EX-2.1 AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

Execution Copy

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

COVENTRY HEALTH CARE, INC.,

COVENTRY MERGER SUB INC.

and

FIRST HEALTH GROUP CORP.

Dated as of October 13, 2004

TABLE OF CONTENTS

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AGREEMENT AND PLAN OF MERGER

     This AGREEMENT AND PLAN OF MERGER, dated as of October 13, 2004 (this “Agreement”), by and among Coventry Health Care, Inc., a Delaware corporation (“Parent”), Coventry Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and First Health Group Corp., a Delaware corporation (the “Company”).

RECITALS

     WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have approved and declared advisable this Agreement and the merger of the Company with and into Merger Sub (the “Merger”) upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the “DGCL”);

     WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have determined that the Merger is in furtherance of and consistent with their respective business strategies and is in the best interest of their respective stockholders; and

     WHEREAS, for federal income tax purposes, it is intended that the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”);

     NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and intending to be legally bound hereby, the parties hereto agree as follows:

Article 1.
The Merger

      Section 1.1 The Merger. Upon the terms and subject to satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the DGCL, the Company shall be merged with and into Merger Sub. As a result of the Merger, the separate corporate existence of the Company shall cease and Merger Sub shall continue as the surviving corporation of the Merger (the “Surviving Corporation”).

      Section 1.2 Effective Time. As soon as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article 6, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with the relevant provisions of, the DGCL (the date and time of such filing, or at such later date and time as Parent and the Company shall agree and specify in the Certificate of Merger, such specified date and time, being the “Effective Time”).

      Section 1.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the

Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

      Section 1.4 Certificate of Incorporation; By-laws. At the Effective Time, Merger Sub’s Certificate of Incorporation (the “Merger Sub Certificate”) and By-laws (the “Merger Sub By-laws”) shall be the Certificate of Incorporation and By-laws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law.

      Section 1.5 Directors and Officers. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation. The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation.

Article 2.
Conversion of Securities; Exchange of Certificates

      Section 2.1 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, the Company or the holders of any of the following securities:

                Section 2.1.1       Conversion of Company Common Stock . Each share of common stock, par value $.01 per share, of the Company (“Company Common Stock”) issued and outstanding immediately prior to the Effective Time (other than any shares of Company Common Stock to be canceled pursuant to Section 2.1.2 and Dissenting Shares) shall be converted, subject to this Section 2.1.1 and Section 2.2.5, into the right to receive: (A) 0.1791 shares (the “Exchange Ratio”) of common stock, par value $.01 per share (“Parent Common Stock”), of Parent (the “Stock Consideration”); and (B) $9.375 in cash (the “Cash Consideration”; and, together with the Stock Consideration, as the same may be adjusted pursuant to the last sentence of this Section 2.1.1, the “Merger Consideration”). All such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each certificate previously representing any such share shall thereafter represent the right to receive the Merger Consideration therefor. No fractional share of Parent Common Stock shall be issued, and in lieu thereof, a cash payment shall be made pursuant to Section 2.2.5 hereof. In the event that, at the time the Company is first able to mail the Proxy Statement to its stockholders (the “Mailing Date”), Parent shall reasonably determine, after consultation with outside counsel, that the number of shares of Parent Common Stock included in the Merger Consideration when aggregated with the number of shares of Parent Common Stock which will be subject to issuance with respect to Company Options pursuant to Section 2.5 (excluding those Company Options which have become subject to Consents) (the “Issuances”) will result in the Merger becoming subject to approval by the stockholders of Parent pursuant to Rule 312.03 of the New York Stock Exchange (the “Parent Approval Requirement”), then Parent may, upon two Business Days notice to the Company given within two Business Days after the Company notifies Parent of its intent to mail the Proxy Statement, adjust the Cash Consideration and the Stock Consideration as follows:

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          (a)       The Exchange Ratio may be reduced (pursuant to a resolution duly adopted by the Parent Board) to, and only to, such level that the Issuances no longer result in the Parent Approval Requirement applying to the Merger (Parent having so been advised by outside counsel), provided, that the Exchange Ratio shall not be adjusted to a level that would result in a failure of the conditions set forth in Sections 6.2.3 or 6.3.3; and

          (b)       In such event, the Cash Consideration shall be increased to an amount such that the sum of (i) such adjusted Cash Consideration and (ii) the adjusted Exchange Ratio multiplied by $52.3365 equals $18.75.

                Section 2.1.2       Cancellation of Certain Company Common Stock . Each share of Company Common Stock held by Parent, Merger Sub, any wholly-owned subsidiary of Parent or Merger Sub, in the treasury of the Company or by any wholly-owned subsidiary of the Company immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof and no payment shall be made with respect thereto.

                Section 2.1.3       Merger Sub . Each share of common stock, par value $.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and be exchanged for one newly and validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.

                Section 2.1.4       Change in Common Stock . If between the date of this Agreement and the Effective Time the outstanding shares of Parent Common Stock or Company Common Stock shall have been changed into a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, the Merger Consideration shall be correspondingly adjusted to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares.

      Section 2.2 Exchange of Certificates.

                Section 2.2.1       Exchange Agent . Prior to the Effective Time, Parent shall designate Mellon Investor Services, LLC, or another bank or trust company designated by Parent and reasonably satisfactory to the Company (the “Exchange Agent”), to act as agent for Parent for purposes of, among other things, mailing and receiving letters of transmittal, and distributing cash and certificates for Parent Common Stock to the Company’s stockholders.

                Section 2.2.2       Exchange Fund and Exchange Procedures . Prior to the Effective Time, Parent shall deposit, or shall cause to be deposited, with the Exchange Agent, for the benefit of the holders of shares of Company Common Stock, for exchange in accordance with this Article 2: (A) cash in U.S. dollars sufficient to pay the Cash Consideration, (B) certificates representing the Stock Consideration issuable pursuant to Section 2.1.1 in exchange for outstanding shares of Company Common Stock, and (C) from time to time as needed, additional cash sufficient to pay cash in lieu of fractional shares pursuant to Section 2.2.5 and any dividends and other distributions pursuant to Section 2.2.3 (such Cash Consideration and certificates representing the Stock Consideration, together with such additional cash

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consideration and such dividends or other distributions, being hereinafter referred to as the “Exchange Fund”). Promptly after the Effective Time, Parent shall cause the Exchange Agent to mail to each holder of record of a certificate or certificates which represent outstanding shares of Company Common Stock (the “Certificates”) as of immediately prior to the Effective Time (A) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent and shall be in customary form) and (B) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. On and following the Effective Time, upon surrender of a Certificate for cancellation to the Exchange Agent together with such letter of transmittal, properly completed and duly executed, and upon surrender of such other documents as may be required by the Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration that such holder has the right to receive in respect of the shares of Company Common Stock formerly represented by such Certificate, cash in lieu of fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.2.5 and any dividends or other distributions to which such holder is entitled pursuant to Section 2.2.3, and the Certificate so surrendered shall forthwith be canceled. No interest will be paid or accrued on any Merger Consideration or any other cash or other consideration payable to holders of Certificates. In the event of a transfer of ownership of shares of Company Common Stock which is not registered in the transfer records of the Company, the Merger Consideration, cash in lieu of any fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.2.5 and any dividends or other distributions to which such holder is entitled pursuant to Section 2.2.3, may be paid to a transferee if the Certificate representing such shares of Company Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer Taxes have been paid. Until surrendered as contemplated by this Section 2.2, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration, cash in lieu of any fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.2.5 and any dividends or other distributions to which such holder is entitled pursuant to Section 2.2.3.

