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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 1996

REGISTRATION NO. 333-05327
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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MIM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 8099 05-0489664
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)

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ONE BLUE HILL PLAZA RICHARD H. FRIEDMAN
PEARL RIVER, NEW YORK 10965 ONE BLUE HILL PLAZA
(914) 735-3555 PEARL RIVER, NEW YORK 10965
(ADDRESS, INCLUDING ZIP CODE, AND (914) 735-3555
TELEPHONE NUMBER, INCLUDING AREA (NAME, ADDRESS, INCLUDING ZIP CODE,
CODE, OF REGISTRANT'S PRINCIPAL AND TELEPHONE NUMBER, INCLUDING AREA
EXECUTIVE OFFICES) CODE, OF AGENT FOR SERVICE)

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COPIES TO:
JOHN E. STODDARD III, ESQ. JOHN J. SCHUSTER, ESQ.
DRINKER BIDDLE & REATH CAHILL GORDON & REINDEL
47 HULFISH STREET 80 PINE STREET
PRINCETON, NEW JERSEY 08542 NEW YORK, NEW YORK 10005
(609) 497-7004 (212) 701-3000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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MIM CORPORATION

CROSS REFERENCE SHEET

ITEM NUMBER AND CAPTION IN FORM S-1 LOCATION IN PROSPECTUS
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1.Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus...... Outside Front Cover Page
2.Inside Front and Outside Back
Cover Pages of Prospectus..... Inside Front and Outside Back Cover Pages
3.Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges.............. Outside Front Cover Page; Prospectus
Summary; Risk Factors
4.Use of Proceeds................. Prospectus Summary; Use of Proceeds
5.Determination of Offering
Price......................... Outside Front Cover Page; Underwriting
6.Dilution........................ Dilution
7.Selling Security Holders........ Not Applicable
8.Plan of Distribution............ Underwriting
9.Description of Securities to be
Registered.................... Description of Capital Stock
10.Interests of Named Experts and
Counsel....................... Not Applicable
11.Information with Respect to the
Registrant.................... Additional Information; Prospectus Summary;
Risk Factors; Use of Proceeds; Dividend
Policy; Capitalization; Dilution; Selected
Consolidated Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain Transactions;
Principal Stockholders; Description
of Capital Stock; Shares Eligible for
Future Sale; Consolidated Financial
Statements
12.Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Not Applicable

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED AUGUST 13, 1996

4,000,000 SHARES

MIM CORPORATION
[LOGO]
COMMON STOCK

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All of the shares of Common Stock offered hereby are being sold by MIM
Corporation. Prior to this Offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $14.00 and $16.00 per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol MIMS, subject to official notice of issuance.

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THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING
ON PAGE 6.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

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Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
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Per Share.................................. $ $ $
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Total...................................... $ $ $
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Total Assuming Full Exercise of
Over-Allotment Option(3).................. $ $ $

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(1) See "Underwriting."
(2) Before deducting expenses estimated at $1,000,000, which are payable by the
Company.
(3) Assuming exercise in full of the 45-day option granted by the Company to
the Underwriters to purchase up to 600,000 additional shares, on the same
terms, solely to cover over-allotments. See "Underwriting."

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The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and
subject to their right to reject orders in whole or in part. It is expected
that delivery of the Common Stock will be made in New York City on or about
, 1996.

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PAINEWEBBER INCORPORATED DILLON, READ & CO. INC.

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THE DATE OF THIS PROSPECTUS IS , 1996.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments thereto, the "Registration Statement") under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information contained in the Registration Statement,
certain portions of which have been omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits and schedule thereto.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and are qualified
in all respects by such reference. A copy of the Registration Statement,
including the exhibits and schedule thereto, may be inspected without charge
at the principal office of the Commission, 450 Fifth Street, N.W., Washington,
DC 20549 and at the Commission's regional offices located at 500 West Madison
Street, Suite 1400, Chicago, IL 60661 and Seven World Trade Center, 13th
Floor, New York, NY 10048. Copies of such material may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, DC 20549, upon payment of the fees prescribed by the Commission.
The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, and the address of such site is
(http://www.sec.gov).

The Company intends to furnish to its stockholders annual reports containing
financial statements audited by independent certified public accountants and
quarterly reports containing unaudited financial information for the first
three quarters of each fiscal year of the Company.

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. All references to the Company refer to
MIM Corporation and its subsidiaries and predecessors (the "Company"). Unless
otherwise indicated, the information in this Prospectus (i) assumes that the
Underwriters' over-allotment option will not be exercised, (ii) assumes an
initial public offering price per share of $15.00 and (iii) gives effect to the
reorganization of the Company and its affiliates in May 1996. See "Certain
Transactions--The Formation." All references herein to industry financial and
statistical information are based on trade articles and industry reports that
the Company believes to be reliable, although there can be no assurance to that
effect. Investors should consider carefully the information set forth under the
heading "Risk Factors."

THE COMPANY

MIM Corporation is a pharmacy management organization that provides a broad
range of services designed to promote the cost-effective delivery of pharmacy
benefits. The Company targets organizations involved in three key segments of
the pharmaceutical health care industry--sponsors of public and private health
plans (such as HMOs and other managed care organizations), retail pharmacies
and pharmaceutical manufacturers--and offers services that provide financial
benefits to each of them. The Company works with plan sponsors and local health
care professionals to design, implement and manage innovative programs to
control pharmacy benefit costs, primarily through financial risk sharing
arrangements and increased substitution of lower-cost generic drugs for brand
name drugs. Participating retail pharmacies receive management and support
services, as well as financial incentives to purchase and dispense preferred
generic drugs. Finally, the Company offers manufacturers of generic drugs the
potential to increase their market share in regions covered by participating
pharmacies as a result of the increase in generic drug utilization encouraged
by the Company's programs.

The Company has derived virtually all of its revenues to date from operations
in the State of Tennessee under the TennCare Medicaid waiver program for
formerly Medicaid-eligible, and certain uninsured and uninsurable, Tennessee
residents. These revenues have been derived pursuant to a contract with RxCare
of Tennessee, Inc. ("RxCare"), a professional services administrative
organization owned by the Tennessee Pharmacists Association and representing
approximately 1,200 retail pharmacies in Tennessee. At June 30, 1996, the
Company provided pharmacy benefit management services, such as formulary design
and compliance, drug usage evaluation, claims processing and disease
management, to 19 health plan sponsors with an aggregate of approximately 1.1
million plan members. Substantially all of such members participate in six of
such health plans, representing approximately 88% of the eligible participants
in the TennCare program. During 1995, approximately 90% of the Company's $214
million in revenues was derived from contracts under which the Company was paid
on a capitated basis (that is, on the basis of a fixed monthly fee per plan
member). Since program inception in January 1994, the generic utilization rate
as a percentage of all covered prescriptions under the Company's pharmacy
benefit management programs has averaged 67%, compared to an estimated industry
average of approximately 40% during 1994.

The retail pharmaceutical market has grown in recent years, with over two
billion prescriptions filled and estimated sales of approximately $77 billion
in 1995. Approximately 42% of retail prescriptions during 1994 were paid by
plan sponsors, with over 50 million people in the United States belonging to
managed care organizations at the end of 1994. Industry sources estimate that
by the year 2000 approximately 80 million people in the United States are
expected to belong to managed care organizations and that such organizations
are expected to be responsible for approximately 77% of all retail
prescriptions. Managed care organizations and other plan sponsors have
increasingly turned to pharmacy benefit managers to help administer and control
the cost of the pharmacy benefit component of their overall benefit programs.
The Company believes that a key

element in successfully controlling pharmacy benefit costs is generic
substitution. Sales of generic drugs at retail, which typically sell at a 30%
to 70% discount to brand name drug equivalents, were approximately $6.3 billion
in 1994. However, there were approximately $28 billion of off-patent brand name
drug sales at retail during 1994 for which a generic equivalent was available.
In addition, brand name drugs with estimated sales at retail of approximately
$23 billion are scheduled to go off-patent from 1996 through 2006.

The Company has developed the following strategy that it believes will allow
it to capitalize upon these industry trends:

Establish MIM as a National Pharmacy Benefit Manager. The Company has begun
to market its pharmacy benefit management services to sponsors of public and
private health plans outside of Tennessee on a capitated or cost savings
sharing basis, thereby transferring from the plan sponsor to the Company all or
some of the risk of controlling overall pharmacy benefit costs. Building upon
the experience it has gained from managing capitated TennCare pharmacy benefit
programs, the Company has begun to offer its innovative financial risk sharing
programs to plan sponsors in similar highly price-competitive and emerging
capitated markets, while also continuing to offer traditional fee-for-service
programs. In addition, the Company will further develop its information systems
to provide plan sponsors with real-time access to pharmacy and financial data.

Strengthen Pharmacy Relationships. The Company believes that local
pharmacists play a critical role in providing high quality cost-effective care,
including the point-of-sale substitution of generic drugs when appropriate. The
Company intends to increase pharmacy participation in its programs by
continuing to offer financial incentives and discount drug purchasing services,
as well as a broad range of pharmacy support programs for local retail
pharmacists.

Market Preferred Generics. The Company is currently marketing and promoting
certain generic drugs of Zenith Goldline Pharmaceuticals, Inc. ("Zenith
Goldline") in the State of Tennessee under the Company's preferred generics
program. In general, the Company's preferred generics program encourages
pharmacies to stock a particular manufacturer's generic drugs ("preferred
generics") in lieu of brand name or other generic drugs in the same therapeutic
class by arranging for discounts on the purchase of preferred generics by
pharmacies. Under Company-managed pharmacy benefit programs, the Company also
provides financial incentives to pharmacies to sell preferred generics. These
arrangements and incentives are designed to encourage participating pharmacies
to dispense and sell preferred generics to all of their customers, including
those not covered by Company-managed pharmacy benefit plans. The Company
intends to expand its preferred generics program with Zenith Goldline to other
geographic areas and is negotiating similar arrangements with other generic
drug manufacturers. The Company also plans, subject to economic and other
conditions, to distribute generic and over-the-counter drugs under its own
private label. Certain agreements may restrict the Company's ability to compete
in certain areas of the Company's preferred generics business, its planned drug
distribution business and certain other business areas. See "Business--
Preferred Generics" and "Certain Transactions--Relationship of Certain
Executive Officers with Zenith and Zenith Goldline."

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MIM Corporation was incorporated in Delaware in March 1996 for the purpose of
combining the businesses and operations of Pro-Mark Holdings, Inc. and MIM
Strategic Marketing, LLC. For a description of the transactions involved in
connection therewith (the "Formation"), see "Certain Transactions--The
Formation" and Note 1 to the consolidated financial statements included herein.

The Company's principal executive offices are located at One Blue Hill Plaza,
Pearl River, New York 10965, and its telephone number is (914) 735-3555.

THE OFFERING

Common Stock Offered by the
Company........................ 4,000,000 shares(1)

Common Stock to be Outstanding
after the Offering............. 12,027,100 shares(1)(2)

Use of Proceeds................. The Company intends to use the net proceeds
from the Offering to expand the Company's
preferred generics business, to fund addi-
tional pharmacy benefit management programs,
to enhance its management information system
capabilities and for general corporate pur-
poses, including working capital. See "Use of
Proceeds."

Proposed Nasdaq National Market
Symbol......................... MIMS
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(1) Assumes no exercise of the Underwriters' over-allotment option.
(2) Excludes 3,931,520 shares of Common Stock issuable upon exercise of
outstanding options under the Company's stock option plans at July 31, 1996
at a weighted average exercise price of approximately $3.49 per share.

SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except for per share amounts)

SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
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1994 1995 1995 1996
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(unaudited)

STATEMENT OF OPERATIONS DATA
Revenue.......................... $ 109,326 $ 213,929 $71,330 $135,320
Cost of revenue.................. 106,717 213,398 70,684 130,218
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Gross profit................... 2,609 531 646 5,102
General and administrative
expenses........................ 5,256 8,048 3,450 4,627
Executive stock option
compensation expense(1)......... -- -- -- 26,640
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Loss from operations........... (2,647) (7,517) (2,804) (26,165)
Interest income, net............. 191 745 229 275
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Loss before minority interest.. (2,456) (6,772) (2,575) (25,890)
Less: minority interest ......... -- -- -- 6
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Net loss......................... $ (2,456) $ (6,772) $(2,575) $(25,896)
=========== =========== ======= ========
Net loss per common and common
equivalent share................ $ (0.55) $ (1.43) $ (0.57) $ (3.23)
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Weighted average shares
outstanding..................... 4,500 4,732 4,500 8,024
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JUNE 30, 1996
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DECEMBER 31, 1995 ACTUAL AS ADJUSTED (2)
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(unaudited)

BALANCE SHEET DATA
Cash and cash equivalents.......... $ 1,804 $ 2,964 $ 57,764
Working capital (deficit).......... (12,080) (12,340) 42,460
Total assets....................... 18,924 21,702 76,502
Accumulated deficit(1)............. (9,188) (35,706) (35,706)
Stockholders' equity (deficit)..... (11,524) (10,768) 44,032

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(1) The Company's net loss for the six months ended June 30, 1996 included a
nonrecurring, noncash charge for compensation expense and a credit to
additional paid-in capital of $26,640, representing the difference between
the exercise price and the deemed fair market value of the Common Stock at
the date of grant of options to purchase an aggregate of 3,600,000 shares
of Common Stock granted by the Company's principal stockholder to certain
executive officers and directors of the Company. See "Certain
Transactions--Other Transactions" and Note 7 to the consolidated financial
statements included herein.
(2) Adjusted to give effect to the receipt of the estimated net proceeds of the
Offering, based on an assumed initial public offering price of $15.00 per
share. See "Use of Proceeds."

RISK FACTORS

An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should consider carefully the following risk
factors, in addition to the other information contained in this Prospectus,
before purchasing the securities offered hereby.

GOING CONCERN QUALIFICATION IN REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS;
HISTORY OF LOSSES

The report of independent public accountants on the Company's consolidated
financial statements included herein is qualified because of substantial doubt
about the ability of the Company to continue as a going concern. Among the
factors cited by such independent public accountants are that the Company has
suffered recurring losses from operations and has a net capital deficiency.
For the year ended December 31, 1995 and the six months ended June 30, 1996,
the Company incurred net losses of $6.8 million and $25.9 million,
respectively (including a nonrecurring, noncash charge for executive stock
option compensation expense during the six months ended June 30, 1996 of $26.6
million). At June 30, 1996, the Company had an accumulated deficit of $35.7
million, a working capital deficit of $12.3 million and a stockholders'
deficit of $10.8 million. The Company needs the net proceeds of the Offering
to continue and expand its operations, although there can be no assurance that
even with such proceeds the Company's operations will be profitable in the
future. In management's opinion, the net proceeds from the Offering are
expected to provide the capital necessary to enable the Company to continue as
a going concern. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and notes thereto included elsewhere herein.

LIMITED OPERATING HISTORY; RISK OF MANAGING GROWTH

The Company commenced its operations in June 1993 and has had a limited
operating history. The Company has recently experienced a period of rapid
growth that has strained the Company's financial resources and management
information and other systems. The Company's ability to manage its growth
effectively will require that it continue to improve its systems and hire,
train and manage additional employees. There can be no assurance that the
Company will be able to continue to expand its market presence in current
locations or successfully enter other markets. If the Company is unable to
manage its growth effectively, the Company's business and results of
operations could be adversely affected. See "Business."

DEPENDENCE ON RXCARE RELATIONSHIP

The Company has derived virtually all of its revenue to date pursuant to an
agreement with RxCare of Tennessee, Inc. ("RxCare"), a professional services
administrative organization owned by the Tennessee Pharmacists Association
representing approximately 1,200 retail pharmacies in Tennessee. Under the
RxCare agreement, the Company is obligated to operate and manage pharmacy
benefit programs for plan sponsors that have entered into contracts with
RxCare for such services. Although the Company has been performing
substantially all of RxCare's obligations under RxCare's contracts with plan
sponsors since January 1994, no plan sponsor has been asked to formally
consent to such arrangements, including certain sponsors whose contracts with
RxCare require prior written consent thereto. RxCare reasonably may decline to
execute any contract with plan sponsors or pharmacies, or any amendment or
renewal thereof, negotiated by the Company on behalf of RxCare.

A number of RxCare's contracts with plan sponsors are for providing state-
mandated pharmacy benefits to formerly Medicaid-eligible (as well as certain
uninsured and uninsurable) Tennessee residents under the TennCare program, a
so-called "Medicaid waiver" state health program. Revenues from two of such
TennCare contracts accounted for approximately 75% of the Company's revenues
during 1995. The Company believes that the loss of its arrangement with
RxCare, the loss of one or more of such contracts, the termination or
expiration of the TennCare program (which is currently scheduled to expire on
December 31, 1998) or the loss of funding thereunder would have a material
adverse effect on the Company's business and results of operations. See
"Business--Relationship with RxCare and TennCare."

There can be no assurance that RxCare or the Company will be able to enter
into additional contracts in the State of Tennessee or that the Company's
experience in Tennessee will enable it to obtain additional contracts in other
states. The failure to enter into additional contracts could limit the
Company's ability to increase its revenues on a profitable basis. See
"Business."

LIMITED TERM OF MATERIAL AGREEMENTS

The Company's contract with RxCare is scheduled to expire in December 1998
unless renewed in accordance with its terms. RxCare's contracts with plan
sponsors typically have a one-year term and are subject to automatic renewal
unless notice of termination is given. Those contracts are subject to earlier
termination upon the occurrence of certain events, including a breach of the
agreement which is not cured within 30 days of notice, insolvency or
termination of the TennCare program or of the plan sponsor's contract with the
State of Tennessee. Two of such contracts accounted for 75% of the Company's
revenues during 1995 and are scheduled to expire in December 1997 unless
extended. There can be no assurance that either of the foregoing contracts or
the Company's contract with RxCare will be continued or renewed in accordance
with their terms. The loss of any of such contracts would have a material
adverse effect on the Company's business and results of operations. See
"Business--Relationship with RxCare and TennCare."

RISK OF CAPITATED AGREEMENTS

Approximately 90% of the Company's revenue during 1995 was derived from
"capitated" agreements, through which the Company receives a pre-determined
fee each month for each member enrolled in a particular health plan in return
for providing certain covered pharmacy services to plan members. The Company
generally negotiates the capitation fee for a particular plan (or subset of
individuals within a plan) based upon a number of factors, including
competitive conditions within a particular market and the expected costs of
providing the covered pharmacy services. Expected costs are generally based on
prior experience with similar groups and demographic data based on the
population at large. Data with respect to prior experience may not be
available and, if available, may not be a reliable indicator of the actual
results for a particular plan. The cost of providing pharmacy services varies
among plan participants and groups and is affected by many factors, including
formulary design and compliance, generic substitution rate and payment
structure. During the early stages of a contract, the cost of providing
pharmacy services typically exceeds the capitation fee, primarily due to the
lag between the commencement of the contract and the full implementation of
the formulary and the Company's other cost containment measures. There can be
no assurance that the cost of providing pharmacy services will not exceed the
capitation fee, either per member or per plan, throughout the entire contract
term. Under an April 1995 contract with one plan sponsor that was renegotiated
and extended in June 1996, the Company underestimated the utilization of
prescription drugs by the plan's members and recognized losses under that
contract of approximately $10 million for the year ended December 31, 1995.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

The Company intends to expand its scope of activities to include groups with
which the Company has not had any meaningful experience and with respect to
which no prior experience data is available, such as Medicare. Accordingly,
the Company may miscalculate certain costs and utilization levels associated
with these groups and may incur losses as a result. In addition, the Company
may be required, due to contractual obligations or other business reasons, to
bear all or a portion of the costs of certain newly-developed drugs, such as
medications for the treatment of AIDS, the existence or cost of which may not
have been known at the time the capitation fee for a particular plan was
established. See "Business."

EXPANSION OF PREFERRED GENERICS BUSINESS

The Company intends to utilize a portion of the proceeds of the Offering to
fund the expansion of its preferred generics business. The expansion of the
Company's preferred generics business is expected to place a significant
strain on the Company's management, operational and financial resources and
systems, and there can be no assurance that the Company's planned operations
in this area will be profitable. See "Business--Preferred Generics."

The Company also plans, subject to economic and other conditions, to
distribute generic and over-the-counter drugs. The Company has had limited
experience regarding the distribution of drugs and may, among other things,
miscalculate the demand for particular types of drugs, carry excess inventory,
incorrectly estimate certain matters involving the pricing and shipment of
products to customers and fail to develop adequate distribution capabilities.
In addition, the generic drug industry is extremely competitive, with
generally declining prices and margins as generic versions of the same product
enter the marketplace. See "Business--Business Strategy" and "--Competition."

Certain agreements may restrict the Company's ability to compete in certain
areas of the Company's preferred generics business, its planned drug
distribution business and certain other business areas. John H. Klein, the
Company's Chairman and Chief Executive Officer, and Richard H. Friedman, the
Company's Chief Financial Officer, Chief Operating Officer and Treasurer, have
agreed that they will not, prior to January 1999 and January 1997,
respectively, own, manage or be employed by any business or enterprise that is
substantially competitive with any material portion of the business of
manufacturing or distributing prescription generic drugs as conducted in early
1996 by Zenith Laboratories, Inc. ("Zenith"), an affiliate of Zenith Goldline,
or Zenith's subsidiaries. See "Certain Transactions--Relationship of Certain
Executive Officers with Zenith and Zenith Goldline." Furthermore, pursuant to
agreements with Zenith Goldline, the Company has agreed that it will not offer
certain kinds of programs to market or promote generic drugs anywhere in the
United States for any other manufacturer or seller without first offering such
programs to Zenith Goldline. See "Business--Preferred Generics."

GOVERNMENT REGULATION

The Company's current and planned businesses are subject to extensive
Federal and state laws and regulations. Subject to certain exceptions, Federal
law (the "Federal Anti-Kickback Statute") prohibits the payment or receipt of
any remuneration, directly or indirectly, to induce, arrange for or recommend
the purchase of health care items or services paid for in whole or in part by
the Medicare or state health care programs (including Medicaid and TennCare),
and certain state laws (including professional licensing laws prohibiting fee-
splitting) contain similar provisions that may extend the prohibition to cover
items or services that are paid for by private insurance and self-pay
patients. There can be no assurance that some of the Company's practices will
be found to be protected by certain so-called "safe harbor" regulations, which
provide insulation from prosecution under the Federal Anti-Kickback Statute,
and in some instances it is clear that they are not so protected. Federal
authorities enforcing the Federal Anti-Kickback Statute have issued Fraud
Alerts describing suspect activity and have initiated enforcement proceedings
involving practices that have similar features to some of the practices of the
Company. The Company is also subject to various false claim, drug
distribution, antitrust and consumer protection laws and may be subject to
certain other laws, including various state insurance laws.

any such challenge would not be successful. Any such challenge, whether or not
successful, could have a material adverse effect upon the Company's business
and results of operations. Violation of the Federal Anti-Kickback Statute, for
example, may result in substantial criminal penalties, as well as exclusion
from the Medicare and Medicaid (including TennCare) programs. Further, there
can be no assurance that the Company will be able to obtain or maintain any of
the regulatory approvals that may be required to operate its business, and the
failure to do so could have a material adverse effect on the Company's
business and results of operations. See "Business--Government Regulation" and
"Certain Transactions."

