AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

among

UNIVERSAL AMERICAN FINANCIAL CORP.,

MH ACQUISITION I CORP.,

MH ACQUISITION II LLC,

MHRX LLC,

MEMBERHEALTH, INC.

and

THE SHAREHOLDER REPRESENTATIVE NAMED HEREIN

Dated as of May 7, 2007

• • Table of Contents

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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this " Agreement "), dated as of May 7, 2007, is entered into by and among UNIVERSAL AMERICAN FINANCIAL CORP., a New York corporation (" Parent "), MH ACQUISITION I CORP., a Delaware corporation and wholly owned subsidiary of Parent (the " Delaware Corp. Merger Sub "), MH ACQUISITION II LLC, a Delaware limited liability company and wholly owned subsidiary of Parent (the " Delaware LLC Merger Sub " and, together with the Delaware Corp. Merger Sub, collectively, the " Merger Subs "), MHRx LLC, a Delaware limited liability company (" MHRx "), MemberHealth, Inc., an Ohio corporation and wholly owned subsidiary of MHRx (the " Company "), and Welsh, Carson, Anderson & Stowe IX, L.P., a Delaware limited partnership (" WCAS IX "), as the Shareholder Representative hereunder.

RECITALS

WHEREAS, the parties hereto desire to effect a business combination of Parent and the Company by means of (i) the merger (the " First Merger ") of the Delaware Corp. Merger Sub with and into the Company, with the Company continuing as the surviving corporation of the First Merger (the " First Merger Surviving Corporation "), and (ii) immediately following the effectiveness of the First Merger, and as part of the same plan of merger and reorganization, the merger (the " Second Merger " and, together with the First Merger, collectively, the " Mergers ") of the First Merger Surviving Corporation with and into the Delaware LLC Merger Sub, with the Delaware LLC Merger Sub continuing as the surviving entity of the Second Merger (the " Second Merger Surviving Entity ");

WHEREAS, pursuant to the First Merger (i) all of the issued and outstanding shares of common stock, par value $.01 per share, of the Company (" Company Common Stock ") shall be converted into the right to receive a combination of cash and shares of Common Stock, par value $0.01, of Parent (the " Parent Common Stock ") as herein provided and (ii) all of the issued and outstanding common stock of the Delaware Corp. Merger Sub shall be converted into shares of common stock, par value $.01 per share, of the First Merger Surviving Corporation (" First Merger Surviving Corporation Common Stock ");

WHEREAS, pursuant to the Second Merger (i) all of the issued and outstanding First Merger Surviving Corporation Common Stock shall be cancelled and (ii) all of the issued and outstanding membership interests of the Delaware LLC Merger Sub shall be converted into 100% of the issued and outstanding membership interests of the Second Merger Surviving Entity;

WHEREAS, the respective Boards of Directors of each of the parties hereto (or, in the case of the Delaware LLC Merger Sub, Parent, as its sole managing member) have unanimously determined that this Agreement and the Mergers and other transactions contemplated hereby, including the issuance of the Parent Shares (as defined below) pursuant to the First Merger (such other transactions, together with the Mergers and the other "Transactions" (as defined in Securities Purchase Agreement referred to below) contemplated by the Financing Documents (as defined below) and the Other Securities Purchase Agreement, being referred to herein collectively as the " Transactions "), are fair to and in the best interests of their respective

shareholders or members, as applicable, and have declared advisable and approved this Agreement and the transactions contemplated hereby;

WHEREAS, the Board of Directors of the Delaware Corp. Merger Sub has resolved to recommend that Parent, as the sole shareholder of the Delaware Corp. Merger Sub, adopt this Agreement and approve the Mergers;

WHEREAS, immediately following the execution and delivery of this Agreement, Parent, as the sole shareholder of the Delaware Corp. Merger Sub, is executing and delivering a written consent adopting this Agreement and approving the Mergers;

WHEREAS, the Board of Directors of Parent has unanimously resolved to recommend that the shareholders of Parent approve the issuance of the Parent Shares pursuant to the First Merger and the shares of capital stock of Parent (the " Equity Financing Shares ") to be issued in connection with the equity financing contemplated by the Securities Purchase Agreement (as defined below) (the " Equity Financing "), and the related changes to the authorized capital stock of Parent required to complete the Equity Financing;

WHEREAS, as contemplated by Rule 4350(i) of The Nasdaq Stock Market, Inc. (" Nasdaq ") Marketplace Rules, Parent shall call a special meeting of its shareholders (the " Parent Shareholder Meeting ") and, at such meeting, seek the affirmative vote of the holders of a majority of the shares of Parent Common Stock voting in person or by proxy at such meeting on proposals regarding the issuance of the Parent Shares in the First Merger and the Equity Financing Shares in connection with the Equity Financing (such vote together with the Parent Charter Vote referred to below, being hereinafter referred to as the " Required Parent Shareholder Approval ");

WHEREAS, at the Parent Shareholder Meeting, Parent shall also seek the affirmative vote of the holders of a majority of the shares of Parent Common Stock then outstanding on a proposal to amend the Certificate of Incorporation of Parent to authorize new classes of Parent capital stock and increase the number of authorized shares of Parent capital stock in the manner required by the Securities Purchase Agreement (as in effect on the date hereof) (the " Parent Charter Vote ");

WHEREAS, as a condition and inducement to MHRx’s and the Company’s willingness to enter into this Agreement, each of the persons listed on Annex A-1 hereto (each a " Parent Voting Agreement Party ") has entered into a voting agreement in the form attached hereto as Exhibit A-1 (the " Parent Voting Agreement "), pursuant to which each Parent Voting Agreement Party has, among other things, irrevocably agreed to vote all of the voting securities of Parent now or hereafter held by it or over which it has voting control in favor of the Required Parent Shareholder Approval;

WHEREAS, the sole shareholder and Board of Directors of the Company have unanimously resolved to adopt this Agreement and approve the First Merger;

WHEREAS, the Management Committee of MHRx has unanimously resolved to adopt this Agreement and approve the First Merger; and

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WHEREAS, for United States federal income tax purposes, the parties hereto intend that the Mergers qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the " Code "), and the regulations promulgated thereunder, and that this Agreement shall be, and is hereby, adopted as a plan of reorganization within the meaning of Treasury Regulation Section 1.368-2(g).

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

ARTICLE 1

CERTAIN DEFINITIONS

Section 1.1             Certain Definitions .  As used in this Agreement, the following terms have the respective meanings set forth below.

" 2006 CMS Reconciliation " has the meaning set forth in Section 2.12(c) .

" Actual Net CMS Reconciliation Amount " means (a) the actual amount of all payments made or to be made to the Company and its Subsidiaries (or their successors) in respect of the 2006 coverage year less (b) the actual amount of all payments made or to be made by the Company and its Subsidiaries (or their successors) in respect of the 2006 coverage year, in each case, as a result of the 2006 CMS Reconciliation, the State Claims Post Reconciliation and Plan to Plan Post Reconciliation.  For the avoidance of doubt, if the amount referred to in (a) exceeds the amount referred to in (b), the Actual Net CMS Reconciliation Amount would be a positive number and if the amount referred to in (a) is less than the amount referred to in (b), the Actual Net CMS Reconciliation Amount would be a negative number.

" Affiliate " means, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person.  The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlled" and "controlling" have meanings correlative thereto.

" Agreement " has the meaning set forth in the preamble.

" Alternative Transaction " has the meaning set forth in Section 5.8 .

" Annual Cap " shall mean, with respect to each Annual Earnout Period, $50,000,000.

" Annual EBITDA " shall mean, with respect to each Annual Earnout Period, the total EBITDA of the MH Business for such period.

" Annual Earnout Amount " shall mean (A) with respect to the Annual Earnout Periods ending December 31, 2008 and December 31, 2009, an amount equal to the lesser of (i) the amount by which Annual EBITDA for such period exceeds the EBITDA Threshold for such

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period and (ii) the Annual Cap and (B) with respect to the Annual Earnout Period ending December 31, 2010, an amount equal to the lesser of (i) the amount by which the sum of the Annual EBITDA for such period and the TRICARE Amount exceeds the EBITDA Threshold for such period and (ii) the Annual Cap.  For the avoidance of doubt, to the extent that any portion of the CMS Reconciliation Payment Amount is paid to or by the Company, with respect to the 2006 plan year, during the Annual Earnout Periods, any such portion of the CMS Reconciliation Payment Amount or other CMS settlement amounts shall be excluded from the calculation of Annual EBITDA for such Annual Earnout Period.

" Annual Earnout Financials " has the meaning set forth in Section 2.13(b)(i) .

" Annual Earnout Period " means each of the following three periods:  (i) January 1, 2008 through and including December 31, 2008, (ii) January 1, 2009 through and including December 31, 2009 and (iii) January 1, 2010 through and including December 31, 2010.

" Annual Earnout Statement " has the meaning set forth in Section 2.13(b)(i) .

" Antitrust Division " has the meaning set forth in Section 5.6(a) .

" Arbitrator " has the meaning set forth in Section 2.13(b)(iii) .

" Business Day " means a day, other than a Saturday or Sunday, on which commercial banks in New York City and Cleveland, Ohio are open for the general transaction of business.

" Capitalization Date " has the meaning set forth in Section 4.5(a) .

" Cash Merger Consideration " means the Initial Cash Merger Consideration as from time to time adjusted pursuant to Section 2.12 , Section 2.13 and/or Section 8.2 (it being understood that if any cash is paid to Parent pursuant to Section 2.12 or Section 8.2 , the payment of such cash to Parent shall be deemed to reduce the Cash Merger Consideration).

" Certificates of Merger " has the meaning set forth in Section 2.3 .

" Charter Amendment " means an amendment to the Certificate of Incorporation of Parent to increase the number of authorized shares of Parent capital stock in the form of Exhibit B hereto.

" Closing " has the meaning set forth in Section 2.2 .

" Closing Date " has the meaning set forth in Section 2.2 .

" CMS " means the Centers for Medicare & Medicaid Services.

" CMS Dispute Arbitrator " has the meaning set forth in Section 2.12(d)(iii) .

"CMS Reconciliation Disagreement Notice" has the meaning set forth in Section 2.12(c)(ii) .

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" CMS Reconciliation Payment Amount " means the Reserve-Adjusted Net CMS Reconciliation Amount multiplied by a percentage equal to (a) 100% less (b) the marginal income tax rate of the Company taking into account federal, state and local income taxes, including any taxes, such as franchise taxes, measured by net income (and the deductibility for federal income tax purposes of state and local income taxes) as determined by reference to the federal, state and local income tax returns of the Company for 2006 as filed and as amended from time to time (or in the event such returns have not been filed as reasonably estimated in good faith by Parent).

" CMS Reconciliation Payment Date " has the meaning set forth in Section 2.12(e) .

" CMS Reconciliation Reserve Amount " means $21,393,922 (which represents an amount equal to the reserve for "claims" reflected on the Latest Company Balance Sheet.

" CMS Reconciliation Statement " has the meaning set forth in Section 2.12(d)(i) .

" COBRA " means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code and any similar state law.

" Code " has the meaning set forth in the recitals.

" Company " has the meaning set forth in the preamble.

" Company CMS Agreement " has the meaning set forth in Section 3.20(a) .

" Company Common Stock " has the meaning set forth in the recitals.

" Company Confidentiality Agreement " means the confidentiality agreement dated January 2, 2007 by and between MHRx and Parent.

" Company Contracts " has the meaning set forth in Section 3.17 .

" Company Disclosure Schedules " means the disclosure schedules to this Agreement delivered by the Company to Parent and the Merger Subs on or prior to the date hereof in connection with this Agreement.

" Company Employee Benefit Plan " means any Employee Benefit Plan of the Company or any of its Subsidiaries.

" Company ERISA Affiliate " means any entity that is considered a single employer with the Company under Section 414 of the Code.

