10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to               .

Commission file number: 000-52073

SXC HEALTH SOLUTIONS CORP.

(Exact name of registrant as specified in its charter)

Yukon Territory
(State or other jurisdiction of
incorporation or organization) 75-2578509
(I.R.S. Employer
Identification Number)

2441 Warrenville Road, Suite 610, Lisle, IL 60532-3642
(Address of principal executive offices, zip code)

(800) 282-3232
(Registrant’s phone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):.

Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of July 31, 2009, there were 24,644,964 shares outstanding of the Registrant’s no par value common stock.

TABLE OF CONTENTS

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)		3
Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008		3
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2009 and 2008		4
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2009 and 2008		5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008		6
Consolidated Statements of Shareholders’ Equity for the Six Months Ended June 30, 2009 and 2008		7
Notes to Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3. Quantitative and Qualitative Disclosures About Market Risk		24
Item 4. Controls and Procedures		24
PART II – OTHER INFORMATION
Item 1. Legal Proceedings		24
Item 1A. Risk Factors		24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		24
Item 3. Defaults Upon Senior Securities		24
Item 4. Submission of Matters to a Vote of Security Holders		24
Item 5. Other Information		25
Item 6. Exhibits		25
SIGNATURE		26
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

2

Part I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

SXC HEALTH SOLUTIONS CORP.

Consolidated Balance Sheets

(in thousands, except share data)

	June 30,			December 31,
	2009			2008
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	96,634		$	67,715
Restricted cash		14,135			12,498
Accounts receivable, net of allowance for doubtful accounts of $3,133 (2008 — $3,570)		81,013			80,531
Rebates receivable		22,512			29,586
Unbilled revenue		—			73
Prepaid expenses and other assets		5,580			4,382
Inventory		6,108			6,689
Income tax recoverable		1,327			1,459
Deferred income taxes		8,209			10,219
Total current assets		235,518			213,152
Property and equipment, net of accumulated depreciation of $23,566 (2008 — $19,449)		20,778			20,756
Goodwill		143,852			143,751
Other intangible assets, net of accumulated amortization of $19,339 (2008 — $14,099)		42,066			46,406
Deferred financing charges		1,259			1,481
Deferred income taxes		1,852			1,323
Other assets		1,310			1,474
Total assets	$	446,635		$	428,343
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	8,386		$	8,302
Customer deposits		12,647			11,875
Salaries and wages payable		12,509			15,681
Accrued liabilities		25,751			32,039
Pharmacy benefit management rebates payable		45,856			36,326
Pharmacy benefit claim payments payable		41,940			51,406
Deferred revenue		8,493			7,978
Current portion of long-term debt		4,800			3,720
Total current liabilities		160,382			167,327
Long-term debt, less current installments		41,520			43,920
Deferred income taxes		15,538			15,060
Deferred lease inducements		2,986			3,217
Deferred rent		1,323			1,461
Other liabilities		3,103			3,195
Total liabilities		224,852			234,180
Commitments and contingencies (Note 12)
Shareholders’ equity
Common stock: no par value, unlimited shares authorized; 24,639,093 shares issued and outstanding at June 30, 2009 (2008 — 24,103,032 shares)		153,320			146,988
Additional paid-in capital		13,407			11,854
Retained earnings		55,410			35,751
Accumulated other comprehensive loss		(354	)		(430	)
Total shareholders’ equity		221,783			194,163
Total liabilities and shareholders’ equity	$	446,635		$	428,343

See accompanying notes to the consolidated financial statements.

3

SXC HEALTH SOLUTIONS CORP.

Consolidated Statements of Operations

(in thousands, except per share data)