FTC CONSENT DECREE WITH RXCARE

In June 1996, the proposed consent decree between the Federal Trade
Commission (the "FTC") and RxCare and its parent, the Tennessee Pharmacists
Association ("TPA"), became final. Under the terms of the consent decree,
RxCare and TPA are prohibited from entering into a "most favored nations"
clause (under which a participating pharmacy that accepts a lower
reimbursement rate than that offered by RxCare must reduce its charges to
RxCare) with any pharmacy or from suggesting or assisting any other person to
do so. The FTC contends that such clause had the effect of increasing prices
charged by pharmacies to purchasers of prescription drugs in Tennessee because
the preponderance of pharmacies in Tennessee are members of RxCare and because
RxCare accounted for a substantial portion of drug purchases from each
pharmacy. Because the FTC justified its challenge and the decree, in part, on
RxCare's potential market power in Tennessee, business arrangements and
practices involving RxCare, either directly or indirectly, or involving sales
to or purchases by RxCare-affiliated pharmacies may face heightened scrutiny
or continued review from an anti-competitive perspective by state or Federal
regulators and possible challenge by private parties. The existence of this
consent order may hamper the Company's efforts to develop or pursue
competitive opportunities, in Tennessee or elsewhere, in areas such as group
purchasing or market advocacy on behalf of drug manufacturers. Prolonged
proceedings involving regulatory or private party challenges to the Company's
activities would be costly to the Company and divert its resources, including
key personnel. An adverse determination in such a proceeding could have a
material adverse effect on the Company's business and results of operations.
See "Business--Government Regulation."

DEPENDENCE ON SENIOR MANAGEMENT

The Company's operations have been substantially dependent on the services
of E. David Corvese, the Vice Chairman and principal stockholder of the
Company. In April 1996, Messrs. Klein and Friedman joined the Company and will
be responsible for implementing the Company's strategic plan, including the
development of the Company's preferred generics business. The loss of the
services of one or more of these individuals would have a material adverse
effect upon the Company's business. Messrs. Klein, Corvese and Friedman each
have employment agreements with the Company which restrict the ability of such
officers to compete with the Company and its affiliates for a period of one
year following termination. See "Management--Employment Agreements."

RELATIONSHIP OF CERTAIN EXECUTIVE OFFICERS WITH ZENITH AND ZENITH GOLDLINE

Prior to their employment with the Company, Messrs. Klein and Friedman were
employed by Zenith, and also were executive officers of Zenith Goldline, a
major generic drug manufacturer and marketer. Zenith Goldline also has a 10%
ownership interest in MIM Strategic Marketing, LLC, a 90%-owned subsidiary of
the Company formed for the purpose of enhancing the distribution of Zenith
Goldline's pharmaceutical products in the State of Tennessee. Pursuant to
termination agreements with Zenith, Mr. Klein has agreed to continue as an
untitled employee of Zenith through December 1996 and to act as a consultant
to Zenith and its affiliates from January 1997 through December 1998, and Mr.
Friedman has agreed to continue as an untitled employee of Zenith through
December 1996. Messrs. Klein and Friedman also continue to hold options to
purchase shares of common stock of Zenith Goldline's and Zenith's parent.
Although Messrs. Klein and Friedman intend to devote substantially all of
their time to the business and operations of the Company, no assurance can be
given that their rights and obligations under their respective termination
agreements or that their interests in Zenith's parent will not result in or
create a conflict of interest with their obligations to the Company. See
"Certain Transactions--Relationship of Certain Executive Officers with Zenith
and Zenith Goldline."

CONTROL BY MANAGEMENT

Upon consummation of the Offering, the Company's directors and executive
officers will beneficially own in the aggregate approximately 72% of the
Company's Common Stock (69% if the Underwriters' over-allotment option is
exercised in full). Accordingly, they collectively will be able to determine
the outcome of virtually all corporate actions requiring approval by the
stockholders of the Company, including the election of directors. See
"Principal Stockholders."

BROAD DISCRETION IN APPLICATION OF PROCEEDS

Approximately $26.6 million, or 49%, of the estimated net proceeds of the
Offering (assuming an initial public offering price of $15.00 per share) have
not been specifically allocated and will be utilized by the Company for
working capital and general corporate purposes. Accordingly, management of the
Company will have broad discretion in the application of the unallocated
proceeds. See "Use of Proceeds."

COMPETITION

Generic drugs are distributed by numerous generic drug distributors, drug
wholesalers and mail order suppliers. Generic drug distributors and
wholesalers generally offer a broad line of generic drugs from a variety of
sources to a diverse customer base, typically including independent retail and
chain pharmacies, government agencies and managed care organizations. In the
generic products business (unlike patent-protected brand name drugs), similar
versions of existing generic drugs frequently enter the market, resulting in
significantly lower prices and margins. In addition, certain agreements
between Zenith and Messrs. Klein and Friedman may restrict the Company's
ability to compete in certain areas of the preferred generics business, its
planned drug distribution business and certain other business areas. See
"Business--Competition" and "Certain Transactions--Relationship of Certain
Executive Officers with Zenith and Zenith Goldline."

PROFESSIONAL LIABILITY RISK

The services provided by the Company in connection with its business may
subject the Company to litigation and liability for damages. The Company
believes that its insurance protection is adequate for its present business
operations, but there can be no assurance that the Company will be able to
obtain and maintain insurance coverage in the future or that such insurance
coverage will be available on acceptable terms or adequate to cover any or all
potential professional liability, product liability or other claims. A
successful claim in excess of the Company's insurance coverage could have a
material adverse effect on the Company's business and results of operations.

DEPENDENCE ON INFORMATION SYSTEMS

The Company believes that its point-of-sale technology is an integral part
of its business. Any continuing disruption in its computer or telephone
systems could adversely affect its ability to operate its business on a timely
basis, and could adversely affect the Company's relations with pharmacies and
health plan sponsors. The Company is also dependent on certain licensed
software for the operation of its on-line transaction processing system
pursuant to a non-exclusive license for a one-year term with automatic
renewals. There can be no assurance that the licensor of such software will
continue this license beyond the period presently agreed, and the loss of such
rights could have a material adverse effect on the Company's business and
results of operations.

EFFECT OF CERTAIN LEGAL PROCEEDINGS

On March 5, 1996, the Company was added as a third-party defendant in a
proceeding in the Superior Court of the State of Rhode Island. The third-party
plaintiffs, Medical Marketing Group, Inc. ("MMG"), PPI Holding, Inc. ("PPI
Holding") and Payer Prescribing Information, Inc. ("PPI"), allege that the
Company employed E. David Corvese, the Company's Vice Chairman, with knowledge
of covenants not to compete in effect between Mr. Corvese and PPI, PPI Holding
and MMG that prevent Mr. Corvese from competing in the area of the collection,
analysis or marketing of data for the pharmaceutical or health care industries
relating to physician practice demographics and the influence of managed care
plans. The complaint alleges that the Company interfered with the contractual
relationship between the parties and that it misappropriated MMG's and PPI's
confidential information through its employment of Mr. Corvese. The complaint
seeks to enjoin the Company from using confidential information allegedly
misappropriated from MMG and PPI and seeks an unspecified amount of
compensatory and consequential damages, interest and attorneys' fees. The
Company believes that the third-party plaintiffs' allegations are without
merit; however, the loss of this litigation could have a material adverse
effect on the Company's business and results of operations. See "Business--
Legal Proceedings."

Certain of the Company's programs may be objectionable to certain special
interest groups, such as competitors, manufacturers of drugs excluded from the
Company's formularies, pharmacists, health care providers and public advocacy
groups, who may seek to hinder or delay, through legal, regulatory or other
means, the Company's ability to conduct its business. For example, a Federal
court case brought by the National Association of Community Health Centers in
June 1994 against the Secretary of the U.S. Department of Health and Human
Services is pending in the United States District Court for the District of
Columbia which seeks to have certain experimental and demonstration Medicaid
programs, including TennCare, declared unlawful and enjoined. A decision which
revokes or otherwise restricts the TennCare program would have a material
adverse effect on the Company's business and results of operations. See
"Business--Relationship with RxCare and TennCare."

POSSIBLE NEGATIVE EFFECTS OF PREFERRED STOCK

The Company is authorized to issue 5,000,000 shares of Preferred Stock, the
designation, rights and preferences of which (including voting, dividend,
redemption and liquidation rights) may be fixed by the Company's Board of
Directors from time to time without further stockholder action. Shares of
Preferred Stock could be issued in the future with rights and preferences that
could make the possible takeover of the Company or the removal of management
of the Company more difficult or could otherwise adversely impact the rights
of holders of Common Stock. See "Description of Capital Stock--Preferred
Stock."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of shares of Common Stock in the public market
after the Offering, or the perception that such sales could occur, could
adversely affect the prevailing market price of the Common Stock. Upon
completion of the Offering, the Company will have a total of 12,027,100 shares
of Common Stock outstanding, assuming no exercise of outstanding stock options
and no exercise of the Underwriters' over-allotment option. Of these shares,
the 4,000,000 shares of Common Stock offered hereby will be freely tradeable
without restriction under the Securities Act of 1933, as amended (the
"Securities Act"), by persons other than "affiliates" of the Company, as
defined under the Securities Act. The remaining 8,027,100 shares of Common
Stock outstanding are "restricted shares" as that term is defined by Rule 144
as promulgated under the Securities Act. Of these restricted shares, 48,300
will be saleable in the public market 90 days following the date of this
Prospectus, subject to compliance with Rule 144. Beginning one year after the
date of this Prospectus (or earlier for certain limited transactions or with
the written consent of PaineWebber Incorporated on behalf of the
Underwriters), 4,455,000 additional restricted shares will become eligible for
sale in the public market upon the expiration of lock-up agreements between
the Underwriters and the holders of such shares, subject to compliance with
Rule 144 of the Securities Act. See "Shares Eligible for Future Sale."

A reserve of 4,100,000 shares of Common Stock has been established for
issuance under the Company's stock option plans. At July 31, 1996, options to
purchase a total of 3,931,520 shares of Common Stock were outstanding under
such plans, of which options to purchase 2,685,600 shares were exercisable.
See "Management--Stock Incentive Plans."

IMMEDIATE AND SUBSTANTIAL DILUTION

Investors purchasing shares of Common Stock in the Offering will experience
immediate and substantial dilution in the net tangible book value of their
shares of approximately $11.34 per share from the assumed initial public
offering price of $15.00 per share (the mid-point of the range set forth on
the cover page of this Prospectus). In the event the Company issues additional
Common Stock in the future, purchasers of Common Stock in the Offering may
experience further dilution in the net tangible book value per share of the
Common Stock. See "Dilution."

ABSENCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE

Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active or liquid trading market will
develop or be sustained. The initial public offering price for the Common
Stock offered hereby will be determined by negotiations between the Company
and the Underwriters and may bear no relationship to the price at which the
Common Stock will trade after completion of the Offering. See "Underwriting"
for factors to be considered in determining the offering price.

In addition, the stock market has, from time to time, experienced extreme
price and volume volatility. These fluctuations may be unrelated to the
operating performance of particular companies whose shares are publicly
traded. Market fluctuations may adversely affect the market price of the
Common Stock. The market price of the Common Stock could also be subject to
significant fluctuations in response to the Company's operating results,
government regulation and other factors, and there can be no assurance that
the market price of the Common Stock will not decline below the initial public
offering price.

NO INTENTION TO PAY DIVIDENDS

The Company presently intends to retain all earnings, if any, to support the
operation and expansion of its business and does not anticipate paying cash
dividends in the foreseeable future. See "Dividend Policy."

USE OF PROCEEDS

The net proceeds to the Company from the sale of shares of Common Stock
offered hereby (assuming an initial public offering price of $15.00 per share)
are estimated to be $54.8 million ($63.2 million if the over-allotment option
granted to the Underwriters is exercised in full), after deducting
underwriting discounts and commissions and estimated expenses of the Offering
payable by the Company. The Company intends to use approximately $18.6 million
to fund the expansion of the Company's preferred generics business (including
the purchase of inventory), approximately $7.0 million to fund additional
pharmacy benefit management programs, approximately $2.6 million to enhance
its management information system capabilities and the balance for working
capital and general corporate purposes. The Company may also use a portion of
the net proceeds of the Offering for the acquisition of technology, assets or
businesses complementary to the Company's business, although no such
acquisitions are currently being negotiated. The uses of proceeds described
above are estimates and are subject to change. Pending use for the purposes
described above, the Company will invest such net proceeds in short-term,
interest-bearing, investment grade securities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business."

DIVIDEND POLICY

The Company has not declared or paid any dividends on its Common Stock and
does not anticipate paying any cash dividends in the foreseeable future. The
Company intends to retain all working capital and earnings, if any, for use in
the Company's operations and in the expansion of its business. Any future
determination with respect to the payment of dividends will be at the
discretion of the Board of Directors and will depend upon, among other things,
the Company's results of operations, financial condition and capital
requirements, the terms of any then existing indebtedness, general business
conditions and such other factors as the Board of Directors deems relevant.

CAPITALIZATION

The following table sets forth the capitalization of the Company at June 30,
1996 and as adjusted to reflect the sale of the shares of Common Stock offered
by the Company hereby (assuming an initial public offering price of $15.00 per
share), after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company. This table should be read in
conjunction with the consolidated financial statements and related notes
thereto appearing elsewhere in this Prospectus.

JUNE 30, 1996
--------------------------
ACTUAL AS ADJUSTED
----------- -------------
(In thousands,
except for share data)

Cash and cash equivalents.......................... $ 2,964 $ 57,764
=========== ===========
Long-term debt, including capital lease
obligations, net of current portion .............. $ 486 $ 486
Stockholders' equity (deficit):
Preferred Stock, $.0001 par value; 5,000,000
shares authorized,
no shares issued or outstanding................. -- --
Common Stock, $.0001 par value; 40,000,000 shares
authorized,
8,023,800 shares issued and outstanding,
12,023,800 shares
issued and outstanding as adjusted(1)........... 1 1
Additional paid-in capital(2).................... 26,640 81,440
Accumulated deficit(2)........................... (35,706) (35,706)
Stockholder notes receivable..................... (1,703) (1,703)
----------- -----------
Total stockholders' equity (deficit)........... (10,768) 44,032
----------- -----------
Total capitalization........................... $ (10,282) $ 44,518
=========== ===========

- --------
(1) Excludes 3,833,710 shares of Common Stock issuable upon exercise of
outstanding options at June 30, 1996. Also excludes 103,929 shares of
Common Stock issuable upon exercise of additional options that were
granted in July 1996.
(2) The Company's net loss for the six months ended June 30, 1996 included a
nonrecurring, noncash charge for compensation expense and a credit to
additional paid-in capital of $26,640, representing the difference between
the exercise price and the deemed fair market value of the Common Stock at
the date of grant of options to purchase an aggregate of 3,600,000 shares
of Common Stock granted by the Company's principal stockholder to certain
executive officers and directors of the Company. See "Certain
Transactions--Other Transactions" and Note 7 to the consolidated financial
statements included herein.

DILUTION

The net tangible book value of the Company at June 30, 1996 was
approximately ($10.8 million), or ($1.34) per share of Common Stock. Net
tangible book value per share represents the amount of the Company's total
tangible assets less total liabilities, divided by the number of shares of
Common Stock outstanding. After giving effect to the sale by the Company of
4,000,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $15.00 per share (after deducting Underwriters' discounts
and commissions and estimated offering expenses), the net tangible book value
of the Company at June 30, 1996 would have been approximately $3.66 per share.
This represents an immediate increase of $5.00 per share to existing
stockholders and an immediate dilution of $11.34 per share to new investors.
The following table illustrates this per share dilution:

Assumed initial public offering price per share............ $15.00
Net tangible book value per share before Offering........ $(1.34)
Increase in net tangible book value per share
attributable to new public investors.................... 5.00
------
Net tangible book value per share after the Offering....... 3.66
------
Dilution per share to new investors........................ $11.34
======

The following table summarizes at June 30, 1996 the differences between the
number of shares of Common Stock purchased from the Company, the total cash
consideration paid (before deducting Underwriters' discounts and commissions
and estimated offering expenses), and the average price per share paid by the
existing stockholders and by the investors purchasing shares of Common Stock
in the Offering (based upon an assumed initial public offering price of $15.00
per share):

SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------

Existing stockholders...... 8,023,800 66.7% $ 802 --% $.0001
New investors.............. 4,000,000 33.3% 60,000,000 100 $15.00
---------- ----- ----------- ---
Total.................... 12,023,800 100.0% $60,000,802 100% $ 4.99
========== ===== =========== ===

The foregoing tables assume no exercise of any outstanding options to
purchase Common Stock after June 30, 1996. At June 30, 1996, 3,833,710 shares
of Common Stock were reserved for issuance pursuant to outstanding options
under the Company's 1996 Stock Incentive Plan at a weighted average exercise
price of approximately $3.18 per share. To the extent that these outstanding
options are exercised, the dilution per share to new investors would be
$11.45. See "Management--Stock Incentive Plans."

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of December 31, 1994
and 1995, for the period from inception (June 22, 1993) through December 31,
1993 and for the years ended December 31, 1994 and 1995 are derived from the
audited consolidated financial statements included elsewhere in this
Prospectus. The selected consolidated financial data as of June 30, 1996 and
for the six months ended June 30, 1995 and 1996 are derived from the Company's
unaudited consolidated financial statements included elsewhere in this
Prospectus. In the opinion of management, such unaudited financial statements
reflect all adjustments (consisting only of normal recurring accruals) which
the Company considers necessary for a fair presentation of the financial
position and results of operations of the Company for these periods. Operating
results for the six months ended June 30, 1996 are not necessarily indicative
of the results to be expected for the entire year. The selected consolidated
financial data set forth below should be read in conjunction with the
consolidated financial statements and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.

PERIOD FROM
INCEPTION SIX MONTHS ENDED
(JUNE 22,1993) YEAR ENDED DECEMBER 31, JUNE 30,
THROUGH ------------------------ -----------------
DECEMBER 31, 1993 1994 1995 1995 1996
----------------- ----------- ----------- ------- --------
(In thousands, except for per share amounts)

STATEMENT OF OPERATIONS
DATA
Revenue................. $ 122 $ 109,326 $ 213,929 $71,330 $135,320
Cost of revenue......... -- 106,717 213,398 70,684 130,218
------ ----------- ----------- ------- --------
Gross profit.......... 122 2,609 531 646 5,102
General and administra-
tive expenses.......... 82 5,256 8,048 3,450 4,627
Executive stock option
compensation
expense(1)............. -- -- -- -- 26,640
------ ----------- ----------- ------- --------
Income (loss) from
operations........... 40 (2,647) (7,517) (2,804) (26,165)
Interest income, net.... -- 191 745 229 275
------ ----------- ----------- ------- --------
Income (loss) before
minority interest.... 40 (2,456) (6,772) (2,575) (25,890)
Less: minority
interest............... -- -- -- -- 6
------ ----------- ----------- ------- --------
Net income (loss)....... $ 40 $ (2,456) $ (6,772) $(2,575) $(25,896)
====== =========== =========== ======= ========
Net income (loss) per
common and common
equivalent share....... $ 0.01 $ (0.55) $ (1.43) $ (0.57) $ (3.23)
====== =========== =========== ======= ========
Weighted average shares
outstanding............ 4,500 4,500 4,732 4,500 8,024
====== =========== =========== ======= ========

DECEMBER 31,
-----------------------
1993 1994 1995 JUNE 30, 1996
---- ------- -------- -------------
(In thousands)

BALANCE SHEET DATA
Cash and cash equivalents................ $-- $ 2,933 $ 1,804 $ 2,964
Working capital (deficit)................ (3) (5,087) (12,080) (12,340)
Total assets............................. 93 15,260 18,924 21,702
Accumulated earnings (deficit)........... 40 (2,416) (9,188) (35,706)
Stockholders' equity (deficit)........... 41 (3,693) (11,524) (10,768)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated
financial statements and the notes thereto included elsewhere in the
Prospectus.

OVERVIEW

Virtually all of the Company's revenues to date have been derived from
operations in the State of Tennessee under the Company's contract with RxCare
of Tennessee, Inc. ("RxCare"), a professional services administrative
organization owned by the Tennessee Pharmacists Association and representing
approximately 1,200 retail pharmacies in Tennessee. See "Risk Factors--
Dependence on RxCare Relationship." RxCare initially contracted with the
Company in 1993 to help secure health plan pharmaceutical business for the
RxCare network and to provide related services, including pharmacy benefit
design and pricing. In December 1993, the State of Tennessee announced the
formation of its TennCare program, a state health program for formerly
Medicaid-eligible, and certain uninsured and uninsurable, Tennessee residents.
Under this program, selected plan sponsors (such as HMOs and other managed
care organizations) contracted with the State of Tennessee to provide mandated
medical services to designated portions of TennCare beneficiaries on a
capitated basis--that is, for a fixed monthly fee per plan member. In turn,
certain of these plan sponsors contracted with RxCare to provide TennCare-
mandated pharmaceutical benefits to the plan sponsor's TennCare beneficiaries
through RxCare's network of retail pharmacies, in most cases on a
corresponding capitated basis.

In March 1994, the Company agreed with RxCare to provide a broad range of
pharmacy benefit management services with respect to RxCare's TennCare and
private pharmaceutical benefit businesses. The Company performs essentially
all of RxCare's obligations under its pharmacy benefit contracts with plan
sponsors, including the receipt of fees due from the plan sponsors and the
reimbursement to pharmacies for delivered pharmacy benefits. The Company pays
certain amounts to RxCare and is compensated by sharing with RxCare the
profit, if any, from activities under RxCare's contracts with plan sponsors.
The Company initially began providing pharmacy benefits for five plan sponsors
representing 327,000 members of Tennessee's Medicaid population. In April
1995, a contract was added with the single largest TennCare provider, Blue
Cross and Blue Shield of Tennessee ("Blue Cross"), for approximately 623,000
members. At June 30, 1996, the Company provided pharmacy benefit management
services to 19 health plan sponsors with an aggregate of approximately 1.1
million plan members in Tennessee, primarily on a capitated basis. See
"Business--Relationship with RxCare and TennCare."

Although the Company commenced limited operations in June 1993, the Company
did not begin to receive significant revenue until 1994 pursuant to its
agreement with RxCare. Accordingly, the results of operations for 1994
compared to 1993 are not meaningful and have not been included herein. See
"Risk Factors--Limited Operating History; Risk of Managing Growth."

RESULTS OF OPERATIONS

Six months ended June 30, 1996 compared to six months ended June 30, 1995

For the six months ended June 30, 1996, the Company recorded a net loss of
$25.9 million on revenue of $135.3 million, including a nonrecurring, noncash
charge for compensation expense and a credit to additional paid-in capital of
$26.6 million, representing the difference between the exercise price and the
deemed fair market value of the Common Stock at the date of grant of options
to purchase an aggregate of 3,600,000 shares of Common Stock granted by the
Company's principal stockholder to certain executive officers and directors of
the Company. This compares with a net loss of $2.6 million on revenue of $71.3
million for the same period in 1995. The increase of $64.0 million in revenue
was primarily due to the addition of the Blue Cross contract in April 1995.
For the first six months of 1996, approximately 92% of the Company's revenue
was generated through capitated contracts, compared with 86% during the first
six months of 1995.

At December 31, 1995, the Company had accrued $4.5 million to cover the
losses expected to be incurred under the initial term of the Blue Cross
contract (which was originally scheduled to expire in June 1996 but was
renegotiated on more favorable terms to the Company and extended through
December 1997). Approximately $2.1 million of such accrual remained at June
30, 1996.

Cost of revenue as a percentage of revenue decreased from 99.1% in the first
six months of 1995 to 96.2% in the first six months of 1996. Such decrease
reflects the application of $2.4 million of Blue Cross claims during the first
six months of 1996 against the $4.5 million reserve established at December
31, 1995, the renegotiation of a higher capitation rate on one of the
Company's contracts effective March 1, 1996 and the Company's decision not to
renew a capitation contract that expired on December 31, 1995 and that had
adversely affected gross profit during 1995.

General and administrative expenses were $4.6 million for the six months
ended June 30, 1996 and $3.5 million for the six months ended June 30, 1995,
an increase of 31.4%. The $1.1 million increase was largely attributable to
the costs of additional personnel to support expanded marketing efforts. As a
percentage of revenue, general and administrative expenses declined from 4.8%
in the first six months of 1995 to 3.4% in the first six months of 1996.

Year ended December 31, 1995 compared to the year ended December 31, 1994

For the year ended December 31, 1995 the Company recorded a net loss of $6.8
million on revenue of $213.9 million. This compares with a net loss of $2.5
million on revenue of $109.3 million for 1994. The increase in revenue was
primarily due to the addition of the Blue Cross contract in April 1995. In
1995, approximately 90% of the Company's revenue was generated through
capitated contracts, compared with 85% during 1994.