                Section 2.2.3       Distributions with Respect to Unexchanged Shares . No dividends or other distributions with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the share of Parent Common Stock represented thereby, and no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to Section 2.2.5, unless and until the holder of such Certificate shall surrender such Certificate. Subject to the effect of escheat, Tax or other applicable Laws, following surrender of any such Certificate, there shall be paid to the holder of the certificates representing whole shares of the Parent Common Stock issued in exchange therefor, without interest, (A) promptly, the amount of any cash payable with respect to a fractional share of Parent Common Stock to which such holder is entitled pursuant to Section 2.2.5 and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock and (B) at the appropriate payment date, the amount of dividends or other distributions, with a record date after the Effective Time but prior to surrender and a payment date occurring after surrender, payable with respect to such whole shares of Parent Common Stock.

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                Section 2.2.4       Further Rights in Company Common Stock . All Merger Consideration, cash in lieu of any fractional shares of Parent Common Stock and dividends or other distributions, in each case, issued or paid in accordance with the terms hereof shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to such shares of Company Common Stock.

                Section 2.2.5       Fractional Shares . No certificates or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates, no dividend or other distributions with respect to Parent Common Stock shall be payable on or with respect to any fractional share and such fractional share interests will not entitle the owner thereof to any rights of a stockholder of Parent. In lieu of such fractional share interests, Parent shall pay to each holder of Company Common Stock as of immediately prior to the Effective Time an amount in cash equal to (A) the fractional share interest of Parent Common Stock to which such holder (after taking into account all shares of Company Common Stock held immediately prior to the Effective Time by such holder) would otherwise be entitled, multiplied by (B) the average of the closing sales prices of Parent Common Stock on the Exchange, as reported in The Wall Street Journal for the twenty (20) consecutive Business Days in which shares are traded on the Exchange in the period ending on the second Business Day immediately prior to the date of the Effective Time (the “Average Closing Price”). As promptly as practicable after the determination of the amount of cash, if any, to be paid to holders of fractional share interests, the Exchange Agent shall so notify Parent and Parent shall, or shall cause the Surviving Corporation to, deposit such amount with the Exchange Agent and shall cause the Exchange Agent to forward payments to such holders of fractional share interests subject to and in accordance with the terms hereof.

                Section 2.2.6       Termination of Exchange Fund . Any portion of the Exchange Fund which remains undistributed to the holders of Company Common Stock for twelve months after the Effective Time shall be delivered to Parent upon demand, and any holders of Company Common Stock who have not theretofore complied with this Article 2 shall thereafter look only to Parent for payment of the Merger Consideration, any cash in lieu of fractional shares of Parent Common Stock to which they are entitled pursuant to Section 2.2.5 and any dividends or other distributions with respect to Parent Common Stock to which they are entitled pursuant to Section 2.2.3, in each case, without any interest thereon. If any Certificate shall not have been surrendered immediately prior to the date on which any Merger Consideration (and all dividends or other distributions payable pursuant to Section 2.2.3 and all cash payable in lieu of fractional shares pursuant to Section 2.2.5) would otherwise escheat to or become the property of any Governmental Entity, any such Merger Consideration (and all dividends or other distributions payable pursuant to Section 2.2.3 and all cash payable in lieu of fractional shares pursuant to Section 2.2.5 in respect thereof) shall, to the extent permitted by applicable Law, become the property of Parent, free and clear of all claims or interest of any person previously entitled thereto.

                Section 2.2.7       No Liability . Neither Parent, the Company, Merger Sub nor the Surviving Corporation shall be liable to any holder of shares of Company Common Stock for any shares of Parent Common Stock (or dividends or distributions with respect thereto) or cash from the Exchange Fund delivered to a public official pursuant to any abandoned property, escheat or similar Law.

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                Section 2.2.8       Investment of Exchange Fund . The Exchange Agent shall invest any cash included in the Exchange Fund, as directed by Parent only in obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States of America or any agency or instrumentality thereof, provided that such obligations are backed by the full faith and credit of the United States of America. Any interest and other income resulting from such investments shall be the property of, and shall be paid to, Parent. Any losses resulting from such investments shall not in any way diminish Parent’s and Merger Sub’s obligation to pay the full amount of the Merger Consideration.

                Section 2.2.9       Lost Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration, any cash in lieu of fractional shares of Parent Common Stock to which such person is entitled pursuant to Section 2.2.5 and any dividends or other distributions with respect to Parent Common Stock to which such person is entitled pursuant to Section 2.2.3, in each case, without interest thereon.

                Section 2.2.10       Withholding . Parent or the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Common Stock such amounts as Parent or the Exchange Agent are required to deduct and withhold under the Code, or any provision of state, local or foreign Tax Law, with respect to the making of such payment. To the extent that amounts are so withheld by Parent or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Company Common Stock in respect of whom such deduction and withholding was made by Parent or the Exchange Agent. If withholding is required from shares of Parent Common Stock, the Exchange Agent shall sell in the open market such shares of Parent Common Stock on behalf of the former holder of Company Common Stock as is necessary to satisfy such withholding obligation and shall pay such cash proceeds to the appropriate Taxing authority.

      Section 2.3 Dissenters’ Rights. Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock issued and outstanding immediately prior to the Effective Time held by a holder who shall not have voted to adopt this Agreement and has the right to demand and has properly demanded payment for and an appraisal of such shares in accordance with Section 262 of the DGCL (“Dissenting Shares”) shall not be converted into the right to receive the Merger Consideration, but shall be converted into the right to receive such consideration as may be due such holder pursuant to Section 262 of the DGCL unless such holder fails to perfect, withdraws or otherwise loses such holder’s right to such payment or appraisal. If, after the Effective Time, such holder fails to perfect, withdraws or otherwise loses any such right to appraisal, each such share of such holder shall no longer be considered a Dissenting Share and shall be deemed to have converted as of the Effective Time into the right to receive the Merger Consideration, any cash in lieu of fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.2.5 and any dividends or other distributions with respect to Parent Common Stock to which such holder is entitled pursuant to Section 2.2.3, in each case, in accordance with Section 2.1. The Company shall give prompt notice to Parent of

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any demands received by the Company for appraisal of shares of Company Common Stock, withdrawals of such demands and any other instruments served pursuant to the DGCL received by the Company, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent (which shall not be unreasonably withheld or delayed), voluntarily make any payment with respect to, or settle or offer to settle, any such demands or agree to do or commit to do any of the foregoing except to the extent required by applicable Law.