	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	(unaudited)						(unaudited)
Revenue:
PBM	$	293,906		$	204,860		$	561,686		$	204,860
HCIT:
Transaction processing		15,663			11,888			29,390			26,536
Maintenance		4,477			4,130			8,951			8,340
Professional services		3,801			3,066			7,443			6,857
System sales		2,982			3,811			4,319			5,479
Total revenue		320,829			227,755			611,789			252,072
Cost of revenue:
PBM		259,376			188,046			498,374			188,046
HCIT		14,242			9,869			27,020			20,706
Total cost of revenue		273,618			197,915			525,394			208,752
Gross profit		47,211			29,840			86,395			43,320
Expenses:
Product development costs		3,027			2,480			6,190			4,939
Selling, general and administrative		21,907			19,557			42,704			25,428
Depreciation of property and equipment		1,405			1,433			2,887			2,194
Amortization of intangible assets		2,415			2,432			5,240			2,828
		28,754			25,902			57,021			35,389
Operating income		18,457			3,938			29,374			7,931
Interest income		(225	)		(647	)		(471	)		(1,701	)
Interest expense		1,204			763			2,160			798
Net interest expense (income)		979			116			1,689			(903	)
Other (income) expense		283			29			(42	)		35
Income before income taxes		17,195			3,793			27,727			8,799
Income tax expense (benefit):
Current		4,403			597			6,604			1,979
Deferred		815			(71	)		1,464			196
Total income taxe expense (benefit)		5,218			526			8,068			2,175
Net income	$	11,977		$	3,267		$	19,659		$	6,624
Earnings per share:
Basic	$	0.49		$	0.14		$	0.81		$	0.30
Diluted	$	0.47		$	0.14		$	0.79		$	0.29
Weighted average number of shares used in computing earnings per share:
Basic		24,638,986			22,948,940			24,417,241			21,972,315
Diluted		25,270,639			23,558,446			25,001,382			22,510,153

See accompanying notes to the consolidated financial statements.

4

SXC HEALTH SOLUTIONS CORP.

Consolidated Statements of Comprehensive Income

(in thousands)

	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009		2008
	(unaudited)				(unaudited)
Net income	$	11,977	$	3,267	$	19,659	$	6,624
Other comprehensive income — gain on cash flow hedges (net of income taxes of $29 and $38 for the three and six months ended June 30, 2009, respectively)		47		—		76		—
Comprehensive income	$	12,024	$	3,267	$	19,735	$	6,624

See accompanying notes to the consolidated financial statements.

5

SXC HEALTH SOLUTIONS CORP.

Consolidated Statements of Cash Flows

(in thousands)

	Six months ended June 30,
	2009			2008
	(unaudited)
Cash flows from operating activities:
Net income	$	19,659		$	6,624
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		1,430			2,104
Depreciation of property and equipment		3,944			3,046
Amortization of intangible assets		5,240			2,828
Deferred lease inducements and rent		(369	)		(107	)
Deferred income taxes		1,464			196
Tax benefit on option exercises		(2,106	)		(80	)
Gain on foreign exchange		(26	)		(21	)
Changes in operating assets and liabilities, net of effects from acquisition:
Accounts receivable		(374	)		12,828
Rebates receivable		7,074			1,153
Restricted cash		(1,637	)		(4,325	)
Unbilled revenue		73			101
Prepaid expenses		(1,164	)		1,322
Inventory		597			(264	)
Income tax recoverable		2,238			354
Accounts payable		84			1,264
Accrued liabilities		(6,016	)		(5,715	)
Deferred revenue		472			(254	)
Pharmacy benefit claim payments payable		(9,466	)		(1,536	)
Pharmacy benefit management rebates payable		9,530			(2,448	)
Customer deposits		772			102
Other		261			(131	)
Net cash provided by operating activities		31,680			17,041
Cash flows from investing activities:
Purchases of property and equipment		(5,746	)		(3,414	)
Lease inducements received		—			373
Acquisitions, net of cash acquired		(2,176	)		(101,670	)
Net cash used in investing activities		(7,922	)		(104,711	)
Cash flows from financing activities:
Issuance of long-term debt		—			48,000
Payment of financing costs		—			(1,518	)
Proceeds from exercise of options		4,349			333
Tax benefit on option exercises		2,106			80
Repayment of long-term debt		(1,320	)		(120	)
Net cash provided by financing activities		5,135			46,775
Effect of foreign exchange on cash balances		26			21
Increase (decrease) in cash and cash equivalents		28,919			(40,874	)
Cash and cash equivalents, beginning of period		67,715			90,929
Cash and cash equivalents, end of period	$	96,634		$	50,055

See accompanying notes to the consolidated financial statements.

6

SXC HEALTH SOLUTIONS CORP.