Cost of revenue as a percentage of revenue increased from 97.6% in 1994 to
99.8% in 1995, primarily due to the increase in claims paid as a result of the
addition of the Blue Cross contract. The drug utilization rate of Blue Cross
participants was significantly higher than rates previously experienced under
other contracts, resulting in losses under that contract of $10 million during
1995, including the accrual of approximately $4.5 million to cover the
expected losses to be incurred under the remainder of the contract. Claims
expense (after giving effect to such accrual) was 107% of capitation revenues
under the contract.

General and administrative expenses were $8.0 million in 1995 and $5.3
million in 1994, an increase of 50.9%. Of the $2.7 million increase, $2.0
million was the result of a charge relating to an advance to RxCare in 1995
which the Company has fully reserved for. The remainder of the increase is
largely attributable to the costs of additional personnel to support expanded
marketing efforts. As a percentage of revenue, general and administrative
expenses declined from 4.8% in 1994 to 3.8% in 1995.

LIQUIDITY AND CAPITAL RESOURCES

As a result of the Company's historical losses, the Company had a working
capital deficit of $12.3 million at June 30, 1996. The Company's primary
source of liquidity to date has been the receipt of revenue from plan sponsors
under capitated programs. From time to time, the Company has also delayed
payments due plan sponsors and others in order to meet its working capital
requirements. In June 1996, John H. Klein, the Chairman of the Board and Chief
Executive Officer of the Company, loaned $500,000 to the Company for working
capital purposes pursuant to an unsecured, 10% demand note that was repaid
that month.

Cash and cash equivalents were $3.0 million at June 30, 1996, compared with
$1.8 million at December 31, 1995. Operating activities of the Company
generated $3.1 million in cash for the six months ended June 30, 1996
primarily due to the generation of net income of $0.7 million (prior to a
nonrecurring, noncash charge of $26.6 million relating to executive stock
option compensation expense) and an increase in payables to plan sponsors and
others of $4.3 million and was partially offset by a decrease in claims
payable of $3.5 million.

The Company believes that the funds expected to be generated from operations
and the anticipated net proceeds of the Offering will provide adequate cash to
fund the Company's anticipated working capital and other cash needs for the
foreseeable future. Although the Company does not currently have any
significant capital commitments, the Company intends to use approximately $2.6
million of the net proceeds of the Offering to enhance its management
information systems capabilities. In addition, the Company intends to offset,
against profit sharing amounts, if any, due RxCare in the future under the
RxCare contract, approximately $2.4 million previously advanced or paid to
RxCare. See "Certain Transactions--Relationship with RxCare."

The Company believes that its improved financial condition and capital
structure following the Offering will enhance its ability to negotiate and
obtain additional contracts with plan sponsors and other potential customers.

OTHER MATTERS

The Company's pharmaceutical reimbursement claims have historically been
subject to a significant increase over annual averages from October through
February, which the Company believes is due to increased medical problems
during the colder months.

Changes in prices charged by manufacturers and wholesalers for
pharmaceuticals affect the Company's cost of revenue. The Company does not
believe that inflation has had a material impact on the results of its
operations.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 requires that an entity account for employee stock
compensation under a fair value-based method. However, SFAS 123 also allows an
entity to continue to measure compensation cost for employee stock-based
compensation plans using the intrinsic value-based method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). Effective for fiscal years beginning after December 15, 1995,
entities electing to remain with accounting under APB 25 are required to make
pro forma disclosures of net income and earnings per share as if the fair
value-based method of accounting under SFAS 123 had been applied. The Company
will continue to account for employee stock-based compensation under APB 25
and will make the pro forma disclosures required under SFAS 123.

BUSINESS

SUMMARY

The Company is a pharmacy management organization that provides a broad
range of services designed to promote the cost-effective delivery of pharmacy
benefits. The Company targets organizations involved in three key segments of
the pharmaceutical health care industry--sponsors of public and private health
plans (such as HMOs and other managed care organizations), retail pharmacies
and pharmaceutical manufacturers--and offers services that provide financial
benefits to each of them. The Company works with plan sponsors and local
health care professionals to design, implement and manage innovative programs
to control pharmacy benefit costs, primarily through financial risk sharing
arrangements and increased substitution of lower-cost generic drugs for brand
name drugs. Participating retail pharmacies receive management and support
services, as well as financial incentives to purchase and dispense preferred
generic drugs. Finally, the Company offers manufacturers of generic drugs the
potential to increase their market share in regions covered by participating
pharmacies as a result of the increase in generic drug utilization encouraged
by the Company's programs.

The Company has derived virtually all of its revenues to date from
operations in the State of Tennessee under the TennCare Medicaid waiver
program for formerly Medicaid-eligible, and certain uninsured and uninsurable,
Tennessee residents. These revenues have been derived pursuant to a contract
with RxCare, a professional services administrative organization owned by the
Tennessee Pharmacists Association and representing approximately 1,200 retail
pharmacies in Tennessee. At June 30, 1996, the Company provided pharmacy
benefit management services, such as formulary design and compliance, drug
usage evaluation, claims processing and disease management, to 19 health plan
sponsors with an aggregate of approximately 1.1 million plan members.
Substantially all of such members participate in six of such health plans,
representing approximately 88% of the eligible participants in the TennCare
program. During 1995, approximately 90% of the Company's $214 million in
revenues was derived from contracts under which the Company was paid on a
capitated basis (that is, on the basis of a fixed monthly fee per plan
member). Since program inception in January 1994, the generic utilization rate
as a percentage of all covered prescriptions under the Company's pharmacy
benefit management programs has averaged 67%, compared to an estimated
industry average of approximately 40% during 1994.

BUSINESS STRATEGY

The Company intends to continue to work closely with plan sponsors,
pharmacists and generic drug manufacturers to encourage the delivery of
clinically acceptable pharmaceutical care on a cost-effective basis, primarily
through restricted formularies and continued generic substitution. The Company
has developed the following strategy:

Establish MIM as a National Pharmacy Benefit Manager. The Company has begun
to market its pharmacy benefit management services to sponsors of public and
private health plans outside of Tennessee on a capitated or cost savings
sharing basis, thereby transferring from the plan sponsor to the Company all
or some of the risk of controlling overall pharmacy benefit costs. Building
upon the experience it has gained from managing capitated TennCare pharmacy
benefit programs, the Company has begun to offer its innovative financial risk
sharing programs to plan sponsors in similar highly price-competitive and
emerging capitated markets, while also continuing to offer traditional fee-
for-service programs. In addition, the Company will further develop its
information systems to provide plan sponsors with real-time access to pharmacy
and financial data.

Strengthen Pharmacy Relationships. The Company believes that local
pharmacists play a critical role in providing high quality cost-effective
care, including the point-of-sale substitution of generic drugs when
appropriate. The Company intends to increase pharmacy participation in its
programs by continuing to offer financial incentives and discount drug
purchasing services, as well as a broad range of pharmacy support programs for
local retail pharmacists.

Market Preferred Generics. The Company is currently marketing and promoting
certain generic drugs of Zenith Goldline in the State of Tennessee under the
Company's preferred generics program. In general, the Company's preferred
generics program encourages pharmacies to stock a particular manufacturer's
generic drugs ("preferred generics") in lieu of brand name or other generic
drugs in the same therapeutic class by arranging for discounts on the purchase
of preferred generics by pharmacies. Under Company-managed pharmacy benefit
programs, the Company also provides financial incentives to pharmacies to sell
preferred generics. These arrangements and incentives are designed to
encourage participating pharmacies to dispense and sell preferred generics to
all of their customers, including those not covered by Company-managed
pharmacy benefit plans. The Company intends to expand its preferred generics
program with Zenith Goldline to other geographic areas and is negotiating
similar arrangements with other generic drug manufacturers. The Company also
plans, subject to economic and other conditions, to distribute generic and
over-the-counter drugs under its own private label. Certain agreements may
restrict the Company's ability to compete in certain areas of the Company's
preferred generics business, its planned drug distribution business and
certain other business areas. See "--Preferred Generics" and "Certain
Transactions--Relationship of Certain Executive Officers with Zenith and
Zenith Goldline."

INDUSTRY OVERVIEW

Pharmacy Benefit Management. The retail pharmaceutical market has grown in
recent years, with over two billion prescriptions filled and estimated sales
of approximately $77 billion in 1995. Pharmaceutical costs, as well as other
medical costs, are increasingly being covered by sponsors of public and
private health plans, including plans administered by managed care
organizations. Approximately 42% of retail prescriptions during 1994 were paid
by plan sponsors, with over 50 million people in the United States belonging
to managed care organizations at the end of 1994. Industry sources estimate
that by the year 2000 approximately 80 million people in the United States are
expected to belong to managed care organizations, and that such organizations
are expected to be responsible for approximately 77% of all retail
prescriptions.

Industry-wide financial pressures have created incentives for managed care
organizations and other plan sponsors to limit their exposure to rising
medical costs. In order to focus on their core business, plan sponsors have
increasingly turned to pharmacy benefit managers to help administer and
control the cost of the pharmacy benefit component of their overall benefit
programs. Pharmacy benefit managers have typically operated on a fee-for-
service basis in which the profitability of the pharmacy benefit manager is
based more upon the volume of claims processed than upon the reduction of the
cost of the pharmacy benefit. The Company believes that in order for plan
sponsors and pharmacy benefit managers to maintain profitability, they have
increasingly relied on rebates from drug manufacturers and have reduced
reimbursement rates to retail pharmacies. This trend has contributed to a
general decrease in retail pharmacy profitability and consolidation in the
retail pharmacy industry.

Generic Drugs. The Company believes that generic drug sales will continue to
increase, primarily because of the expiration of patents on brand name drugs
and their relatively high cost compared to generic drugs, which typically sell
at a 30% to 70% discount to brand name drug equivalents. There were an
estimated $28 billion of off-patent brand name drug sales at retail during
1994 for which a generic equivalent was available. In addition, patents on
brand name drugs with estimated sales at retail of approximately $23 billion
are scheduled to expire from 1996 through 2006. Generic drug sales at retail
have increased steadily in recent years, reaching an estimated $6.3 billion in
1994.

Certain other factors that have contributed, and that are expected to
continue to contribute, to the increase in the sales of generic drugs include
the following: (a) the continuing transition of health plans from cost
reimbursement to managed care has encouraged the use of lower-cost generic
drugs when available; (b) changes in distribution patterns have resulted in
more prescription drugs being sold through sources that are financially
motivated to use lower-cost generic drugs, such as managed care organizations,
preferred provider pharmacy networks and mail order drug distributors; (c)
various state laws have been enacted that enable, and in some instances
mandate, the use of generic drugs; (d) greater awareness and acceptance of the
safety and efficacy of generic drugs among consumers, prescribers and
pharmacists; and (e) streamlined procedures for approval of certain generic
drugs have provided an incentive for manufacturers to develop generic
equivalents for brand name drugs with smaller markets.

RELATIONSHIP WITH RXCARE AND TENNCARE

In December 1993, the State of Tennessee announced the institution effective
January 1, 1994 of its TennCare program, a so-called "Medicaid waiver" state
health program for formerly Medicaid-eligible, and certain uninsured and
uninsurable, Tennessee residents. Under this program, selected plan sponsors
contracted with the State of Tennessee to provide mandated medical services to
designated portions of the TennCare beneficiaries on a capitated basis. In
turn, certain of these plan sponsors contracted with RxCare to provide
TennCare-mandated pharmaceutical benefits to the plan sponsor's TennCare
beneficiaries through RxCare's network of retail pharmacies, in most cases on
a corresponding capitated basis. In addition, RxCare is typically required to
share with plan sponsors its manufacturers' rebates and profits.

In March 1994, the Company agreed with RxCare to provide a broad range of
pharmacy benefit management services with respect to RxCare's TennCare and
private pharmaceutical benefit businesses. The Company pays certain amounts to
RxCare and is compensated by sharing with RxCare the profit, if any, from
activities under RxCare's contracts with TennCare plan sponsors and other plan
sponsors in Tennessee. Under the RxCare contract, the Company performs
essentially all of RxCare's obligations under its pharmacy benefit contracts
with sponsors of public and private health plans in Tennessee. The Company (a)
markets and negotiates new pharmacy benefit management contracts, (b) designs
and prices the pharmacy benefit programs (including restricted formularies and
related procedures) with local health care professionals, (c) manages the
delivery of the pharmacy benefits through RxCare's pharmacy network (including
recommending the prices that RxCare pays pharmacists for each drug), (d)
provides or arranges for the provision by third parties of claims processing
and other pharmacy benefit management functions, (e) receives fees due from
the plan sponsors, (f) designs and administers incentive programs with
suppliers of pharmaceutical products covered by the plans (including the
collection of rebates from manufacturers on drugs dispensed under the plans)
and (g) makes payments to pharmacies for delivered pharmacy benefits. The
Company also negotiates agreements with pharmacies on behalf of RxCare which
establish the terms of their participation in the network. Although the
Company has been performing substantially all of RxCare's obligations under
RxCare's contracts with plan sponsors since January 1994, no plan sponsor has
been asked to formally consent to such arrangements, including certain
sponsors whose contracts with RxCare require prior written consent thereto.
RxCare may reasonably decline to execute any contract with plan sponsors or
pharmacies, or any amendment or renewal thereof, negotiated by the Company on
behalf of RxCare. While most of RxCare's private pharmacy benefit management
contracts provide for payment of per-transaction network fees or traditional
fee-for-service compensation, over 90% of RxCare's TennCare business under
contracts with plan sponsors was serviced by the Company on a capitated basis
during 1995. The Company's contract with RxCare is scheduled to expire in
December 1998 unless renewed in accordance with its terms. In December 1995,
the Company also agreed with RxCare to assist network pharmacies in obtaining
generic drugs in return for a fee payable to the Company by vendors of generic
drugs.

At June 30, 1996, the Company provided pharmacy benefit management services
to 19 plan sponsors with an aggregate of approximately 1.1 million plan
members in Tennessee, primarily on a capitated basis. Substantially all of
such members participate in health plans of six of such plan sponsors,
representing approximately 88% of the eligible participants in the TennCare
program. Since program inception in January 1994, the generic utilization rate
as a percentage of all covered prescriptions under the Company's pharmacy
benefit management programs has averaged 67%, compared to an industry average
of 40% during 1994.

RxCare's contracts with TennCare plan sponsors typically are for a term of
one year and are subject to automatic renewal unless notice of termination is
given by either party. Those contracts are subject to early termination upon
the occurrence of certain events, including a breach of the agreement which is
not cured within 30 days of notice, insolvency, termination of the TennCare
program (which is currently scheduled to terminate on December 31, 1998) or
termination of the plan sponsor's contract with the State of Tennessee.
RxCare's contracts with Tennessee Primary Care Network, Inc., Preferred Health
Partnership and Health Net accounted for approximately 60%, 15% and 13%,
respectively, of the Company's revenues in 1994, and RxCare's contracts with
Blue Cross and Blue Shield of Tennessee and Tennessee Primary Care Network,
Inc. accounted for approximately 45% and 30%, respectively, of the Company's
revenues in 1995. Although the Company continues to add new Tennessee private
plan sponsors as customers under the RxCare contract, the loss of the Blue
Cross and Blue Shield or Tennessee Primary Care Network contracts, or the
RxCare contract, would have a material adverse effect on the Company's
business and results of operations. See "Risk Factors--Dependence on RxCare
Relationship."

There is a Federal court case pending against the Secretary of the U.S.
Department of Health and Human Services which seeks to have certain
experimental and demonstration Medicaid programs, including TennCare, declared
unlawful. The case was brought in June 1994 by the National Association of
Community Health Centers in the U.S. District Court for the District of
Columbia, and has resulted in the intervention by eight states (including the
States of Tennessee and Rhode Island) as named defendants. Among other grounds
cited, the plaintiffs allege that such programs fail to comply with the
Federal statutory criteria authorizing such programs. The suit also seeks an
injunction revoking the Secretary's approval of such programs and requiring
their phase-out over a six-month period. A decision which revokes or otherwise
restricts the TennCare program would have a material adverse effect on the
Company's business and results of operations.

BENEFIT MANAGEMENT SERVICES

The Company offers plan sponsors a broad range of services that are designed
to ensure the cost-effective delivery of clinically acceptable pharmacy
benefits. The Company's benefit management programs include a number of design
features and fee structures that are tailored to suit a customer's particular
service and cost requirements. In addition to traditional fee-for-service
arrangements, the Company offers alternative methodologies for pricing its
various benefit management packages, including charging a fixed fee per
capita, as well as sharing costs exceeding established per capita amounts or
sharing savings where costs are less than established per capita amounts.
During 1995, approximately 90% of the Company's revenues was derived from
capitated contracts. Benefit parameters are managed through a point-of-sale
("POS") claims processing system through which real-time electronic messages
are transmitted to pharmacists to ensure compliance with specified parameters
before services are rendered. The Company's organization and programs are
clinically oriented, with a high proportion of staff having pharmacological
certification, training and experience. The Company uses commissioned
independent agents and brokers, as well as its own employees, to solicit
business from plan sponsors.

Benefit management services available to customers of the Company include
the following:

Formulary Design and Compliance. The Company offers flexible formulary
designs to meet the plan sponsor's requirements. Many plan sponsors do not
restrict coverage to a specific list of pharmaceuticals and are said to have
no formulary or an open formulary that generally covers all FDA-approved drugs
except certain classes of excluded pharmaceuticals (such as certain vitamins
and cosmetic, experimental, investigative or over-the-counter drugs). As a
result of rising program costs, the Company believes that both public and
private health plans have become increasingly receptive to restricting the
drugs covered in any given therapeutic class. Once a determination has been
made by a plan sponsor to utilize a restricted or closed formulary, the
Company actively involves local Pharmacy and Therapeutics Committees
(consisting of local plan sponsors, prescribers, pharmacists and other health
care professionals) to design clinically acceptable formularies in order to
control costs. The composition of the formulary is subject to the final
approval of the plan sponsor.

An essential component of formulary design is the promotion of the
substitution of therapeutically equivalent generic drugs, in lieu of brand
name drugs, to the extent permitted by law and standards of medical and
pharmacy practice. Increased usage of generic drugs by Company-managed
pharmacy benefit programs also enables the Company to obtain purchasing
concessions and other financial incentives on generic drugs, which may be
shared with plan sponsors. While brand name drug rebates are also negotiated
under certain circumstances, the Company believes that it is less dependent on
such rebates than certain larger pharmacy benefit managers, particularly those
that are owned by drug manufacturers.

The primary method for assuring formulary compliance is that pharmacists
will not be reimbursed for dispensing non-formulary drugs, subject to certain
limited exceptions. The Company also provides financial incentives to
pharmacists to utilize preferred status products. Formulary compliance is
managed with the active assistance of participating network pharmacists,
primarily through prior authorization procedures, on-line POS edits as to
particular subscribers and other network communications. Overutilization of
medication is monitored and managed through quantity limitations, based upon
nationally recognized standards and guidelines regarding maintenance vs. non-
maintenance therapy and the use of certain therapeutic classes of drugs and
specific medications. Step protocols, which are procedures requiring that
preferred therapies be tried and shown ineffective before less favored
therapies are covered, also are established by the Company in conjunction with
local Pharmacy and Therapeutics Committees to control improper utilization of
certain high-risk or high-cost medications.

Overrides and Prior Authorizations. The Company's formularies typically
provide an appropriate selection of covered drugs within all major therapeutic
classes to treat the vast majority of medical conditions. However, provision
is made for covering non-formulary drugs (other than excluded products) when
shown to be clinically appropriate. Since non-formulary drugs ordinarily are
automatically rejected for coverage by the real-time POS system, procedures
may be employed to override restrictions on non-formulary medications for a
particular patient and period of treatment. Restrictions on the use of certain
high-risk or high-cost formulary drugs may be similarly overridden through
prior authorization procedures. Non-formulary overrides and prior
authorizations are processed on the basis of documented, clinically-supported
medical necessity and typically are granted or denied within 24 hours after
request. Requests for, and appeals of denials of, coverage in these cases are
handled by the Company through its staff of trained pharmacists, nationally
certified pharmacy technicians and board certified pharmacotherapy
specialists. Further, in case of a medical emergency as determined by the
dispensing pharmacist, the Company authorizes, without prior approval, short-
term supplies of antibiotics and certain other medications.

Drug Usage Evaluation. Drug usage is evaluated on a concurrent, prospective
and retrospective basis, utilizing the real-time POS system and proprietary
information systems, for multiple drug interactions, drug-health condition
interactions, duplication of therapy, step therapy protocol enforcement,
minimum/maximum dose range edits, compliance with prescribed utilization
levels and early refill notification. The Company also maintains an on-going
drug utilization review program in which select medication therapies are
reviewed and data collected, analyzed and reported for management and
educational applications.

Pharmacy Data Services. The Company is currently developing systems to
provide plan sponsors with real-time access to pharmacy, financial, claims,
prescriber, subscriber and dispensing data.

Claims Processing. The Company utilizes claims processing data to generate
reports for management and plan sponsor use, including drug utilization
review, quality assurance, claims analysis and rebate contract administration.
The Company also intends to market its existing claims processing capability
to plan sponsors.

Disease Management. The Company designs and administers programs geared
toward specific diseases to maximize the benefit of pharmaceutical use as a
tool in achieving therapy goals. Programs focus on preventing high risk
events, such as asthma exacerbations or stroke, through appropriate use of
pharmaceuticals, while eliminating unnecessary or duplicate therapies. Key
components of these programs include health care provider training,
integration of care between health disciplines, monitoring of patient
compliance, measurement of care process and quality, and providing feedback
for continuous improvement in achieving therapy goals. Diseases

that can be favorably affected through customized pharmaceutical management
include asthma, hypertension, hypercholesterolemia, tuberculosis and diabetes.
Other patients who can benefit from these services include those who receive
long-term institutional care and individuals who are at high risk for adverse
drug reaction due to complex, multiple drug maintenance regimens.

PREFERRED GENERICS

The Company believes it is able to increase a generic drug manufacturer's
market share in regions where the Company has established relationships with
pharmacy networks. The Company encourages pharmacies to stock a particular
manufacturer's generic drugs ("preferred generics") in lieu of brand and other
generic drugs in the same therapeutic class by generally arranging for
discounts on the purchase of preferred generics by pharmacies. Under Company-
managed pharmacy benefit programs, the Company also provides financial
incentives to pharmacies to sell preferred generics. These incentives are
designed to encourage participating pharmacies to dispense and sell preferred
generics to all of their customers, including those not covered by Company-
managed pharmacy benefit plans. The Company also offers generic drug
manufacturers consulting services with respect to marketing and promoting
their generic drugs.

The Company is currently marketing and promoting certain preferred generic
drugs of Zenith Goldline pursuant to two three-year contracts entered into in
December 1995. Under one contract, the Company has agreed to use its best
efforts to cause Zenith Goldline to be designated as the preferred or
exclusive supplier of certain generic drugs carried by Zenith Goldline under
the Company's TennCare programs. The Company is also required to pay certain
incentive fees to pharmacists for dispensing Zenith Goldline products to
persons covered by the Company's TennCare programs. In return, the Company
receives a fee based on a percentage of the growth in Zenith Goldline's gross
margins from related sales. Under the other agreement, MIM Strategic
Marketing, LLC ("MIM Strategic"), a Rhode Island limited liability company and
a 90%-owned subsidiary of the Company, has agreed to provide marketing and
sales information relating to generic drugs. In return, the Company receives a
fee based on a percentage of the growth in Zenith Goldline's gross margins
from sales in Tennessee other than those related to TennCare members. Zenith
Goldline owns 10% of MIM Strategic. See "Certain Transactions--Relationship of
Certain Executive Officers with Zenith and Zenith Goldline." The agreements
prohibit the Company from accepting any proposal from any other manufacturer
or seller of generic drugs to participate in a program anywhere in the United
States similar to the Company's arrangement with Zenith Goldline without first
offering Zenith Goldline the right to participate on the same terms. The
Company is currently negotiating with Zenith Goldline to extend such services
to other states and the Company intends to offer such services to other
generic drug manufacturers.