      Section 2.4 Stock Transfer Books. At the close of business, New York time, on the day the Effective Time occurs, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of shares of Company Common Stock theretofore outstanding on the records of the Company. From and after the Effective Time, the holders of certificates representing shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Common Stock except as otherwise provided herein or by Law. On or after the Effective Time, any Certificates presented to the Exchange Agent or Parent for any reason shall be converted into the Merger Consideration, any cash in lieu of fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.2.5 and any dividends or other distributions with respect to Parent Common Stock to which such holder is entitled pursuant to Section 2.2.3.

      Section 2.5 Stock Options.

                Section 2.5.1       At the Effective Time, all unexercised and unexpired options to purchase Company Common Stock (“Company Options”) then outstanding, under any stock option plan of the Company, including the First Health Group Corp. 1995 Stock Option Plan, the First Health Group Corp. 1998 Stock Option Plan, the First Health Group Corp. 1998 Directors’ Stock Option Plan, the First Health Group Corp. 2000 Stock Option Plan, the First Health Group Corp. 2001 Stock Option Plan, and the First Amended and Restated First Health Group Corp. 2001 Directors’ Stock Option Plan, as amended, or any other plan, agreement or arrangement (the “Company Stock Option Plans”), whether or not then exercisable, will be assumed by Parent. Each Company Option so assumed by Parent under this Agreement will continue to have, and be subject to, the same terms and conditions as set forth in the Company Stock Option Plan and any agreements thereunder immediately prior to the Effective Time, except that (i) each Company Option will be exercisable (or will become exercisable in accordance with its terms) for that number of whole shares of Parent Common Stock equal to the product of the number of shares of Company Common Stock that were issuable upon exercise of such Company Option immediately prior to the Effective Time multiplied by 0.3583 (the “Option Exchange Ratio”), rounded to the nearest whole number of shares of Parent Common Stock and (ii) the per share exercise price for the shares of Parent Common Stock issuable upon exercise of each Company Option will be equal to the quotient determined by dividing the exercise price per share of Company Common Stock at which such Company Option was exercisable immediately prior to the Effective Time by the Option Exchange Ratio, rounded to the nearest whole cent; provided, that the conversion of any Company Options which are incentive stock options within the meaning of Section 422 of the Code into options to purchase Parent Common Stock shall be made so as not to constitute a “modification” of such Company Options within the meaning of Section 424 of the Code. Continuous employment with the

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Company or its subsidiaries shall be credited to the optionee for purposes of determining the vesting of all assumed Company Options after the Effective Time.

                Section 2.5.2       Promptly after the date hereof, the Company shall use its commercially reasonable efforts to solicit the consent of each holder (“Consents”) of Company Options outstanding to cancel his or her Company Options (whether or not then exercisable) effective as of the Effective Time, in exchange for a single lump sum cash payment equal to the product of (i) the number of shares of Company Common Stock subject to such Company Option (whether or not then exercisable) immediately prior to the Effective Time and (ii) the greater of (A) the excess, if any, of $18.75 over the exercise price per share of such Company Option and (B) $1.25. The Company shall use its commercially reasonable efforts to obtain such Consents on or prior to the Mailing Date, but notwithstanding anything in this Agreement to the contrary, the failure to obtain any or all of such consents shall not result in a failure of a condition to Closing (including Section 6.2.2 hereof).

Article 3.
Representations and Warranties of the Company

     Except as set forth in the Disclosure Schedule delivered by the Company to Parent prior to the execution of this Agreement (the “Company Disclosure Schedule”), or as set forth in the Company SEC Filings, the Company hereby represents and warrants to Parent as follows:

      Section 3.1 Organization and Qualification; Subsidiaries. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Company Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, as the case may be. Each of the Company and each Company Subsidiary has the requisite power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted. Each of the Company and each Company Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Section 3.1 of the Company Disclosure Schedule sets forth a true and complete list of all of the subsidiaries of the Company (each a “Company Subsidiary” and, collectively, the “Company Subsidiaries”) and the state of incorporation or organization of such Company Subsidiary and each jurisdiction in which such Company Subsidiary is qualified or licensed to do business. All the outstanding shares of capital stock of, or other equity interests in, each Company Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by the Company free and clear of all pledges, claims, liens, charges, encumbrances or security interests of any kind or nature whatsoever (collectively, “Liens”) other than Liens created by federal or state securities laws, and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity interests. Except as set forth in the Company Disclosure Schedule, none of the Company or any Company Subsidiary holds an Equity Interest in any other person.

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      Section 3.2 Certificate of Incorporation and By-laws. The copies of the Company’s Restated Certificate of Incorporation, as amended (the “Company Certificate”), and Restated By-laws, as amended (the “Company By-laws”), that are attached as Exhibit A to the Company Disclosure Schedule are complete and correct copies thereof as in effect on the date hereof. The Company has made available, or will make available to Parent upon request of Parent at the Company’s executive offices, complete and correct copies of the certificate of incorporation and by-laws (or comparable organizational documents) of each of the Company Subsidiaries, in each case as amended to the date of this Agreement, and the minute books of each Company Subsidiary. The Company has made available to Parent complete and correct copies of the minute books of the Company, provided that the minutes contained therein have been redacted to remove competitively sensitive pricing or other information and records of proceedings of the Company Board and any committee thereof with respect to the process (and alternatives thereto) that resulted in this Agreement.

      Section 3.3 Capitalization.

                Section 3.3.1       The authorized capital stock of the Company consists of 401,000,000 shares of capital stock, of which 400,000,000 are designated Company Common Stock and 1,000,000 are designated preferred stock, par value $1.00 per share (“Company Preferred Stock”). As of October 7, 2004, (A) 91,887,018 shares of Company Common Stock (other than treasury shares) were issued and outstanding, all of which were validly issued and fully paid, nonassessable and free of preemptive rights, (B) 45,403,000 shares of Company Common Stock were held in the treasury of the Company or by the Company Subsidiaries, and (C) 10,955,376 shares of Company Common Stock were issuable (and such number was reserved for issuance) upon exercise of Company Options outstanding as of such date. As of the date hereof, no shares of Company Preferred Stock are issued or outstanding.