Consolidated Statements of Shareholders’ Equity

(in thousands, except share data)

	Common Stock					Additional			Retained		Accumulated Other
	Number		Amount			paid-in capital			Earnings (deficit)		Comprehensive Loss			Total
Balance at December 31, 2008		24,103,032	$	146,988		$	11,854		$	35,751	$	(430	)	$	194,163
Activity during the period (unaudited):
Net income		—		—			—			19,659		—			19,659
Exercise of stock options		533,562		6,284			(1,935	)		—		—			4,349
Issuance of shares for acquisition		21		—			—			—		—			-
Vesting of restricted stock units		2,478		48			(48	)		—		—			-
Tax benefit on options exercised		—		—			2,106			—		—			2,106
Stock-based compensation		—		—			1,430			—		—			1,430
Other comprehensive income		—		—			—			—		76			76
Balance at June 30, 2009 (unaudited)		24,639,093		153,320			13,407			55,410		(354	)		221,783
Balance at December 31, 2007		20,985,934		103,520			8,299			20,638		—			132,457
Activity during the period (unaudited):
Net income		—		—			—			6,624		—			6,624
Issuance of shares under ESPP		2,386		33			—			—		—			33
Issuance of shares for acquisition		2,783,151		40,884			—			—		—			40,884
Costs to issue shares for acquisition		—		(320	)		—			—		—			(320	)
Exercise of stock options		51,800		521			(188	)		—		—			333
Tax benefit on options exercised		—		—			80			—		—			80
Stock-based compensation		—		—			2,104			—		—			2,104
Balance at June 30, 2008 (unaudited)		23,823,271	$	144,638		$	10,295		$	27,262	$	—		$	182,195

See accompanying notes to the consolidated financial statements.

7

SXC HEALTH SOLUTIONS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

SXC Health Solutions Corp. (the “Company”) is a leading provider of pharmacy benefits management (“PBM”) services and healthcare information technology (“HCIT”) solutions to the healthcare benefits management industry. The Company’s product offerings and solutions combine a wide range of software applications, application service provider processing services and professional services designed for many of the largest organizations in the pharmaceutical supply chain, such as federal, provincial, and state and local governments, pharmacy benefit managers, managed care organizations, retail pharmacy chains and other healthcare intermediaries. The Company is headquartered in Lisle, Illinois with several locations in the U.S. and Canada. For more information please visit www.sxc.com.

2. Basis of Presentation

(a)	Basis of presentation:
	The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and include its majority-owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. Amounts in the consolidated financial statements and notes are expressed in U.S. dollars, except where indicated, which is also the Company’s functional currency.
	Certain information and note disclosures normally included in the annual financial statements prepared in accordance with U.S. GAAP have been condensed or excluded. As a result, these unaudited interim consolidated financial statements do not contain all the disclosures required to be included in the annual financial statements and should be read in conjunction with the most recent audited annual consolidated financial statements and notes thereto for the year ended December 31, 2008.
	These unaudited interim consolidated financial statements are prepared following accounting policies consistent with the Company’s audited annual consolidated financial statements for the year ended December 31, 2008.
	The financial information included herein reflects all adjustments (consisting only of normal recurring adjustments), which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the three- and six-month periods ended June 30, 2009 are not necessarily indicative of the results to be expected for the full year ending December 31, 2009.
	Effective with the acquisition of National Medical Health Card Systems, Inc. (“NMHC”) on April 30, 2008, the Company began operating in two reportable segments: PBM and HCIT. Please see Note 10 for more information.
(b)	Use of estimates:
	The preparation of financial statements in conformity with U.S. GAAP requires management to make 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 revenue and expenses during the period. Significant items subject to such estimates and assumptions include revenue recognition, rebates, purchase price allocation in connection with acquisitions, valuation of property and equipment, valuation of intangible assets acquired and related amortization periods, impairment of goodwill, income tax uncertainties, contingencies and valuation allowances for receivables and income taxes. Actual results could differ from those estimates.

3. Recent Accounting Pronouncements

FASB Statement No. 165

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement No. 165, Subsequent Events (“SFAS 165”), which establishes general requirements of accounting and disclosure of events that occur after the balance sheet date, but before the financial statements are issued. SFAS 165 was effective for the Company’s interim period ended June 30, 2009 and its adoption did not have a material impact to the Company’s consolidated financial statements. As of the issuance date of the Company’s financial statements, no subsequent events have occurred that would require disclosure in accordance with SFAS 165.