" Company Financial Advisor " means Banc of America Securities LLC.

" Company Financial Statements " has the meaning set forth in Section 3.6(a) .

" Company Intellectual Property Rights " has the meaning set forth in Section 3.16(a) .

" Company Lease " and " Company Leases " have the meanings set forth in Section 3.19(a) .

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" Company Leased Property " has the meaning set forth in Section 3.19(a) .

" Company Material Adverse Effect " means any fact, event, circumstance, change, occurrence, effect or condition individually or in the aggregate which has had or would reasonably be expected to have a material adverse effect on (A) the financial condition, business or results of operations of the Company and its Subsidiaries, taken as a whole, or (B) the ability of the Company to consummate the transactions contemplated hereby; provided , that any change, event or effect, arising from or related to, or in the case of matters covered by clause (ix) below, directly and solely resulting from:  (i) conditions generally affecting the industries in which the Company and its Subsidiaries operate or the United States economy generally; (ii) acts of terrorism, acts of war or the escalation of hostilities; (iii) any disruption of the financial, banking or securities markets (including any decline in the price of any security or any market index); (iv) changes in GAAP; (v) changes in any Legal Requirements, except for changes in Legal Requirements or CMS written interpretation and guidance related to Medicare Part D; (vi) any action taken or omission by the Company in accordance with this Agreement or at the written request or with prior written consent of Parent; (vii) any change in or effect on the business of the Company or its Subsidiaries that is cured prior to the Closing; (viii) the announcement of the Transactions; or (ix) any failure, in and of itself, by the Company or any of its Subsidiaries to meet any projections, forecasts or revenue or earnings predictions for any period ending on or after the date of this Agreement, shall not be taken into account in determining whether a "Company Material Adverse Effect" has occurred, or would reasonably be expected to occur, except, in the case of clauses (i) and (iii), to the extent that such change, event or effect referred to therein has had a materially disproportionate impact on the financial condition, business or results of operations of the Company and its Subsidiaries, taken as a whole, relative to other industry participants and except in the case of clause (ix), any fact, event, circumstance, change, occurrence, effect or condition underlying any failure to meet any such projections, forecasts or revenue or earnings predictions shall be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur, and except that clause (viii) shall not apply with respect to Sections 3.3 and 3.4 hereof.

" Company Novation Agreement " has the meaning set forth in Section 3.20(a) .

" Company Representatives " has the meaning set forth in Section 5.1(a)(ii) .

" Consents " has the meaning set forth in Section 5.6(a) .

" Contracts " means the Company Contracts and the Parent Contracts.

" Contractual Obligation " means, with respect to any Person, any contract, obligation, agreement, deed, mortgage, lease, sublease, license or legally binding commitment, promise, undertaking or instrument, whether written or oral, to which or by which such Person is a party or otherwise bound or to which or by which any property, business, operation or right of such Person is bound.

" Conversion Shares " means the shares of Parent Common Stock issuable upon conversion of (i) the Equity Financing Shares and the Other SPA Shares and (ii) any shares issued in exchange for any Equity Financing Shares or Other SPA Shares.

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" Debt Commitment Letter " has the meaning set forth in Section 4.20 .

" Debt Financing " has the meaning set forth in Section 4.20 .

" Delaware LLC Act " means the Limited Liability Company Act of the State of Delaware, as amended and in effect from time to time.

" Delaware LLC Merger Sub " has the meaning set forth in the preamble.

" Delaware LLC Merger Sub Interests " has the meaning set forth in Section 2.6(b) .

" Delaware Corp. Merger Sub " has the meaning set forth in the preamble.

" Delaware Corp. Merger Sub Common Stock " has the meaning set forth in Section 2.6(a) .

" DGCL " means the Delaware General Corporation Law, as amended and in effect from time to time.

" Dispute Panel " has the meaning set forth in Section 2.13(b)(iii) .

" Disclosure Schedules " means the Company Disclosure Schedules and Parent Disclosure Schedules.

" Earnout Disagreement Notice " has the meaning set forth in Section 2.13(b)(ii) .

" EBITDA " shall mean, with respect to each Annual Earnout Period, the revenue of the MH Business for such period plus interest income directly allocable to the MH Business (excluding interest income on capital) for such period less the Operating Expenses of the MH Business for such period, calculated in accordance with the principles set forth in this Section 2.13 and, to the extent consistent with such principles, GAAP.

 " EBITDA Threshold " shall mean, with respect to each Annual Earnout Period, the amount set forth below:

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" Employee Benefit Plan " means any "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) and any other material employee benefit plan, program or arrangement maintained, sponsored or contributed to by a Person or any of its Subsidiaries.

" Environmental Laws " means all federal, state, local and foreign Legal Requirements concerning pollution or protection of the environment as such Legal Requirements are enacted and in effect on or prior to the Closing Date.

" Equity Financing " has the meaning set forth in the recitals.

" Equity Financing Shares " has the meaning set forth in the recitals.

" Equity Financing Sources " has the meaning set forth in Section 4.20 .

" Equity Shortfall Amount " has the meaning set forth in Section 2.6(a)(iii)(B) .

" Equity Shortfall Notice " has the meaning set forth in Section 2.6(a)(iii)(B) .

" ERISA " means the Employee Retirement Income Security Act of 1974, as amended.

" Escrow Agent " has the meaning set forth in Section 2.10 .

" Escrow Agreement " has the meaning set forth in Section 2.10 .

" Escrow Cash " has the meaning set forth in Section 2.10 .

" Escrow Fund " has the meaning set forth in Section 2.10 .

" Escrow Shares " has the meaning set forth in Section 2.10 .

" Exchange Act " means the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder).

" Fair Market Value " means, as of any date of determination, (i) if the Parent Common Stock is publicly traded on the NASDAQ Global Select Market, unless (and then only to the extent) otherwise specified herein, the average of the high and low trading price of the Parent Common Stock on such date of determination or (ii) if the Parent Common Stock is not publicly traded on the NASDAQ Global Select Market, the fair market value of the Parent Common Stock on such date of determination as determined by an independent appraiser mutually selected by Parent and the Shareholder Representative each acting reasonably (it being agreed that, in such circumstances, (a) if Parent and the Shareholder Representative cannot agree on an independent appraiser, Parent and the Shareholder Representative shall each choose an independent appraiser, and the two appraisers that are chosen shall appoint a third independent appraiser to determine the Fair Market Value of the Parent Common Stock, (b) Parent and the Shareholder Representative shall use their reasonable best efforts to cause such valuation to be completed within 60 days of the date that the need to determine Fair Market Value first arises, (c) the fees and expenses of the independent appraiser shall be paid 50% by Parent and 50% by

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MHRx and (d) any determination of Fair Market Value by such independent appraiser shall be final, conclusive and binding for all purposes of this Agreement).

" Financing " has the meaning set forth in Section 4.20 .

" Financing Documents " has the meaning set forth in Section 4.20 .

" First Merger " has the meaning set forth in the recitals.

" First Merger Certificate of Merger " has the meaning provided in Section 2.3 .

" First Merger Effective Time " has the meaning provided in Section 2.3 .

" First Merger Surviving Corporation " has the meaning set forth in the recitals.

" First Merger Surviving Corporation Common Stock " has the meaning set forth in the recitals.

" FTC " has the meaning set forth in Section 5.6(a) .

" Funded Indebtedness " means, as of any date, without duplication, the outstanding principal amount of, accrued and unpaid interest on and other payment obligations (including any prepayment premiums payable as a result of the consummation of the transactions contemplated hereby) arising under any obligations of a Person or any of its Subsidiaries consisting of (i) indebtedness for borrowed money, (ii) indebtedness evidenced by any note, bond, debenture or other debt security, or (iii) obligations under any interest rate, currency or other hedging agreements, to the extent payable if terminated, in each case, as of such date.

" GAAP " means generally accepted accounting principles as in effect in the United States on the date of this Agreement, applied on a consistent basis.

" Governing Documents " means the legal document(s) by which any Person (other than an individual) establishes its legal existence or which govern its internal affairs.  For example, the "Governing Documents" of a corporation are its certificate of incorporation and by-laws (or equivalent), the "Governing Documents" of a limited partnership are its certificate of formation and its limited partnership agreement and the "Governing Documents" of a limited liability company are its certificate of formation and its operating agreement.

" Government Order " means any order, writ, judgment, injunction, decree, stipulation, ruling, determination or award entered by or with any Governmental Authority.

" Governmental Authority " means any foreign government, or the government of the United States of America and any state, commonwealth, territory, possession, county, or municipality thereof, or the government of any political subdivision of any of the foregoing, or any entity, authority, agency, ministry, court or other similar body exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government, including any authority or other quasi-governmental entity established to perform any of such functions and, in the case of Parent, Nasdaq.

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" Governmental Authorization " means any or all licenses, permits, Waivers, accreditations, approvals, qualifications, certifications, and other authorizations granted by any Governmental Authority, accreditation organization or Payment Program relating to or affecting a Medicare prescription drug plan, discount drug plan or other drug plan or product offered or administered by the Company or Parent, the establishment, ownership, operation, maintenance, management, regulation, development or expansion thereof (including the Company CMS Agreement).

" Hazardous Substance " means any pollutant, contaminant or toxic or hazardous material, substance or waste, whether solid, liquid or gas.

" HSR Act " means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

" Indemnifiable Losses " has the meaning set forth in Section 8.2(d)(i) .

" Indemnifiable Tax Benefit " has the meaning set forth in Section 8.2(d)(vi) .

" Indemnification Percentage " has the meaning set forth in Section 8.2(d)(iii) .

" Indemnified Person " has the meaning set forth in Section 8.2(d)(vi) .

" Indemnifying Member " has the meaning set forth in Section 8.2(b) .

" Indemnifying Party " has the meaning set forth in Section 8.2(d)(vi) .

" Initial Cash Merger Consideration " has the meaning set forth in Section 2.6(a)(ii)(A) .

" Initial Merger Consideration " has the meaning set forth in Section 2.6(a)(ii)(B) .

" Initial Parent Shares " has the meaning set forth in Section 2.6(a)(ii)(B) .  For the avoidance of doubt, it is acknowledged that the Initial Parent Shares include the Escrow Shares.

" Initial Stock Merger Consideration " has the meaning set forth in Section 2.6(a)(ii)(B) .

" Intellectual Property Rights " means all intellectual property, whether owned or held for use under license, whether registered or unregistered, including, without limitation, such rights in and to all: (i) patents and patent applications (collectively, " Patents "); (ii) trademarks, trade dress, service marks, certification marks, logos and trade names; (iii) copyrights, copyright registrations and applications and works of authorship; (iv) Internet domain names and uniform resource locators; (v) trade secrets (as defined in the Uniform Trade Secrets Act and common law) (" Trade Secrets "); and (vi) software and information technology systems including, without limitation, data files, source code, object code, application programming interfaces, databases and other software-related specifications and documentation (collectively, " Software ").

" Joinder Agreement " means an agreement substantially in the form of Exhibit C hereto pursuant to which an Indemnifying Member agrees to be bound by the provisions of this

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Agreement solely as they relate to the indemnification obligations of the Indemnifying Members pursuant to Section 8.2(b) and the appointment of the Shareholder Representative.

" Knowledge " means, with respect to any Person, the actual knowledge of such Person (and shall in no event encompass constructive, imputed or similar concepts of knowledge); provided that in the case of the Company, such actual knowledge shall be limited to the Knowledge of Charles E. Hallberg, David S. Azzolina, Jane C. Koehl-Colling, Scott G. Hughes, D. Alan Scantland, Robert J. Donnelly, John G. Kloss and Len Ploskonka, none of whom shall have any personal liability regarding such Knowledge, and in the case of Parent and the Merger Subs, such actual knowledge shall be limited to the Knowledge of Richard Barasch, Robert Waegelein, Gary Bryant, Jason Israel, Gary Jacobs, Theodore Carpenter, Jr., Lisa M. Spivack and Steven B. Najjar, none of whom shall have any personal liability regarding such Knowledge.