                Section 3.3.2       The Company has delivered to Parent a correct and complete list, as of October 7, 2004, of all outstanding Company Stock Options, restricted stock awards and other rights to purchase or receive shares of Company Common Stock granted under the Company Stock Option Plans or otherwise, the number of shares of Company Common Stock subject thereto, whether or not a stock option is an incentive stock option within the meaning of Section 422 of the Code, the expiration dates and the exercise prices thereof, in each case broken down as to each plan, agreement or other arrangement and as to each individual holder. As of October 7, 2004, except for (A) Company Options to purchase not more than 10,955,376 shares of Company Common Stock and (B) other arrangements and agreements set forth in the Company Disclosure Schedule, there are no options, warrants or other rights to acquire capital stock or other Equity Interests from the Company, or securities convertible into or exchangeable for such capital stock or other Equity Interests. Since October 7, 2004 through the date hereof, the Company has not issued any shares of its capital stock or other Equity Interests, or securities (other than Company Options issued in the ordinary course of business) convertible into or exchangeable for such capital stock or other Equity Interests, other than shares of capital stock reserved for issuance as provided in this Section 3.3, issuance of shares pursuant to Company Options, or as set forth in the Company Disclosure Schedule. All shares of Company Common Stock subject to issuance under the Company Stock Option Plans, upon issuance prior to the Effective Time on the terms and conditions specified in the instruments pursuant to which

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they are issuable, will be duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights.

                Section 3.3.3       Except as set forth in the Company Disclosure Schedule, there are no outstanding contractual obligations of the Company or any Company Subsidiary (A) restricting the transfer of, (B) affecting the voting rights of, (C) requiring the repurchase, redemption or disposition of, or containing any right of first refusal with respect to, (D) requiring the registration for sale of, or (E) granting any preemptive or antidilutive right with respect to, any shares of Company Common Stock or any capital stock of, or other Equity Interests in, the Company or any Company Subsidiary. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote.

      Section 3.4 Authority.

                Section 3.4.1       The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to the adoption of this Agreement by the Required Company Stockholders, to consummate the transactions contemplated by this Agreement to be consummated by the Company. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company and no stockholder votes are necessary to authorize this Agreement or the Merger or to consummate the transactions contemplated hereby subject, with respect to the Merger, to the adoption of this Agreement by the Required Company Stockholders. This Agreement has been duly authorized and validly executed and delivered by the Company and, assuming due authorization, execution and delivery by each of the other parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

                Section 3.4.2       The Company Board, at a meeting duly called and held, has adopted resolutions (i) declaring that this Agreement and the Merger are advisable and in the best interests of the Company’s stockholders, (ii) approving and adopting this Agreement and the Merger, (iii) directing that the adoption of this Agreement be submitted to a vote at a meeting of the stockholders of the Company and (iv) recommending that the stockholders of the Company adopt this Agreement. Assuming the accuracy of the representation and warranty set forth in Section 4.17, the action of the Board of Directors of the Company (the “Company Board”) in approving this Agreement and the Merger is sufficient to render inapplicable to this Agreement and the Merger the restrictions on business combinations contained in Section 203 of the DGCL. To the knowledge of the Company after due inquiry, no other “fair price”, “merger moratorium”, “control share acquisition” or other anti-takeover or similar statute or regulation applies to this Agreement or the Merger.

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      Section 3.5 No Conflict; Required Filings and Consents.

                Section 3.5.1       The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, (A) assuming the Required Company Stockholders adopt this Agreement, conflict with or violate any provision of the Company Certificate or Company By-laws or any equivalent organizational documents of any Company Subsidiary, (B) assuming that all consents, approvals, authorizations and permits described in Section 3.5.2 have been obtained and all filings and notifications described in Section 3.5.2 have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected or (C) except as set forth in the Company Disclosure Schedule, require any consent or approval under, or result in the creation of a Lien on any property or asset of the Company or any Company Subsidiary pursuant to, any Company Permit, except, as to clauses (B) and (C), respectively, for any such conflicts, violations, consents, approvals or other occurrences which would not, individually or in the aggregate, reasonably be expected to (x) have a Company Material Adverse Effect or (y) prevent the consummation of the Merger .

                Section 3.5.2       The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing by the Company with or notification by the Company to, any Governmental Entity, except (A) as set forth in the Company Disclosure Schedule, (B) under the Exchange Act, the Securities Act, any applicable Blue Sky Law, the rules and regulations of the NASDAQ, the HSR Act, the Other Regulatory Approvals and the filing and recordation of the Certificate of Merger as required by the DGCL and (C) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to (x) have a Company Material Adverse Effect or (y) prevent the consummation of the Merger.

      Section 3.6 Permits; Compliance With Law.

                Section 3.6.1       Except for Environmental Permits, which are covered by Section 3.14, each of the Company and each Company Subsidiary is in possession of all authorizations, licenses, permits, certificates, approvals and clearances of any Governmental Entity necessary for the Company and each Company Subsidiary to own, lease and operate its properties or to carry on its respective businesses substantially as it is being conducted as of the date hereof (the “Company Permits”), and all such Company Permits are valid, and in full force and effect, except where the failure to have, or the suspension or cancellation of, or failure to be valid or in full force and effect of, any of the Company Permits would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. None of the Company or any Company Subsidiary is in conflict with, or in default or violation of (A) except for Laws with respect to matters covered by Sections 3.10, 3.11 and 3.14, any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected or (B) except for Environmental Permits, which are covered by Section 3.14, any Company Permits, except in each case for any such conflicts, defaults or violations that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

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                Section 3.6.2       Since December 31, 2001, except as set forth on the Company Disclosure Schedule, (i) neither the Company nor any of the Company Subsidiaries nor, to the knowledge of the Company, any vendor or third party service provider, in each case, that is the counter-party to a contract set forth on Section 3.12.1.4 or Section 3.12.1.11 of the Company Disclosure Schedule (other than hospitals or other medical providers) acting on behalf of the Company or any of the Company Subsidiaries (collectively, the “Material Vendors”), has received any written notice from any Governmental Entity that alleges any material noncompliance (or that the Company or any of the Company Subsidiaries or any Material Vendor is under investigation or the subject of an inquiry by any such Governmental Entity for such alleged material noncompliance) with any applicable Law, except as would not be reasonably likely to result in a fine in excess of $250,000 or any criminal penalty, criminal fine or similar criminal liability, and (ii) neither the Company nor any of the Company Subsidiaries has entered into any agreement or settlement with any Governmental Entity with respect to its non-compliance with any applicable Law, except for such agreements or settlements that do not require payment of a fine in excess of $250,000 or would materially change the manner in which the Company or any Company Subsidiary presently operates its business.

                Section 3.6.3       Since December 31, 2001 and except as set forth on the Company Disclosure Schedule, the Company and each of the Company Subsidiaries has timely filed all material regulatory reports, schedules, statements, documents, filings, submissions, forms, registrations and other documents, together with any amendments required to be made with respect thereto, that each was required to file with any Governmental Entity, and have timely paid all fees and assessments due and payable in connection therewith, except, in each case, where the failure to file such reports, schedules, statements, documents, filings, submissions, forms, registrations or other documents or to make such payments would not have a material and adverse effect on the Company or any of the Company Subsidiaries.