FASB Statement No. 161

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133 (“SFAS 161”), which amends and expands the disclosure requirements of SFAS 133. SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 was effective for the Company’s fiscal year beginning January 1, 2009, and its adoption did not have a material impact to the Company.

8

FASB Statement No. 141(R)

In December 2007, the FASB issued Statement No. 141 (revised 2007), Business Combinations (“SFAS 141(R)”), which applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more businesses. SFAS 141(R) establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the assets, liabilities, noncontrolling interest and goodwill related to a business combination. SFAS 141(R) also establishes what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009.

FASB Statement No. 160

In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS 160”), which establishes accounting and reporting standards for entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. A noncontrolling interest (previously referred to as a minority interest) is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. SFAS 160 was effective for the Company’s fiscal year beginning January 1, 2009, and will be applied prospectively to all noncontrolling interests, including those that arose before the effective date, and its adoption did not have a material impact to the Company.

4. Business Combinations

NMHC Acquisition

Effective April 30, 2008, the Company completed the acquisition of NMHC, a pharmacy benefit management company, in an exchange offer of (i) 0.217 of a common share of the Company’s common stock and (ii) $7.70 in cash for each outstanding NMHC common share. Total deal consideration approximated $143.8 million, which included the issuance of 2,785,981 shares of the Company’s common stock. The value of the stock issued was based on the guidance of EITF Issue No. 99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination. This EITF provides that the value of shares issued is based on the average market price of the acquirer’s stock from a few days before to a few days after the agreement is agreed to and announced. To fund the transaction, the Company entered into a six-year $48.0 million term loan agreement. The Company also signed a $10.0 million senior secured revolving credit agreement. NMHC results of operations are included in the consolidated financial statements from the date of acquisition.

Prior to the acquisition, the Company and one of NMHC’s subsidiaries, NMHCRX, Inc., were parties to a consulting agreement and software license and maintenance agreements pursuant to which the Company licensed, and provided consulting and support services in connection with, certain computer software for one of NMHCRX, Inc.’s claims adjudication systems.

The Company and NMHC have similar missions and core values, and the Company believes the synergies gained from this business combination will create long term value for customers, vendors and shareholders, as well as opportunities for new and existing employees by making the Company better positioned to compete in the changing PBM environment.

The purchase price of the acquired operations was comprised of the following (in thousands):

Cash payment to NMHC shareholders	$	98,711
Value assigned to shares issued		40,626
Direct costs of the acquisition		4,114
Total purchase price	$	143,451

Direct Costs of the Acquisition

Direct costs of the acquisition include investment banking fees, legal and accounting fees and other external costs directly related to the acquisition.

Purchase Price Allocation

The acquisition was accounted for under the purchase method of accounting with the Company treated as the acquiring entity in accordance with SFAS No. 141, Business Combinations. Accordingly, the consideration paid by the Company to complete the acquisition has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of acquisition. The excess of the purchase price over the estimated fair values of the net assets acquired and liabilities assumed was recorded as goodwill. Goodwill is non-amortizing for financial statement purposes and is not tax deductible. The changes in goodwill from December 31, 2008 to June 30, 2009 are primarily due to deferred tax adjustments, changes in the estimated fair value of acquired fixed assets and revisions to the estimated fair values of assumed liabilities related to the NMHC acquisition. The purchase price allocation is considered final as of June 30, 2009 in accordance with SFAS 141.