" Latest Company Balance Sheet " has the meaning set forth in Section 3.6(a)(ii) .

" Latest Parent Balance Sheet " has the meaning set forth in Section 4.7 .

" Legal Requirement " means any United States federal, state or local or foreign law, statute, standard, ordinance, code, rule, regulation, binding directive, resolution or promulgation, or any Government Order, or any license, franchise, permit or similar right granted under any of the foregoing, or any similar provision having the force or effect of law and, with respect to Parent, the Nasdaq Marketplace Rules.

" Lender " has the meaning set forth in Section 4.20 .

" Lien " means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind.  For avoidance of doubt, " Lien " shall not include any license of Intellectual Property Rights.

" Losses " has the meaning set forth in Section 8.2(a) .

" Medicare Part D " means the Outpatient Prescription Drug Program established by the Medicare Modernization of Act of 2003.

" Mergers " has the meaning set forth in the recitals.

" Merger Consideration " means the Merger Consideration, as from time to time adjusted pursuant to Section 2.12 , Section 2.13 and/or Section 8.2 .

" Merger Subs " has the meaning set forth in the preamble.

" MH Business " shall mean, collectively: (a) the Part D Business, (b) the Private Fee-for-Service Business, (c) the TRICARE Business, (d) MH New Business and (e) the PBM Business.

" MH New Business " shall mean the business of establishing, underwriting, selling, administering and/or maintaining any policies or other insurance products (other than Medicare Advantage private fee-for-service and Medicare Part D products and policies) (i) to or for any beneficiaries of the Part D Business;  (ii) to or for any beneficiaries acquired (a) through the

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CommunityCareRx brand, (b) through any other brand utilized by the Company or any of its Subsidiaries before, on or after the date hereof or (c) through any arrangements (including, without limitation, any co-branding arrangements) entered into with the National Community Pharmacists Association before, on or after the date hereof (in all cases under this section (ii), whether such business is conducted by the Company or any of its Subsidiaries or Parent or any of its other Subsidiaries); or (iii) to or for any beneficiaries of the Private Fee-for-Service Business.

" MHRx " has the meaning set forth in the preamble.

" MHRx Indemnified Persons " has the meaning set forth in Section 8.2(c) .

" MHRx Representative " means Sean M. Traynor or another representative appointed by the Shareholder Representative.

" Multiemployer Plan " has the meaning set forth in Section 3(37) of ERISA.

" Nasdaq " has the meaning set forth in the recitals.

" Net Present Value " means, for purposes of calculating the TRICARE Amount, the net present value of the future stream of revenues and expenses directly associated with the TRICARE Agreement (including Taxes actually incurred that but for the TRICARE Agreement would not have been incurred), discounting future revenues and expenses using a discount rate of twelve percent (12%), and subtracting the sum total of discounted expenses from the sum total of discounted revenues, and assuming that the future revenues and expenses to be earned and incurred under the TRICARE Agreement will continue to be the same as the revenues and expenses of the TRICARE Business during the final Annual Earnout Period ( i.e. , January 1, 2010 through December 31, 2010) and assuming that the TRICARE Agreement will expire at the end of its stated term (as in effect on December 31, 2010).

" New Plans " has the meaning set forth in Section 5.9(a) .

" New Shares " has the meaning set forth in Section 2.10 .

" OGCL " means the General Corporation Law of the State of Ohio, as amended and in effect from time to time.

" Operating Expenses " means all expenses other than (a) interest expense and any other capital-related charges, including expenses relating to third party reinsurance contracts entered into to satisfy capital requirements, (b) depreciation, (c) amortization, (d) federal and state income taxes and (e) unusual and non-recurring non-cash expenses.

" Other Securities Purchase Agreement " means that certain Securities Purchase Agreement dated as of the date hereof pursuant to which Parent has agreed to issue and sell to the investors party thereto, and such investors have agreed to purchase from Parent, an aggregate of 30,473 shares of Series A Participating Convertible Preferred Stock of Parent and an aggregate of 19,527 shares of Series B Participating Convertible Preferred Stock of Parent (the " Other SPA Shares ") on the date hereof.

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" Other SPA Shares " has the meaning set forth in the definition of Other Securities Purchase Agreement.

" Outstanding Parent Stock Awards " has the meaning set forth in Section 4.5(a) .

" Parent " has the meaning set forth in the preamble.

" Parent Board Recommendation " has the meaning set forth in Section 5.12(d) .

" Parent Charter Vote " has the meaning set forth in the recitals.

" Parent Common Stock " has the meaning set forth in the recitals.

" Parent Confidentiality Agreement " means the confidentiality agreement dated November 2, 2006 by and between the Company and Parent.

" Parent Contracts " has the meaning set forth in Section 4.16 .

" Parent Disclosure Schedules " means the disclosure schedules to this Agreement delivered by Parent and the Merger Subs to MHRx and the Company on or prior to the date hereof in connection with this Agreement.

" Parent Employee Benefit Plan " means any Employee Benefit Plan of Parent or any of its Subsidiaries.

" Parent ERISA Affiliate " means any entity that is considered a single employer with Parent under Section 414 of the Code.

" Parent Indemnified Persons " has the meaning set forth in Section 8.2(a) .

" Parent Intellectual Property Rights " has the meaning set forth in Section 4.15(a) .

" Parent Lease " and " Parent Leases " have the meanings set forth in Section 4.18(a) .

" Parent Material Adverse Effect " means any fact, event, circumstance, change, occurrence, effect or condition individually or in the aggregate which has had or would reasonably be expected to have a material adverse effect on (A) the financial condition, business or results of operations of Parent and its Subsidiaries, taken as a whole, or (B) the ability of Parent or either Merger Sub to consummate the Transactions; provided , that any change, event or effect arising from or related to, or in the case of matters covered by clauses (ix) and (x) below, directly and solely resulting from:  (i) conditions generally affecting the industries in which Parent and its Subsidiaries operate or the United States economy generally; (ii) acts of terrorism, acts of war or the escalation of hostilities; (iii) any disruption of the financial, banking or securities markets (including any decline in the price of any security or any market index); (iv) changes in GAAP; (v) changes in any Legal Requirements, except for changes in Legal Requirements or CMS written interpretations and guidance related to Medicare Part D or related to the business of providing health and life insurance or managed care products and services; (vi) any action taken or omission by Parent or either Merger Sub in accordance with this Agreement

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or at the written request or with the prior written consent of the Company; (vii) any change in or effect on the business of Parent or its Subsidiaries that is cured prior to the Closing; (viii) the announcement of the Transactions; (ix) any failure, in and of itself, by Parent or any of its Subsidiaries to meet any projections, forecasts or revenue or earnings predictions for any period ending on or after the date of this Agreement; or (x) any change, in and of itself, in the market price or trading volume of shares of Parent Common Stock, shall not be taken into account in determining whether a "Parent Material Adverse Effect" has occurred, or would reasonably be expected to occur, except, in the case of clauses (i) and (iii), to the extent that such change, event or effect referred to therein has had a materially disproportionate impact on the financial condition, business or results of operations of Parent and its Subsidiaries, taken as a whole, relative to other industry participants and except in the case of clauses (ix) and (x) any fact, event, circumstance, change, occurrence, effect or condition underlying any failure to meet any projections, forecasts or revenue or earnings predictions or affecting such market price or trading volume shall be taken into account in determining whether a Parent Material Adverse Effect has occurred or would reasonably be expected to occur, and except that clause (viii) shall not apply with respect to Sections 4.3 and 4.4 hereof.

" Parent Preferred Stock " has the meaning set forth in Section 4.5(a) .

" Parent Representative " means Robert Waegelein or another senior executive officer of Parent designated by Parent.

" Parent Representatives " has the meaning set forth in Section 5.1(a)(i) .

" Parent SEC Documents " has the meaning set forth in Section 4.6(a) .

" Parent Shares " means the Initial Parent Shares, and any Parent Shares from time to time issued pursuant to Section 2.12 , Section 2.13 and/or Section 8.2 (it being understood that if any shares of Parent Common Stock are transferred to Parent pursuant to Section 2.12 and/or Section 8.2 , the transfer of such shares to Parent shall be deemed to reduce the number of Parent Shares actually and ultimately issued by Parent as Merger Consideration hereunder).

" Parent Shareholder Meeting " has the meaning set forth in the recitals.

" Parent Shareholder Meeting Date " has the meaning set forth in Section 3.24 .

" Parent Significant Subsidiaries " means, the "significant subsidiaries" of the Parent as defined by Regulation S-X under the Exchange Act.

" Parent Stock Plans " has the meaning set forth in Section 4.5(a) .

" Parent Voting Agreement " has the meaning set forth in the recitals.

" Parent Voting Agreement Party " has the meaning set forth in the recitals.

" Part D Business " shall mean the business of establishing, underwriting, selling, administering and/or maintaining Medicare Part D prescription drug plans under the Company CMS Agreement (as the same may be from time to time amended, modified, restated or

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superseded by a successor or replacement agreement) or under the CommunityCareRx brand or any other brand utilized by the Company and its Subsidiaries as of the date of this Agreement or under any other brand developed by the Company or its Subsidiaries or the National Community Pharmacists Association or any other co-branding arrangements specifically for the employer group business (for example, the Hartford and Aegon) before, on or after the date hereof (whether such business is conducted by the Company or any of its Subsidiaries or Parent or any of its other Subsidiaries).

" Patents " has the meaning set forth in the definition of Intellectual Property Rights.

" Payment Program " means Medicare, Medicaid, commercial and private insurers, employer group health plans (including, without limitation a "Welfare Plan" described in Section 3(1) of ERISA), and any other governmental, commercial, or other organization which maintains a health care reimbursement program or policy.

" PBM Business " shall mean the pharmacy benefit management business of Parent, the Company and their respective Subsidiaries other than (i) any business replacing, after the date hereof, any pharmacy benefit management services currently provided to customers of Parent and its Subsidiaries by third parties as of the date hereof or (ii) business existing at the time of Closing, acquired or developed as part of Parent’s preexisting pharmacy benefit management business.

" Permitted Liens " means (a) mechanics, materialmen’s, carrier’s, repairer’s and other Liens arising or incurred in the ordinary course of business or that are not yet delinquent or are being contested in good faith; (b) Liens for Taxes, assessments or other governmental charges not yet delinquent or which are being contested in good faith, provided an appropriate reserve is established therefor to the extent required by GAAP; (c) Liens (including encumbrances and restrictions on real property such as easements, covenants, rights of way and similar matters affecting title) that do not, individually or in the aggregate, materially interfere with the present uses or value of the property subject to such Liens; (d) Liens granted to any lender at the Closing in connection with the Financing; (e) with respect to the Company Common Stock and Parent Common Stock, restrictions on transfer imposed under applicable securities laws; (f) with respect to the Company and its Subsidiaries, Liens described on Schedule 1.1(a) and (g) with respect to Parent and its Subsidiaries, Liens described on Schedule 1.1(b) .

" Person " means an individual, partnership, corporation, limited liability company, joint stock company, unincorporated organization or association, trust, joint venture, association or other organization, whether or not a legal entity, or a Governmental Authority.

" Plan to Plan Post Reconciliation " means any Medicare Part D prescription drug claim that has been paid for by another CMS approved Part D sponsor plan whereby (i) the claim is for a beneficiary who was a member of the Company’s Part D plan in the 2006 plan year and (ii) the claim was not received timely from the sponsor and therefore was not included in the 2006 CMS Reconciliation.  This reconciliation is not limited to just Phase 1 exposures.