                Section 3.6.4       Except as described in the Company Disclosure Schedule or as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, other than with respect to Company Benefit Plans, the Company and the Company Subsidiaries are not fiduciaries as such term is defined in Section 404 of ERISA, applicable Department of Labor regulations and relevant case law with respect to the provisions of any services to ERISA welfare plans and are not subject to Section 404 or 406 of ERISA.

      Section 3.7 SEC Filings; Financial Statements.

                Section 3.7.1       The Company has filed all registration statements, prospectuses, forms, reports, definitive proxy statements, schedules and documents required to be filed by it under the Securities Act or the Exchange Act, as the case may be, together with all certifications required pursuant to the Sarbanes Oxley Act of 2002 (the “Sarbanes-Oxley Act”), from and after January 1, 2003 (collectively, the “Company SEC Filings”). Each Company SEC Filing, as amended or supplemented if applicable, (A) as of its date, or, if amended or supplemented, as of the date of such amendment or supplement, complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the Sarbanes-Oxley Act, and (B) did not, at the time it was filed (or became effective in the case of registration statements), or, if amended or supplemented, as of the date of such amendment or supplement, contain any untrue statement of a material fact or omit to state a material fact

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required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. As of the date of this Agreement, no Company Subsidiary is subject to the periodic reporting requirements of the Exchange Act.

                Section 3.7.2       Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the Company SEC Filings, as amended or supplemented if applicable, was prepared in accordance with GAAP applied (except as may be indicated in the notes thereto and, in the case of unaudited quarterly financial statements, as permitted by Form 10-Q under the Exchange Act) on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto), and each presented fairly, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and the consolidated Company Subsidiaries as of the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited quarterly financial statements, to normal year-end adjustments which did not and would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect).

                Section 3.7.3       Except as and to the extent set forth (A) on the consolidated balance sheet of the Company and the consolidated Company Subsidiaries as of December 31, 2003 included in the Company’s annual report filed on Form 10-K for the year ended December 31, 2003, including the notes thereto, or (B) in the Company SEC Filings filed after December 31, 2003, none of the Company or any consolidated Company Subsidiary has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that would be required to be reflected or reserved against on a balance sheet prepared in accordance with GAAP, except for liabilities or obligations (1) under this Agreement or incurred in connection with the transactions contemplated hereby or (2) incurred in the ordinary course of business since January 1, 2004 that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

      Section 3.8 Disclosure Documents.

                Section 3.8.1       The Proxy Statement and any Other Filings, and any amendments or supplements thereto, that the Company is responsible for filing at (A) the time the Registration Statement is declared effective, (B) the time the Proxy Statement or such Other Filing (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Company, (C) the time of the Company Stockholders’ Meeting, (D) if the Parent Approval Requirement applies, the time the Proxy Statement (or amendment thereof or supplement thereto) is first mailed to the stockholders of Parent, and (E) if the Parent Approval Requirement applies, the time of the Parent Stockholders’ Meeting, as applicable, will comply as to form in all material respects with the applicable requirements of the Securities Act, the Exchange Act and other applicable Law.

                Section 3.8.2       None of the information supplied by the Company for use in the Proxy Statement, at (A) the time the Registration Statement is declared effective, (B) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Company, (C) the time of the Company Stockholders’ Meeting, (D) if the Parent Approval Requirement applies, the time the Proxy Statement (or amendment thereof or

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supplement thereto) is first mailed to the stockholders of Parent, and (E) if the Parent Approval Requirement applies, the time of the Parent Stockholders’ Meeting, in each case, will contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. None of the information supplied by the Company for use in the Registration Statement, at (A) the time the Registration Statement is declared effective, and (B) the time of the Company Stockholders’ Meeting, in each case, will contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. None of the information supplied by the Company for use in any Other Filing, at the time such Other Filing (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Company, will contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 3.8.2 will not apply to statements or omissions included in the Proxy Statement, the Registration Statement or any Other Filings based upon information supplied to the Company by Parent or Merger Sub for use therein.

      Section 3.9 Absence of Certain Changes or Events. Since January 1, 2004, except as set forth in the Company Disclosure Schedule, or as specifically contemplated by, or as disclosed in, this Agreement, there has not been (A) any change, effect, event, circumstance, occurrence or state of facts that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect or (B) any action taken by the Company or any Company Subsidiary during the period from January 1, 2004 through the date of this Agreement that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Section 5.1.

      Section 3.10       Employee Benefit Plans.

                Section 3.10.1       The Company Disclosure Schedule sets forth a true and complete list of each “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and any other plan, policy, program, practice, agreement, understanding or arrangement (whether written or oral) providing compensation or other benefits to any current or former director, officer, employee or consultant (or to any dependent or beneficiary thereof of the Company), which are now, or were within the past 6 years, maintained, sponsored or contributed to by the Company, or under which the Company has any obligation or liability, whether actual or contingent, including, without limitation, all incentive, bonus, deferred compensation, vacation, holiday, cafeteria, medical, disability, stock purchase, stock option, stock appreciation, phantom stock, restricted stock or other stock-based compensation plans, policies, programs, practices or arrangements (each a “Company Benefit Plan”).

     With respect to each Company Benefit Plan, the Company has delivered or made available to Parent true, correct and complete copies of (A) each Company Benefit Plan (or, if not written a written summary of its material terms), including without limitation all plan documents, trust agreements, insurance contracts or other funding vehicles and all amendments thereto, (B) all summaries and summary plan descriptions, including any summary of material

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modifications, (C) the three most recent annual reports (Form 5500 series) filed with the IRS with respect to such Company Benefit Plan, (D) the three most recent financial statements relating to such Company Benefit Plan, and (E) the most recent determination or opinion letter, if any, issued by the IRS with respect to any Company Benefit Plan and any pending request for such a determination letter.

                Section 3.10.2       Except as set forth on the Company Disclosure Schedule, each Company Benefit Plan has been administered in all material respects in accordance with its terms and all applicable Laws, including ERISA and the Code. With respect to the Company Benefit Plans, no event has occurred, and there exists no condition or set of circumstances in connection with which the Company could be subject to any material liability (other than for routine benefit liabilities) under the terms of, or with respect to, such Company Benefit Plans, ERISA, the Code or any other applicable Law.

                Section 3.10.3       Except as disclosed on the Company Disclosure Schedule: (A) each Company Benefit Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS as to its qualified status, and each trust established in connection with any Company Benefit Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code is so exempt, and to the Company’s knowledge no fact or event has occurred that could adversely affect the qualified status of any such Company Benefit Plan or the exempt status of any such trust, (B) to the Company’s knowledge there has been no prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code, other than a transaction that is exempt under a statutory or administrative exemption) with respect to any Company Benefit Plan that could result in a material liability to the Company, and (C) no suit, administrative proceeding, action or other litigation has been brought, or to the knowledge of the Company is threatened, against or with respect to any such Company Benefit Plan, including any audit or inquiry by the IRS or United States Department of Labor (other than routine benefits claims).