9

The following summarizes the estimates of the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Current assets	$	115,864
Property and equipment		3,495
Goodwill		124,194
Intangible assets		44,420
Other assets		1,258
Total assets acquired		289,231
Current liabilities		132,618
Deferred income taxes		12,566
Other liabilities		296
Total liabilities assumed		145,480
Net assets acquired	$	143,751

During the three and six months ended June 30, 2009, the Company recognized $1.9 million and $4.2 million of amortization expense from intangible assets acquired, respectively. Amortization for the remainder of 2009 is expected to be $3.4 million. Amortization for 2010 and 2011 is expected to be $6.0 million and $5.3 million, respectively. The estimated fair values and useful lives of intangible assets acquired are as follows (in thousands):

	Fair value		Useful Life
Trademarks/Trade names	$	1,120	6 months
Customer relationships		39,700	8 years
Non-compete agreements		1,480	1 year
Software		1,120	1 year
Licenses		1,000	15 years
Total	$	44,420

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the combined historical results of the operations of the Company and NMHC as if the acquisition had occurred on the first day of the period presented. Certain adjustments have been made to reflect changes in depreciation, amortization and income taxes based on the Company’s estimates of fair values recognized in the application of purchase accounting, and interest expense on borrowings to finance the acquisition.

Unaudited pro forma results of operations are as follows (in thousands, except per share data):

	Three months ended June			Six months ended June
	30,			30,
	2008			2008
Sales	$	321,233		$	631,139
Gross profit	$	32,863		$	66,011
Income (loss)	$	(976	)	$	288
Income (loss) per share:
Basic	$	(0.04	)	$	0.01
Diluted	$	(0.04	)	$	0.01
Weighted average shares outstanding
Basic		23,808,512			23,793,677
Diluted		24,418,018			24,331,515

This unaudited pro forma financial information is not intended to represent or be indicative of what would have occurred if the transaction had taken place on the date presented and is not indicative of what the Company’s actual results of operations would have been had the acquisition been completed at the beginning of the period indicated above. Further, the pro forma combined results do not reflect one-time costs to fully merge and operate the combined organization more efficiently, or anticipated synergies expected to result from the combination and should not be relied upon as being indicative of the future results that the Company will experience.

10

Other Acquisitions

On December 22, 2008, the Company announced that it had acquired substantially all of the assets of Zynchros, a privately-owned leader in formulary management solutions, in a cash transaction effective December 19, 2008. Founded in 2000, Zynchros provides a suite of on-demand formulary management tools to approximately 45 health plan and PBM customers. The zynchros.com platform helps payers to effectively manage their formulary programs, and to maintain Medicare Part D compliance of their programs. The Company recorded identifiable intangible assets of $1.7 million with estimated useful lives of 4 to 5 years and goodwill of $2.7 million associated with the acquisition. The goodwill acquired was allocated to the Company’s HCIT segment. Zynchros’ results of operations are included in the consolidated statement of operations as of the effective date of the acquisition and were not material to the Company’s results of operations on a pro forma basis.

In the second quarter of 2009, the Company completed the acquisition of substantially all of the assets of a small pharmacy system vendor in a cash transaction, effective June 11, 2009. The Company recorded identifiable intangible assets of $0.9 million with estimated useful lives of 1 to 10 years and goodwill of $1.1 million associated with the acquisition. The goodwill acquired was allocated to the Company’s HCIT segment. The results of operations are included in the consolidated statement of operations as of the effective date of the acquisition and were not material to the Company’s results of operations on a pro forma basis.

5. Cash and Cash Equivalents

The components of cash and cash equivalents are as follows (in thousands):

	June 30, 2009			December 31, 2008
	(unaudited)
Cash on deposit	$	75,076		$	46,532
Payments in transit		(52,515	)		(55,559	)
U.S. money market funds		74,043			76,713
Canadian dollar deposits (June 30, 2009 — Cdn. $35 at 1.1554;		30			29
December 31, 2008 — Cdn. $35 at 1.2168)	$	96,634		$	67,715

In estimating the fair value of its financial instruments, the Company determined the carrying amount reported in the consolidated balance sheets as cash and cash equivalents approximates fair value because of the short maturities of these instruments and are considered Level 1 investments in the fair value hierarchy.

6. Goodwill and Other Intangible Assets

Goodwill and indefinite-lived intangible assets are reviewed for impairment annually, or more frequently if impairment indicators arise. The Company allocates goodwill to both the PBM and HCIT segments. There were no impairments of goodwill or indefinite-lived intangible assets during the six months ended June 30, 2009 and 2008.

During the second quarter of 2009, the Company recorded an additional $0.9 million in identifiable intangible assets which was allocated to the Company’s HCIT segment. See Note 4 for more information.