" Private Fee-for-Service Business " shall mean the business of establishing, underwriting selling, administering and/or maintaining Medicare Advantage private fee-for-service policies

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(or private fee-for-service policies under any successor program) (i) to or for any beneficiaries of the Part D Business or (ii) to or for any beneficiaries acquired (a) through the CommunityCareRx brand, (b) through any other brand utilized by the Company or any of its Subsidiaries before, on or after the date hereof or (c) through any arrangements (including, without limitation, any co-branding arrangements) entered into with the National Community Pharmacists Association before, on or after the date hereof (in all cases under this section (ii), whether such business is conducted by the Company or any of its Subsidiaries or Parent or any of its other Subsidiaries).

" Proxy Statement/Prospectus " has the meaning set forth in Section 4.4 .

" Registration Statement " has the meaning set forth in Section 4.4 .

" Required Parent Shareholder Approval " has the meaning set forth in recitals.

" Reserve-Adjusted Net CMS Reconciliation Amount " means the Actual Net CMS Reconciliation Amount plus the CMS Reconciliation Reserve Amount.

" Sarbanes-Oxley Act " means the Sarbanes-Oxley Act of 2002.

" SEC " means the United States Securities and Exchange Commission.

" Second Merger " has the meaning provided in the recitals.

" Second Merger Certificate of Merger " has the meaning provided in Section 2.3 .

" Second Merger Effective Time " has the meaning provided in Section 2.3 .

" Second Merger Surviving Entity " has the meaning provided in the recitals.

" Securities Act " means the Securities Act of 1933, as amended (together with the rules and regulations promulgated thereunder).

" Securities Purchase Agreement " has the meaning set forth in Section 4.20 .

" Seller Transaction Expenses " has the meaning set forth in Section 8.2(a)(iv) .

" Settlement Discussions " has the meaning set forth in Section 5.2(d) .

" Shareholder Representative " has the meaning set forth in Section 5.16(a) .

" Shareholders Agreement " has the meaning set forth in Section 6.3(i)(v) .

" Software " has the meaning set forth in the definition of Intellectual Property Rights.

" State Claims Post Reconciliation " means any Medicare Part D prescription drug claim that has been paid for by a state whereby (i) the claim is for a beneficiary who was a member of the Company’s Part D plan in 2006 and (ii) the claim was not received timely from the state and therefore was not included in the 2006 CMS Reconciliation.

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" Stock Merger Consideration " means the Initial Stock Merger Consideration, as from time to time adjusted pursuant to Section 2.12 , Section 2.13 and/or Section 8.2 (it being understood that if any shares of Parent Common Stock are transferred to Parent pursuant to Section 2.12 and/or Section 8.2 , the transfer of such shares to Parent shall be deemed to reduce the number of Parent Shares actually and ultimately issued by Parent as Merger Consideration hereunder).

" Subsidiary " of a Person means any and all corporations, partnerships, limited liability companies and other entities, whether incorporated or unincorporated, with respect to which such Person, directly or indirectly, owns securities having the power to elect a majority of the board of directors or similar body governing the affairs of such entity.

" Tax " means (A) any and all federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, real property gains, registration, value added, excise, natural resources, severance, stamp, occupation, windfall profits, environmental (under Section 59A of the Code), customs, duties, real property, personal property, capital stock, social security (or similar), unemployment, disability, payroll, license, employee or other withholding, or other tax assessment, duty, fee, levy, or other governmental charge, of any kind whatsoever, including any interest, penalties or additions to tax or similar items in respect of the foregoing (whether disputed or not) and including any obligations to indemnify or otherwise assume or succeed to the tax liability of any other Person and (B) any liability for the payment of any amount of the type described in the immediately preceding clause (A) as a result of (1) being a "transferee" of another person, (2) being a member of an affiliated, combined, consolidated or unitary group, or (3) any contractual liability.

" Tax Benefits " has the meaning set forth in Section 8.2(d)(vi) .

" Tax Return " means any return, report, declaration, claim for refund, information return or other document (including any related or supporting schedule, statement or information) filed or required to be filed in connection with the determination, assessment or collection of any Tax of any party or the administration of any Legal Requirements relating to any Tax (including any amendment thereof).

" Termination Date " has the meaning set forth in Section 7.1(b) .

" Third Party Claim " has the meaning set forth in Section 8.2(f)(i) .

" Trade Secrets " has the meaning set forth in the definition of Intellectual Property Rights.

" Transactions " has the meaning set forth in the recitals.

" TRICARE Agreement " shall mean any written agreement pursuant to which Parent, the Company or one or more other Subsidiaries of Parent (or any successor thereto) offers pharmacy services directly or indirectly through Computer Sciences Corporation (or any Affiliate thereof acting as prime contractor to the United States Department of Defense / TRICARE), as the same may be from time to time amended, modified, restated or superseded by a successor or replacement agreement.

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" TRICARE Amount " means an amount equal to twenty-five percent (25%) of the Net Present Value of the all profits ( i.e ., revenues less expenses) to be earned under the TRICARE Agreement from and after January 1, 2011.

" TRICARE Business " shall mean business conducted pursuant to the TRICARE Agreement.

" Waivers " has the meaning set forth in Section 3.20(b) .

" WCAS IX " has the meaning set forth in the preamble.

Section 1.2             Interpretive Provision .  Unless otherwise indicated to the contrary herein by the context or use thereof: (i) the words, "herein," "hereto," "hereof" and words of similar import refer to this Agreement as a whole and not to any particular Section or paragraph hereof; (ii) the word "including" means "including, but not limited to"; (iii) masculine gender shall also include the feminine and neutral genders, and vice versa; and (iv) words importing the singular shall also include the plural, and vice versa.

ARTICLE 2

THE TRANSACTIONS

Section 2.1             The Mergers .  At the First Merger Effective Time, on the terms and subject to the conditions of this Agreement and the applicable provisions of the OGCL and the DGCL, the Delaware Corp. Merger Sub shall be merged with and into the Company, the separate corporate existence of the Delaware Corp. Merger Sub shall cease, and the Company shall continue as the First Merger Surviving Corporation.  At the Second Merger Effective Time (as defined below), and as part of the same plan of merger and reorganization, and on the terms and subject to the conditions of this Agreement and the applicable provisions of the DGCL and the Delaware LLC Act, the First Merger Surviving Corporation shall be merged with and into the Delaware LLC Merger Sub, the separate corporate existence of the First Merger Surviving Corporation shall cease, and the Delaware LLC Merger Sub shall continue as the Second Merger Surviving Entity under the name "MemberHealth, LLC".

Section 2.2             Closing .  The closing of the transactions contemplated hereby (the " Closing ") shall take place at the offices of Ropes & Gray LLP, 1211 Avenue of the Americas, New York, New York, at 10:00 A.M. (New York City time) on the second Business Day following the satisfaction or waiver of the conditions set forth in Article 6 (other than those conditions that by their terms cannot be satisfied until the Closing, but subject to the satisfaction of such conditions at the Closing), or on such other date and time as the Company and Parent shall mutually agree.  The date of the Closing is herein called the " Closing Date ".

Section 2.3             Effective Times .  On the terms and subject to the conditions of this Agreement, the parties hereto shall cause the First Merger to be consummated at the Closing by the filing of a certificate of merger (the " First Merger Certificate of Merger ") in a form mutually acceptable to Parent and the Company with the Secretary of State of Ohio and the Secretary of State of Delaware as required by, and executed in accordance with, the relevant provisions of the OGCL and the DGCL (the time of such later filing being the " First Merger Effective Time ").

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Immediately following the First Merger Effective Time, Parent shall cause the Board of Directors of the First Merger Surviving Corporation to adopt this Agreement and approve the Second Merger (and shall adopt this Agreement and approve the Second Merger as sole shareholder of the Second Merger Surviving Corporation).  Immediately following such approval, the parties hereto shall cause the Second Merger to be effected by the filing of a certificate of merger (the " Second Merger Certificate of Merger " and, together with the First Merger Certificate of Merger, the " Certificates of Merger ") in a form that is mutually acceptable to Parent and MHRx with the Secretary of State of Ohio and the Secretary of State of Delaware as required by, and executed in accordance with, the relevant provisions of the OGCL and the Delaware LLC Act (the time of such later filing being the " Second Merger Effective Time ").

Section 2.4             Effects of the Mergers .  The First Merger shall have the effects set forth in this Agreement, the First Merger Certificate of Merger and the applicable provisions of the OGCL and DGCL.  The Second Merger shall have the effects set forth in this Agreement, the Second Merger Certificate of Merger and the applicable provisions of the DGCL and the Delaware LLC Act.

Section 2.5             Governing Documents; Officers and Directors .

(a)           The Articles of Incorporation and Regulations of the Company as in effect immediately prior to the First Merger Effective Time shall be the Articles of Incorporation and Regulations of the First Merger Surviving Corporation.  The initial certificate of formation and limited liability company operating agreement of the Second Merger Surviving Entity shall be in the forms of Exhibits C-1 and C-2 , respectively.

(b)           The directors and officers of Delaware Corp. Merger Sub immediately prior to the First Merger Effective Time shall be the directors and officers of the First Merger Surviving Corporation.  In connection with the Second Merger, the First Merger Surviving Corporation and the Delaware LLC Merger Sub shall take all actions necessary so that the directors and officers of Delaware LLC Merger Sub immediately prior to the Second Merger Effective Time shall be the initial directors and officers of the Second Merger Surviving Entity; provided however that Parent may, at its option, elect to appoint a manager for (or serve as managing member of the Second Merger Surviving Entity in lieu of such directors and officers).

Section 2.6             Effect of the Mergers on the Capital Stock of the Constituent Entities of the Mergers .

(a)           At the First Merger Effective Time, by virtue of the First Merger and without any action on the part of any holder of any shares of common stock, $.01 par value, of the Delaware Corp. Merger Sub (the " Delaware Corp. Merger Sub Common Stock ") or any holder of Company Common Stock:

• • • • (i)            Delaware Corp. Merger Sub Common Stock .  Each share of Delaware Corp. Merger Sub Common Stock issued and outstanding immediately prior to the First Merger Effective Time shall be converted into and become one fully paid and nonassessable share of First Merger Surviving Corporation Common Stock.

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• • • • (ii)           Company Common Stock .  Subject to Section 2.6(a)(iii) , Section 2.7 , Section 8.6 and Section 2.12(b) , each share of Company Common Stock issued and outstanding immediately prior to the First Merger Effective Time shall be converted into the right to receive:

        • • • • • • (A)                               an amount of cash equal to the quotient obtained by dividing (x) $346,500,000 by (y) the number of issued and outstanding shares of Company Common Stock as of immediately prior to the First Merger Effective Time (the " Initial Cash Merger Consideration ");

                    (B)                                 that number of shares (the " Initial Parent Shares ") of Parent Common Stock as is equal to the quotient obtained by dividing (x) 14,175,000 (subject to adjustment in the case of stock split, stock combination, stock dividend or similar event in respect of the Parent Common Stock) by (y) the number of issued and outstanding shares of Company Common Stock as of immediately prior to the First Merger Effective Time (the " Initial Stock Merger Consideration " and together with the Initial Cash Merger Consideration, the " Initial Merger Consideration "), all of which shares shall have been issued pursuant to an effective registration statement on Form S-4 under the Securities Act;

                    (C)                                 subject to the terms and conditions thereof, any additional Cash Merger Consideration and Parent Shares from time to time deliverable pursuant to Section 2.12 below; and

                    (D)                                subject to the terms and conditions thereof, any additional Cash Merger Consideration and Parent Shares from time to time deliverable pursuant to Section 2.13 below.

        (iii)          Adjustments .

        • • • • (A)          Notwithstanding anything to the contrary contained in Section 2.6(a)(ii) above, in the event that the Fair Market Value of the Initial Parent Shares (determined as of the trading day immediately preceding the Closing Date) would otherwise represent less than forty percent (40%) of the aggregate Initial Merger Consideration, then the number of Initial Parent Shares shall be increased (and such additional shares shall be deemed to be Initial Parent Shares for purposes of this Agreement) and the Initial Cash Merger Consideration shall be decreased in a manner to be determined by MHRx (and reasonably acceptable to Parent) so that the Fair Market Value of the Initial Parent Shares (determined as of the trading day immediately preceding the Closing Date) equals forty percent (40%) of the Initial Merger

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• • • • • • • • Consideration and the Initial Merger Consideration continues to equal $630,000,000 (assuming a value of $20 per Initial Parent Share).

