be, that the Indemnitee has been fully
indemnified under the terms of this Agreement. The Trustee shall be chosen by
the Indemnitee. Nothing in this Section 4 shall relieve the Company of any of
its obligations under this Agreement. All income earned on the assets held in
the Trust shall be reported as income by the Company for federal, state, local
and foreign tax purposes.

5. INDEMNIFICATION FOR EXPENSES INCURRED IN ENFORCING THIS AGREEMENT. The
Company shall indemnify Indemnitee against any and all expenses (including
attorneys' fees), and, if requested by Indemnitee, shall (within ten business
days of such request) advance such expenses to Indemnitee, which are incurred by
Indemnitee in connection with any claim asserted against or action brought by
Indemnitee for (i) indemnification or advance payment of Expenses by the Company
under this Agreement or any other agreement or under applicable law or the
Company's Certificate of Incorporation or By-laws now or hereafter in effect
relating to indemnification for Indemnifiable Events and/or (ii) recovery under
any directors' and officers' liability insurance policies maintained by the
Company, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, advance expense payment or insurance recovery,
as the case may be.


                                       4

6. PARTIAL INDEMNITY. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of the
Expenses, judgments, fines, penalties and amounts paid in settlement of a
Proceeding but not, however, for all of the total amount thereof, the Company
shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled. Moreover, notwithstanding any other provision of this
Agreement, to the extent that Indemnitee has been successful on the merits or
otherwise in defense of any or all Proceedings relating in whole or in part to
an Indemnifiable Event or in defense of any issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified against all
Expenses incurred in connection therewith.

7. DEFENSE TO INDEMNIFICATION, BURDEN OF PROOF AND PRESUMPTIONS. It shall be a
defense to any action brought by the Indemnitee against the Company to enforce
this Agreement (other than an action brought to enforce a claim for expenses
incurred in defending a Proceeding in advance of its final disposition where the
required undertaking has been tendered to the Company) that the Indemnitee has
not met the standards of conduct that make it permissible under the Delaware
General Corporation Law for the Company to indemnify the Indemnitee for the
amount claimed. In connection with any determination by the Reviewing Party or
otherwise as to whether the Indemnitee is entitled to be indemnified hereunder,
the burden of proving such a defense shall be on the Company. Neither the
failure of the Company (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action by the Indemnitee that indemnification of the
claimant is proper under the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the Indemnitee
had not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the Indemnitee has not met the applicable
standard of conduct. For purposes of this Agreement, the termination of any
claim, action, suit or proceeding, by judgment, order, settlement (whether with
or without court approval) or conviction, or upon a plea of nolo contendere, or
its equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law.

8. NON-EXCLUSIVITY. The rights of the Indemnitee hereunder shall be in addition
to any other rights Indemnitee may have under the Company's Certificate of
Incorporation or By-laws or the Delaware General Corporation Law or otherwise.
To the extent that a change in the Delaware General Corporation Law (whether by
statute or judicial decision) permits greater indemnification by agreement than
would be afforded currently under the Company's Certificate of Incorporation and
By-laws and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change.

9. LIABILITY INSURANCE. To the extent the Company maintains an insurance policy
or policies providing directors' and officers' liability insurance, Indemnitee
shall be covered by such policy or policies, in accordance with its or their
terms, to the maximum extent of the coverage available for any Company director
or officer.

10. PERIOD OF LIMITATIONS. No legal action shall be brought and no cause of
action shall be asserted by or on behalf of the Company or any affiliate of the
Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or
legal representatives after the expiration of two years from the date of accrual
of such cause of action, or such longer period as may be required by state law
under the circumstances, and any claim or cause of action of the Company or its
affiliate shall be extinguished and deemed released unless asserted by the
timely filing of a legal action within such period; provided,


                                       5

however, that if any shorter period of limitations is otherwise applicable to
any such cause of action such shorter period shall govern.

11. AMENDMENT OF THIS AGREEMENT. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.

12. SUBROGATION. In the event of payment under this Agreement, the Company shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.

13. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, By-law or otherwise) of the amounts otherwise
indemnifiable hereunder.

14. SETTLEMENT OF CLAIMS. The Company shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any action
or claim effected without the Company's written consent. The Company shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither the
Company nor the Indemnitee will unreasonably withhold their consent to any
proposed settlement. The Company shall not be liable to indemnify the Indemnitee
under this Agreement with regard to any judicial award if the Company was not
given a reasonable and timely opportunity, at its expense, to participate in the
defense of such action.

15. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors, assigns, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets of the Company, spouses, heirs, and personal and legal
representatives. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation or otherwise) to all,
substantially all, or a substantial part, of the business and/or assets of the
Company, by written agreement in form and substance satisfactory to the
Indemnitee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. This Agreement shall continue in effect
regardless of whether Indemnitee continues to serve as a director or officer of
the Company or of any other enterprise at the Company's request.

16. SEVERABILITY. The provisions of this Agreement shall be severable in the
event that any of the provisions hereof (including any provision within a single
section, paragraph or sentence) is held by a court of competent jurisdiction to
be invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the fullest extent permitted by law. Furthermore, to the
fullest extent possible, the provisions of this Agreement (including, without
limitation, each portion of this Agreement containing any provision held to be
invalid, void or otherwise unenforceable, that is not itself invalid, void or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.


                                       6

17. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in such State without giving effect to the
principles of conflicts of laws.



IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the _______________ day of __________________, 20___.


                                    McKESSON CORPORATION

                                    By: ______________________
                                        Name:
                                        Title:

                                        ______________________
                                        [Indemnitee]


                                       7

EX-31.1

                              MCKESSON CORPORATION
                                                                    EXHIBIT 31.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C SECTION 1350,
      AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, John H. Hammergren, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of McKesson
      Corporation (the "Registrant");

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the Registrant as of, and for, the periods presented in this report;

4.    The Registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) for the
      Registrant and have:

      (a)   designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            Registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      (b)   evaluated the effectiveness of the Registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

      (c)   disclosed in this report any change in the Registrant's internal
            control over financial reporting that occurred during the
            Registrant's most recent fiscal quarter that has materially
            affected, or is reasonably likely to materially affect, the
            Registrant's internal control over financial reporting; and

5.    The Registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation of internal control over financial reporting,
      to the Registrant's auditors and the audit committee of the Registrant's
      board of directors:

      (a)   all significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the Registrant's ability to
            record, process, summarize and report financial information; and

      (b)   any fraud, whether or not material, that involves management or
            other employees who have a significant role in the Registrant's
            internal control over financial reporting.


Date: October 30, 2003                     /s/ John H. Hammergren
                                           -------------------------------------
                                           JOHN H. HAMMERGREN
                                           Chairman and Chief Executive Officer

EX-31.2

                              MCKESSON CORPORATION

                                                                    EXHIBIT 31.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
      AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, William R. Graber, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of McKesson Corporation
      (the "Registrant");

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the Registrant as of, and for, the periods presented in this report;

4.    The Registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) for the
      Registrant and have:

      (a)   designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            Registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      (b)   evaluated the effectiveness of the Registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

      (c)   disclosed in this report any change in the Registrant's internal
            control over financial reporting that occurred during the
            Registrant's most recent fiscal quarter that has materially
            affected, or is reasonably likely to materially affect, the
            Registrant's internal control over financial reporting; and

5.    The Registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation of internal control over financial reporting,
      to the Registrant's auditors and the audit committee of the Registrant's
      board of directors:

      (a)   all significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the Registrant's ability to
            record, process, summarize and report financial information; and

      (b)   any fraud, whether or not material, that involves management or
            other employees who have a significant role in the Registrant's
            internal control over financial reporting.

Date: October 30, 2003                           /s/ William R. Graber
                                                 -------------------------------
                                                 WILLIAM R. GRABER
                                                 Senior Vice President and Chief
                                                 Financial Officer

EX-32.1

                              MCKESSON CORPORATION

                                                                    EXHIBIT 32.1

                            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 quarter ended September 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned, in the capacities and on the dates indicated below, each hereby
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 their knowledge:

(1)   The Report fully complies with the requirements of section 13(a) or 15(d)
      of the Securities Exchange 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
October 30, 2003

/s/ William R. Graber
- -------------------------------
WILLIAM R. GRABER
Chief Financial Officer
October 30, 2003

      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.

      A signed original of this written statement required by Section 906 has
been provided to McKesson Corporation and will be retained by the Company and
furnished to the Securities and Exchange Commission or its staff upon request.