Definite-lived intangible assets are amortized over the useful lives of the related assets. The components of intangible assets were as follows (in thousands):

	June 30, 2009							December 31, 2008
	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated
	Amount		Amortization			Net		Amount		Amortization		Net
Customer relationships	$	53,760	$	(14,065	)	$	39,695	$	53,100	$	10,043	$	43,057
Acquired software		3,765		(2,563	)		1,202		3,565		1,903		1,662
Trademarks/Trade names		1,370		(1,153	)		217		1,360		1,122		238
Non-compete agreements		1,510		(1,480	)		30		1,480		987		493
Licenses		1,000		(78	)		922		1,000		44		956
Total	$	61,405	$	(19,339	)	$	42,066	$	60,505	$	14,099	$	46,406

Amortization associated with intangible assets at June 30, 2009 is estimated to be $4.5 million for the remainder of 2009, $7.9 million in 2010, $7.1 million in 2011, $6.5 million in 2012, $5.7 million in 2013 and $5.2 million in 2014.

7. Long Term Debt

On April 25, 2008, the Company’s U.S. subsidiary, SXC Health Solutions, Inc. (“US Corp.”), entered into a credit agreement (the “Credit Agreement”) providing for up to $58 million of borrowings, consisting of (i) a $10 million senior secured revolving credit facility (including borrowing capacity available for letters of credit and for borrowings on same-day notice) referred to as a swing loan (the “Revolving Credit Facility”) and (ii) a $48 million senior secured term loan (the “Term Loan Facility” and, together with the Revolving Credit Facility, the “Credit Facilities”). On April 29, 2008, US Corp. borrowed $48 million under the Term Loan Facility to pay a portion of the consideration in connection with the acquisition of NMHC and certain transaction fees and expenses related to the acquisition.

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The interest rates applicable to the loans under the Credit Facilities are based on a fluctuating rate measured by reference to either, at US Corp.’s option, (i) a base rate, plus an applicable margin, subject to adjustment, or (ii) an adjusted London interbank offered rate (adjusted for the maximum reserves)(“LIBOR”), plus an applicable margin. The initial rate for all borrowings is prime plus 2.25% with respect to base rate borrowings or LIBOR plus 3.25%. During an event of default, default interest is payable at a rate that is 2% higher than the rate otherwise applicable. The interest rate on the loan at June 30, 2009 was 3.85%. In addition to paying interest on outstanding principal under the Credit Facilities, US Corp. is required to pay an unused commitment fee to the lenders in respect of any unutilized commitments under the Revolving Credit Facility at a rate of 0.50% per annum. US Corp. is also required to pay customary letter of credit fees. In addition, pursuant to the terms of its credit agreement, the Company entered into interest rate contracts for 50% of the borrowed amount, or $24 million, to provide protection against fluctuations in interest rates for a three-year period from the date of issue. See Note 13 for more information.

The Credit Facilities require US Corp. to prepay outstanding loans, subject to certain exceptions, with:

• 50% of the net proceeds arising from the issuance or sale by the Company of its own stock;

• 100% of the net proceeds of an incurrence of debt, other than proceeds from the debt permitted under the Credit Facilities; and

• 100% of the net proceeds of certain asset sales and casualty events, subject to a right to reinvest the proceeds.

The foregoing mandatory prepayments will be applied first to the Term Loan Facility and second to the Revolving Credit Facility.

The Term Loan Facility will amortize in quarterly installments, which commenced on June 30, 2008, in aggregate annual amounts equal to 1% (year 1), 10% (years 2 and 3), 15% (years 4 and 5), and 49% (year 6) of the original funded principal amount of such facility. Principal repayments will be $3.7 million in 2009, $4.8 million in 2010, $6.6 million in 2011, $7.2 million in 2012, $19.4 million in 2013 and $5.9 million in 2014. Principal amounts outstanding under the Revolving Credit Facility are due and payable in full on April 30, 2013.

The Company and all material U.S. subsidiaries of US Corp. guarantee the obligations under the Credit Agreement. All future material U.S. subsidiaries of the Company, as well as certain future Canadian subsidiaries, will guarantee the obligations under the Credit Agreement as well. In addition, the Credit Facilities and the guarantees are secured by the capital stock of US Corp. and certain other subsidiaries of the Company and substantially all other tangible and intangible assets owned by the Company, US Corp. and each subsidiary that guarantees the obligations of US Corp. under the Credit Facilities, subject to certain specified exceptions.