                (B)           Parent shall not be entitled to assert the closing condition set forth in Section 6.2(d) below unless Parent shall have first given to MHRx written notice (an " Equity Shortfall Notice ") of its intention to do so specifying the reasons why all or a portion of the Equity Financing will not be available for purposes of the Closing and the amount of such Equity Financing that is not anticipated to be available (the " Equity Shortfall Amount ").  If an Equity Shortfall Notice is delivered to MHRx, MHRx shall have the option, exercisable in its sole discretion, to elect to reduce the Initial Cash Merger Consideration by the Equity Shortfall Amount and increase the number of Initial Parent Shares by a number of shares of Parent Common Stock equal to the Equity Shortfall Amount divided by $20.

(b)           At the Second Merger Effective Time, by virtue of the Second Merger and without any action on the part of any holder of First Merger Surviving Corporation Common Stock or any holder of membership interests of the Delaware LLC Merger Sub (the " Delaware LLC Merger Sub Interests "):

• • • • (i)            First Merger Surviving Corporation Common Stock .  Each share of First Merger Surviving Corporation Common Stock issued and outstanding immediately prior to the Second Merger Effective Time shall be cancelled and cease to exist and no consideration shall be payable in respect thereof.

        (ii)           Delaware LLC Merger Sub Membership Interests .  The issued and outstanding Delaware LLC Merger Sub Interests (all of which will be held by Parent) shall remain as the membership interests of the Second Merger Surviving Entity.

Section 2.7             Fractional Shares .  Notwithstanding anything to the contrary contained in Section 2.6(a)(ii)(B) , no fraction of a share of Parent Common Stock will be issued as Stock Merger Consideration, and in lieu thereof an amount of cash (rounded to the nearest whole cent) equal to the product of (i) such fraction, multiplied by (ii) the Fair Market Value of the Parent Common Stock determined as of the trading day immediately prior to the date of issuance shall be added to the Cash Merger Consideration.

Section 2.8             Cancellation and Retirement of Company Common Stock .  As of the First Merger Effective Time, all shares of Company Common Stock that are issued and outstanding immediately prior to the First Merger Effective Time shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each certificate representing any such shares of Company Common Stock shall be converted into the right to receive the Merger Consideration to be paid in consideration therefor pursuant to this Article 2.  From and after the First Merger Effective Time, there shall be no further registration of transfers on the

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records of the Company of shares of Company Common Stock which were outstanding immediately prior to the First Merger Effective Time.

Section 2.9             Exchange of Certificates; Payment of Initial Merger Consideration .  Parent acknowledges that, as of the First Merger Effective Time, MHRx will be distributing and assigning to its members in accordance with its Governing Documents the right to receive directly from Parent the Initial Parent Shares (other than the Escrow Shares) and the Initial Cash Merger Consideration net of expenses as contemplated by Section 8.6 (other than the Escrow Cash), and Parent agrees to facilitate such distribution by delivering such Initial Merger Consideration directly to the MHRx members in accordance with specific written directions to be provided by MHRx to Parent not less than two (2) Business Days prior to the Closing Date for such purposes. On the Closing Date, MHRx shall surrender to Parent all certificates representing all of the shares of Company Common Stock and Parent shall deliver or cause to be delivered to the members of MHRx (i) the Initial Cash Merger Consideration (less the amount of Initial Cash Merger Consideration to be deposited in the Escrow Fund pursuant to Section 2.10 and the Escrow Agreement) (which shall be paid by wire transfer of immediately available funds to accounts specified in writing by MHRx to Parent not less than two (2) Business Days prior to the Closing) and (ii) certificates evidencing the Initial Parent Shares (other than the Initial Parent Shares to be deposited in the Escrow Fund pursuant to Section 2.10 and the Escrow Agreement) registered in the names of the MHRx members as specified in the instructions delivered by MHRx to Parent (or, if MHRx so specifies in such instruction that any of its members wishes to receive all or a portion of the Initial Parent Shares in book-entry or other uncertificated form, book-entry transfers evidencing the issuance of such portion of the Initial Parent Shares in accordance with such instructions).  MHRx agrees to use its commercially reasonable efforts to provide Parent with such documents and information as it may reasonably request in connection with the issuance of such Initial Parent Shares, including completed Forms W-9 or, if applicable, appropriate Forms W-8 for each MHRx member who receives the Initial Parent Shares and information with respect to each MHRx member for Parent’s stock records.

Section 2.10           Escrow Fund .  As soon as practicable after the First Merger Effective Time, without any act of any holder of Company Common Stock, a portion of the Initial Stock Merger Consideration consisting of 708,750 shares of Parent Common Stock (such shares being the " Escrow Shares ") and $17,325,000 of the Initial Cash Merger Consideration (the " Escrow Cash ") shall be deposited with The Bank of New York (or such other institution mutually selected by Parent and the Company) as escrow agent (the " Escrow Agent "), such deposit to constitute the "Escrow Fund" and to be governed by the terms set forth herein and in an escrow agreement among Parent, the Shareholder Representative and the Escrow Agent (the " Escrow Agreement "), the form of which is attached as Exhibit D hereto.  Each Person who is issued Initial Parent Shares shall have a proportionate interest in the Escrow Shares and the Escrow Cash deposited in the Escrow Fund (the amount of such proportionate interests to be provided to Parent by MHRx not later than two (2) Business Days prior to the Closing Date).  The Escrow Shares shall be registered in the names of such MHRx members.  Any shares of Parent Common Stock or other Parent equity securities (including shares issued upon a stock split) (" New Shares" ) issued or distributed by Parent in respect of the Escrow Shares that have not been released from the Escrow Fund shall be added to the Escrow Fund, and become a part thereof; provided , however , any other dividends or distributions on the Escrow Shares (including on the New Shares) made in cash or property shall be currently distributed to the owners of such shares.

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The owners of the Escrow Shares shall pay any taxes on such dividends.  The parties hereto shall cause each record owner of Escrow Shares to have the ability to direct the voting of that number of Escrow Shares contributed to the Escrow Fund on behalf of such shareholder (and on any New Shares) so long as such shares are held in the Escrow Fund.  Parent shall show the Parent Common Stock contributed to the Escrow Fund as issued and outstanding on its balance sheet.

Section 2.11           Withholding .  Parent, the Company and MHRx, as applicable, shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement to any holder such amounts as may be required to be deducted or withheld therefrom under the Code or any provision of state, local or foreign Tax law or under any other applicable legal requirement.  To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

Section 2.12           Post Closing Adjustment Relating to CMS Reconciliation .

(a)           Post-Closing Adjustment to Merger Consideration .  Upon the final determination of the CMS Reconciliation Payment Amount pursuant to this Section 2.12 , the Merger Consideration shall be adjusted as follows: (a) if the CMS Reconciliation Payment Amount is a positive number, then the Merger Consideration shall be increased on a dollar for dollar basis by the CMS Reconciliation Payment Amount and (b) if the CMS Reconciliation Payment Amount is a negative number, then the Merger Consideration shall be decreased on a dollar for dollar basis by the CMS Reconciliation Payment Amount.  If the CMS Reconciliation Payment Amount is zero, the Merger Consideration shall not be adjusted pursuant to this Section 2.12 . If the adjustments pursuant to this Section 2.12 result in an increase in the Merger Consideration, Parent shall pay to each Person who received the Initial Merger Consideration its pro rata share of such increase in accordance with Section 2.12(e) below.  If the adjustments pursuant to this Section 2.12 result in a reduction in the Merger Consideration, the Indemnifying Members shall be severally obligated to pay to Parent their respective Indemnification Percentage of such decrease in accordance with Section 2.12(e) below.  Payments made pursuant to this Section 2.12 shall not be subject to any right of setoff.

(b)           Pre-Closing Finalization of the CMS Reconciliation Process .  Notwithstanding the foregoing, the parties hereto acknowledge and agree that it may be possible to calculate and finalize the CMS Reconciliation Payment Amount prior to the Closing depending on when the 2006 CMS Reconciliation becomes final.  In the event that the CMS Reconciliation Amount does become final prior to the Closing, the parties shall seek to agree on the Actual Net CMS Reconciliation Amount and the CMS Reconciliation Payment Amount prior to Closing and if possible adjust the Initial Merger Consideration accordingly.  For such purposes, the review and dispute resolution provisions of Section 2.12(d ) shall apply.

(c)           CMS Reconciliation Process .  In connection with the Company’s participation in the process by which CMS calculates final payments and determines if any retroactive adjustment or reconciliation is necessary pursuant to 42 C.F.R. 423.343 for the 2006 plan year (the " 2006 CMS Reconciliation "), the Company and Parent shall use their commercially reasonable efforts to conduct the 2006 CMS Reconciliation in good faith and in accordance with the prescribed methodology required pursuant to 42 C.F.R. 423.343.  The

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Company and Parent shall keep the Shareholder Representative informed on a reasonably current basis with respect to items that pertain to the 2006 CMS Reconciliation, State Claims Post Reconciliation and Plan to Plan Post Reconciliation, and the 2006 CMS reconciliation relating to the existing Part D business of the Parent and its Subsidiaries.  The Company and Parent further agree to consult with the Shareholder Representative on all material decisions relating to the 2006 CMS Reconciliation, State Claims Post Reconciliation and Plan to Plan Post Reconciliation, and shall permit the Shareholder Representative to review and comment on all material correspondence and submissions pertaining to the 2006 CMS Reconciliation, State Claims Post Reconciliation and Plan to Plan Post Reconciliation, and to review all material correspondence and submission pertaining to the 2006 CMS reconciliation relating to the existing Part D business of the Parent and its Subsidiaries.

(d)           CMS Reconciliation Statement; Dispute Resolution .

• • • • (i)            As soon as practicable and in any event not later than thirty (30) days after the 2006 CMS Reconciliation becomes final and is made available, Parent shall, at Parent’s expense, prepare or cause to be prepared and delivered to the Shareholder Representative a statement (the " CMS Reconciliation Statement ") setting forth in reasonable detail its determination (together with all supporting calculations) of the Actual Net CMS Reconciliation Amount and the CMS Reconciliation Payment Amount, such amounts and statement to be prepared and calculated in good faith and in accordance with the terms of this Agreement.

        (ii)           Parent shall provide the Shareholder Representative and its representatives prompt and complete access to all of the work papers of Parent and its representatives relating to the preparation of the CMS Reconciliation Statement and the 2006 CMS reconciliation relating to the existing Part D business of the Parent and its Subsidiaries (as well as access to all other books and records, employees and accountants of Parent and its Subsidiaries as may be reasonably requested by the Shareholder Representative in connection with its review of such CMS Reconciliation Statement and the 2006 CMS reconciliation relating to the existing Part D business of the Parent and its Subsidiaries), provided further that Parent shall only be required to exercise its commercially reasonable efforts to require its accountants to provide the Shareholder Representative with access to such accountants’ work papers.  If the Shareholder Representative determines that the CMS Reconciliation Statement (or the Actual Net CMS Reconciliation Amount or CMS Reconciliation Payment Amount (including the tax rate used to calculate such amount) has not been prepared or calculated in accordance with this Agreement, the Shareholder Representative shall be entitled to deliver a notice of disagreement (the " CMS Reconciliation Disagreement Notice ") to Parent within 60 days of its receipt of the CMS Reconciliation Statement.  The  CMS Reconciliation Disagreement Notice shall set forth in reasonable detail those items or amounts set forth in the CMS Reconciliation Statement as to which the Shareholder Representative disagrees and the reasons for such disagreement.  If no CMS Reconciliation Disagreement Notice is delivered within such 60-day period, the CMS Reconciliation Statement (and the Actual Net CMS Reconciliation Amount and CMS Reconciliation

         

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• • • •  

        Payment Amount) shall become final, conclusive and binding on the parties hereto for all purposes of this Section 2.12 as of 5:00 p.m. (New York City time) on the 60th day, or, if earlier, upon the written acceptance of the CMS Reconciliation Statement by the Shareholder Representative.