The Company may, subject to economic conditions and other factors, expand
its business to become a private label distributor of generic and over-the-
counter drugs, by buying discounted drugs in bulk from manufacturers for
resale and further distribution, at least initially, through wholesalers and
other traditional industry distribution channels.

COMPETITION

The pharmacy benefit management and generic drug distribution businesses are
each highly competitive, and many of the Company's current and potential
competitors have considerably greater financial, technical, marketing and
other resources than the Company. The pharmacy benefit management business
includes a number of large, well capitalized companies with nationwide
operations and many smaller organizations typically operating on a local or
regional basis. Some of the larger organizations are owned by or otherwise
related to a brand name drug manufacturer and may have significant influence
on the distribution of pharmaceuticals. Among larger companies offering
pharmacy benefit management services are Medco Containment Services, Inc. (a
subsidiary of Merck & Co., Inc.), Caremark International Inc., PCS, Inc. (a
subsidiary of Eli Lilly & Company), Express Scripts, Inc., Value Health, Inc.,
Diversified Pharmaceutical Services, Inc. (a subsidiary of SmithKline Beecham)
and National Prescription Administrators, Inc. Numerous insurance and Blue
Cross and Blue Shield plans, managed care organizations and retail drug chains
also have their own pharmacy benefit management capabilities.

Generic drugs are distributed by numerous generic drug distributors, drug
wholesalers and mail order suppliers. Generic drug distributors and
wholesalers generally offer a broad line of generic drugs from a variety of
sources to a diverse customer base, typically including independent retail and
chain pharmacies, government agencies and managed care organizations. Chain
pharmacies use their size to procure pharmaceuticals on advantageous terms,
and independent pharmacies frequently are offered opportunities through trade
and wholesaler organizations to join group purchasing efforts. In addition,
certain agreements between Zenith and Messrs. Klein and Friedman may restrict
the Company's ability to compete in certain areas of its preferred generics
business, its planned drug distribution business and certain other business
areas. See "Certain Transactions--Relationship of Certain Executive Officers
with Zenith and Zenith Goldline."

GOVERNMENT REGULATION

The Company's current and planned businesses are subject to extensive
Federal and state laws and regulations. While management believes that the
Company is in material compliance with all existing laws and regulations
material to the operation of its business, many of the laws and regulations
affecting it are uncertain in their application and are subject to
interpretation and change. Laws regulating healthcare businesses, and
interpretations thereof, are undergoing rapid change. As controversies
continue to arise in this area, for example, regarding the efforts of plan
sponsors and pharmacy benefit managers to limit formularies, alter drug choice
and establish limited networks of participating pharmacies, Federal and state
regulation and enforcement priorities in this area can be expected to
increase, the impact of which on the Company cannot be predicted. There can be
no assurance that the Company will not be subject to scrutiny or challenge
under one or more of these laws or that any such challenge would not be
successful. Any such challenge, whether or not successful, could have a
material adverse effect upon the Company's business and results of operations.
Further, there can be no assurance that the Company will be able to obtain or
maintain any of the regulatory approvals that may be required to operate its
business, and the failure to do so could have a material adverse effect on the
Company's business and results of operations.

Anti-Kickback Laws. Subject to certain exceptions, a Federal law (the
"Federal Anti-Kickback Statute") prohibits the payment or receipt of any
remuneration, directly or indirectly, to induce, arrange for or recommend the
purchase of health care items or services paid for in whole or in part by the
Medicare or state health care programs (including Medicaid and TennCare), and
certain state laws (including professional licensing laws prohibiting fee-
splitting) contain similar provisions that may extend the prohibition to cover
items or services that are paid for by private insurance and self-pay patients
(together with the Federal Anti-Kickback Statute, the "Anti-Kickback Laws").
The Company's arrangements with RxCare, RxCare's Chairman, Zenith Goldline,
other drug manufacturers, marketing agents, brokers, health plan sponsors and
pharmacies involve payments to or from persons providing or purchasing, or
recommending or arranging for the purchase of, items or services paid in part
by the TennCare program or by other programs covered by the Anti-Kickback
Laws. See "Certain Transactions." Management believes the Company is in
compliance with the Anti-Kickback Laws; however, the laws in this area are
uncertain in their application, and there can be no assurance that in the
future the foregoing arrangements will not be challenged or found to violate
such laws if, among other things, a party thereto is found to have the
requisite intent. As a felony provision, a violation of the Federal Anti-
Kickback Statute requires proof of criminal intent, with those found in
violation subject to substantial criminal penalties, as well as exclusion from
the Medicare and Medicaid (including TennCare) programs. Courts differ,
however, regarding the requisite level of criminal intent necessary to find a
violation of the Federal Anti-Kickback Statute. Although a Federal appellate
court has ruled that a violation requires proof that the parties specifically
intended to violate the law, this decision was not followed in subsequent
cases. State Anti-Kickback Laws may impose different standards of intent than
the Federal Anti-Kickback Statute.

In July 1991 and January 1996, the Department of Health and Human Services
Office of Inspector General ("OIG") issued so-called "safe harbor" regulations
specifying certain managed care, discount, management and personal services,
group purchasing, investment interests and other arrangements involving
payments which, although potentially capable of constituting unlawful
remuneration, will be protected from prosecution or civil sanctions under the
Federal Anti-Kickback Statute. There can be no assurance that any of the
Company's

arrangements mentioned above will be found to be protected by these safe
harbors, and in some instances it is clear that they are not so protected. The
OIG has indicated, however, that failure of an arrangement to comply with a
specific safe harbor provision does not necessarily indicate that it will
challenge the arrangement or that it violates the Federal Anti-Kickback
Statute.

In August 1994, the OIG issued a Fraud Alert describing prescription drug
marketing practices that the OIG might investigate under the Federal Anti-
Kickback Statute, including among other things product conversion programs
that offer cash rewards to pharmacies for switching prescriptions from one
drug to another. The Fraud Alert also indicates that a payment may be
considered improper if it is made to a person in a position to generate
business for the paying party, is related to the volume of business generated
and exceeds the fair market value of services rendered to the payor, or is
unrelated to any service other than referrals. The Fraud Alert uses broad
language to describe some of the practices that it indicates the OIG might
investigate, and it could be interpreted as including among them some of the
Company's practices, including Zenith Goldline and other drug manufacturer
rebate payments to the Company and the Company's incentive payments to
pharmacists under its preferred generics program. Although a Fraud Alert
represents a statement of the OIG's views, it is not binding on a court.
Management believes that the kinds of financial incentives paid to or by the
Company in connection with the TennCare program, where it has been acting as a
purchaser of pharmacy benefits on behalf of plan sponsors, are not prohibited
by the Federal Anti-Kickback Statute.

Payments by a health care provider to an entity that refers or influences
the referral of Medicare or Medicaid business and subcontracts a substantial
portion of the required services and financial risk to the health care
provider have been the subject of an OIG Fraud Alert on Joint Venture
Arrangements issued in April 1989 and a formal proceeding brought by the OIG
under the Federal Anti-Kickback Statute seeking to exclude the parties from
the Medicare and Medicaid programs. Payments by a health care provider to a
consultant who has influence over Medicare or Medicaid referrals because of
his position of authority with a referral source have been the subject of
successful prosecutions by the Department of Justice under the Federal Anti-
Kickback Statute. In such cases, a court's inquiry is directed towards whether
the payments were intended in whole or in part to induce referrals or whether
they were for other legitimate purposes. Some Federal appeals courts have held
that if one among a number of purposes for a payment is improper, then the
payment is unlawful. Although not protected by safe harbor regulations, the
Company believes that its payments to RxCare and RxCare's Chairman, a
consultant to the Company, and Zenith Goldline's investment in a subsidiary of
the Company comply with the Federal Anti-Kickback Statute. However, no
assurances can be given that a successful challenge might not be brought
involving one or more such transactions. Whether or not successful, such a
challenge could have a material adverse effect on the Company's business and
results of operations.

In recent years, Federal health care prosecutions have been initiated by so-
called qui tam litigants who file suits as private parties on behalf of the
government seeking a portion of the fines eventually assessed by prosecutors
against health care providers alleged to have filed false claims with the
Medicare or Medicaid programs. Some courts have permitted qui tam actions to
proceed where the wrongful activity alleged is a violation of the Federal
Anti-Kickback Statute. In general, if one or more of the Company's
transactions were found to constitute false claims or deemed to be fraudulent
under state or Federal laws, the Company and responsible individuals could be
subject to substantial civil and criminal penalties and restitution.
Specifically, if one or more of the Company's transactions described under
"Certain Transactions" were determined to be inappropriately classified or
described, the Company could be required to make restitution or pay other sums
as compensation or penalties.

In addition to the Anti-Kickback Laws, certain state laws designed to
protect consumers have been the basis for investigations and multi-state
settlements requiring the discontinuance of certain financial incentives
provided by manufacturers to retail pharmacies to promote the sale of the
manufacturers' drugs. One recent settlement required, among other things, that
a pharmacy benefit manager owned by a drug manufacturer inform physicians of
the identity of its owner and the manufacturer of the drugs being recommended
when attempting to persuade physicians to switch prescription drugs.

Antitrust Laws. Numerous lawsuits have been filed throughout the United
States by retail pharmacies against drug manufacturers challenging certain
brand drug pricing practices under various state and Federal antitrust laws.
Although the Company is not a party to any of these proceedings, its
operations are subject to review and scrutiny under those laws. The suits
allege, among other things, that the manufacturers have offered, and certain
pharmacy benefit managers have knowingly accepted, discounts or rebates on
drug purchases that allegedly violate the Federal Robinson-Patman Act in that
similar discounts were not available to retail pharmacies. A Federal district
court judge in one such suit recently rejected a proposed monetary settlement
that required no change in the challenged pricing practices. The parties to
that civil suit have agreed to settle the disputes by agreeing to an
injunction that meets the court's objections to the previously proposed
settlement by prohibiting the defendant drug manufacturers from refusing to
offer discounts based solely on the status of the buying entity, and by
providing that to the extent that retail pharmacies and retail buying groups
can demonstrate an ability to affect market share in the same or similar
manner as managed care entities, retailers will be entitled to the same types
of discounts given to managed care entities. Although the Company is not a
party to that civil suit, under the terms of the revised settlement approved
in June 1996 the availability to the Company of certain discounts, rebates and
fees that the Company presently receives in connection with its drug
purchasing and formulary administration programs could be adversely affected
and the Company could encounter increased competition from pharmacies and
pharmacy chains. In addition, the FTC has reportedly recently begun an
investigation of the defendants' pricing practices complained of in these
cases.

In June 1996, the FTC's proposed consent decree with RxCare and its parent,
the Tennessee Pharmacists Association ("TPA"), became final. Under the terms
of the consent decree, RxCare and TPA are prohibited from entering into a
"most favored nations" clause (under which a participating pharmacy that
accepts a lower reimbursement rate than that offered by RxCare must reduce its
charges to RxCare) with any pharmacy or from suggesting or assisting any other
person to do so. The FTC contends that such clause had the effect of
increasing prices charged by pharmacies to purchasers of prescription drugs in
Tennessee because the preponderance of pharmacies in Tennessee are members of
RxCare and because RxCare accounted for a substantial portion of drug
purchases from each pharmacy. Because the FTC justified its challenge and the
decree, in part, on RxCare's potential market power in Tennessee, business
arrangements and practices involving RxCare, either directly or indirectly, or
involving sales to or purchases by RxCare-affiliated pharmacies may face
heightened scrutiny or continued review from an anti-competitive perspective
by state or Federal regulators and possible challenge by private parties. The
existence of this consent order therefore may hamper the Company's effort to
develop or pursue competitive opportunities, in Tennessee or elsewhere, in
areas such as group purchasing or market advocacy on behalf of drug
manufacturers. Prolonged proceedings involving regulatory or private party
challenges to the Company's activities would be costly to the Company and
divert its resources, including key personnel. An adverse determination in
such a proceeding could have a material adverse effect on the Company.

Drug Distribution Laws. The Federal Food, Drug and Cosmetic Act generally
regulates the introduction, manufacture, advertising, labeling, packaging,
storage, handling, marketing and distribution of, and recordkeeping for,
pharmaceuticals shipped in interstate commerce. The Prescription Drug
Marketing Act of 1987 amended the Federal Food, Drug and Cosmetic Act and
established certain requirements applicable to the wholesale distribution of
prescription drugs, including the requirement that wholesale drug distributors
be registered with the Secretary of Health and Human Services or licensed by
each state in which they conduct business in accordance with federally
established guidelines on storage, handling and records maintenance. If the
Company distributes pharmaceutical products, it will be subject to inspection
by the Food and Drug Administration ("FDA") and will be required to maintain
licenses and permits under the laws of the states in which it operates.
Failure by the Company of an FDA inspection or to comply with any of the
foregoing laws, licenses, permits or other requirements could result in a
suspension of one or more of its operations and in penalties, which could have
a material adverse affect on the Company.

State Regulation. Many states have statutes and regulations that do or may
impact the provision of pharmacy benefits. In some states, pharmacy benefit
managers may be subject to regulation under insurance laws or laws licensing
HMOs and other managed care organizations, in which event requirements could
include the maintenance of reserves, required filings with regulatory
agencies, and compliance with disclosure requirements and other regulation of
the Company's operations. A number of states have laws designed to restrict
limitations on the consumer's choice of pharmacies. Some states require that
the benefits of discounts negotiated by managed care organizations be passed
along to consumers in proportionate reductions of co-payments. Some states
require that pharmacies be permitted to participate in provider networks if
they are willing to comply with network requirements. Other states require
pharmacy benefit managers to follow certain prescribed procedures in
establishing a network and admitting and terminating its members. Many states
require that Medicaid obtain the lowest prices from a pharmacy, which may
limit the Company's ability to reduce the prices it pays for drugs below
Medicaid prices. States have a variety of laws regulating pharmacists' ability
to switch prescribed drugs or to split fees, which could impede the Company's
business strategy.

ERISA. If the Company were determined to be a fiduciary under ERISA because
it was found to have discretionary responsibility for part or all of a group
health plan's administration, or because it was found to exercise authority or
control over the management or disposition of the plan's assets, the Company
could be restricted from commercial activities and relationships with
pharmacies, drug manufacturers and others deemed to conflict with its
fiduciary duties to plan members under ERISA statutes and regulations.
Violation of ERISA may result in substantial civil penalties and damage awards
to affected plan beneficiaries.

LEGAL PROCEEDINGS

On March 5, 1996, the Company was added as a third-party defendant in a
proceeding in the Superior Court of the State of Rhode Island. The third-party
plaintiffs, Medical Marketing Group, Inc. ("MMG"), PPI Holding, Inc. ("PPI
Holding") and Payer Prescribing Information, Inc. ("PPI"), allege that the
Company employed E. David Corvese, the Company's Vice Chairman, with knowledge
of covenants not to compete in effect between Mr. Corvese and PPI, PPI Holding
and MMG that prevent Mr. Corvese from competing in the area of the collection,
analysis or marketing of data for the pharmaceutical or health care industries
relating to physician practice demographics and the influence of managed care
plans. The complaint alleges that the Company interfered with the contractual
relationship between the parties and that it misappropriated MMG's and PPI's
confidential information through its employment of Mr. Corvese. The complaint
seeks to enjoin the Company from using confidential information allegedly
misappropriated from MMG and PPI and seeks an unspecified amount of
compensatory and consequential damages, interest and attorneys' fees. The
Company and Mr. Corvese believe the claim is without merit and intend to
vigorously defend against it; however, the loss of this litigation could have
a material adverse effect on the Company's business and results of operations.

FACILITIES AND EMPLOYEES

The Company's corporate headquarters are located in approximately 9,500
square feet of leased office space in Pearl River, New York. For its
operational needs, the Company leases approximately 24,000 square feet of
office space in South Kingstown, Rhode Island, approximately 5,000 square feet
in Nashville, Tennessee and approximately 1,850 square feet in Memphis,
Tennessee. The Company believes that its facilities, while currently adequate,
will need to be augmented as additional headquarters staff are added. The
addition of new pharmacy benefit management business, if obtained, may require
the Company to lease additional local facilities to support effective delivery
by the Company of its programs and services.

At July 31, 1996, the Company employed a total of 85 people, 17 of whom are
licensed pharmacists. The Company's employees are not represented by any
union, and, in the opinion of management, the Company enjoys good relations
with its employees.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Board of Directors currently consists of seven members. The Company's
directors and executive officers are as follows:

NAME AGE POSITION
- ---- --- --------

John H. Klein............ 50 Chairman of the Board, Chief Executive Officer
and Director
E. David Corvese......... 40 Vice Chairman of the Board and Director
Richard H. Friedman...... 45 Chief Financial Officer, Chief Operating Officer,
Treasurer and Director
Todd R. Palmieri......... 31 Executive Vice President--Business Development
and Director
Leslie B. Daniels........ 49 Director
Louis A. Luzzi, Ph.D. ... 64 Director
Scott R. Yablon.......... 45 Director

JOHN H. KLEIN joined the Company in April 1996 and was elected Chief
Executive Officer, Chairman of the Board and a director of the Company in May
1996. From May 1989 to December 1994, Mr. Klein served as President, Chief
Executive Officer, a director and a member of the Executive Committee of the
Board of Directors of Zenith Laboratories, Inc. ("Zenith"), a manufacturer of
multi-source generic pharmaceutical drugs. In December 1994, Zenith was
acquired by IVAX Corporation ("IVAX"), an international healthcare company and
the world's largest multi-source generic pharmaceutical manufacturer and
marketer. From January 1995 to January 1996, Mr. Klein was President of IVAX'
North American Multi-Source Pharmaceutical Group and each of its operating
companies, including Zenith and Zenith Goldline (collectively, "NAMPG"). From
January 1995 to January 1996, he was also an executive officer and a member of
the Executive Committee of IVAX. Pursuant to a termination and consulting
agreement between Zenith and Mr. Klein executed in January 1996, Mr. Klein has
agreed to work as an untitled employee of Zenith for up to three days per
month through December 1996 and to act as a consultant to Zenith and its
affiliates for up to three days per month from January 1997 through December
1998. See "Certain Transactions." Mr. Klein has served as Chairman of the
Generic Pharmaceutical Industry Association since March 1995.

E. DAVID CORVESE has served as a director of the Company since March 1996
and as Vice Chairman since May 1996. Mr. Corvese has served as Chairman of
Pro-Mark Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary
of the Company ("Pro-Mark"), since June 1995 and also served as President and
Chief Executive Officer of Pro-Mark from March 1994 to June 1995. From June
1991 to November 1993, Mr. Corvese served as President of Payer Prescribing
Information, Inc. ("PPI"), a company engaged in the business of providing
informational products, market analysis and consulting services to the
pharmaceutical industry. From March 1990 to March 1992, he served as President
of Kay-Rem Associates, Inc., a company engaged in the business of
pharmaceutical consulting. Mr. Corvese is also a past President of the Rhode
Island Pharmaceutical Association and a member of the American Pharmaceutical
Association, the American Society of Hospital Pharmacists and the Rhode Island
Society of Hospital Pharmacists.

RICHARD H. FRIEDMAN joined the Company in April 1996 and was elected Chief
Financial Officer, Chief Operating Officer, Treasurer and a director of the
Company in May 1996. From May 1991 to January 1992, Mr. Friedman served as
Vice President--Finance of Genpharm, Inc., a manufacturer and distributor of
generic pharmaceuticals. From February 1992 to December 1994, he served as
Chief Financial Officer and Vice President of Finance of Zenith. From January
1995 to January 1996, Mr. Friedman was Vice President of Administration of
NAMPG. Pursuant to a termination agreement between Zenith and Mr. Friedman
executed in February 1996, Mr. Friedman has agreed to work as an untitled
employee of Zenith for up to three days per month through December 1996. See
"Certain Transactions."

TODD R. PALMIERI has served as Executive Vice President--Business
Development and a director of the Company since May 1996 and as President of
MIM Strategic Marketing, LLC, a Rhode Island limited liability company and
majority-owned subsidiary of the Company, since December 1995. From December
1993 to August 1995, Mr. Palmieri served as Chief Financial Officer and a
director of Pro-Mark. From January 1992 to September 1993, he served as Vice
President--Operations and Product Development of PPI. From March 1991 to May
1992, Mr. Palmieri served as Vice President--Marketing and Business
Development for Cole Associates Inc., a company engaged in pharmaceutical
managed care marketing and consulting.

LESLIE B. DANIELS has served as a director of the Company since May 1996.
Mr. Daniels has been a principal of CAI Advisors & Co., an investment firm,
since 1988. He was Chairman of the Board of Directors of Zenith from April
1990 to December 1994 and a director from December 1989 to December 1994. From
December 1994 to December 1995, he was a director of IVAX. Mr. Daniels has
served as a director of several public and private companies.

LOUIS A. LUZZI, PH.D. has served as a director of the Company since July
1996. Dr. Luzzi is Dean of Pharmacy and Provost for Health Science Affairs of
the University of Rhode Island College of Pharmacy. He has been a Professor of
Pharmacy at the University of Rhode Island since 1981. Dr. Luzzi participates
in several university, industry and government committees and has published
numerous research articles.

SCOTT R. YABLON has served as a director of the Company since July 1996.
Since 1981, he has held the position of Vice President--Administration for
Forbes, Inc. and currently is Vice President--Finance and Administration. He
is also a member of the Investment Committee of Forbes, Inc., Vice President,
Treasurer and Secretary of Forbes Investors Advisory Institute and Vice
President and Treasurer of Forbes Trinchera, Sangre de Cristo Ranches, Fiji
Forbes and Forbes Europe.

The members of the Board of Directors will serve until the next annual
meeting of stockholders and thereafter until their successors are elected and
qualified.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company has an Executive Committee, an Audit Committee and a
Compensation Committee of the Board of Directors. The Executive Committee,
currently comprised of Messrs. Klein, Corvese, Friedman and Palmieri, reviews
the operating and strategic plans of the Company and, to the extent permitted
by Delaware law, has all the powers of the Board of Directors to direct and
manage the business and affairs of the Company. The Audit Committee, currently
comprised of Messrs. Daniels, Friedman and Yablon, makes recommendations to
the Board of Directors regarding the selection of independent auditors,
reviews the results and scope of the audit and other services provided by the
Company's independent auditors, reviews and evaluates the Company's internal
accounting controls and performs such other functions as directed by the Board
of Directors. The Compensation Committee, currently comprised of Messrs. Luzzi
and Yablon, administers the Company's stock incentive plans. See "--Stock
Incentive Plans."

COMPENSATION OF DIRECTORS

Directors who are not officers of the Company ("Outside Directors") receive
fees of $1,500 per month and $500 per meeting of the Board of Directors and
any committee thereof and are reimbursed for expenses incurred in connection
with attending such meetings. In addition, each Outside Director joining the
Company since the adoption of the Company's 1996 Non-Employee Directors Stock
Incentive Plan receives an option to purchase 20,000 shares of Common Stock
under that plan. See "--Stock Incentive Plans." Directors who are also
officers of the Company will not be paid any director fees.