The Credit Agreement also contains certain restrictive covenants including financial covenants that require the Company to maintain (i) a maximum consolidated leverage ratio, (ii) a minimum consolidated fixed charge coverage ratio and (iii) a maximum capital expenditure level. As of June 30, 2009, the Company is in compliance with its covenants.

In connection with the Term Loan Facility, the Company incurred approximately $1.8 million in financing costs. The financing costs are presented on the consolidated balance sheet as deferred financing charges and are being amortized into interest expense over the life of the loan using the effective-interest method.

The fair value of the Company’s debt at June 30, 2009 is $46.3 million, which approximates its carrying value. The estimated fair value of the Company’s variable-rate debt approximates the carrying value of the debt since the variable interest rates are market-based, and the Company believes such debt could be refinanced on materially similar terms.

Interest expense relates to the following (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009		2008
Long-term debt	$	550	$	590	$	995	$	590
Finacing charges		110		79		222		79
Other		544		94		943		129
Total	$	1,204	$	763	$	2,160	$	798

8. Shareholders’ equity

(a)

Stock incentive plans:

The Company maintains a stock option plan (the “Option Plan”), as amended, under which there were outstanding 1,734,989 stock options as of June 30, 2009. Effective on March 11, 2009, the Board of Directors of the Company adopted the SXC Health Solutions Corp. Long-Term Incentive Plan (the “LTIP”), which was approved by the shareholders of the Company at the Annual and Special Meeting of Shareholders on May 13, 2009. The LTIP provides for the grant of stock option awards, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other stock-based awards to eligible persons, including executive officers and directors of the Company. The purpose of the LTIP is to advance the interests of the Company by attracting and retaining high caliber employees and other key individuals who perform services for the Company, a subsidiary or an affiliate; align the interests of the Company’s shareholders and recipients of awards under the LTIP by increasing the proprietary interest of such recipients in the Company’s growth and success; and motivate award recipients to act in the best long-term interest of the Company and its shareholders. The LTIP replaced the Option Plan, and no further grants or awards will be issued under the Option Plan. The LTIP provides for a maximum of 1,070,000 common shares of the Company to be issued in addition to the common shares available that remained available for issuance under the Option Plan.

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(b)	Employee Stock Purchase Plan:
	The Company maintains an Employee Stock Purchase Plan (“ESPP”) which allows eligible employees to withhold annually up to a maximum of 15% of their base salary, or $25,000, subject to IRS limitations, for the purchase of the Company’s common shares. Common shares will be purchased on the last day of each offering period at a discount of 5% of the fair market value of the common shares on such date. The aggregate number of common shares that may be issued under the ESPP may not exceed 100,000 common shares.
	During the first quarter of 2009, the ESPP was amended so that the common shares available for purchase under the ESPP are drawn from reacquired common shares purchased on behalf of the Company in the open market. During the six months ended June 30, 2009 and 2008, there were 3,720 and nil shares issued under the ESPP, respectively.
	The ESPP is not considered compensatory under the provisions of SFAS No. 123R and, therefore, no portion of the costs related to ESPP purchases will be included in the Company’s stock-based compensation expense.
(c)	Outstanding shares and stock options:
	At June 30, 2009, the Company had outstanding common shares of 24,639,093 and stock options outstanding of 1,734,989. At December 31, 2008, the Company had outstanding common shares of 24,103,032 and stock options outstanding of 2,093,194. As of June 30, 2009, stock options outstanding consisted of 624,582 options at a weighted-average exercise price of Canadian $11.28 and 1,110,407 options at a weighted-average exercise price of U.S. $18.64.
(d)	Restricted stock units:
	The Company assumed 170,500 restricted stock units (“RSUs”) of NMHC after the acquisition, which converted into 126,749 RSUs of the Company. In September 2008, the Company issued an additional 51,000 RSUs with a grant date fair value of $15.90 per share to certain new employees who were previous employees of NMHC.
	During the six months ended June 30, 2009, the Company granted a total of 168,205 RSUs to its employees and non-employee directors with a grant date fair value per share of $25.54.
	Substantially all RSUs vest on a straight-line basis over a range of three to four years. Certain additional RSUs granted to senior management cliff vest based upon reaching agreed upon three-year performance conditions.
	At June 30, 2009, there were 266,633 restricted stock units outstanding.