                Section 3.10.4       No Company Benefit Plan is a multiemployer pension plan (as defined in Section 3(37) of ERISA) (“Multiemployer Plan”) or other pension plan subject to Title IV of ERISA. The Company has no liability under Title IV of ERISA, Section 302 of ERISA, or Section 412 of the Code, and no condition exists that presents a risk to the Company of incurring or being subject (whether primarily, jointly or secondarily) to a liability thereunder.

                Section 3.10.5       All contributions (including all employer contributions and employee salary reduction contributions) required to have been made under any of the Company Benefit Plans or by Law (without regard to any waivers granted under Section 412 of the Code), to any funds or trusts established thereunder or in connection therewith have been made by the due date thereof (including any valid extension) except to the extent the failure to make such contributions would not result in material liability to the Company.

                Section 3.10.6       Except as set forth on the Company Disclosure Schedule, there are no pending actions, claims or lawsuits that have been asserted or instituted against the Company Benefit Plans, the assets of any of the trusts under the Company Benefit Plans or the sponsor or administrator of any of the Company Benefit Plans, or against any fiduciary of the Company Benefit Plans with respect to the operation of any of the Company Benefit Plans (other

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than routine benefit claims), nor does the Company have any knowledge of facts that could form the basis for any such action, claim or lawsuit.

                Section 3.10.7       Except as set forth on the Company Disclosure Schedule, none of the Company Benefit Plans provides for post-employment life or health insurance, benefits or coverage for any participant or any dependent of a participant, except as may be required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), or applicable state law, and at the expense of the participant or the participant’s dependent. Each of the Company and any ERISA Affiliate which maintains a “group health plan” within the meaning Section 5000(b)(1) of the Code has complied in all material respects with the notice and continuation requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder.

                Section 3.10.8       Except as set forth in Section 3.10 of the Company Disclosure Schedule or as otherwise specified in this Agreement, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, including the approval of the Required Company Stockholders or the Merger, will (i) result in any payment becoming due to any employee, (ii) increase any benefits otherwise payable under any Company Benefit Plan, (iii) result in the acceleration of the time of payment or vesting of any such benefits under any Company Benefit Plan or (iv) result in any obligation to fund any trust or other arrangement with respect to compensation or benefits under a Company Benefit Plan. Except as set forth in Section 3.10 of the Company Disclosure Schedules, since January 1, 2004, the Company, including the Company Board, any committee thereof and any officer of the Company, has not taken any action to increase the compensation or benefits payable after the date hereof to any officer having the title of senior vice president or higher of the Company.

                Section 3.10.9       Neither the Company nor any of the Company Subsidiaries has a contract, plan or commitment, whether legally binding or not, to create any additional Company Benefit Plan or to modify any existing Company Benefit Plan, except as required by applicable Law or Tax qualification requirement and as set forth in Section 3.10 of the Company Disclosure Schedule.

      Section 3.11       Labor and Other Employment Matters.

                Section 3.11.1       Each of the Company and each Company Subsidiary is in compliance in all material respects with all applicable Laws respecting labor, employment, fair employment practices, terms and conditions of employment, workers’ compensation, occupational safety, plant closings, and wages and hours. Neither the Company nor any Company Subsidiary is a party to a collective bargaining agreement and no labor union has been certified to represent any employee or the Company or any Company Subsidiary, or has applied to represent or is attempting to organize so as to represent such employees.

                Section 3.11.2       Except as set forth in the Company Disclosure Schedule, there are no (A) severance or employment agreements with directors, officers or employees of or consultants to the Company or any Company Subsidiary; (B) severance programs or policies of the Company and each Company Subsidiary with or relating to its employees; or (C) plans, programs, agreements or other arrangements of the Company and each Company Subsidiary

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with or relating to its directors, officers, employees or consultants which contain change in control provisions.

      Section 3.12       Contracts.

                Section 3.12.1       Except for contracts filed in unredacted form as exhibits to the Company SEC Filings, Section 3.12 of the Company Disclosure Schedule sets forth a correct and complete list as of the date of this Agreement, and the Company has made available to Parent correct and complete copies (including all material amendments, modifications, extensions or renewals, with respect thereto, but excluding all names, terms and conditions that have been redacted in compliance with applicable Laws governing the sharing of information) of (collectively, the “Company Contracts”):

                          Section 3.12.1.1       any agreement and any amendment thereto required to be filed as an Exhibit to any report of the Company filed pursuant to the Exchange Act of the type described in Item 601(b)(10) of Regulation S-K of the Securities Act;

                          Section 3.12.1.2       all contracts to which the Company or any Company Subsidiary is a party that contain a covenant restricting the ability of the Company or any of the Company Subsidiaries to compete in any business or with any person or in any geographic area;

                          Section 3.12.1.3       all contracts of the Company or any of the Company Subsidiaries with any affiliate of the Company (other than any of the Company Subsidiaries);

                          Section 3.12.1.4       any contract to which the Company or any of the Company Subsidiaries is a party which primarily relates to (A) the granting to the Company or any Company Subsidiary of license rights in or to any material Company Intellectual Property owned by a third party, or (B) the granting by the Company or any Company Subsidiary of license rights to a third party in or to any material Company Intellectual Property, in each of case (A) and (B) above, excluding “click-wrap” or “shrink-wrap” agreements, agreements contained in or pertaining to “off-the-shelf” Software, or the terms of use or service for any Web site;

                          Section 3.12.1.5       all joint venture, partnership or other similar agreements involving co-investment with a third party to which the Company or any of the Company Subsidiaries is a party;

                          Section 3.12.1.6       any contract with a Governmental Entity (other than ordinary course contracts with Governmental Entities as a customer) which imposes any material obligation or restriction on the Company or the Company Subsidiaries;

                          Section 3.12.1.7       all contracts pursuant to which any indebtedness of the Company or any of the Company Subsidiaries is outstanding or may be incurred and all guarantees of or by the Company or any of the Company Subsidiaries of any indebtedness of any other person (other than the Company or any of the Company Subsidiaries) (except for such indebtedness or guarantees the aggregate principal amount of which does not exceed $500,000 on an annual basis and excluding trade payables arising in the ordinary course of business);

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                          Section 3.12.1.8       contracts with hospitals and medical groups that, in the aggregate, represent an amount of claims repriced by the Company and the Company Subsidiaries of at least 50% of the total amount of projected 2004 claims repriced by the Company and the Company Subsidiaries to hospitals and medical groups;

                          Section 3.12.1.9       any customer contract (other than contracts with hospitals or other providers) that involves annual payments by the customer to the Company and the Company Subsidiaries of greater than $500,000;

                          Section 3.12.1.10       any contract with a vendor or supplier (other than contracts covered by Sections 3.12.1.4 or 3.12.1.8) that involves annual payments of greater than $500,000 by the Company and the Company Subsidiaries; and

                          Section 3.12.1.11       any contract with respect to any risk sharing or risk transfer arrangement or that provides for a retroactive premium or similar adjustment or withholding arrangement or any contract, agreement or policy for reinsurance.