EXECUTIVE COMPENSATION

MIM Corporation was incorporated in March 1996 for the purpose of combining
the businesses and operations of Pro-Mark and MIM Strategic Marketing, LLC.
See "Certain Transactions--The Formation." Prior to the Formation in May 1996,
substantially all of the operations of MIM Corporation were conducted by Pro-
Mark. Accordingly, the following table sets forth certain information of Pro-
Mark concerning the annual, long-term and other compensation of the chief
executive officer of Pro-Mark and the four executive officers of Pro-Mark
whose total annual salary and bonus exceeded $100,000 during 1995 (the "Named
Executive Officers"):

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------------------------ ------------
NAME AND PRINCIPAL SECURITIES
POSITION WITH PRO- OTHER ANNUAL UNDERLYING ALL OTHER
MARK(1) YEAR SALARY BONUS COMPENSATION(2) OPTIONS(3) COMPENSATION
- ------------------ ---- -------- -------- --------------- ------------ ------------

E. David Corvese ....... 1995 $221,539(4) $100,000 $10,599 1,336,950 $33,000(5)
Chairman of the Board
Todd R. Palmieri ....... 1995 139,809(6) 182,308 2,400 955,500 --
Chief Financial Officer
Richard H. Krupski...... 1995 127,885 5,400 3,710 48,750 --
Chief Executive Officer
and President
Steven M. Dias ......... 1995 102,513 19,000 3,600 -- --
Vice President
Michael R. Ryan ........ 1995 96,000 41,398 3,600 48,750 --
Vice President

- --------
(1) The current executive officers of the Company are Messrs. Klein, Corvese,
Friedman and Palmieri, and their respective annual base salary rates for
1996 are as follows: Mr. Klein ($325,000), Mr. Corvese ($325,000), Mr.
Friedman ($275,000) and Mr. Palmieri ($210,000). Messrs. Krupski, Dias and
Ryan are currently non-executive officer employees of the Company. See "--
Employment Agreements."
(2) Consists of car allowances.
(3) Represents options to purchase shares of Common Stock of the Company
issued in connection with the Formation of the Company in exchange for
options that were granted by Pro-Mark during 1995. See "Certain
Transactions--The Formation."
(4) Includes $69,231 of compensation paid to Mr. Corvese by MIM Holdings, LLC.
Mr. Corvese served Pro-Mark as Chairman of the Board, Chief Executive
Officer and President prior to June 1995 and since June 1995 as Chairman
of the Board.
(5) Represents certain legal costs and expenses paid by Pro-Mark and MIM
Holdings, LLC on behalf of Mr. Corvese during 1995. See "Business--Legal
Proceedings."
(6) Includes $53,846 of compensation paid to Mr. Palmieri by MIM Holdings,
LLC.

The following table sets forth information concerning stock option grants
made during 1995 to the Named Executive Officers. These grants are also
reflected in the Summary Compensation Table. In accordance with the rules and
regulations of the Commission, the hypothetical gains or "option spreads" for
each option grant are shown based on compound annual rates of stock price
appreciation of 5% and 10% from the grant date to the expiration date. The
assumed rates of growth are prescribed by the Commission and are for
illustrative purposes only; they are not intended to predict the future stock
prices, which will depend upon market conditions and the Company's future
performance, among other things.

OPTION GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS(1)
-----------------------------------------------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM
OPTIONS FISCAL YEAR PRICE EXPIRATION ----------------------
NAME GRANTED(#) 1995 ($/SHARE) DATE 5% 10%
- ---- ---------- ------------ --------- ---------- ---------- -----------

E. David Corvese........ 1,336,950(2) 53.6% $.0067 3/30/10 $ 9,665 $ 28,460
Todd R. Palmieri........ 906,750(2) 36.4 .0067 3/30/10 6,555 19,302
48,750(3) 2.0 .0067 3/23/10 352 1,038
Richard H. Krupski...... 48,750(3) 2.0 .0067 3/23/10 352 1,038
Michael R. Ryan......... 48,750(3) 2.0 .0067 3/23/10 352 1,038

- --------
(1) Represents options to purchase shares of Common Stock of the Company
issued in connection with the Formation of the Company in exchange for
options granted by Pro-Mark during 1995. See "Certain Transactions--The
Formation."
(2) Such options became immediately exercisable on the date of grant.
(3) Such options become exercisable in equal installments on the first three
anniversaries of the date of grant.

None of the Named Executive Officers exercised options during 1995. The
following table sets forth for each Named Executive Officer the number of
shares covered by both exercisable and unexercisable stock options held as of
December 31, 1995. Also reported are the values for "in-the-money" options,
which represent the difference between the respective exercise prices of such
stock options and the assumed initial public offering price of $15.00 per
share.

AGGREGATED FISCAL YEAR-END OPTION VALUES

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END(1) FISCAL YEAR-END(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------

E. David Corvese............ 1,336,950 -- $20,045,292 $ --
Todd R. Palmieri............ 923,000 81,250 13,838,816 1,218,206
Richard H. Krupski.......... -- 48,750 -- 730,923
Steven M. Dias.............. 12,650 25,300 189,665 379,330
Michael R. Ryan............. 16,250 81,250 243,641 1,218,206

EMPLOYMENT AGREEMENTS

In May 1996, Messrs. Klein, Corvese, Friedman and Palmieri entered into
executive employment agreements with the Company which provide for initial
base salaries at annualized rates of $325,000, $325,000, $275,000 and
$210,000, respectively, and certain fringe benefits including automobile and
life insurance allowances. Such executives are also eligible to participate in
an executive bonus program for senior executive officers. The term of
employment is four years, subject to earlier termination by either party. If
employment is terminated early due to disability, or by the Company without
cause, or by the executive with cause, the Company is obligated to continue to
pay his salary and provide fringe benefits for twelve months following
termination. During the term of employment and for one year after the later of
termination of severance payments (unless the Company terminates the executive
without cause) or employment, the executive may not, directly or indirectly,
participate in the United States (other than with the Company) in the pharmacy
benefit management business, any business then being engaged in by the Company
or any component of any such business, nor may the executive induce any
customers to take actions disadvantageous to the Company.

Mr. Krupski entered into a three-year employment agreement with Pro-Mark in
April 1995 which provides for an initial annual base salary of $175,000 and
certain fringe benefits. In addition, Mr. Krupski will be eligible for
incentive compensation or performance bonuses, not exceeding the sum of
$25,000 in any calendar year, as determined by Pro-Mark's Board of Directors.
During the term of his employment by Pro-Mark and for one year thereafter, Mr.
Krupski may not, directly or indirectly, interfere with any business
relationship between Pro-Mark and its employees, customers, suppliers or other
business associates, or own, operate, or participate in the ownership or
operation of, or in any manner be connected with, any business the principal
activity of which is in competition with the pharmacy benefit management and
consulting business or any other present or planned business of Pro-Mark or
any of its subsidiaries. If Pro-Mark terminates Mr. Krupski's employment as a
result of his disability or his unsatisfactory performance of his duties, Pro-
Mark is obligated to pay him an amount equal to his base salary for a period
of six months, with fringe benefits.

Dr. Ryan entered into a three-year employment agreement with Pro-Mark
effective April 1994 which provides for an initial annual base salary of
$96,000 and certain fringe benefits. In March 1996, Dr. Ryan's annual base
salary was increased to $125,000. In addition, Dr. Ryan will be eligible for
incentive compensation or performance bonuses as determined by Pro-Mark's
Board of Directors. During the term of his employment by Pro-Mark and for up
to one year thereafter, Dr. Ryan may not, directly or indirectly, interfere
with any business relationship between Pro-Mark and its employees, customers
or suppliers or own, operate, or participate in the ownership or operation of,
or in any manner be connected with, any business which is in competition with
the drug benefit plan marketing and consulting business or any other present
or planned business of Pro-Mark or any of its subsidiaries. If Pro-Mark
terminates Dr. Ryan's employment as a result of (a) his unsatisfactory
performance of his duties or (b) the termination, expiration or modification
of government funding for TennCare or of the Federal waiver for TennCare, Pro-
Mark is obligated to pay him an amount equal to his base salary for a period
of up to three months.

STOCK INCENTIVE PLANS

Employee Plan

The Company's 1996 Stock Incentive Plan (the "Employee Plan") was adopted in
May 1996 and provides for the grant of either statutory or non-qualified stock
options to employees and key contractors of the Company to purchase up to an
aggregate of 4,000,000 shares of Common Stock. In connection with the
Formation of the Company in May 1996, the Company issued options to purchase
an aggregate of 3,021,900 shares of Common Stock under the Employee Plan (of
which options to purchase 2,683,100 shares were fully vested, options to
purchase 1,650 shares had been forfeited and options to purchase 3,300 shares
had been exercised at July 31, 1996) at an exercise price of $.0067 per share
in exchange for options to purchase shares of Pro-Mark common stock. In May
and July 1996, the Company also granted options to purchase an aggregate of
878,239 shares of Common Stock under the Employee Plan (of which options to
purchase 2,500 shares were vested and options to

purchase 3,669 shares had been forfeited at July 31, 1996) at an exercise
price equal to the initial public offering price of the shares offered in the
Offering. Options granted under the Employee Plan vest in full upon a change
in control of the Company, and have a term of up to 15 years. All options at
the time of original grant were deemed to be at fair market value.

Directors Plan

The Company's 1996 Non-Employee Directors Stock Incentive Plan (the
"Directors Plan" and, together with the Employee Plan, the "Plans") was
adopted in July 1996. The purpose of the Directors' Plan is to attract and
retain qualified individuals to serve as non-employee directors of the Company
("Outside Directors"), to provide incentives and rewards to such directors and
to associate more closely the interests of such directors with those of the
Company's stockholders. The Directors Plan provides for the automatic granting
of non-qualified stock options to Outside Directors joining the Company since
the adoption of the Directors Plan. Each such Outside Director receives an
option to purchase 20,000 shares of Common Stock upon his or her initial
appointment or election to the Board of Directors. The exercise price of such
options is equal to the fair market value of the Common Stock on the date of
grant. Options granted under the Directors Plan generally vest over three
years. A reserve of 100,000 shares of Common Stock has been established for
issuance under the Directors Plan. Options to purchase 40,000 shares of Common
Stock are currently outstanding under the Directors Plan at an exercise price
equal to the initial public offering price of the shares offered in the
Offering.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Delaware General Corporation Law authorizes corporations to limit or
eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach of directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of the
corporation, directors must exercise an informed business judgment based on
all material information reasonably available to them. Absent the limitations
authorized by the Delaware statute, directors could be accountable to
corporations and their stockholders for monetary damages for conduct that does
not satisfy their duty of care. Although the statute does not change
directors' duty of care, it enables corporations to limit available relief to
equitable remedies such as injunction or rescission. The Company's Amended and
Restated Certificate of Incorporation ("Certificate of Incorporation") limits
the liability of the Company's directors to the Company or its stockholders to
the fullest extent permitted by the Delaware statute. Specifically, directors
of the Company will not be personally liable for monetary damages for breach
of a director's fiduciary duty as a director, except for liability (a) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (c) for unlawful payments of
dividends or unlawful stock repurchases or redemptions as provided in Section
174 of the Delaware General Corporation Law, or (d) for any transaction from
which the director derived an improper personal benefit. The inclusion of this
provision in the Certificate of Incorporation may have the effect of reducing
the likelihood of derivative litigation against directors and may discourage
or deter stockholders or management from bringing a lawsuit against directors
for breach of their duty of care, even though such an action, if successful,
might otherwise have benefited the Company and its stockholders. At present,
there is no litigation or proceeding pending involving a director of the
Company as to which indemnification is being sought, nor is the Company aware
of any threatened litigation that may result in claims for indemnification by
any director.

The By-laws of the Company also provide for indemnification of the officers
and directors of the Company to the fullest extent permitted under Delaware
law.

The Company believes the foregoing are necessary to attract and retain
qualified persons as directors and officers.

CERTAIN TRANSACTIONS

THE FORMATION

MIM Corporation was incorporated in Delaware in March 1996 for the purpose
of combining the businesses and operations of Pro-Mark Holdings, Inc. ("Pro-
Mark"), a Delaware corporation, and MIM Strategic Marketing, LLC ("MIM
Strategic"), a Rhode Island limited liability company (the "Formation").
Immediately prior to the Formation, Pro-Mark was controlled by E. David
Corvese, the Vice Chairman and a director of MIM Corporation, and MIM
Strategic was controlled by MIM Holdings, LLC ("MIM Holdings"), a Rhode Island
limited liability company. The owners of MIM Holdings prior to the Formation
were Mr. Corvese and his wife, various trusts for the benefit of their family,
and Todd R. Palmieri, currently Executive Vice President--Business Development
and a director of MIM Corporation. Prior to the Formation, substantially all
of the operations of MIM Corporation were conducted by Pro-Mark.

The transactions that occurred in the Formation took place in May 1996 and
were as follows:

. The stockholders of Pro-Mark transferred their Pro-Mark shares to MIM
Corporation in exchange for an aggregate of 4,500,000 shares of Common
Stock of MIM Corporation (including an aggregate of 4,455,000 shares to
Mr. Corvese), and the holders of options to purchase shares of common
stock of Pro-Mark exchanged such options for options to purchase an
aggregate of 3,021,900 shares of Common Stock of MIM Corporation
(including options to purchase 1,336,950 shares to Mr. Corvese and
options for 1,004,250 shares to Mr. Palmieri).

. MIM Holdings redeemed a portion of Mr. Corvese's ownership interest in
MIM Holdings in exchange for an ownership interest in MIM Strategic, and
Mr. Corvese then transferred such ownership interest in MIM Strategic to
MIM Corporation in exchange for 905,000 shares of Common Stock of MIM
Corporation.

. MIM Holdings redeemed all of Mr. Palmieri's ownership interests in MIM
Holdings in exchange for an ownership interest in MIM Strategic, and Mr.
Palmieri then transferred such ownership interest in MIM Strategic to
MIM Corporation in exchange for 195,747 shares of Common Stock of MIM
Corporation.

. MIM Holdings assigned certain contract rights and transferred all of its
remaining ownership interests in MIM Strategic to MIM Corporation in
exchange for an aggregate of 2,423,053 shares of Common Stock of MIM
Corporation.

As a result of the foregoing transactions, Pro-Mark became a wholly-owned
subsidiary of MIM Corporation and MIM Strategic became a 90%-owned subsidiary
of MIM Corporation, with Zenith Goldline owning the remaining 10% ownership
interest in MIM Strategic. Mr. Corvese and his wife and various trusts for the
benefit of their family are the current owners of MIM Holdings. Messrs.
Corvese and Palmieri and MIM Holdings are each principal stockholders of MIM
Corporation. See "Principal Stockholders."

RELATIONSHIP OF CERTAIN EXECUTIVE OFFICERS WITH ZENITH AND ZENITH GOLDLINE

In December 1995, the Company and Zenith Goldline, a major generic drug
manufacturer and marketer and a subsidiary of IVAX, formed MIM Strategic for
the purpose of enhancing the distribution of Zenith Goldline's pharmaceutical
products in the State of Tennessee. Zenith Goldline contributed $1,150,000 to
MIM Strategic in exchange for its 10% ownership interest in MIM Strategic.

In December 1995, the Company entered into agreements to advise and assist
Zenith Goldline in the distribution of Zenith Goldline's line of generic and
non-prescription pharmaceutical products in the State of Tennessee in return
for a fee based on a percentage of the growth in Zenith Goldline's gross
margins from the distribution of such products. See "Business--Preferred
Generics." John H. Klein, the Company's Chairman and Chief Executive Officer
and a director, and Richard H. Friedman, the Company's Chief Financial
Officer, Chief Operating Officer and Treasurer and a director, both of whom
joined the Company in April 1996, were executive officers of Zenith Goldline
at the time the Company entered into the agreements with Zenith Goldline.

In January 1996, Mr. Klein and Zenith entered into a termination and
consulting agreement, whereby Mr. Klein agreed to continue as an untitled
employee of Zenith through December 1996 and to act as a consultant to Zenith
and its affiliates from January 1997 through December 1998. Mr. Klein has
agreed to devote up to three days per month to Zenith under such agreement,
and Zenith has agreed to pay Mr. Klein $400,000 per year through December
1998. Under the agreement, Mr. Klein has agreed that he will not, prior to
January 1999, own, manage, or be employed by, consult to or otherwise assist
any business or enterprise that is substantially competitive with any material
portion of the business of manufacturing prescription generic drugs as
conducted by Zenith or its subsidiaries as of the date of the agreement. Such
covenant may restrict the Company's ability to compete in certain areas of the
preferred generics business, its planned drug distribution business and
certain other business areas.

In February 1996, Mr. Friedman and Zenith entered into a termination
agreement, whereby Mr. Friedman agreed to continue as an untitled employee of
Zenith through December 1996. Mr. Friedman has agreed to work up to three days
per month under the agreement, and Zenith has agreed to pay Mr. Friedman an
annual salary of $184,000 through December 1996. Mr. Friedman has agreed to a
noncompetition covenant similar to that of Mr. Klein's that will be in effect
through December 1996.

As of June 30, 1996, Messrs. Klein and Friedman held options to purchase an
aggregate of 288,150 and 84,955 shares, respectively, of common stock of
Zenith's parent, IVAX. Although Messrs. Klein and Friedman intend to devote
substantially all of their time to the business and operations of the Company,
no assurance can be given that their rights and obligations under the above
agreements or their interests in Zenith's parent will not result in or create
a conflict of interest with their obligations to the Company.

RELATIONSHIP WITH RXCARE

In March 1994, the Company entered into an agreement with RxCare agreeing to
provide RxCare with a broad range of pharmacy benefit management services with
respect to RxCare's TennCare and private pharmaceutical benefit businesses.
Under the agreement, the Company shares with RxCare the Company's profit, if
any, from such pharmaceutical benefit business. Based on the Company's
estimated results of operations for 1994, the Company paid RxCare a profit
sharing fee of $473,000 pursuant to the agreement in early 1995. The Company's
actual operations for 1994 were subsequently determined not to be profitable.
Although the Company does not intend to request repayment of the fee, the
Company intends to offset such amount against future profit sharing amounts,
if any, due to RxCare under the agreement. Under the agreement, the Company
also agreed to pay RxCare $10,000 per month through October 1995 for the use
of certain office space and equipment and $20,000 per month thereafter through
December 1998. Expenses under this agreement were $100,000, $140,000 and
$120,000 during 1994, 1995 and the first six months of 1996, respectively. The
Company believes that the loss of the agreement with RxCare would have a
material adverse effect on the Company's results of operations.

Since January 1994, the Chairman of the Board and Chief Executive Officer of
RxCare has been a consultant to the Company. Pursuant to the agreement between
the Company and the consultant, the Company has agreed to pay the consultant
$5,500 each month, and additional compensation as agreed by the parties for
special projects, through December 1996. During 1994, 1995 and the first six
months of 1996, the Company paid the consultant and a related party assignee a
total of $516,000 (including $150,000 upon execution of the RxCare agreement
and $300,000 for special projects related to the establishment of the
Company's TennCare business), $66,000 and $33,000, respectively, under the
agreement.

In July 1995, the Company advanced RxCare approximately $1,957,000 to fund
the losses RxCare had incurred in connection with one of its pharmacy benefit
management contracts that is currently being managed by the Company under the
above agreement with RxCare. Although the Company does not intend to seek
repayment of the advance, the Company intends to offset such amount against
future profit sharing amounts, if any, due to RxCare under the agreement.

OTHER TRANSACTIONS

In March 1994, a brother of E. David Corvese received a loan of $150,000
from the Company bearing interest at the prime rate, with principal and
interest payable upon demand. The loan was secured by his brother's present
and future interests in the capital and profits of a subsidiary of the
Company. The loan was repaid in 1995.

In June 1994, Mr. and Mrs. Corvese received loans from the Company in the
aggregate amount of $978,750 bearing interest at 5.42% per annum, with
interest payable monthly and principal payable in full on or before June 15,
1997. The loans are secured by a first mortgage on their principal residence
located in Peace Dale, Rhode Island. Indebtedness of $956,000 under the loans
(including accrued interest) was outstanding at June 30, 1996.

In August 1994, the Company provided Alchemie Properties, LLC ("Alchemie")
with a $299,000 loan bearing interest at 10% per annum, with interest payable
monthly and principal payable in full on or before December 1, 2004. Alchemie
is a Rhode Island limited liability company of which Mr. Corvese is the
manager and the principal owner. The loan is secured by a lien on Alchemie's
rental income. Indebtedness of $280,000 under the loan was outstanding at June
30, 1996.

In December 1994, the Company entered into a ten-year lease with Alchemie
for approximately 7,200 square feet of office space in Peace Dale, Rhode
Island. The Company paid $5,000, $60,000 and $30,000 in rent for this space
during 1994, 1995 and the first six months of 1996, respectively. The Company
has also expended an aggregate of approximately $480,000 for alterations and
leasehold improvements to this space, which upon termination of the lease will
accrue to the benefit of Alchemie.

In September 1995, the Company entered into a two-year agreement with MIM
Holdings, whereby MIM Holdings agreed to provide management and consulting
services to the Company for a fee of $75,000 per month. During 1995 and the
first quarter of 1996, the Company paid MIM Holdings $300,000 and $225,000,
respectively, pursuant to the agreement. The agreement was terminated in March
1996.

In December 1995, MIM Strategic advanced to MIM Holdings $800,000 for
certain consulting services to be performed for MIM Strategic in 1996. During
1995, the Company also paid $278,000 for certain expenses on behalf of MIM
Holdings. These amounts, totaling $1,078,000, were recorded as a stockholder
note receivable at December 31, 1995. The Company has received a note from MIM
Holdings guaranteed by Mr. Corvese for $456,000. The note bears interest at
10% per annum, payable quarterly, with principal due on March 31, 2001. The
note is further secured by the assignment of two notes due to MIM Holdings
from Messrs. Palmieri and Ryan in the aggregate amount of $456,000. The
outstanding principal balance of the note plus accrued interest at June 30,
1996 was $467,000. The remaining $622,000 will not be repaid and was treated
as a stockholder distribution during the first quarter of 1996. MIM Holdings
has agreed to indemnify MIM Strategic and its affiliates against all
liabilities or losses that may be incurred in connection with any third-party
claim arising out of such distribution.

In January 1996, MIM Strategic entered into another agreement with MIM
Holdings, whereby MIM Holdings agreed to provide to MIM Strategic operational
and professional services for a fee of $50,000 per month. MIM Strategic paid
MIM Holdings $150,000 under this Agreement during the first quarter of 1996.
In connection with the Formation, MIM Holdings assigned such agreement to the
Company. The agreement was terminated in May 1996.

During the first quarter of 1996, the Company advanced $99,000 and $25,000
to MIM Holdings and Alchemie, respectively. During the second quarter of 1996,
the advance to Alchemie was repaid in full and $13,000 of the advance to MIM
Holdings was repaid. The $86,000 balance of the advance to MIM Holdings at
June 30, 1996 is to be repaid by September 30, 1996 without interest.

Prior to the affiliation of Messrs. Klein, Friedman and Daniels with the
Company, the Company primarily was a pharmacy benefit manager providing
capitated services to the TennCare Medicaid population of Tennessee. Drawing
upon their experience, know-how, contacts and relationships, managerial
expertise, contracts under negotiation and strategic understandings and plans
relating to the generic drug and health care industries, the Company has
determined to pursue a business strategy that emphasizes the promotion and
distribution of generic drugs through exclusive contracts with preferred
generic drug manufacturers and the marketing of risk sharing pharmacy benefit
programs to sponsors of public and private health plans outside of Tennessee.
Negotiations are currently proceeding with a number of generic drug
manufacturers and plan sponsors. Management believes that combining the
interests of Messrs. Klein, Friedman and Daniels with the interests of the
Company has resulted in a business strategy uniquely suited to capitalize on
the present and expected conditions in the pharmaceutical and health care
industries. Based upon the foregoing, in May 1996 Mr. Corvese granted to
Messrs. Klein, Friedman and Daniels options to purchase 1,800,000, 1,500,000
and 300,000 shares of his Common Stock, respectively, at an exercise price of
$.10 per share. These options are immediately exercisable and have a term of
ten years, subject to earlier termination upon certain mergers or
consolidations of the Company or the sale or other disposition of all or
substantially all of the assets of the Company ("Change in Control"). Mr.
Corvese also granted to Mr. Klein an additional option to purchase 1,860,000
shares of his Common Stock at the initial public offering price (the
"Option"). The Option has a term of ten years, subject to earlier termination
upon a Change in Control of the Company or within certain specified periods
following Mr. Klein's death, disability or termination of employment for any
reason. The Option becomes exercisable in installments of 620,000 shares each
on December 31, 1996, 1997 and 1998, respectively, and is immediately
exercisable upon the approval of a Change in Control by the Company's Board of
Directors and, if required, stockholders. In connection with the grant of the
foregoing options, the Company granted certain registration rights to Messrs.
Corvese, Klein, Friedman and Daniels. See "Shares Eligible for Future Sale."