        (iii)          If the Shareholder Representative delivers a CMS Reconciliation Disagreement Notice to Parent within the 60-day period described above, the parties shall use their good faith, commercially reasonable efforts to reach agreement on the disputed items or amounts in order to finalize such CMS Reconciliation Statement during the thirty (30) day period following the delivery of such CMS Reconciliation Statement.  If the parties do not resolve all such disputed items or amounts set forth in the CMS Reconciliation Statement within such thirty (30) day period, Parent and the Shareholder Representative shall retain an appraisal or valuation firm of national reputation that is mutually acceptable to Parent and the Shareholder Representative (each acting reasonably) (the " CMS Dispute Arbitrator ") pursuant to a customary engagement letter proposed by the CMS Dispute Arbitrator and reasonably acceptable to Parent and the Shareholder Representative and submit all such disputed items and amounts to the CMS Dispute Arbitrator for final resolution of such disputed items and amounts in accordance with the terms of this Agreement and such engagement letter.  Parent and the Shareholder Representative will have the opportunity to present their positions with respect to such disputed items and amounts to the CMS Dispute Arbitrator, and such disputed items and amounts shall be finally resolved by the CMS Dispute Arbitrator.  The CMS Dispute Arbitrator shall prepare a written report setting forth the resolution of the disputed items and amounts and the final calculation of the Actual Net CMS Reconciliation Amount and the CMS Reconciliation Payment Amount.  Such report of the CMS Dispute Arbitrator shall be delivered to Parent and the Shareholder Representative as promptly as possible and the final determination of the CMS Dispute Arbitrator of such disputed items and amounts (and the Actual Net CMS Reconciliation Amount and the CMS Reconciliation Payment Amount derived therefrom) and shall be final, conclusive and binding upon each of the parties to this Agreement and shall not be subject to appeal of any kind.  The fees and expenses of the CMS Dispute Arbitrator shall be borne equally by Parent and the Shareholder Representative.  Each of Parent and MHRx shall provide all work papers, books and records, employees and accountants that are requested by the CMS Dispute Arbitrator in connection with the resolution of any such dispute.

(e)           Payments .  Subject to Section 2.14 , any payment due pursuant to this Section 2.12 shall be paid within five (5) Business Days after the final determination of such amount pursuant to this Section 2.12 (such date, the " CMS Reconciliation Payment Date ") and shall consist of (i) a number of shares of Parent Common Stock (which in the case of shares being issued by Parent shall have been registered under the Securities Act or be eligible to be sold immediately pursuant to an effective registration statement in form and substance reasonably acceptable to Parent and the Shareholder Representative) equal to (A) forty-five percent (45%) of such payment amount divided by (A) the Fair Market Value of a share of Parent Common Stock (provided that if the Parent Common Stock is then traded on the

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NASDAQ Global Select Market, such Fair Market Value shall be determined by reference to the average of the high and low trading price of the Parent Common Stock on a ten trailing day average basis for the last ten trading days immediately preceding the CMS Reconciliation Payment Date) and (ii) the remaining fifty-five percent (55%) of such payment shall be made by wire transfer of immediately available funds to an account or accounts designated by or on behalf of the party or parties receiving such payment; provided , however , that any Indemnifying Member that is obligated to make a payment to Parent pursuant to this Section 2.12 may, at its election, pay its Indemnification Percentage of such payment amount in cash by wire transfer of immediately available funds.  If Parent is required to make a payment to MHRx pursuant to this Section 2.12 , such payment shall be made to the Indemnifying Members to the extent that MHRx has distributed the right to receive such payment to such Persons.

(f)            Tax Treatment .  Except to the extent that a portion of any payment made pursuant to this Section 2.12 is required to be treated as imputed interest under Section 483 of the Code, the parties will treat any such payment as an adjustment to the Merger Consideration for Tax and financial reporting purposes.

(g)           For the avoidance of doubt, the CMS Reconciliation Payment Amount calculated pursuant to Section 2.12 is not limited to the CMS reconciliation required under 42 C.F.R 423.343, but includes the 2006 CMS Reconciliation, Plan to Plan Post Reconciliation and State Claims Post Reconciliation in connection with the Company’s 2006 plan year.  In addition, any corollary true-up adjustments that would have been made in connection with any agreements entered into by the Company, including but not limited to NCPA Agreement and the Hannover Reinsurance Agreement, shall be considered in calculating the CMS Reconciliation Payment Amount.

Section 2.13           Contingent Payments .

(a)           Additional Merger Consideration .  Subject to and upon the terms and conditions of this Agreement, on each Earnout Payment Date, Parent shall pay to MHRx as additional Merger Consideration the Annual Earnout Amount due with respect to the immediately preceding Annual Earnout Period.  Notwithstanding the foregoing, Parent may, in its sole discretion, elect to pay to MHRx an Annual Earnout Amount (or a portion thereof) despite the Annual EBITDA (or, for the Annual Earnout Period ending December 31, 2010, the Annual EBITDA plus the TRICARE Amount) being less than the EBITDA Threshold for such Annual Earnout Period.  Payments made pursuant to this Section 2.13 shall not be subject to any right of setoff.

(b)           Annual Earnout Financials; Annual Earnout Statement; Dispute Resolution .

• • • • (i)            As soon as practicable and in any event not later than ninety (90) days after the last day of each Annual Earnout Period, Parent shall, at Parent’s expense, prepare or cause to be prepared and delivered to the Shareholder Representative an income statement of the MH Business for such immediately preceding Annual Earnout Period (" Annual Earnout Financials ") together with a statement (each an " Annual Earnout Statement ") setting forth in reasonable detail

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• • • • its determination (together with all supporting calculations) of Annual EBITDA for such period and the Annual Earnout Amount, if any, for such period, each such amount and all such statements to be prepared and calculated in good faith and in accordance with the terms of this Agreement.  In connection with the delivery of the Annual Earnout Financials and Annual Earnout Statement relating to the final Annual Earnout Period ( i.e ., January 1, 2010 through December 31, 2010), Parent shall also include as part of such Annual Earnout Statement, a reasonably detailed calculation of the TRICARE Amount calculated in good faith and in accordance with the terms of this Agreement.

        (ii)           Parent shall provide the Shareholder Representative and its representatives prompt and complete access to all of the work papers of Parent and its representatives relating to the preparation of the Annual Earnout Financials and each Annual Earnout Statement and access to all other books and records, employees and accountants of Parent and its Subsidiaries as may be reasonably requested by the Shareholder Representative in connection with its review of such Annual Earnout Financials and Annual Earnout Statements; provided that Parent shall only be required to exercise its commercially reasonable efforts to require its accountants to provide the Shareholder Representative with access to such accountants’ work papers.  If the Shareholder Representative determines that any Annual Earnout Financials or Annual Earnout Statements (or any Annual Earnout Amount or TRICARE Amount, if applicable, reflected thereon) has not been prepared or calculated in accordance with this Agreement, the Shareholder Representative shall be entitled to deliver a notice of disagreement (an " Earnout Disagreement Notice ") to Parent within 60 days of its receipt of such Annual Earnout Financials and Annual Earnout Statement.  Each Earnout Disagreement Notice shall set forth in reasonable detail those items or amounts set forth in such Annual Earnout Financials and/or Annual Earnout Statement as to which the Shareholder Representative disagrees and the reasons for such disagreement.  If no Earnout Disagreement Notice is delivered within such 60-day period, such Annual Earnout Financials and Annual Earnout Statement (and each calculation of the Annual Earnout Amount and/or TRICARE Amount, as applicable, reflected thereon) shall become final, conclusive and binding on the parties hereto for all purposes of this Section 2.13 as of 5:00 p.m. (New York City time) on such 60th day, or, if earlier, upon the Shareholder Representative’s written acceptance of the Annual Earnout Financials and Annual Earnout Statement (including each calculation of the Annual Earnout Amount and/or TRICARE Amount, as applicable, reflected thereon).

        (iii)          If the Shareholder Representative delivers an Earnout Disagreement Notice to Parent within the 60-day period described above, the parties shall use their good faith, commercially reasonable efforts to reach agreement on the disputed items or amounts in order to finalize such Earnout Financial Statements and determine the Annual Earnout Amount for such period (including the TRICARE Amount, if applicable) during the thirty (30) day period following the delivery of such Earnout Disagreement Notice by submitting such dispute to a panel consisting of the MHRx Representative, the Parent

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• • • • Representative and Charles E. Hallberg (the " Dispute Panel ").  The Dispute Panel shall attempt to resolve such disputed items and amounts in good faith including, if necessary, by conducting not less than two in person meetings to discuss such dispute.  If the Dispute Panel does not resolve all such disputed items or amounts set forth in the Earnout Disagreement Notice within such thirty (30) day period, Parent and the Shareholder Representative shall retain an appraisal or valuation firm of national reputation that is mutually acceptable to Parent and the Shareholder Representative (the " Arbitrator ") pursuant to a customary engagement letter proposed by the Arbitrator and reasonably acceptable to Parent and the Shareholder Representative and submit all such disputed items and amounts to the Arbitrator for final resolution of such disputed items and amounts in accordance with the terms of this Agreement and such engagement letter.  Parent and the Shareholder Representative will have the opportunity to present their positions with respect to such disputed items and amounts to the Arbitrator, and such disputed items and amounts shall be finally resolved by the Arbitrator.  The Arbitrator shall prepare a written report setting forth the resolution of the disputed items and amounts and the final calculation of the disputed Annual Earnout Amount (including the TRICARE Amount, if applicable).  Such report of the Arbitrator shall be delivered to Parent and the Shareholder Representative as promptly as possible and the final determination of the Arbitrator of such disputed items and amounts (and such Annual Earnout Amount (including the TRICARE Amount, if applicable) derived therefrom) and shall be final, conclusive and binding upon each of the parties to this Agreement and shall not be subject to appeal of any kind.  The fees and expenses of the Arbitrator shall be borne by Parent; provided , that MHRx shall pay all such fees and expenses in the event that the Annual Earnout Amount (including the TRICARE Amount, if applicable) proposed by Parent are, in the aggregate, greater than or not more than $1,000,000 less than the final amounts as determined by the Arbitrator.  Each of Parent and the Shareholder Representative shall provide all work papers, books and records, employees and accountants that are requested by the Arbitrator in connection with the resolution of any such dispute.

        (iv)          Subject to Section 2.14 , any payments required to be made pursuant to this Section 2.13 shall be paid by Parent to MHRx (or its members, if the right to receive such payment has been distributed to such Persons by MHRx), within five (5) Business Days after the final determination of such amount pursuant to this Section 2.13 (each an " Earnout Payment Date ") and shall consist of (i) a number of shares of Parent Common Stock that have been registered under the Securities Act (or which are eligible to be sold immediately pursuant to an effective registration statement in form and substance reasonably acceptable to Parent and the Shareholder Representative) equal to (A) forty-five percent (45%) of such payment amount divided by (B) the Fair Market Value of a share of Parent Common Stock (provided that if the Parent Common Stock is then traded on the NASDAQ Global Select Market, such Fair Market Value shall be determined by reference to the average of the high and low trading price of the Parent Common Stock on a ten trailing day average basis for the last ten trading days of the immediately preceding Annual Earnout Period to which such payment

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• • • • relates) and (ii) the remaining fifty-five percent (55%) of such payment shall be made by wire transfer of immediately available funds to an account or accounts designated by the Shareholder Representative.