                Section 3.12.2       Except as set forth in the Company Disclosure Schedule, each Company Contract is valid and binding on the Company and each Company Subsidiary party thereto and, to the Company’s knowledge, each other party thereto, and in full force and effect, and the Company and each Company Subsidiary has in all material respects performed all obligations required to be performed by it to the date hereof under each Company Contract and, to the Company’s knowledge, each other party to each Company Contract has in all material respects performed all obligations required to be performed by it to the date hereof under such Company Contract, except, in each case, as has not, individually or in the aggregate, resulted in a Company Material Adverse Effect.

                Section 3.12.3       (i) None of the Company or any of the Company Subsidiaries (x) has received written notice that it is, or has knowledge that any other party to any Company Contract is, in violation or breach of or default (with or without notice or lapse of time or both) under or (y) since January 1, 2004 through the date hereof, has expressly waived any rights or benefits under any Company Contract, and (ii) to the knowledge of the Company, there has occurred no event giving to others any right of termination, amendment or cancellation of (with or without notice or lapse of time or both) any such Company Contract, except in each case for violations, breaches, defaults or waivers covered by clauses (i) or (ii) above that, individually or in the aggregate, have not had or would not reasonably be expected to have a Company Material Adverse Effect. Since January 1, 2004 through the date hereof, except as set forth on the Company Disclosure Schedule, no counterparty to any Company Contract scheduled in response to Section 3.12.1.9 (each, a “Customer”) has given written notice of any intention to cancel or otherwise terminate, prior to the end of the applicable contract term, such Company Contract, and, to the Company’s knowledge, no Customer intends to terminate such Company Contract or otherwise materially reduce its usage or purchase of the products or services provided by the Company or any Company Subsidiary.

                Section 3.12.4       Except as set forth in the Company Disclosure Schedule or as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the execution and delivery of this Agreement by the Company does not,

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and the performance of this Agreement by the Company will not, require any consent or approval under, result in any breach of or any loss of any benefit under, or constitute a change of control or default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, any Company Contract.

      Section 3.13       Litigation. Except as set forth in the Company Disclosure Schedule, there is no suit, claim, action or proceeding pending or, to the knowledge of the Company, threatened, nor, to the knowledge of the Company, is there any investigation pending, in each case, against the Company or any Company Subsidiary and none of the Company or any Company Subsidiary is subject to any outstanding judgment, order, writ, injunction, or decree, in each case, which has had or would, individually or in the aggregate, reasonably be expected to (x) have a Company Material Adverse Effect or (y) prevent the consummation of the Merger.

      Section 3.14       Environmental Matters. Except as set forth in the Company Disclosure Schedule:

                Section 3.14.1       The Company and each Company Subsidiary is in material compliance with applicable Environmental Laws, and holds all Environmental Permits necessary to conduct their current operations and is in material compliance with their respective Environmental Permits. All such Environmental Permits are listed on the Company Disclosure Schedule.

                Section 3.14.2       None of the Company or any Company Subsidiary has received any written notice, demand, letter, claim or request for information alleging that the Company or any Company Subsidiary is in violation of, or liable under, any Environmental Law.

                Section 3.14.3       None of the Company or any Company Subsidiary has entered into or agreed to any consent decree or order or is subject to any judgment, decree or judicial order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Materials and, to the knowledge of the Company, no investigation, litigation or other proceeding is pending or threatened in writing with respect thereto.

                Section 3.14.4       The Company and the Company Subsidiaries do not have any material Environmental Liabilities and, to the knowledge of the Company, no facts, circumstances or conditions relating to, arising from, associated with or attributable to (i) any real property currently or formerly owned, operated or leased by the Company or the Company Subsidiaries or operations thereon or (ii) any person whose liability the Company or any of the Company Subsidiaries has or may have retained or assumed either contractually or by operation of law would reasonably be expected to result in material Environmental Liabilities to the Company or any Company Subsidiary.

                Section 3.14.5       To the knowledge of the Company, with respect to any real property currently or formerly owned or leased, as the case may be, by the Company or the Company Subsidiaries, there have been no releases of Hazardous Materials that have or are

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reasonably likely to result in material Environmental Liabilities against the Company or the Company Subsidiaries.

                Section 3.14.6       As used in this Agreement, the term “Environmental Liabilities” with respect to any Person means any and all liabilities of or relating to such Person or any of the Company Subsidiaries (including any entity which is, in whole or in part, a predecessor of such Person or any of such Subsidiaries), whether vested or unvested, contingent or fixed, including contractual, which (i) arise under applicable Environmental Laws or with respect to Hazardous Materials and (ii) relate to actions occurring or conditions existing on or prior to the Closing Date.

                Section 3.14.7       The Company has not placed, owned or operated any storage tanks, including without limitation, underground storage tanks, in, on or under any Real Property now or at any time owned, leased, used, controlled or operated by the Company (“Company Controlled Real Property”) and, except as set forth on the Company Disclosure Schedule, to the knowledge of the Company there are no facts or circumstances related to storage tanks, including, without limitation, underground storage tanks, located on, in or under any Company Controlled Real Property that would reasonably be expected to result in material Environmental Liabilities to the Company and the Company Subsidiaries.

                Section 3.14.8       Except as set forth on the Company Disclosure Schedule, the Company does not generate, and has not generated, hazardous waste (as such terms are defined under any Resource Conservation and Recovery Act, 42 U.S.C. § 6901, et seq .).

                Section 3.14.9       To the knowledge of the Company, no asbestos or mold is present in any of the improvements of the Real Property that could reasonably be expected to result in material Environmental Liabilities to the Company and the Company Subsidiaries.

                Section 3.14.10       The Company is not aware of any changes to its business as currently operated that would require material expenditures in order to comply with Environmental Laws.

                Section 3.14.11       The Company has provided Parent with complete copies of all environmental site assessments or audits in the Company’s possession, custody or control related to any Company Controlled Real Property.

      Section 3.15       Intellectual Property; Software.