In June 1996, Mr. Klein loaned $500,000 to the Company for working capital
purposes pursuant to an unsecured, 10% demand note that was repaid that month.
The Company paid $2,500 to Mr. Klein in interest and associated fees in
connection with the loan.

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

ALL FUTURE TRANSACTIONS BETWEEN THE COMPANY AND ITS OFFICERS, DIRECTORS,
PRINCIPAL STOCKHOLDERS AND AFFILIATES WILL BE ON TERMS NO LESS FAVORABLE TO
THE COMPANY THAN COULD BE OBTAINED FROM UNAFFILIATED PARTIES AND, TO THE
EXTENT THAT SUCH TRANSACTIONS ARE NOT IN THE ORDINARY COURSE OF BUSINESS, WILL
BE SUBJECT TO THE APPROVAL OF A MAJORITY OF THE COMPANY'S INDEPENDENT,
DISINTERESTED DIRECTORS.

PRINCIPAL STOCKHOLDERS

The following table sets forth as of July 31, 1996 the beneficial ownership
of the Common Stock by: (i) each person or entity known to the Company to own
beneficially five percent or more of the Company's Common Stock; (ii) each of
the Company's directors; (iii) the Company's Chief Executive Officer and each
other Named Executive Officer; and (iv) all directors and current executive
officers of the Company as a group.

PERCENTAGE OF SHARES
NUMBER OF SHARES --------------------------------
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) PRIOR TO OFFERING AFTER OFFERING
------------------------ ------------------------ ----------------- --------------

E. David Corvese........ 9,120,003(3)(4) 97.4% 68.2%
25 North Road (5)(6)
Peace Dale, RI 02883
MIM Holdings, LLC....... 2,323,053(7) 28.9 19.3
25 North Road
Peace Dale, RI 02883
John H. Klein........... 1,800,000(4) 22.4 15.0
One Blue Hill Plaza
Pearl River, NY 10965
Richard H. Friedman..... 1,500,000(5) 18.7 12.5
One Blue Hill Plaza
Pearl River, NY 10965
Todd R. Palmieri........ 1,151,247(8) 12.8 8.9
One Blue Hill Plaza
Pearl River, NY 10965
Leslie B. Daniels....... 300,000(6) 3.7 2.5
Michael R. Ryan......... 48,750(9) * *
Steven M. Dias.......... 25,300(9) * *
Richard H. Krupski...... 16,250(9) * *
Louis A. Luzzi, Ph.D.... -- (10) * *
Scott R. Yablon......... -- (10) * *
All directors and
current executive
officers as a group
(seven persons)........ 10,271,250(11) 99.5 71.7

- --------
* Less than 1%.
(1) The inclusion herein of any shares as beneficially owned does not
constitute an admission of beneficial ownership of those shares. Except as
otherwise indicated, each person has sole voting power and sole investment
power with respect to all shares beneficially owned by such person.
(2) Shares not outstanding but deemed financially owned by virtue of the right
of an individual to acquire them within 60 days upon the exercise of an
option are treated as outstanding for purposes of determining beneficial
ownership and the percentage beneficially owned by such individual.
(3) Includes 1,336,950 shares issuable upon exercise of options. Also includes
2,323,053 shares held by MIM Holdings, LLC, a Rhode Island limited
liability company, the owners of which are Mr. Corvese, his wife and
various trusts for the benefit of their family.
(4) Includes 1,800,000 shares that Mr. Klein has the right to acquire from Mr.
Corvese pursuant to a stock option agreement. Excludes 1,860,000 shares
subject to the unvested portion of an additional option granted to Mr.
Klein by Mr. Corvese. See "Certain Transactions."
(5) Mr. Friedman has the right to acquire 1,500,000 shares from Mr. Corvese
pursuant to a stock option agreement. See "Certain Transactions."
(6) Mr. Daniels has the right to acquire 300,000 shares from Mr. Corvese
pursuant to a stock option agreement. See "Certain Transactions."
(7) For purposes of beneficial ownership, the shares held by MIM Holdings, LLC
are also deemed to be held by Mr. Corvese (see footnote 3).
(8) Includes 955,500 shares issuable upon exercise of the vested portion of
options. Excludes 48,750 shares subject to the unvested portion of options
held by Mr. Palmieri.
(9) Consists of shares issuable upon exercise of the vested portion of
options. Excludes 53,133, 123,750 and 90,600 shares subject to the
unvested portion of options held by Messrs. Dias, Ryan and Krupski,
respectively.
(10) Excludes 20,000 and 20,000 shares subject to unvested options held by
Messrs. Luzzi and Yablon, respectively.
(11) See footnotes 3 through 8 and 10 above.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company as stated in the Company's
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") consists of 40,000,000 shares of Common Stock, $.0001 par
value per share, and 5,000,000 shares of preferred stock, $.0001 par value per
share (the "Preferred Stock"). At July 31, 1996, 8,027,100 shares of Common
Stock were issued and outstanding and held of record by seven stockholders and
no shares of Preferred Stock were issued or outstanding.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the outstanding shares of Common
Stock entitled to vote in any election of directors may elect all the
directors standing for election. Holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the Company's
Board of Directors out of funds legally available therefor. Upon the
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to receive ratably the net assets of the Company available for
distribution after the payment of, or adequate provision for, all debts and
other liabilities of the Company. Holders of Common Stock have no preemptive,
subscription, redemption, sinking fund or conversion rights. Immediately upon
consummation of the Offering, all of the then outstanding shares of Common
Stock will be validly issued, fully paid and nonassessable by the Company.

PREFERRED STOCK

Under the terms of the Company's Certificate of Incorporation, the Company's
Board of Directors is authorized, subject to any limitations prescribed by
law, to issue without stockholder approval up to 5,000,000 shares of Preferred
Stock in one or more series. Each such series of Preferred Stock shall have
preferences, privileges, restrictions and rights, including voting, dividend,
conversion and redemption and liquidation preferences, as shall be determined
by the Company's Board of Directors.

The purpose of authorizing the Company's Board of Directors to issue
Preferred Stock and determine its rights and preferences is to eliminate
delays associated with a stockholder vote on specific issuances. The issuance
of Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue any shares of Preferred
Stock.

DELAWARE ANTI-TAKEOVER STATUTE

Upon consummation of the Offering, the Company will be subject to Section
203 of the Delaware General Corporation Law ("Section 203"). Subject to
certain exceptions and limitations, Section 203 prohibits a Delaware
corporation from engaging in any business combination with any "interested
stockholder," defined as any entity or person beneficially owning 15% or more
of the outstanding voting stock of a corporation and any entity or person
affiliated with or controlling or controlled by such entity or person, for a
period of three years following the time that such stockholder became an
interested stockholder, unless: (i) prior to such time, the board of directors
of the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder; (ii)
upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (for the purposes of determining the number of shares
outstanding under Delaware law, those shares owned (x) by persons who are
directors and also officers and (y) by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer are
excluded from the calculation); or (iii) at or subsequent to such time, the
business combination is approved by the board of directors and authorized at
an annual or special meeting of stockholders, and not by written

consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.

Section 203 defines a business combination to include: (i) any merger or
consolidation of the corporation with the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of
the corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder;
(iv) any transaction involving the corporation which has the effect of
increasing the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder; or (v) the
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the
corporation.

STOCK TRANSFER AGENT AND REGISTRAR

The stock transfer agent and registrar for the Common Stock is American
Stock Transfer and Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding
12,027,100 shares of Common Stock (assuming no exercise of outstanding stock
options under the Plans or the Underwriters' over-allotment option). The
4,000,000 shares of Common Stock sold in the Offering (plus any additional
shares of Common Stock sold upon exercise of the Underwriters' over-allotment
option) will be freely tradeable without restriction, except for any shares
purchased by affiliates of the Company which will be subject to the resale
limitations under Rule 144 of the Securities Act and which may also be subject
to the agreement with the Underwriters described below. None of the remaining
8,027,100 outstanding shares of Common Stock (collectively, the "restricted
shares") have been issued in transactions registered under the Securities Act,
which means that they may be resold publicly only in future transactions
registered under the Securities Act or in compliance with an exemption from
the registration requirements of the Securities Act, including the exemption
provided by Rule 144 thereunder. Of these restricted shares, 48,300 will be
saleable in the public market 90 days following the date of this Prospectus,
subject to compliance with Rule 144. Beginning one year after the date of this
Prospectus (or earlier for certain limited transactions or with the written
consent of PaineWebber Incorporated on behalf of the Underwriters), 4,455,000
additional restricted shares will become eligible for sale in the public
market upon the expiration of lock-up agreements between the Underwriters and
the holders of such shares, subject to compliance with Rule 144. The remaining
3,523,800 restricted shares will become eligible for sale in the public market
in December 1997, subject to compliance with Rule 144.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) whose restricted shares have been fully paid for
and held for at least two years from the later of the date of issuance by the
Company or acquisition from an affiliate, including an "affiliate" as that
term is defined under the Securities Act, is entitled to sell, within any
three-month period commencing 90 days after the date of this Prospectus, a
number of shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock (approximately 120,000 shares immediately
after the Offering, assuming no exercise of outstanding stock options under
the Plan or the Underwriters' over-allotment option) or the average weekly
trading volume of the Common Stock on all exchanges and/or reported through
the automated quotation system of a registered securities association during
the four calendar weeks preceding the date on which notice of the sale is
filed with the Commission. Sales under Rule 144 are also subject to certain
manner of sale provisions, notice requirements and the availability of current
public information about the Company. A person (or persons whose shares are
aggregated) who is not deemed to have been an "affiliate" of the Company at
any time during the 90 days preceding the sale, and whose restricted shares
have been fully paid for and held for at least three years from the later of
the date of issuance by the Company or acquisition from an affiliate, would be
entitled to sell such shares under Rule 144(k) without regard to the
limitations described above. Rule 144A under the Securities Act permits

the immediate sale by the current holders of restricted shares of all or a
portion of their shares to certain qualified institutional buyers as defined
in Rule 144A, subject to certain conditions.

The Commission has proposed to amend the holding periods required by Rule
144 to permit sales of restricted securities after one year rather than two
years (and two years rather than three years for non-affiliates who desire to
sell such shares under Rule 144(k)). If such proposed amendment were enacted,
the restricted securities would become freely tradeable (subject to any
applicable contractual restrictions) at correspondingly earlier dates.

At July 31, 1996, options to purchase an aggregate of 3,931,520 shares of
Common Stock were outstanding under the Plans, of which options to purchase
2,685,600 shares were exercisable. Restricted securities, including shares
issuable upon exercise of options under the Plans, sold by the Company in
reliance on Rule 701 under the Securities Act may be resold 90 days after the
date hereof in reliance on Rule 144 by persons who are not affiliates of the
Company subject only to the provision of Rule 144 regarding manner of sale,
and by persons who are affiliates of the Company without complying with the
Rule's holding period requirements. The Company intends to file a registration
statement on Form S-8 under the Securities Act to register all shares of
Common Stock issuable under the Plans. The registration statement is expected
to be filed approximately 180 days after the date of this Prospectus and is
expected to become effective immediately upon filing. Shares covered by that
registration statement will be eligible for resale in the public market after
the effective date of that registration statement subject to Rule 144
limitations applicable to affiliates, the vesting provisions of each option
grant (generally three years) and the lock-up agreements described below, if
applicable.

Pursuant to various registration rights agreements, certain of the Company's
securityholders have certain demand and piggyback registration rights with
respect to an aggregate of up to 7,783,053 outstanding shares of Common Stock
and an additional 1,336,950 shares of Common Stock issuable upon exercise of
outstanding options. The demand registration rights are exercisable after the
first anniversary of the closing of this Offering, and the piggyback
registration rights are exercisable after the closing of this Offering, in
each case subject to certain limitations. The Company has agreed to pay
substantially all expenses incident to the registration of such shares, other
than underwriting discounts and commissions.

Each of the Company's executive officers and directors and MIM Holdings, who
owned an aggregate of 7,978,800 shares of Common Stock and options to purchase
2,381,200 shares of Common Stock at July 31, 1996, have agreed, except for
certain limited exceptions or without the prior written consent of PaineWebber
Incorporated, that they will not, directly or indirectly, sell, offer to sell,
grant an option for the sale of, grant a security interest in, or otherwise
dispose of any shares of Common Stock or other equity securities of the
Company beneficially owned by them for a period of one year from the date of
this Prospectus. See "Underwriting."

Prior to the Offering, there has been no market for the Common Stock, and no
prediction can be made as to the effect, if any, that the sale of shares or
the availability of shares for sale will have on the market price prevailing
from time to time. Nevertheless, sales of substantial amounts of the Common
Stock in the public market could adversely affect prevailing market prices of
the Common Stock and may make it more difficult for the Company to sell its
equity securities in the future at times and prices which it deems
appropriate.

UNDERWRITING

The Underwriters named below, acting through PaineWebber Incorporated and
Dillon, Read & Co. Inc. (the "Representatives"), have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement by
and among the Company and the Representatives (the "Underwriting Agreement"),
to purchase from the Company, and the Company has agreed to sell to the
Underwriters, the number of shares of Common Stock set forth opposite the name
of such Underwriter below:

UNDERWRITER NUMBER OF SHARES
----------- ----------------

PaineWebber Incorporated.................................
Dillon, Read & Co. Inc...................................
---------
Total................................................ 4,000,000
=========

The Underwriting Agreement provides that the obligations of the Underwriters
to purchase the shares listed above are subject to certain conditions. The
Underwriting Agreement also provides that the Underwriters are committed to
purchase, and the Company is obligated to sell, all of the shares offered by
this Prospectus, if any of the shares being sold pursuant to the Underwriting
Agreement are purchased (without consideration of any shares that may be
purchased through the exercise of the Underwriters' over-allotment option).

The Representatives have advised the Company that the Underwriters propose
to offer the shares to the public initially at the public offering price set
forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $ per share. The Underwriters may
allow, and such dealers may reallow, a concession to other dealers not in
excess of $ per share. After the initial public offering of the shares, the
public offering price, the concessions to selected dealers and the reallowance
to other dealers may be changed by the Representatives.

The Company has granted to the Underwriters an option, exercisable during
the 45-day period after the date of this Prospectus, to purchase up to an
additional 600,000 shares of Common Stock at the initial public offering price
set forth on the cover page of this Prospectus, less underwriting discounts
and commissions. The Underwriters may exercise such option only to cover over-
allotments, if any. To the extent the Underwriters exercise such option, each
of the Underwriters will become obligated, subject to certain conditions, to
purchase such percentage of such additional shares of Common Stock as is
approximately equal to the percentage of shares that it is obligated to
purchase as shown in the table set forth above.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the Underwriters may be required to make in respect thereof.

The Representatives have informed the Company that they do not expect the
Underwriters to confirm sales to any account over which they exercise
discretionary authority.

The Company, the directors and executive officers of the Company and MIM
Holdings have agreed not to offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of, directly or indirectly, any shares of
capital stock or warrants or other rights to purchase shares of capital stock
of the Company or any securities convertible into or exercisable or
exchangeable for any capital stock or warrants or other rights to purchase
shares of capital stock of the Company owned by any of them prior to the
expiration of one year from the date of this Prospectus without the prior
written consent of PaineWebber Incorporated, except for (a) in the case of the

Company, the issuance of shares of Common Stock upon the exercise of options,
or the grant of options to purchase shares of Common Stock, under the Plans or
in connection with other employee or director incentive compensation
arrangements, (b) in the case of the Company's directors and executive
officers and MIM Holdings, shares of Common Stock disposed of (i) as bona fide
gifts to donees who agree not to sell or otherwise dispose of such Common
Stock during the one-year period following the date of this Prospectus without
the prior consent of PaineWebber Incorporated, (ii) pursuant to the laws of
testamentary or intestate descent, (iii) pursuant to a final and nonappealable
order of a court or other body of competent jurisdiction, or (iv) in
consideration of the cashless exercise of options under the Plans or to
fulfill tax withholding obligations and (c) in the case of MIM Holdings,
shares of Common Stock distributed or otherwise transferred to its members who
agree not to sell or otherwise dispose of such Common Stock during the one-
year period following the date of this Prospectus without the prior written
consent of PaineWebber Incorporated.

Prior to the Offering, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined pursuant
to negotiations between the Company and the Representatives. Among the factors
to be considered in determining the initial public offering price, in addition
to prevailing market conditions, will be certain financial information of the
Company, the history of, and the prospects for, the Company and the industry
in which it competes, an assessment of the Company's management, its past and
present operations, the prospects for, and timing of, future revenues of the
Company, the present state of the Company's development, and the above factors
in relation to market values and various valuation measures of other companies
engaged in activities similar to the Company. The initial public offering
price set forth on the cover page of this Prospectus should not, however, be
considered an indication of the actual value of the Common Stock. Such price
is subject to change as a result of market conditions and other factors. There
can be no assurance that an active trading market will develop for the Common
Stock or that the Common Stock will trade in the public market subsequent to
the Offering at or above the initial public offering price.

The Representatives have provided and may continue to provide investment
banking services to certain affiliates of the Company. The registration rights
agreements with certain executive officers of the Company provide the
Representatives a right of first offer with respect to any requested demand
registrations through August 14, 1999.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol MIMS, subject to official notice of issuance.

LEGAL MATTERS

Certain legal matters with respect to the shares of Common Stock offered
hereby will be passed upon for the Company by Drinker Biddle & Reath,
Princeton, New Jersey. John E. Stoddard III, a partner in Drinker Biddle &
Reath, was appointed the Secretary of the Company in July 1996, but is not an
employee of the Company. Certain legal matters relating to the Offering will
be passed upon for the Underwriters by Cahill Gordon & Reindel (a partnership
including a professional corporation), New York, New York.

EXPERTS

The audited consolidated financial statements and schedule included in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. Reference is made to
said reports which include an explanatory paragraph that describes the ability
of the Company to continue as a going concern discussed in Note 1 to the
consolidated financial statements.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

MIM CORPORATION AND SUBSIDIARIES

PAGE
----

Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30,
1996 (Unaudited)......................................................... F-3
Consolidated Statements of Operations for the period from inception (June
22, 1993) through December 31, 1993, the years ended December 31, 1994
and 1995 and the six months ended June 30, 1995 and 1996 (Unaudited)..... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the period
from inception (June 22, 1993) through December 31, 1993, the years ended
December 31, 1994 and 1995 and the six months ended June 30, 1996
(Unaudited).............................................................. F-5
Consolidated Statements of Cash Flows for the period from inception (June
22, 1993) through December 31, 1993, the years ended December 31, 1994
and 1995 and the six months ended June 30, 1995 and 1996 (Unaudited)..... F-6
Notes to Consolidated Financial Statements................................ F-7

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To MIM Corporation and Subsidiaries:

We have audited the accompanying consolidated balance sheets of MIM
Corporation and Subsidiaries as of December 31, 1994 and 1995 and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the period from inception (June 22, 1993) through December 31, 1993
and for the years ended December 31, 1994 and 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MIM
Corporation and Subsidiaries as of December 31, 1994 and 1995 and the results
of their operations and their cash flows for the period from inception (June
22, 1993) through December 31, 1993 and for the years ended December 31, 1994
and 1995, in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has suffered
recurring losses from operations and has a net capital deficiency that raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

Arthur Andersen LLP

Roseland, New Jersey
April 10, 1996 (Except with respect to the matter discussed in Note 1,
as to which the date is May 24, 1996)

F-2

MIM CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)

DECEMBER 31,
----------------- JUNE 30,
1994 1995 1996
------- -------- -----------
(UNAUDITED)

ASSETS
Current assets
Cash and cash equivalents..................... $ 2,933 $ 1,804 $ 2,964
Receivables, less allowance for doubtful
accounts of $340, $360 and $426 at December
31, 1994 and 1995 and June 30, 1996,
respectively................................. 10,115 14,823 14,908
Prepaid expenses and other current assets..... 579 481 616
------- -------- --------
Total current assets........................ 13,627 17,108 18,488
Property and equipment, net..................... 1,262 1,807 2,170
Due from affiliates, less allowance for doubtful
accounts of $1,957 and $2,547 at December 31,
1995 and June 30, 1996......................... 198 -- 676
Other assets, net............................... 173 9 368
------- -------- --------
Total assets................................ $15,260 $ 18,924 $ 21,702
======= ======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Current portion of capital lease obligations.. $ 198 $ 216 $ 213
Accounts payable.............................. 1,447 1,071 1,137
Claims payable................................ 10,263 19,294 15,828
Payables to plan sponsors and others.......... 6,433 8,436 12,700
Accrued expenses.............................. 373 171 950
------- -------- --------
Total current liabilities................... 18,714 29,188 30,828
Capital lease obligations, net of current
portion........................................ 239 110 486
Commitments and contingencies (Note 5)
Minority interest............................... -- 1,150 1,156
Stockholders' deficit
Preferred stock, $.0001 par value; 5,000,000
shares authorized, no shares issued or
outstanding.................................. -- -- --
Common stock, $.0001 par value; 40,000,000
shares authorized, 4,500,000, 8,023,800 and
8,023,800 shares issued and outstanding at
December 31, 1994 and 1995 and June 30, 1996,
respectively................................. 1 1 1
Additional paid-in capital.................... -- -- 26,640
Accumulated deficit........................... (2,416) (9,188) (35,706)
Stockholder notes receivable.................. (1,278) (2,337) (1,703)
------- -------- --------
Total stockholders' deficit................. (3,693) (11,524) (10,768)
------- -------- --------
Total liabilities and stockholders'
deficit.................................... $15,260 $ 18,924 $ 21,702
======= ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-3

MIM CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)

PERIOD FROM
INCEPTION SIX MONTHS ENDED
(JUNE 22, 1993) YEAR ENDED DECEMBER 31, JUNE 30,
THROUGH ------------------------ -------------------
DECEMBER 31, 1993 1994 1995 1995 1996
----------------- ----------- ----------- -------- ---------
(UNAUDITED)

Revenue................. $ 122 $ 109,326 $ 213,929 $ 71,330 $ 135,320
Cost of revenue......... -- 106,717 213,398 70,684 130,218
------ ----------- ----------- -------- ---------
Gross profit.......... 122 2,609 531 646 5,102
General and
administrative
expenses............... 82 5,256 8,048 3,450 4,627
Executive stock option
compensation expense... -- -- -- -- 26,640
------ ----------- ----------- -------- ---------
Income (loss) from
operations........... 40 (2,647) (7,517) (2,804) (26,165)
Interest income, net.... -- 191 745 229 275
------ ----------- ----------- -------- ---------
Income (loss) before
minority interest.... 40 (2,456) (6,772) (2,575) (25,890)
Less: minority
interest............... -- -- -- -- 6
------ ----------- ----------- -------- ---------
Net income (loss)....... $ 40 $ (2,456) $ (6,772) $ (2,575) $ (25,896)
====== =========== =========== ======== =========
Net income (loss) per
common
and common equivalent
share.................. $ 0.01 $ (0.55) $ (1.43) $ (0.57) $ (3.23)
====== =========== =========== ======== =========
Weighted average shares
outstanding............ 4,500 4,500 4,732 4,500 8,024
====== =========== =========== ======== =========

The accompanying notes are an integral part of these consolidated financial
statements.