(c)           Operations of the MH Business; Certain Principles of Allocation .  The parties agree that at all times during the period from the date hereof through December 31, 2010 the MH Business shall be conducted in accordance with the following principles and the financial statements required to be prepared and calculations required to be made pursuant to this Section 2.13 shall be prepared and calculated in accordance with the following terms and conditions:

• • • • (i)            Parent shall, in good faith, operate the MH Business in a commercially reasonable manner.

        (ii)           Parent shall provide the Shareholder Representative with reasonable access to the books, records and employees of the MH Business and use its commercially reasonable efforts to keep the Shareholder Representative and the MHRx Representative informed on a reasonably current basis of all material developments relating to the MH Business including by making available to the MHRx Representative within a reasonable period of time prior to the implementation thereof, all operating budgets for the MH Business and by making the Parent Representative available to the Shareholder Representative to discuss such operating budgets.

        (iii)          All expenses relating to the MH Business and any other business conducted by Parent and its Subsidiaries shall be allocated by Parent in good faith among such businesses in a fair and reasonable manner and in a manner consistent past practice and other allocations of expense by Parent to its different business lines for other purposes; provided , that (A) with respect to the Part D Business, if during any relevant period Parent provides any services to the MH Business that are being provided by a third party on the date hereof, the costs of such services shall be allocated on a variable cost basis in order to provide the MH Business the benefits of any synergies associated with in internalization of such expenses; (B) items of income or expense attributable to the operation of any portion of the MH Business that is acquired by Parent after the Closing Date through the purchase of any business enterprise, division or line of business (excluding, for the avoidance of doubt, any CMS contracts acquired by novation) that would otherwise be included within the calculation of Annual EBITDA shall be excluded from the calculations contemplated by this Section 2.13 ; (C) if Parent, the Company or any of their respective Subsidiaries sells, leases, transfers or otherwise disposes of assets of the MH Business after the Closing Date, Parent and the Shareholder Representative shall negotiate in good faith and arrive at a fair and reasonable adjustment to the Annual EBITDA calculation to reflect the impact of such disposition (and if unable to agree thereon shall submit such matter to the Dispute Panel (and, if necessary, the Arbitrator) for resolution, as soon as possible and, if practicable, prior to the consummation of such transaction, on a basis consistent with the procedures set forth in Section

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• • • • 2.13(b)(iii) ; (D) with respect to the Private Fee-for-Service Business, Annual EBITDA shall be calculated on the basis of the premiums received for such business less direct expenses of such business, less medical losses calculated on a basis that is consistent with the company-wide loss ratio of Parent and its Subsidiaries for such period and less a fair and reasonable good faith allocation of all indirect expenses; (E) expenses of integrating the MH Business shall be included as expenses of the MH Business and (F) costs and expenses related to the National Community Pharmacy Association shall be included as expenses of the MH Business.

(d)           Tax Treatment .  Except to the extent that a portion of any payment made pursuant to this Section 2.13 is required to be treated as imputed interest under Section 483 of the Code, the parties will treat any such payment as an adjustment to Merger Consideration for Tax and financial reporting purposes.

Section 2.14           Certain Adjustments .  Notwithstanding anything to the contrary contained in Section 2.12 , Section 2.13 or Section 8.2(e) , if Parent, MHRx or any Indemnifying Member is required to deliver any cash or shares of Parent Common Stock to any other Person which would be treated as an adjustment to the Merger Consideration pursuant to Section 2.12(f) , Section 2.13(d) or Section 8.2(g) , the relative mix of such cash and stock to be delivered shall be adjusted (i) if the cash and shares are being delivered to MHRx or any Indemnifying Member, by increasing the shares and decreasing the cash to be delivered or (ii) if the cash and shares are being delivered to Parent, by decreasing the shares and increasing the cash to be delivered, if necessary (and only to the extent necessary) so that, after the delivery of such cash and shares, the Fair Market Value of all Parent Shares included in the Merger Consideration (valued as of the trading day immediately preceding the Closing Date) is in the aggregate not less than 40% of the total Merger Consideration (with all Parent Shares being valued at their Fair Market Value as of the trading day immediately preceding the Closing Date).  In each case, the required cash payment will be adjusted up or down to the extent necessary so that the total amount of such purchase price adjustment (based on the valuation methodology for Parent Common Stock set forth in Section 2.12(e) , Section 2.13(b)(iv) or Section 8.2(e) , as applicable) is not, in the aggregate, altered.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the Company Disclosure Schedules, the Company hereby represents and warrants to each of Parent and each of the Merger Subs as follows:

Section 3.1             Organization, Good Standing, Qualification and Power .  Each of the Company and its Subsidiaries and MHRx is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation, formation or organization, as the case may be, specified on Schedule 3.1 and has the requisite corporate or limited liability company power and authority to own or lease its properties and assets and to carry on its business as presently conducted.  Each of the Company and its Subsidiaries and MHRx is duly qualified to transact business and is in good standing in

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each jurisdiction wherein the nature of its business or the ownership of its assets makes such qualification necessary, except where the failure to be so qualified and in good standing has not had and would not reasonably be expected to have a Company Material Adverse Effect.  The Company has delivered to Parent true and complete copies of the Governing Documents of MHRx and the Company and its Subsidiaries, as currently in effect.  Neither the Company nor any Subsidiary of the Company nor MHRx is in material violation of or material default under the provisions of any such Governing Documents.

Section 3.2             Authority; Execution and Delivery; Enforceability .  Each of the Company and MHRx has the requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby, all of which have been duly authorized by all requisite corporate or limited liability company, as applicable, action on its part.  Each of MHRx and the Company has duly executed and delivered this Agreement and (assuming this Agreement has been duly and validly authorized, executed and delivered by Parent and each of the Merger Subs), this Agreement is a valid and binding agreement of the Company and MHRx, enforceable against the Company and MHRx in accordance with its terms, except as the enforceability hereof or thereof may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar Legal Requirements affecting the enforcement of creditors’ rights generally or (ii) applicable equitable principles (whether considered in a proceeding at law or in equity).

Section 3.3             Non-contravention .  Neither the execution and delivery of this Agreement by the Company and MHRx nor the fulfillment of and the performance by the Company and MHRx of their respective obligations hereunder will (i) contravene any provision contained in the Governing Documents of MHRx or the Company or any of the Subsidiaries of the Company, (ii) conflict with, violate or result in a breach (with or without the lapse of time, the giving of notice or both) of, permit any Person to terminate, or constitute a default (with or without the lapse of time, the giving of notice or both) under (A) except as set forth on Schedule 3.3 , any contract, agreement, commitment, indenture, mortgage, lease, pledge, note, bond, license, permit, Governmental Authorization, Waiver or other instrument or obligation to which MHRx, the Company or any Subsidiary of the Company is a party or is bound or to which any of their respective properties or assets are  subject or (B) assuming the completion of the actions described in Section 3.4 and on Schedule 3.4 , any Legal Requirement to which MHRx, the Company or any Subsidiary of the Company is bound or subject or to which any of their respective assets or properties are subject, (iii) result in the creation or imposition of any Lien on any of the assets or properties of the Company or any Subsidiary, or (iv) except as set forth on Schedule 3.3 , result in the acceleration of, or permit any Person to terminate, modify, cancel, accelerate or declare due and payable prior to its stated maturity, any obligation of MHRx, the Company or any Subsidiary of the Company, which in the case of any of clauses (ii) through (iv) above, would reasonably be expected to have a Company Material Adverse Effect.

Section 3.4             Consents .  No notice to, filing with, or authorization, registration, consent or approval of any Governmental Authority or other Person is necessary for the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated by this Agreement by MHRx or the Company, except for (i) compliance with and filings under the HSR Act, (ii) compliance with the notice and approval requirements of CMS applicable to the transactions contemplated by this Agreement, (iii) the filing of the Certificates

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of Merger and any related documents with the Secretaries of State of the States of Ohio and Delaware and appropriate foreign qualification documents, if any, with the relevant authorities of other states in which the Company does business, (iv) filings and approvals required by state insurance departments, departments of health, and/or other Governmental Authorities having jurisdiction over the Governmental Authorizations or any part of the Company’s business, each as set forth on Schedule 3.4 , and (v) other notices, filings, authorizations, registrations, consents or approvals set forth on Schedule 3.4 .

Section 3.5             Capitalization of MHRx, the Company; Company Subsidiaries .

(a)           Set forth on Schedule 3.5(a) is the number of authorized, issued and outstanding shares of capital stock of the Company as of the date hereof.  On the date hereof, all of the issued outstanding shares of Company Common Stock are owned beneficially and of record by MHRx, have been validly issued, and are fully paid and nonassessable. Except as set forth on Schedule 3.5(a) , there are no other issued or outstanding equity securities of the Company and (b) there are no other issued and outstanding securities of the Company convertible into or exchangeable for, at any time, equity securities of the Company.  Except as set forth on Schedule 3.5(a) , there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of the Company.

(b)           Except as set forth on Schedule 3.5(b) , there are not any stockholder agreements, voting trusts or other agreements or understandings to which the Company is a party or by which it is bound relating to the voting or transfer of any shares of Company Common Stock.  All registration rights agreements, stockholders’ agreements and voting agreements to which the Company or any of its Subsidiaries is a party are identified on Schedule 3.5(b) .

(c)           Set forth on Schedule 3.5(c) is the number of authorized, issued and outstanding shares of capital stock (or other ownership interests) of each Subsidiary of the Company.  All of the issued and outstanding shares of capital stock (or other ownership interests) of each of the Subsidiaries of the Company are owned beneficially and of record by the Company or another Subsidiary of the Company as set forth on Schedule 3.5(c) , have been validly issued, and are fully paid and nonassessable and, except as set forth on Schedule 3.5(c) , are held free and clear of any preemptive rights (other than such rights as may be held by the Company or a Subsidiary of the Company) or Liens (other than Permitted Liens).  Except as set forth on Schedule 3.5(c) , there are no other issued or outstanding equity securities of any Subsidiary of the Company and there are no other issued and outstanding securities of any Subsidiary of the Company convertible into or exchangeable for, at any time, equity securities of any Subsidiary of the Company.  Except as set forth on Schedule 3.5(c) , there are no (i) outstanding obligations of the Company or any Subsidiary of the Company to repurchase, redeem or otherwise acquire any capital stock (or other ownership interests) of any of the Subsidiaries of the Company or (ii) voting trusts, proxies or other agreements with respect to the voting or transfer of the capital stock (or other ownership interests) of the Subsidiaries of the Company.

(d)           Except for the capital stock (or other ownership interests) of the Subsidiaries of the Company, the Company does not own, directly or indirectly, (i) any shares of outstanding capital stock or membership interests of any other corporation or limited liability

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company or securities convertible into or exchangeable for capital stock or membership interests of any other corporation or limited liability company (ii) any equity or other participating interest in the revenues or profits of any Person, and neither the Company nor any of its Subsidiaries is subject to any obligation to make any investment (in the form of a loan, capital contribution or otherwise) in any Person.

Section 3.6             Financial Statements .

(a)           Attached hereto as Schedule 3.6(a) are copies of the audited consolidated balance sheets of the Company and its consolidated Subsidiaries as of December 31, 2006 (the " Latest Company Balance Sheet "), December 31, 2005 and 2004 and the related audited consolidated statements of income, cash flow and changes in stockholder’s equity of the Company and its consolidated Subsidiaries for the annual periods then ended (the " Company Financial Statements ").

(b)           Except as set forth on Schedule 3.6(b) , the Company Financial Statements (i) have been prepared in accordance with GAAP, applied on a consistent basis throughout the periods covered thereby, except as may be indicated in the notes thereto, and (ii) fairly present, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its consolidated Subsidiaries as of the dates and for the periods indicated.