                Section 3.15.1       As used herein: (i) “Intellectual Property” means all U.S. and foreign (a) trademarks, service marks, trade names, Internet domain names, designs, logos, slogans and other distinctive indicia of origin, together with goodwill, registrations and applications relating to the foregoing (“Trademarks”); (b) patents and pending patent applications, invention disclosure statements, and any and all divisions, continuations, continuations-in-part, reissues, reexaminations, and any extensions thereof, any counterparts claiming priority therefrom and like statutory rights (“Patents”); (c) registered and unregistered copyrights (including those in Software) and all registrations and applications to register the same (“Copyrights”); (d) confidential technology, know-how, inventions, processes, formulae, algorithms, models and methodologies (“Trade Secrets”) and (e) databases and compilations,

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including any and all electronic data and electronic collections of data; (ii) “IP Licenses” means all contracts (excluding “click-wrap” or “shrink-wrap” agreements, agreements contained in or pertaining to “off-the-shelf” Software, or the terms of use or service for any Web site) pursuant to which the Company and the Company Subsidiaries have acquired rights in (including usage rights) or to any Intellectual Property, or licenses and agreements pursuant to which the Company and the Company Subsidiaries have licensed or transferred the right to use any Intellectual Property, including license agreements, settlement agreements and covenants not to sue; (iii) “Software” means all computer programs, including any and all software implementations of algorithms, models and methodologies whether in source code or object code form, all documentation, including user manuals and training materials, related to any of the foregoing; and (iv) “Company Intellectual Property” means the Intellectual Property and Software held for use or used in the business of the Company or the Company Subsidiaries as presently conducted.

                Section 3.15.2       Section 3.15 of the Company Disclosure Schedule sets forth, for the Intellectual Property owned by the Company and the Company Subsidiaries, a complete and accurate list of all U.S., state and foreign: (i) Patents issued or pending; (ii) Trademark registrations (including Internet domain name registrations) and applications for registration of Trademarks and material unregistered trademarks and service marks; and (iii) registered Copyrights.

                Section 3.15.3       Section 3.15 of the Company Disclosure Schedule lists all material IP Licenses.

                Section 3.15.4       Except as would not reasonably be expected to result in a Company Material Adverse Effect, the Company, or one of the Company Subsidiaries, owns or possesses all licenses or other legal rights to use, sell or license all material Company Intellectual Property, free and clear of all Liens, except for Permitted Liens.

                Section 3.15.5       All Trademark registrations and applications for registration, Patents issued or pending and Copyright registrations and applications for registration owned by the Company and the Company Subsidiaries are valid and subsisting, in full force and effect and have not lapsed, expired or been abandoned, and, to the knowledge of the Company, are not the subject of any opposition filed with the United States Patent and Trademark Office or any other intellectual property registry.

                Section 3.15.6       Except as would not reasonably be expected to result in a Company Material Adverse Effect, the Company Intellectual Property is sufficient for the conduct and the operation of the Company’s business as currently conducted and operated by the Company.

                Section 3.15.7       Except as set forth in Section 3.15 of the Company Disclosure Schedule or otherwise would not reasonably be expected to result in a Company Material Adverse Effect:

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                          Section 3.15.7.1       to the knowledge of the Company, the conduct of the businesses of the Company and the Company Subsidiaries does not infringe, misappropriate, or otherwise violate any Intellectual Property rights of any third party;

                          Section 3.15.7.2       to the knowledge of the Company, no third party is infringing, misappropriating, diluting or violating any material Company Intellectual Property owned by the Company or any Company Subsidiary;

                          Section 3.15.7.3       no settlement agreements, consents, orders, forbearances to sue or similar obligations to which the Company or any Company Subsidiary is a party limit or restrict the Company’s or any Company Subsidiary’s rights in and to any Company Intellectual Property.

                          Section 3.15.7.4       the Company and the Company Subsidiaries have not licensed or sublicensed their rights in any Company Intellectual Property, or received or been granted any such rights (except pursuant to “click-wrap” or “shrink-wrap” agreements, agreements contained in or pertaining to “off-the-shelf” Software, or the terms of use or service for any Web site), other than pursuant to the IP Licenses;

                          Section 3.15.7.5       the Company and the Company Subsidiaries take commercially reasonable measures to protect the confidentiality of their Trade Secrets; and

                          Section 3.15.7.6       the consummation of the transactions contemplated hereby will not result in the loss or impairment of the Company’s and the Company Subsidiaries’ rights to own or use any of the Company Intellectual Property or obligate them to pay any material royalties or other amounts to any third party in excess of the amounts that would have been payable by them absent the consummation of these transactions.

                          Section 3.15.7.7       The Company and each of the Company Subsidiaries (i) discloses and, since January 1, 2003, has disclosed its personal data collection and use policy on its websites and (ii) complies and, since January 1, 2003, has complied in all material respects with such policy. Neither this Agreement nor the consummation of the transactions contemplated hereby will violate in any material respect any such personal data policy.

                          Section 3.15.7.8       The Company maintains possession over the Software and the documentation (including user guides) reasonably necessary to use the Software, and the Company maintains possession and control over the source code and/or such other documentation (including user guides and specifications) for all Software owned by the Company or any of the Company Subsidiaries (the “Proprietary Software”) and reasonably necessary to use, maintain and modify the Proprietary Software. The Proprietary Software and, to the knowledge of the Company, the Software included in the Company Intellectual Property which it or the Company Subsidiaries license or otherwise use (excluding Software under development or in testing) (i) functions properly in substantially all respects to achieve its intended purposes and (ii) except as would not reasonably be expected to have a Company Material Adverse Effect, is free of any computer instructions, devices or techniques that are

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designed to infect, disrupt, damage, disable or impair such Software or its processing environment (including other programs, equipment and data).

      Section 3.16       Taxes.

                Section 3.16.1       The Company and each of the Company Subsidiaries has timely filed with the appropriate Tax authority or other Governmental Entity all material Tax Returns required to be filed (taking into account any extension of time within which to file any such Tax Return), and all such filed Tax Returns are correct and complete in all material respects. The Company and the Company Subsidiaries have paid all Taxes that have become due, whether or not shown on any Tax Return, other than Taxes being contested in good faith by appropriate proceedings and for which adequate reserves have been taken.

                Section 3.16.2       Since the date of the financial statements in the most recent Company SEC Filings, neither the Company nor any Company Subsidiary has incurred any liability for Taxes outside the ordinary course of business or otherwise inconsistent with past custom and practice.

                Section 3.16.3       Neither the Company nor any of the Company Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code since the effective date of Section 355(e) of the Code.

                Section 3.16.4       Except as provided in the Company Disclosure Schedules, neither the Company nor any Company Subsidiary is a party to any agreement, contract, arrangement, or plan that has resulted or would result, separately or in the aggregate, in the payment of any (A) “excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding provision of state, local, or foreign Tax law), or (B) amount that is not deductible under Section 162(m) of the Code. Neither the Company nor any Company Subsidiary has been a United States real property holding corporation within the meaning of Code §897(c)(2) during the applicable period specified in Code §897(c)(1)(A)(ii). Neither Company nor any Company Subsidiary is a party to or bound by any Tax allocation or sharing agreement. Neither the Company nor any Company Subsidiary (A) has been a member of an affiliate