F-4

MIM CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

RETAINED
ADDITIONAL EARNINGS STOCKHOLDER TOTAL
COMMON PAID-IN (ACCUMULATED NOTES STOCKHOLDERS'
STOCK CAPITAL DEFICIT) RECEIVABLE EQUITY (DEFICIT)
------ ---------- ------------ ----------- ----------------

Balance, June 22, 1993.. $ 1 $ -- $ -- $ -- $ 1
Net income............ -- -- 40 -- 40
--- ------- -------- ------- ---------
Balance, December 31,
1993................... 1 -- 40 -- 41
Stockholder loans..... -- -- -- (1,278) (1,278)
Net loss.............. -- -- (2,456) -- (2,456)
--- ------- -------- ------- ---------
Balance, December 31,
1994................... 1 -- (2,416) (1,278) (3,693)
Stockholder loans,
net.................. -- -- -- (1,059) (1,059)
Net loss.............. -- -- (6,772) -- (6,772)
--- ------- -------- ------- ---------
Balance, December 31,
1995................... 1 -- (9,188) (2,337) (11,524)
Repayment of
stockholder loans,
net (unaudited)...... -- -- -- 12 12
Stockholder
distribution
(unaudited).......... -- -- (622) 622 --
Executive stock option
compensation expense
(unaudited).......... -- 26,640 -- -- 26,640
Net loss (unaudited).. -- -- (25,896) -- (25,896)
--- ------- -------- ------- ---------
Balance, June 30, 1996
(unaudited)............ $ 1 $26,640 $(35,706) $(1,703) $ (10,768)
=== ======= ======== ======= =========

The accompanying notes are an integral part of these consolidated financial
statements.

F-5

MIM CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

PERIOD FROM
INCEPTION YEAR ENDED SIX MONTHS ENDED
(JUNE 22,1993) DECEMBER 31, JUNE 30,
THROUGH ------------------ -------------------
DECEMBER 31, 1993 1994 1995 1995 1996
----------------- -------- -------- -------- ---------
(UNAUDITED)

Cash flows from
operating activities:
Net income (loss)...... $ 40 $ (2,456) $ (6,772) $ (2,575) $ (25,896)
Adjustments to
reconcile net income
(loss) to net cash
provided by
operating
activities:
Net income allocated
to minority
interest............ -- -- -- -- 6
Depreciation and
amortization........ 2 92 366 184 328
Executive stock
option compensation
expense............. -- -- -- -- 26,640
Provision for losses
on receivables and
due from affiliates
.................... -- 340 1,977 -- 656
Changes in assets and
liabilities:
Receivables........... (49) (10,455) (4,728) 4,390 (151)
Prepaid expenses and
other current
assets............... -- (530) 98 (821) (135)
Accounts payable...... -- 1,447 (376) 201 66
Claims payable........ -- 10,263 9,031 6,847 (3,466)
Payables to plan
sponsors and
others............... -- 6,433 2,003 (2,102) 4,264
Accrued expenses...... 14 359 (202) 315 779
---- -------- -------- -------- ---------
Net cash provided by
operating
activities.......... 7 5,493 1,397 6,439 3,091
---- -------- -------- -------- ---------
Cash flows from
investing activities:
Purchase of property
and equipment......... (41) (810) (802) ( 628) (164)
Stockholder notes
receivable, net....... -- (1,278) (1,059) -- 12
Due from affiliates,
net................... 38 (236) (1,759) 180 (1,266)
(Increase) decrease in
other assets.......... (5) (168) 164 160 (359)
---- -------- -------- -------- ---------
Net cash used in
investing
activities.......... (8) (2,492) (3,456) (288) (1,777)
---- -------- -------- -------- ---------
Cash flows from
financing activities:
Principal payments on
capital lease
obligations........... -- (68) (220) (98) (154)
Minority interest
investment............ -- -- 1,150 -- --
Issuance of common
stock................. 1 -- -- -- --
---- -------- -------- -------- ---------
Net cash provided by
(used in) financing
activities.......... 1 (68) 930 (98) (154)
---- -------- -------- -------- ---------
Net increase (decrease)
in cash and cash
equivalents............ -- 2,933 (1,129) 6,053 1,160
Cash and cash
equivalents--beginning
of period.............. -- -- 2,933 2,933 1,804
---- -------- -------- -------- ---------
Cash and cash
equivalents--end of
period................. $ -- $ 2,933 $ 1,804 $ 8,986 $ 2,964
==== ======== ======== ======== =========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid during the
period for:
Income taxes........... $ -- $ 72 $ 286 $ 286 $ --
==== ======== ======== ======== =========
Interest............... $ -- $ 6 $ 31 $ 15 $ 21
==== ======== ======== ======== =========
SUPPLEMENTAL DISCLOSURE
OF NONCASH
TRANSACTIONS:
Equipment acquired
under capital lease
obligations........... $ -- $ 505 $ 109 $ -- $ 527
==== ======== ======== ======== =========
Distribution to
stockholder through
cancellation of
stockholder notes
receivable............ $ -- $ -- $ -- $ -- $ 622
==== ======== ======== ======== =========

The accompanying notes are an integral part of these consolidated financial
statements.

F-6

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

NOTE 1--NATURE OF BUSINESS

Corporate Organization

MIM Corporation was incorporated in Delaware in March 1996 for the purpose
of combining the businesses and operations of Pro-Mark Holdings, Inc. ("Pro-
Mark"), a Delaware corporation, and MIM Strategic Marketing, LLC ("MIM
Strategic"), a Rhode Island limited liability company (the "Formation"). The
Formation was effected in May 1996. Previously, Pro-Mark Drug Benefit
Management Services, LLC, a Rhode Island limited liability company ("Pro-Mark
DBMS"), formed in June 1993 had merged into Pro-Mark in April 1994. Pro-Mark
is a wholly-owned subsidiary of MIM Corporation, and MIM Strategic is 90%-
owned by MIM Corporation. As used in these notes, the "Company" refers to MIM
Corporation and its subsidiaries and predecessors.

Prior to the Formation, Pro-Mark DBMS, Pro-Mark and Strategic were
controlled by an officer of the Company and his family who collectively hold a
direct or indirect controlling interest in MIM Corporation. All of these
companies are under common control. The Formation has been accounted for using
the carryover basis of accounting, and MIM Corporation's consolidated
financial statements include the accounts and operations of Pro-Mark DBMS,
Pro-Mark and MIM Strategic for all periods presented from the date each entity
was formed.

At incorporation, the authorized capital stock of MIM Corporation consisted
of 1,500,000 shares of common stock, $0.001 par value. In May 1996, the
certificate of incorporation of MIM Corporation was amended and restated to
provide for authorized capital stock consisting of 40,000,000 shares of common
stock, $0.0001 par value ("Common Stock"), and 5,000,000 shares of Preferred
Stock, $0.0001 par value. In May 1996, 8,023,800 shares of Common Stock were
issued in connection with the Formation.

In the Formation, MIM Corporation acquired all of the outstanding stock of
Pro-Mark and 90% of the ownership and membership interest in MIM Strategic. In
exchange, Pro-Mark's stockholders received 150 shares of Common Stock of MIM
Corporation for each Pro-Mark share (or an aggregate of 4,500,000 shares of
Common Stock), and certain members of MIM Strategic received an aggregate of
3,523,800 shares of Common Stock for their 90% interest in MIM Strategic.
Zenith Goldline Pharmaceuticals, Inc., a Florida corporation ("Zenith
Goldline"), has held a 10% interest in MIM Strategic since its inception and
did not participate in the Formation.

In the Formation, outstanding stock options granted by Pro-Mark to employees
and key contractors were exchanged for options from MIM Corporation on
substantially similar terms (see Note 7). Except as otherwise indicated, all
stock and stock option amounts (including share, per share par value and
exercise price) pertaining to Pro-Mark DBMS, Pro-Mark and MIM Strategic prior
to the Formation have been restated to reflect the equivalent amounts
pertaining to Common Stock as if the Formation had already occurred.

MIM Strategic was formed in 1995 by MIM Holdings, LLC ("MIM Holdings"),
which is controlled by an officer of the Company and his family. MIM Holdings
and Zenith Goldline contributed various intangibles and $1,150 in cash,
respectively, to the capital of MIM Strategic in exchange for their 90% and
10% interests, respectively, in MIM Strategic. No accounting recognition has
been given to the intangibles for financial reporting purposes since their
value is not objectively determinable, and the entire $1,150 of capital
contributed by Zenith Goldline has been presented as minority interest in the
accompanying consolidated balance sheets. Profits and losses of MIM Strategic
are allocated 90% to the Company and 10% to Zenith Goldline.

F-7

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
Business

The Company's revenues have been derived primarily from agreements to
provide pharmacy benefit management services to sponsors of public and private
health plans. To date, these services have been provided to sponsors of
Tennessee-based plans who have entered into pharmacy benefit management
contracts with RxCare of Tennessee, Inc. ("RxCare"), a subsidiary of the
Tennessee Pharmacists Association, including contracts ("TennCare contracts")
to provide mandated pharmaceutical services to formerly Medicaid-eligible and
uninsured and uninsurable Tennessee residents under the State's TennCare
Medicaid waiver program ("TennCare").

Under a March 1994 agreement with RxCare, as amended, the Company is
responsible for operating and managing RxCare's pharmacy benefit management
contracts. In return for receipt of all sponsor payments due RxCare under its
pharmacy benefit management contracts and all rebates negotiated with
pharmaceutical manufacturers in connection with RxCare programs, the Company
implements and enforces the drug benefit programs, bears all program costs
including payments to dispensing pharmacies and certain payments to RxCare and
sponsors, and shares with RxCare the remaining profit, if any, under the
pharmacy benefit management contracts (see Note 2). The Company's contract
with RxCare is scheduled to expire in December 1998 unless renewed in
accordance with its terms. Although the Company has been performing
substantially all of RxCare's obligations under RxCare's contracts with plan
sponsors since January 1994, no plan sponsor has been asked to formally
consent to such arrangements, including certain sponsors whose contracts with
RxCare require prior written consent thereto.

The Company markets prescription as well as over-the-counter pharmaceutical
products to pharmacies and pharmacy-buying networks. In December 1995, the
Company entered into two agreements with Zenith Goldline, a company that
manufactures and distributes generic and non-prescription pharmaceutical
products, to provide consulting and marketing services to assist Zenith
Goldline in marketing and promoting sales of its products and distributing its
products in the State of Tennessee.

Management Plan and Going Concern Uncertainty

The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company is
subject to risks and difficulties encountered by new businesses, including
competition from existing companies offering the same or similar services,
lack of financial resources and minimal previous record of operations,
earnings or revenues. The Company has incurred net losses from inception and
has a stockholders' deficit. In general, the likelihood of the success of the
Company must be considered in light of the expenses, difficulties and delays
that could reasonably be expected in connection with the early phases of
operation of a new business. As a result, there can be no assurance that the
Company will not continue to incur losses, and the continuation of the Company
as a going concern is dependent on obtaining additional financing, through the
Company's proposed initial public offering or other sources, in amounts
sufficient to satisfy its liabilities as they become due. In management's
opinion, the net proceeds from the Company's proposed initial public offering
are expected to provide the capital necessary to enable the Company to
continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments that might result should the Company
be unable to continue as a going concern.

The Company is proposing an initial public offering of up to 4,000,000
shares of its Common Stock. Prospective investors should consider, among other
things, the Company's history of losses, its limited operating

F-8

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
history, its ability to manage growth, its dependence on the RxCare
relationship, risks inherent in its capitated agreements and risks associated
with Federal and state government regulations. For additional information on
these and other factors, see "Risk Factors."

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue Recognition

Capitated Agreements. Certain pharmacy benefit management contracts are
capitated agreements pursuant to which the Company receives a fixed monthly
fee for each member enrolled in a particular health plan. In exchange for this
fee the Company is obligated to provide certain covered pharmacy services to
plan members. Typically, capitated agreements have a one-year term and are
subject to automatic renewal unless notice of termination is given. These
contracts are subject to earlier termination upon the occurrence of certain
events.

Capitation payments under TennCare contracts are based upon the latest
eligible member data provided by the State of Tennessee. On a monthly basis,
the Company receives payments (and recognizes revenue) for those members
eligible for the current month, plus or minus capitation amounts for those
persons determined to be retroactively eligible or ineligible for prior months
under the contract. The amounts for retroactive capitation payments are based
upon management's estimates and are included in receivables in the
accompanying consolidated balance sheets. The related receivables at December
31, 1994 and 1995 and June 30, 1996 were approximately $3,578, $1,740 and
$1,733, respectively. The related capitated revenue for the years ended
December 31, 1994 and 1995 was approximately $93,100 and $192,625,
respectively, and for the six months ended June 30, 1995 and 1996 was $61,667
and $124,867, respectively.

Fee-for-Service Agreements. Certain pharmacy benefit management contracts
are fee-for-service agreements pursuant to which the Company is paid by the
plan sponsor an amount reflecting the cost of a prescription plus a service
fee. Under these contracts, the Company is obligated to pay network pharmacies
for pharmacy service provided to plan members only to the extent that the plan
sponsor pays the Company for the cost of the service. Service fee revenue is
recognized at the time a pharmacy prescription claim is received. The related
fee-for-service revenue for the years ended December 31, 1994 and 1995 was
approximately $14,072 and $16,525, respectively, and for the six months ended
June 30, 1995 and 1996 was $8,377 and $7,607, respectively.

Receivables. Receivables include amounts due from plan sponsors under the
Company's pharmacy benefit management contracts and amounts due from
pharmaceutical manufacturers, which represent rebates resulting from the
distribution of certain drugs through retail pharmacies.

Cost of Revenue. Cost of revenue includes pharmacy claims, fees paid to
pharmacists and other direct costs associated with pharmacy management and
claims processing operations, offset by fees received from pharmaceutical
manufacturers in connection with the Company's drug purchasing and formulary
management programs.

F-9

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

Payables to Plan Sponsors and Others

Certain pharmacy benefit management contracts provide for an income or loss
share with the plan sponsor. The income or loss share is calculated by
deducting all related costs and expenses from revenues earned under the
contract. To the extent revenues exceed costs, the Company records a payable
representing the plan sponsor's share of the profit attributable to that
contract, and to the extent costs exceed revenues the Company records a
receivable. Agreements between RxCare and certain plan sponsors also provide
for the sharing of pharmaceutical manufacturers' rebates with the plan
sponsor. The Company is also obligated to share with RxCare the cumulative
profit, if any, under the Company's agreement with RxCare (see Note 3). The
Company estimates that any difference between the recorded liability on the
accompanying consolidated balance sheets and the ultimate exposure under those
contract provisions will not have a material adverse effect on the
consolidated financial statements.

Cash and Cash Equivalents

For the purpose of the accompanying consolidated statements of cash flows,
cash and cash equivalents are defined as demand deposits and overnight
investments at banks.

Property and Equipment

The Company provides for depreciation and amortization using the straight-
line method over the estimated useful lives of assets ranging from three to
five years or in the case of leases, over the life of the lease. Maintenance
and repairs are expensed as incurred.

Long-Lived Assets

During 1995, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets" ("SFAS 121"). SFAS 121 requires, among other things, that an entity
review its long-lived assets and certain related intangibles for impairment
whenever changes in circumstances indicate that the carrying amount of an
asset may not be fully recoverable. As a result of its review, the Company
does not believe that any impairment currently exists related to its long-
lived assets.

Claims Payable

The Company is responsible for all covered prescriptions provided to plan
members during the contract period. At December 31, 1994 and 1995 and at June
30, 1996, certain prescriptions were dispensed to members for which the
related claims had not yet been presented to the Company for payment.
Estimates of $2,925, $3,823 and $3,783 at December 31, 1994 and 1995 and at
June 30, 1996, respectively, have been accrued for these claims in the
accompanying consolidated balance sheets. Unpaid claims incurred and reported
amounted to $7,338, $10,971 and $9,947 at December 31, 1994 and 1995 and at
June 30, 1996, respectively.

The Company has experienced losses on one of its TennCare contracts since
the contract was entered into as of April 1, 1995. The Company recognized
losses under the contract during 1995 of $10,000, including the accrual of
approximately $4,500 to cover management's estimate of losses to be incurred
during the remainder of this contract; $2,098 of such accrual remained at June
30, 1996. These amounts are included in claims payable in the accompanying
consolidated balance sheets.

F-10

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

Minority Interest

The minority interest in MIM Strategic is reflected as a reduction of net
income in the accompanying consolidated statements of operations.

Income Taxes

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 utilizes the liability method, and deferred taxes are
determined based on the estimated future tax effects of differences between
the financial statement and tax bases of assets and liabilities at currently
enacted tax laws and rates.

Disclosure of Fair Value of Financial Instruments

The Company's financial instruments consist mainly of cash and cash
equivalents, accounts receivable and accounts payable. The carrying amounts of
these financial instruments approximate fair value due to their short-term
nature.

Accounting for Stock-Based Compensation

Interim Financial Information

The financial statements at June 30, 1996 and for the six months ended June
30, 1995 and 1996 are unaudited. In the opinion of the Company's management,
the unaudited financial statements at June 30, 1996 and for the six months
ended June 30, 1995 and 1996 include all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation. The results
of operations for the six months ended June 30, 1996 are not necessarily
indicative of the results to be expected for the full year.

Earnings Per Share

Net income (loss) per share is calculated based on the weighted average
number of common shares outstanding during the period plus, in periods in
which they have a dilutive effect, the effect of the common shares
contingently issuable from stock options. Common shares outstanding and per
share amounts reflect the Formation (see Note 1) and are considered
outstanding from the date each entity was formed.

F-11

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

NOTE 3--RELATED PARTY TRANSACTIONS

Due to/from Affiliates

During 1993 the Company borrowed $38 from a relative of an officer of the
Company. The amount was fully repaid in 1994.

During 1994 the Company loaned $150 to a relative of an officer of the
Company in return for a demand note bearing interest at the prime rate (8.5%
at December 31, 1994). At December 31, 1994, accrued interest amounted to
approximately $8. The full amount of principal and interest was repaid in
1995.

In 1994 the Company made approximately $40 of short-term advances to an
officer of the Company. These advances were repaid in full during 1995.

During 1995 the Company advanced RxCare approximately $1,957 to fund the
losses RxCare had incurred in connection with one of its pharmacy benefit
management contracts that is currently being managed by the Company under the
Company's agreement with RxCare. Although the Company does not intend to seek
repayment of the advance, the Company intends to offset such amount against
future profit sharing amounts, if any, due to RxCare under the Company's
agreement with RxCare. As RxCare's revenue is largely dependent upon the
Company's results of operations in Tennessee, the collectibility of this
amount is uncertain, and a full reserve has been recorded against the advance.

As part of its agreement with RxCare, the Company is obligated to share with
RxCare the Company's cumulative profit, if any, from the RxCare pharmacy
benefit management contracts. Based on estimated results of operations for
1994, the Company accrued $473 during 1994, which was included in Payables to
Plan Sponsors and Others on the accompanying consolidated balance sheet at
December 31, 1994 and was paid in 1995. Although actual operations for 1994
were subsequently determined not to be profitable, the Company does not intend
to request repayment of the fee but intends to offset such amount against
future profit sharing amounts, if any, due to RxCare under the agreement. No
amount was due RxCare for the year ended December 31, 1995 or for the six
months ended June 30,1996.

The Company is currently marketing and promoting certain preferred generic
drugs of Zenith Goldline pursuant to two three-year contracts entered into in
December 1995. In return, the Company receives a fee based on a percentage of
the growth in Zenith Goldline's gross margins from related sales. Included in
due from affiliates is management's estimate of revenues earned under these
agreements.

During 1996, the Company made short-term advances to MIM Holdings and
Alchemie Properties, LLC ("Alchemie") of $99 and $25, respectively. Repayments
by MIM Holdings and Alchemie through June 30, 1996 were $13 and $25,
respectively. The remaining balance of $86 from MIM Holding at June 30, 1996
is scheduled to be repaid by September 30, 1996 without interest. Both
companies are controlled by an officer and his family.

In June 1996, an executive officer of the Company loaned $500 to the Company
for working capital purposes pursuant an unsecured, 10% promissory note that
is payable upon demand. The loan amount plus $2.5 for interest and fees was
repaid by June 30, 1996.

Other Activities

In 1994, the Company entered into an agreement with RxCare for, among other
things, the use of certain office space and equipment provided by RxCare on
behalf of the Company. The agreement initially provided for payments of $10
per month and was amended to provide for $20 per month beginning November
1995. The

F-12

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
agreement expires in December 1998. Expenses under this agreement were $100
and $140 for the years ended December 31, 1994 and 1995, respectively, and $40
and $120 for the six months ended June 30, 1995 and 1996, respectively.

In December 1994, the Company entered into a ten-year agreement to lease a
facility from Alchemie. The lease provides for monthly payments of $3 plus
real estate taxes and condominium association fees. Rent expense was
approximately $5 and $60 for the years ended December 31, 1994 and 1995,
respectively, and $30 for the six months ended June 30, 1995 and 1996.

The future minimum rental payments under these agreements are included in
Note 5 with the Company's other operating leases.

Consulting and Service Agreements

In January 1994, the Company entered into consulting agreements with three
minority stockholders of the Company. These agreements expire in 1999 and
provide for payments to be made as services are rendered. In 1994, payments of
$75 were made to each consultant. No amounts were paid in 1995 or in the six
months ended June 30, 1996.

In January 1994, the Company entered into a consulting agreement for various
marketing, distribution and promotional services with an officer of RxCare
which provides for payments by the Company of $5.5 per month, and additional
compensation as agreed by the parties for special projects, through December
1996. The Company paid a total of $516 in 1994 (including $150 upon execution
of the RxCare agreement and $300 for special projects related to the
establishment of the Company's TennCare business), $66 in 1995 and $33 for the
six months ended June 30, 1995 and 1996, respectively, to the officer and a
related party assignee.

In September 1995, the Company entered into a contract with MIM Holdings to
receive management consulting services in return for monthly payments to MIM
Holdings of $75. Consulting expenses amounted to $300 for the year ended
December 31, 1995 and $225 for the six months ended June 30, 1996. The
contract was terminated on March 31, 1996.

A professional services agreement was entered into as of January 1, 1996
between MIM Holdings and the Company. Under this agreement, MIM Holdings
provides to the Company operational professional services required to perform
the Company's obligations under a Marketing Services Agreement with Zenith
Goldline (see Note 1), for which the Company paid MIM Holdings $150 for the
six months ended June 30, 1996. The agreement was terminated in May 1996.

Stockholder Notes Receivable

In June 1994, the Company advanced to an officer approximately $979 for
purposes of acquiring a principal residence, $975 of which is collateralized
by a first mortgage on the residence. In exchange for the funds, the Company
received two promissory notes, the aggregate outstanding principal balance of
which was $979 at December 31, 1994 and 1995 and $956 (including accrued
interest) at June 30, 1996. The notes are due on June 15, 1997 and bear
interest at 5.42% per annum payable monthly. Interest income on the notes for
the years ended December 31, 1994 and 1995 was $29 and $55, respectively, and
$26 for the six months ended June 30, 1995 and 1996.

In August 1994, the Company advanced to Alchemie $299 for the purposes of
acquiring the building leased by the Company, of which approximately $299,
$280 and $280 was outstanding at December 31, 1994 and 1995

F-13

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
and June 30, 1996, respectively. The note bears interest at a rate of 10% per
annum with principal due on December 1, 2004. Interest income was $12 and $29
for the years ended December 31, 1994 and 1995, respectively, and $14 for the
six months ended June 30, 1995 and 1996. The note is secured by a lien on
Alchemie's rental income.

In December 1995, the Company advanced to MIM Holdings $800 for certain
consulting services to be performed for the Company in 1996. During 1995, the
Company also paid $278 for certain expenses on behalf of MIM Holdings. These
amounts, totaling $1,078, were recorded as a stockholder note receivable at
December 31, 1995. The Company has received a note from MIM Holdings
guaranteed by an officer of the Company for $456. The note bears interest at
10% per annum, payable quarterly, with principal due on March 31, 2001. The
note is further secured by the assignment of two notes due to MIM Holdings
also in the amount of $456. The remaining balance of $622 will not be repaid
and was treated as a stockholder distribution during the first quarter of
1996. The outstanding principal balance plus accrued interest at June 30, 1996
was $467.