Section 3.7             No Undisclosed Liabilities .  Except as set forth on Schedule 3.7 , neither the Company nor any of its Subsidiaries has any liability other than (i) liabilities reflected in the Company Financial Statements (including the related notes thereto), (ii) liabilities arising under Contractual Obligations that are connected with future performance under such Contractual Obligations and not required to be reflected on a consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with GAAP, (iii) liabilities that were incurred in the ordinary course of business since the date of the Latest Company Balance Sheet and (iv) liabilities that have not had and would not reasonably be expected to have a Company Material Adverse Effect.

Section 3.8             Title to Tangible Personal Property .  The Company or a Subsidiary of the Company has good title to all of the tangible personal property reflected as being owned by them on the Latest Company Balance Sheet, in each case, free and clear of Liens (other than Permitted Liens), except for any such assets which have been sold or otherwise disposed of since the date of the Latest Company Balance Sheet or where the failure to have such good title has not had and would not reasonably be expected to have a Company Material Adverse Effect.  The Company and its Subsidiaries own or lease all material tangible assets necessary for the conduct of their business as presently conducted.

Section 3.9             Absence of Certain Developments .  Except as set forth on Schedule 3.9 , during the period beginning on the date of the Latest Company Balance Sheet and ending on the date of this Agreement, (a) there has not been any change, event, fact, circumstance, occurrence or effect that has had or would reasonably be expected to have a Company Material Adverse Effect and (b) each of the Company and its Subsidiaries has conducted its business in the ordinary course substantially consistent with past practices.  Without limiting the generality of the foregoing, except as set forth on Schedule 3.9 , none of the Company or any of its

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Subsidiaries has taken any action that would have constituted a violation of Section 5.2(b) of this Agreement if Section 5.2(b) had been in effect at all times since the date of the Latest Company Balance Sheet.

Section 3.10           Governmental Authorizations; Licenses; Etc .  Except as set forth on Schedule 3.10 , the business of each of the Company and its Subsidiaries is now and has been at all times since January 1, 2005 operated in compliance in all material respects with all applicable Legal Requirements.  Except as set forth on Schedule 3.10 , each of the Company and its Subsidiaries has all material permits, Waivers, licenses, approvals, certificates, Governmental Authorizations, and has made all notifications, registrations, certifications and filings with all Governmental Authorities, necessary or advisable for the operation of its business as currently conducted.  Except as set forth on Schedule 3.10 , all such material permits, Waivers, licenses, approvals, certificates and Governmental Authorizations are in full force and effect.  Except as set forth on Schedule 3.10 , there is no action, audit, case, proceeding or investigation pending or, to Company’s Knowledge, threatened in writing by any Governmental Authority with respect to (i) any alleged violation by the Company or any of its Subsidiaries of any Legal Requirement, (ii) any alleged failure by the Company or any of its Subsidiaries to have any permit, license, Waiver, approval, certification or other authorization required in connection with the operation of the business of the Company and its Subsidiaries or (iii) any change or amendment to the permits, licenses, Waiver, approvals, certifications or other authorizations which would impair the ability of the Company and/or its Subsidiaries to operate in the normal course, in each case except as has not had and would not reasonably be expected to have a Company Material Adverse Effect.  The Company has not been determined to be out of material compliance with Payment Program requirements such that there would result in a denial of payment and no statement of charges or deficiencies has been made by any Governmental Authority, except as has not had and would not reasonably be expected to have a Company Material Adverse Effect.  This Section 3.10 does not relate to matters with respect to Taxes (which are the subject of Section 3.12 ), Environmental Matters (which are subject to Section 3.13 ), Employee Matters (which are the subject of Section 3.14 ) or Employee Benefit Plans (which are the subject of Section 3.15 ).  The Company has not received notice from CMS that the accounting methodology employed by the Company in booking additional generic dispensing fees paid by the Company to network pharmacies is not in compliance in all material respects with applicable Legal Requirements.

Section 3.11           Litigation .  Except as set forth on Schedule 3.11 , there are no judgments, decrees, lawsuits, actions, proceedings, claims, complaints, injunctions or orders by or before any Governmental Authority pending or, to Company’s Knowledge, threatened in writing or, to Company’s Knowledge, any pending investigation by any Governmental Authority, in any such case, against the Company or any of its Subsidiaries.

Section 3.12           Taxes .

(a)           Except as set forth on Schedule 3.12(a) , each of the Company and its Subsidiaries has duly and timely filed all material Tax Returns required to be filed by it, all such Tax Returns have been prepared in material compliance with all applicable Legal Requirements and are true, correct and complete in all material respects.  Except as set forth on Schedule 3.12 ,

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all Taxes owed by each of the Company and its Subsidiaries, whether or not shown as due on any such Tax Return, have been timely paid.

(b)           Except as set forth on Schedule 3.12(b) :

• • • • (i)            neither the Company nor any of its Subsidiaries is currently the subject of a Tax audit or examination nor is party to any claim, dispute, action or controversy;

        (ii)           neither the Company nor any of its Subsidiaries has consented to extend the time, or is the beneficiary of any extension of time, in which any Tax may be assessed or collected by any taxing authority; and

        (iii)          neither the Company nor any of its Subsidiaries has received from any taxing authority any written notice of proposed adjustment, deficiency, underpayment of Taxes or any other such written notice which has not been satisfied by payment or been withdrawn; and

        (iv)          neither the Company nor any of its Subsidiaries is presently the beneficiary of any extension of time within which to file any Tax Return.

(c)           No claim, or notice of a claim, has ever been made by an authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that the Company or any of its Subsidiaries is or may be subject to taxation by that jurisdiction.

(d)           Neither the Company nor any of its Subsidiaries has any income or gain reportable for a taxable period ending after the Closing Date but attributable to (i) a transaction (e.g., an installment sale) occurring in or (ii) a change in accounting method made for, a taxable period beginning prior to the Closing Date which resulted in a deferred reporting of income or gain from such transactions or a timing difference in the reporting of income or gain between Tax and GAAP accounting methods or from such change in accounting method.

(e)           The unpaid Taxes of the Company and its Subsidiaries did not, as of December 31, 2006, exceed the reserve for Taxes (rather than any reserve for deferred Taxes established to reflect timing differences between GAAP and Tax income) set forth on the face of the Latest Company Balance Sheet.  The Company and its Subsidiaries have paid all estimated Taxes required to be paid for the Company’s, and each of its Subsidiaries’, current taxable year.

(f)            Neither the Company nor any of its Subsidiaries has ever been a member of a combined, consolidated, affiliated or unitary group for Tax purposes.

(g)           Neither the Company nor any of its Subsidiaries is, or ever has been, a party to any Tax sharing indemnity or similar agreement allocating tax liability that will not be terminated on the Closing Date without any future liability to the Company or such Subsidiary (including for past Taxes).

(h)           The Company and its Subsidiaries have not agreed to, and are not required to, make any adjustments or changes either on, before or after the Closing Date, to their

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accounting methods pursuant to Section 481 of the Code (or similar provisions of state, local, or foreign law), and neither the Internal Revenue Service nor any Taxing authority has proposed any such adjustments or changes in the accounting methods of the Company or any of its Subsidiaries.

(i)            Neither the Company nor any of its Subsidiaries has entered into a "reportable transaction" as such term is defined in Section 6707A(c) of the Code.

(j)            Neither the Company nor any of its Subsidiaries is a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Code.

(k)           None of the assets or properties of the Company or any of its Subsidiaries are (i) tax-exempt use property under Section 168(h) of the Code; (ii) tax-exempt bond financed property under Section 168(g) of the Code; (iii) limited use property under Revenue Procedure 2001-28; or (iv) treated as owned by any other Person under Section 168 of the Code.

(l)            Except as set forth on Schedule 3.12(l) , the Company and its Subsidiaries have complied, in all material respects, with all obligations to withhold and remit Taxes (for employees, creditors or otherwise) and  (i)  there is no compensatory arrangement in existence that would require any withholding of Taxes as a result of the transactions contemplated by this Agreement and (ii) no documentation of any of the arrangements contemplated in  Exhibit E  has been executed since December 31, 2006 other than the Agreement Among Members dated May, 7, 2007 and Amendment No. 1 to the Limited Liability Company Agreement of MHRx  dated May 7, 2007.  There shall be no Tax cost to the Company, Parent or any Subsidiary of Parent or the Company as a result of the documentation described in clause (ii) above and the documentation described in Section 5.11(d) ; it being understood that there will be no such Tax cost to the extent that Parent and the Company are advised of the amount of any Tax withholding obligation of the Company or any Subsidiary of the Company prior to the Closing Date, and Parent and the Company have the opportunity to cooperate to withhold Merger Consideration to satisfy such obligation.

(m)          Since January 1, 2006, the Company has not made any distributions or dividends.

Section 3.13           Environmental Matters .  Except as set forth on Schedule 3.13 hereto:

(a)           the Company and its Subsidiaries are in compliance with all Environmental Laws, except for any failures to comply as have not had and would not reasonably be expected to have a Company Material Adverse Effect;

(b)           the Company and its Subsidiaries have obtained and are in compliance with all permits, licenses and other authorizations that are required pursuant to Environmental Laws, except for any such failure to obtain or comply as has not had and would not reasonably be expected to have a Company Material Adverse Effect;

(c)           neither the Company nor any of its Subsidiaries has received any written notice, report or other information regarding any actual or alleged violation of Environmental

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Laws, or any liabilities for personal injury, property damage or cleanup obligations arising under Environmental Laws, in either case, which violation or liability had or would reasonably be expected to have a Company Material Adverse Effect;

(d)           to Company’s Knowledge, there has been no release or threatened release of any Hazardous Substance on, upon, into or from any site leased or otherwise used by the Company or any of its Subsidiaries, other than such releases or threatened releases that have not had and would not reasonably be expected to have a Company Material Adverse Effect;

(e)           to Company’s Knowledge, there have been no Hazardous Substances generated by the Company or its Subsidiaries that have been disposed of or come to rest at any site that has been included in any published U.S. federal, state, or local "superfund" site list or any other similar list of hazardous or toxic waste sites published by any Governmental Authority in the United States; and

(f)            to Company’s Knowledge, are no underground storage tanks located on, PCBs (polychlorinated biphenyls) or PCB-containing equipment used or stored on, and no hazardous waste as defined by the Resource Conservation and Recovery Act stored on, any site leased or operated by the Company and its Subsidiaries, except for the storage of hazardous waste in substantial compliance with Environmental Laws.

(g)           Notwithstanding anything herein to the contrary, the representations and warranties in this Section 3.13 are the sole and exclusive representations and warranties of the Company and its Subsidiaries concerning environmental matters, including without limitation matters arising under Environmental Laws.

Section 3.14           Employee Matters .

(a)           Except as set forth on Schedule 3.14(a) , (i) neither the Company nor any of its Subsidiaries has entered into any collective bargaining agreement with respect to its employees, (ii) there is no labor strike, labor dispute, or work stoppage or lockout pending or, to Company’s Knowledge, threatened against or affecting the Company or any of its Subsidiaries and since January 1, 2005 there has been no such action, (iii) to Company’s Knowledge, no union organization campaign is in progress with respect to any of the employees of the Company or its Subsidiaries, and (iv) there is no unfair labor practice, charge or complaint pending or, to Company’s Knowledge, threatened against the Company or any of its Subsidiaries.  Neither the Company nor any of its Subsidiaries has engaged in any plant closing or employee layoff activities since January 1, 2003 that would violate or give rise to an obligation to provide any notice required pursuant to the Worker Adjustment Retraining and Notification Act of 1988, as amended, or any similar state or local plant closing or mass layoff statute, rule or regulation.

(b)           Except as set forth on Schedule 3.14(b) , to Company’s Knowledge, the activities of the employees of the Company and its Subsidiaries with respect to the business of the Company and its Subsidiaries do not conflict with or constitute a breach of the terms of any employment agreement, intellectual property disclosure agreement, restrictive covenant or other agreement under which such employee is obligate