NOTE 4--PROPERTY AND EQUIPMENT

Property and equipment, at cost, consists of the following:

DECEMBER 31,
-------------- JUNE 30,
1994 1995 1996
------ ------ --------

Computer and office equipment, including
equipment under capital leases............... $ 787 $1,614 $2,185
Furniture and fixtures........................ 130 173 205
Leasehold improvements........................ 439 480 480
------ ------ ------
1,356 2,267 2,870
Less: Accumulated depreciation and amortiza-
tion......................................... (94) (460) (700)
------ ------ ------
$1,262 $1,807 $2,170
====== ====== ======

NOTE 5--COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company from time to time is involved in legal proceedings in the normal
course of business. The Company is currently a third-party defendant in a
proceeding in the Superior Court in the State of Rhode Island. The third-party
complaint alleges that the Company interfered with certain contractual
relationships and that it misappropriated certain confidential information.
The third-party complaint seeks to enjoin the Company from using the allegedly
misappropriated confidential information and seeks an unspecified amount of
compensatory and consequential damages, interest and attorneys' fees. Although
the Company believes that the third-party plaintiffs' allegations are without
merit, the loss of this litigation could have a material adverse effect on the
Company's financial position and results of operations.

Government Regulation

The Company's current and planned businesses are subject to extensive
Federal and state laws and regulations. Subject to certain exceptions, a
Federal law (the "Federal Anti-Kickback Statute") prohibits the payment or
receipt of any remuneration, directly or indirectly, to induce, arrange for or
recommend the purchase of health care items or services paid for in whole or
in part by the Medicare or state health care programs (including Medicaid and
TennCare), and certain state laws (including professional licensing laws
prohibiting fee-splitting) contain similar provisions that may extend the
prohibition to cover items or services that are paid for

F-14

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
by private insurance and self-pay patients. There can be no assurance that
some of the Company's practices will be found to be protected by certain so-
called "safe harbor" regulations, which provide insulation from prosecution
under the Federal Anti-Kickback Statute, and in some instances it is clear
that they are not so protected. Federal authorities enforcing the Federal
Anti-Kickback Statute have issued Fraud Alerts describing suspect activity and
have initiated enforcement proceedings involving practices that have similar
features to some of the practices of the Company.

In June 1996, the proposed consent decree between the Federal Trade
Commission (the "FTC") and RxCare and its parent, the Tennessee Pharmacists
Association, prohibiting certain allegedly anti-competitive practices, became
final. Because the FTC justified its challenge and the decree, in part, on
RxCare's potential market power in Tennessee, business arrangements and
practices involving RxCare, either directly or indirectly, or involving sales
to or purchases by RxCare-affiliated pharmacies may face heightened scrutiny
or continued review from an anti-competitive perspective by state or Federal
regulators and possible challenge by private parties. The existence of this
consent order may hamper the Company's efforts to develop or pursue
competitive opportunities, in Tennessee or elsewhere, in areas such as group
purchasing or market advocacy on behalf of drug manufacturers. Prolonged
proceedings involving regulatory or private party challenges to the Company's
activities would be costly to the Company and divert its resources, including
key personnel. An adverse determination in such a proceeding could have a
material adverse effect on the Company's financial position and results of
operations.
The Company is also subject to various false claim, drug distribution and
consumer protection laws and may be subject to certain other laws, including
various state insurance laws.

While management believes that the Company is in material compliance with
all existing laws and regulations material to the operation of its business,
many of the laws and regulations affecting it are uncertain in their
application and are subject to interpretation and change. Laws regulating
healthcare businesses, and interpretations thereof, are undergoing rapid
change. As controversies continue to arise in this area, for example,
regarding the efforts of plan sponsors and pharmacy benefit managers to limit
formularies, alter drug choice and establish limited networks of participating
pharmacies, Federal and state regulation and enforcement priorities in this
area can be expected to increase, the impact of which on the Company cannot be
predicted. There can be no assurance that the Company will not be subject to
scrutiny or challenge under one or more of these laws or that any such
challenge would not be successful. Any such challenge, whether or not
successful, could have a material adverse effect upon the Company's financial
position and results of operations. Violation of the Federal Anti-Kickback
Statute, for example, may result in substantial criminal penalties, as well as
exclusion from the Medicare and Medicaid (including TennCare) programs.
Further, there can be no assurance that the Company will be able to obtain or
maintain any of the regulatory approvals that may be required to operate its
business, and the failure to do so could have a material adverse effect on the
Company's financial position and results of operations.

Non-Compete Covenants

The Company's Chief Executive Officer and Chief Financial Officer, both
former executives of Zenith Laboratories, Inc. ("Zenith"), agreed to continue
in consultant and employment capacities with Zenith through December 1998 and
December 1996, respectively. In connection with these agreements, both
executives agreed not to own, manage or be employed by any business that is
substantially competitive with Zenith's business as conducted in early 1996.
Such covenants expire at the end of December 1998 and December 1996,
respectively. Such covenants may restrict the Company's ability to compete in
certain areas of the Company's preferred generics business, its planned drug
distribution business and certain other business areas.

F-15

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

Employment Agreements

The Company has entered into employment agreements with certain key
employees which expire at various dates through May 2000. Total minimum
commitments under these agreements are approximately as follows:

1996.................................. $1,100
1997.................................. 1,500
1998.................................. 1,300
1999.................................. 1,200
2000.................................. 500
------
$5,600
======

Other Agreements

The Company has various consulting agreements which will require payments of
$786 in the aggregate through 1998. As discussed in Note 3, the Company rents
its main facility from Alchemie. Rent expense for non-related party leased
facilities and equipment was approximately $95 and $116 for the years ended
December 31, 1994 and 1995, respectively, and $67 and $84 for the six months
ended June 30, 1995 and 1996, respectively.

Operating Leases

The Company leases its facilities and certain equipment under various
operating leases. The future minimum lease payments under these operating
leases at December 31, 1995 are as follows:

AMOUNT
------

1996............................................................... $ 95
1997............................................................... 64
1998............................................................... 51
1999............................................................... 48
2000............................................................... 45
Thereafter......................................................... 160
----
$463
====

Capital Leases

The Company leases certain equipment under various capital leases. Future
minimum lease payments under the capital lease agreements at December 31, 1995
are as follows:

AMOUNT
------

1996............................................................... $235
1997............................................................... 93
1998............................................................... 24
----
Total minimum lease payments....................................... 352
Less: Amount representing interest............................... 26
----
Obligations under leases........................................... 326
Less: current portion of lease obligation........................ 216
----
$110
====

F-16

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

NOTE 6--INCOME TAXES

The Company accounts for income taxes in accordance with SFAS 109. Under
SFAS 109, deferred tax assets or liabilities are computed based on the
differences between the financial statement and income tax bases of assets and
liabilities as measured by currently enacted tax laws and rates. Deferred
income tax expenses and credits are based on changes in the deferred assets
and liabilities from period to period.

The effect of temporary differences which give rise to a significant portion
of deferred taxes are as follows as of December 31, 1994 and 1995:

1994 1995
------ -------

Deferred tax assets:
Reserves and accruals not yet deductible for tax purpos-
es..................................................... $ 872 $ 2,952
Net operating loss carryforward......................... 432 783
------ -------
Subtotal.............................................. 1,304 3,735
Less: valuation allowance.............................. (922) (3,669)
------ -------
Total deferred tax assets................................. 382 66
------ -------
Deferred tax liabilities:
Revenue not yet recognized for tax purposes............. (378) 0
Property basis differences.............................. (4) (66)
------ -------
Total deferred tax liability.............................. (382) (66)
------ -------
Net deferred taxes........................................ $ -- $ --
====== =======

It is uncertain whether the Company will realize full benefit from its
deferred tax assets, and it has therefore recorded a valuation allowance. The
Company will assess the need for the valuation allowance at each balance sheet
date.

There is no provision (benefit) for income taxes for the period from
inception (June 22, 1993) through December 31, 1993 or for the years ended
December 31, 1994 and 1995. A reconciliation to the tax provision (benefit) at
the Federal statutory rate is presented below:

1993 1994 1995
---- ----- -------

Tax provision (benefit) at statutory rate................. $ 14 $(835) $(2,303)
State tax provision (benefit), net of federal taxes....... 3 (162) (447)
Provision for valuation allowance......................... -- 922 2,747
Other..................................................... (17) 75 3
---- ----- -------
Recorded income taxes.................................... $ -- $ -- $ --
==== ===== =======

At December 31, 1995, the Company had, for tax purposes, unused net
operating loss carryforwards of approximately $1,900 that are available to
offset future taxable income, if any, and which will begin expiring in 2008.
The Tax Reform Act of 1986 contains provisions that limit the net operating
loss carryforwards available to be used in any given year upon the occurrence
of certain events, including significant changes in ownership.

F-17

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

NOTE 7--STOCKHOLDERS' EQUITY

In 1994, Pro-Mark established the Pro-Mark Holdings 1994 Stock Plan (the
"Pro-Mark Plan"). The Pro-Mark Plan provided for, among other awards, options
to employees, contractors and consultants to purchase 60,000 shares of Pro-
Mark common stock at an option price not less than 100% of the fair market
value of the shares on the grant date. The period during which an option may
be exercised varied, but no option could be exercised after 15 years from the
date of grant. During 1994, options to purchase 3,738 shares of common stock
were granted at $1.00 per share (560,700 shares of the Company's Common Stock
at $0.0067 per share as a result of the Formation--see Note 1). On January 9,
January 16, March 24, March 31, August 8, and October 9, 1995, options to
purchase 50, 60, 1,300, 15,108, 60 and 50 shares of common stock,
respectively, were granted at $1.00 per share (a total of 2,494,200 shares of
the Company's Common Stock at $0.0067 per share as a result of the Formation--
see Note 1). All of such options were deemed to have been granted at fair
market value and were exchanged in the Formation for options under the
Company's Plan (as defined below).

In May 1996, the Company adopted the MIM Corporation 1996 Stock Incentive
Plan (the "Plan"). The Plan provides for the granting of incentive stock
options (ISOs) and non-qualified stock options to employees and key
contractors of the Company. Options granted under the Plan generally vest over
a three-year period, but vest in full upon a change in control of the Company
or at the discretion of the Company's compensation committee, and generally
are exercisable up to 15 years from the date of grant. The exercise price of
ISOs granted under the Plan will not be less than 100% of the fair market
value on the date of grant (110% for ISOs granted to more than a 10%
shareholder). If non-qualified stock options are granted at an exercise price
less than fair market value on the grant date, the amount by which fair market
value exceeds the exercise price will be charged to compensation expense over
the period the options vest. A reserve of 4,000,000 shares has been
established for issuances under the Plan. In May and July 1996, options to
purchase 811,810 and 63,929 shares of Common Stock, respectively, were granted
at a price that will equal the initial public offering price. In June 1996,
the Company agreed to grant an option to purchase 15,000 shares of Common
Stock, at a price equal to the initial public offering price, to a member of
the Company's Medical Advisory Board upon completion of the Company's initial
public offering. At July 15, 1996, 102,361 shares remained available for grant
under the Plan.

No options were exercisable at December 31, 1994. As of December 31, 1995
and June 30, 1996, the exercisable portion of outstanding options was
2,442,100 and 2,686,400, respectively. Stock option activity under the Plan
through December 31, 1995 is as follows:

OPTIONS PRICE
--------- -------

Balance, December 31, 1993................................... -- --
Granted.................................................... 560,700 $0.0067
Canceled................................................... (8,400)
---------
Balance, December 31, 1994................................... 552,300 $0.0067
Granted.................................................... 2,494,200 $0.0067
Canceled................................................... (24,600)
---------
Balance, December 31, 1995................................... 3,021,900 $0.0067
=========

F-18

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

In July 1996, the Company adopted the MIM Corporation 1996 Non-Employee
Directors Stock Incentive Plan (the "Directors Plan"). The purpose of the
Directors Plan is to attract and retain qualified individuals to serve as non-
employee directors of the Company ("Outside Directors"), to provide incentives
and rewards to such directors and to associate more closely the interests of
such directors with those of the Company's stockholders. The Directors Plan
provides for the automatic granting of non-qualified stock options to Outside
Directors joining the Company since the adoption of the Directors Plan. Each
such Outside Director receives an option to purchase 20,000 shares of Common
Stock upon his or her initial appointment or election to the Board of
Directors. The exercise price of such options is equal to the fair market
value of the Common Stock on the date of grant. Options granted under the
Directors Plan generally vest over three years. A reserve of 100,000 shares of
Common Stock has been established for issuance under the Directors Plan.
Options to purchase 40,000 shares of Common Stock are currently outstanding
under the Directors Plan at an exercise price equal to the initial public
offering price.

Other Stockholder Activities

Prior to the affiliation of three unrelated individuals with the Company
(each of whom became a director of the Company and two of whom also became
officers of the Company), the Company primarily was a pharmacy benefit manager
providing capitated services to the TennCare Medicaid population of Tennessee.
Drawing upon their experience, know-how, contacts and relationships,
managerial expertise, contracts under negotiation and strategic understandings
and plans relating to the generic drug and health care industries, the Company
has determined to pursue a business strategy that emphasizes the promotion and
distribution of generic drugs through exclusive contracts with preferred
generic drug manufacturers and the marketing of risk sharing pharmacy benefit
programs to sponsors of public and private health plans outside of Tennessee.
Negotiations are currently proceeding with a number of generic drug
manufacturers and plan sponsors. Management believes that combining the
interests of these individuals with the interests of the Company has resulted
in a business strategy uniquely suited to capitalize on the present and
expected conditions in the pharmaceutical and health care industries. Based
upon the foregoing, in May 1996 the majority stockholder of the Company
granted to these individuals options to purchase an aggregate of 3,600,000
shares of Common Stock owned by him at $0.10 per share. These options are
immediately exercisable and have a term of ten years, subject to earlier
termination upon a change in control of the Company, as defined. In connection
with these options, for the six months ended June 30, 1996 the Company
recorded a nonrecurring, noncash charge for compensation expense and a credit
to additional paid-in capital of $26,640, representing the difference between
the exercise price and the deemed fair market value of the Common Stock at the
date of grant. In July 1996, the majority stockholder granted to one of these
individuals an additional option ("additional option") to purchase 1,860,000
shares of Common Stock owned by him at an exercise price equal to the initial
public offering price. The additional option has a term of ten years, subject
to earlier termination upon a change in control of the Company, as defined, or
within certain specified periods following Mr. Klein's death, disability or
termination of employment for any reason. The additional option vests in
installments of 620,000 shares each on December 31, 1996, 1997 and 1998,
respectively, and is immediately exercisable upon the approval of a change in
control of the Company, as defined, by the Company's Board of Directors and,
if required, stockholders.

F-19

MIM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

NOTE 8--CONCENTRATION OF CREDIT RISK

The majority of the Company's revenues have been derived from TennCare
contracts pursuant to its contract with RxCare. The following table outlines
contracts with plan sponsors having revenues which individually exceeded 10%
of total revenues during the applicable time period:

PLAN SPONSOR
---------------
A B C D
--- --- --- ---

Year ended December 31, 1994
% of total revenue............................................ 60% 13% 15% --
% of total accounts receivable at period end.................. 49% * * --
Year ended December 31, 1995
% of total revenue............................................ 30% * * 45%
% of total accounts receivable at period end.................. * * * 28%
Six months ended June 30, 1995
% of total revenue............................................ 45% 13% 12% 18%
% of total accounts receivable at period end.................. 16% * * *
Six months ended June 30, 1996
% of total revenue............................................ 20% -- * 56%
% of total accounts receivable at period end.................. * -- * 36%

- --------
* Less than 10%.

There were no other contracts representing 10% or more of the Company's
total revenue for the years ended December 31, 1994 and 1995 and the six
months ended June 30, 1995 and 1996. There were no TennCare contracts in place
in 1993. It is possible that the State of Tennessee or the Federal government
could require modifications to the TennCare program. The Company is unable to
predict the effect of any such future changes to the TennCare program.

NOTE 9--PROFIT SHARING PLAN

The Company maintains a deferred compensation plan under Section 401(k) of
the Internal Revenue Code. Under the plan, employees may elect to defer up to
15% of their salary, subject to Internal Revenue Service limits. The Company
may make a discretionary match. The Company made no matching contributions
during the period from inception (June 22, 1993) through December 31, 1993,
the years ended December 31, 1994 and 1995 or the six months ended June 30,
1996.

F-20

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES
IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.

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

TABLE OF CONTENTS

PAGE
----

Additional Information................................................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 13
Dividend Policy.......................................................... 13
Capitalization........................................................... 14
Dilution................................................................. 15
Selected Consolidated Financial Data..................................... 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 17
Business................................................................. 20
Management............................................................... 30
Certain Transactions..................................................... 36
Principal Stockholders................................................... 40
Description of Capital Stock............................................. 41
Shares Eligible for Future Sale.......................................... 42
Underwriting............................................................. 44
Legal Matters............................................................ 45
Experts.................................................................. 45
Index to Consolidated Financial Statements............................... F-1

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

UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

4,000,000 SHARES

[LOGO]

MIM CORPORATION

COMMON STOCK

---------------
PROSPECTUS

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

PAINEWEBBER INCORPORATED

DILLON, READ & CO. INC.

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

, 1996

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS.

EXHIBIT
NUMBER DESCRIPTION
-------- -----------

10.33(a) Amendment No. 1 dated August 12, 1996 to Stock Option Agreement be-
tween E. David Corvese and John H. Klein dated July 31, 1996

23.1 Consent of Arthur Andersen LLP

(b) FINANCIAL STATEMENT SCHEDULES.

The following financial statement schedule of the Company is furnished at
the indicated page:

Report of Independent Public Accountants (Page S-1)
Schedule II--Valuation and Qualifying Accounts (Page S-2)

All other schedules not listed are omitted because of the absence of
conditions under which they are required.

II-1

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 4 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN PEARL RIVER, NEW
YORK ON AUGUST 13, 1996.

MIM CORPORATION

/s/ Richard H. Friedman
By: _________________________________
RICHARD H. FRIEDMAN CHIEF
OPERATING OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED BY THE FOLLOWING
PERSONS, IN THE CAPACITIES INDICATED, ON THE 13TH DAY OF AUGUST, 1996.

SIGNATURE TITLE

/s/ John H. Klein Chairman of the Board, Chief
- ------------------------------------- Executive Officer and Director
JOHN H. KLEIN (Principal Executive Officer)

/s/ Richard H. Friedman Chief Financial Officer, Chief
- ------------------------------------- Operating Officer, Treasurer and
RICHARD H. FRIEDMAN Director (Principal Financial
and Accounting Officer)

E. David Corvese* Vice Chairman of the Board and
- ------------------------------------- Director
E. DAVID CORVESE

Todd R. Palmieri* Executive Vice President--
- ------------------------------------- Business Development and
TODD R. PALMIERI Director

Leslie B. Daniels* Director
- -------------------------------------
LESLIE B. DANIELS

Louis A. Luzzi* Director
- -------------------------------------
LOUIS A. LUZZI

Scott R. Yablon* Director
- -------------------------------------
SCOTT R. YABLON

- --------

* RICHARD H. FRIEDMAN, PURSUANT TO A POWER OF ATTORNEY EXECUTED BY EACH OF THE
DIRECTORS AND OFFICERS NOTED ABOVE AND FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AS EXHIBIT 24 TO THIS REGISTRATION STATEMENT, BY SIGNING HIS NAME
HERETO, DOES HEREBY SIGN AND EXECUTE THIS AMENDMENT NO. 4 TO REGISTRATION
STATEMENT ON BEHALF OF EACH OF THE PERSONS NOTED ABOVE, IN THE CAPACITIES
INDICATED, AND DOES HEREBY SIGN AND EXECUTE THIS AMENDMENT NO. 4 TO
REGISTRATION STATEMENT ON HIS OWN BEHALF, IN THE CAPACITIES INDICATED.

/s/ Richard H. Friedman
_____________________________________
RICHARD H. FRIEDMAN

II-2

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES

To MIM Corporation and Subsidiaries:

We have audited in accordance with generally accepted auditing standards the
1993, 1994 and 1995 financial statements of MIM Corporation and Subsidiaries
included in this Registration Statement and have issued our report thereon
dated April 10, 1996 (except with respect to the matter discussed in Note 1,
as to which the date is May 24, 1996), which includes an explanatory paragraph
that describes the ability of the Company to continue as a going concern
discussed in Note 1 to the consolidated financial statements. Our audits were
made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The schedule listed in Item 16(b) of this Registration
Statement is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements as of December 31, 1994 and 1995 and for the period from
inception (June 22, 1993) through December 31, 1993 and for the years ended
December 31, 1994 and 1995, and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.

Arthur Andersen LLP

Roseland, New Jersey
April 10, 1996

S-1

MIM CORPORATION AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE PERIOD FROM INCEPTION (JUNE 22, 1993) THROUGH DECEMBER 31, 1993 ANDFOR
THE YEARS ENDED DECEMBER 31, 1994 AND 1995

(IN THOUSANDS)

BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
OF PERIOD EXPENSES CHARGES OF PERIOD
---------- ---------- ------- ----------

Period from inception (June 22, 1993)
through December 31, 1993
Accounts receivable................ $ 0 $ 0 $ 0 $ 0
Accounts receivable, other......... $ 0 $ 0 $ 0 $ 0
==== ====== === ======
Year ended December 31, 1994
Accounts receivable................ $ 0 $ 340 $ 0 $ 340
Accounts receivable, other......... $ 0 $ 0 $ 0 $ 0
==== ====== === ======
Year ended December 31, 1995
Accounts receivable................ $340 $ 20 $ 0 $ 360
Accounts receivable, other......... $ 0 $1,957 $ 0 $1,957
==== ====== === ======

S-2

INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
-------- -----------

10.33(a) Amendment No. 1 dated August 12, 1996 to Stock Option Agree-
ment between E. David Corvese and John H. Klein dated July
31, 1996
23.1 Consent of Arthur Andersen LLP


 
                                                               EXHIBIT 10.33 (A)

                                AMENDMENT NO.1
                                      TO
                            STOCK OPTION AGREEMENT

        AMENDMENT NO. 1 dated August 12, 1996 to STOCK OPTION AGREEMENT (the 
"Agreement") dated July 31, 1996 between E. David Corvese ("Corvese") and John 
H. Klein ("Optionee").  Terms used but not defined herein shall have the same 
meaning as set forth in the Agreement.


        WHEREAS, Corvese and Optionee have agreed to amend the Agreement as set 
forth in this Amendment.

        NOW, THEREFORE in consideration of the mutual covenants hereinafter set 
forth and for other good and valuable consideration, the legal sufficiency of 
which is hereby acknowledged, the parties hereto, intending to be legally bound 
hereby, agree as follows:

        1.  Secton 2 of the Agreement is hereby amended to read in its entirety 
as follows:

        "2. Price.  The price per share (the "Option Price") of the Option
            ----- 
Shares shall be the initial public offering per share of the common stock of MIM
as set forth in MIM's final prospectus contained in its Registration Statement 
on Form S-1, as amended (Registration No. 333-05327)."

        2.  Governing Law.  This Amendment shall be construed in accordance 
            -------------
with, and its interpretation shall otherwise be governed by, the laws of the 
State of Delaware, without giving effect to otherwise applicable principles of 
conflicts of law.

        3.  Entire Agreement.  This Amendment and the Agreement set forth the 
            ----------------
entire understanding between the parties hereto with respect to the Option and 
may not be modified or amended, except as expressly contemplated herein, except 
by a written instrument signed by the party to be bound thereby

 
  IN WITNESS WHEREOF, Corvese and Optionee hereby execute this Amendment on this
12th day of August, 1996.

                                                  /s/ E. David Corvese
                                                  --------------------------
                                                  E. David Corvese

                                                  /s/ John H. Klein
                                                  --------------------------
                                                  John H. Klein
                                                  Address: c/o MIM Corporation
                                                           One Blue Hill Plaza
                                                           Pearl River, New York
                                                           10965


 
                                                                    EXHIBIT 23.1

                    
                 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS     

  As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of this
registration statement.

                                           Arthur Andersen LLP
   
Roseland, New Jersey 
August 12, 1996