9. Stock-based compensation

During the three and six month periods ended June 30, 2009, the Company recorded stock-based compensation expense of $0.8 million and $1.4 million, respectively. During the three and six month periods ended June 30, 2008, the Company recorded stock-based compensation expense of $1.3 million and $2.1 million, respectively. The Black-Scholes option-pricing model was used to estimate the fair value of the stock options at the grant date based on the following assumptions:

	Six months ended June 30,
	2009	2008
Total U.S. dollar stock options granted	184,107	267,450
Volatility	47.1 – 47.2%	49.6 – 52.4%
Risk-free interest rate	1.96 – 2.56%	1.67 – 3.00%
Expected life	4.5 years	2.5 – 4.5 years
Dividend yield	—	—
Weighted-average grant date fair value	$10.67	$4.94

There were no Canadian dollar stock options granted during the six months ended June 30, 2009 and 2008.

10. Segment information

The Company operates in two geographic areas as follows (in thousands):

	Three mon ths ended June 30,				Six month s ended June 30,
	2009		2008		2009		2008
Revenue
United States	$	320,264	$	226,545	$	610,731	$	249,649
Canada		565		1,210		1,058		2,423
Total	$	320,829	$	227,755	$	611,789	$	252,072

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	June 30, 2009		December 31, 2008
Net assets
United States	$	206,526	$	182,105
Canada		15,257		12,058
Total	$	221,783	$	194,163

With the acquisition of NMHC during the second quarter of 2008, the Company changed its internal organization structure and now reports two operating segments: PBM and HCIT. The Company evaluates segment performance based upon revenue and gross profit. Results for periods reported prior to the three months ended June 30, 2008 were reported in one operating segment, HCIT. Prior period results have not been restated because to do so would be impracticable. Financial information by segment is presented below (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009		2008
PBM:
Revenues	$	293,906	$	204,860	$	561,686	$	204,860
Gross profit	$	34,530	$	16,814	$	63,312	$	16,814
Total assets at June 30	$	300,169	$	303,834
HCIT:
Revenues	$	26,923	$	22,895	$	50,103	$	47,212
Gross profit	$	12,681	$	13,026	$	23,083	$	26,506
Total assets at June 30	$	146,466	$	118,457
Consolidated:
Revenues	$	320,829	$	227,755	$	611,789	$	252,072
Gross profit	$	47,211	$	29,840	$	86,395	$	43,320
Total assets at June 30	$	446,635	$	422,291

For the three-month period ended June 30, 2009, one customer accounted for 14.2% of total revenue. For the three-month period ended June 30, 2008, one customer accounted for 11.1% and another for 10.4% of consolidated revenue, respectively.

For the six-month period ended June 30, 2009, one customer accounted for 14.7% of total revenue. For the six-month period ended June 30, 2008, one customer accounted for 10.0% of consolidated revenue.

At June 30, 2009 and December 31, 2008 no one customer accounted for 10% or more of the outstanding accounts receivable balance.

11. Income Taxes

Tax benefits utilized by the Company as a result of historical net operating losses (“NOLs”) and tax-related timing differences are recognized in accordance with SFAS No. 109, Accounting for Income Taxes. In assessing the realizability of deferred tax assets (“DTAs”), management considers whether it is more likely than not that some portion or all of the DTAs will be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible, in addition to management’s tax planning strategies. In consideration of net losses incurred, the Company has provided a valuation allowance to reduce the net carrying value of DTAs. The amount of this valuation allowance is subject to adjustment by the Company in future periods based upon its assessment of evidence supporting the degree of probability that DTAs will be realized.

The Company’s effective tax rate for the three months ended June 30, 2009 and 2008 was 30% and 14%, respectively.

Uncertain Tax Positions

FASB Interpretation No. 48 (“FIN 48”) prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of June 30, 2009 and at December 31, 2008, the Company had a long-term accrued liability of $0.3 million related to various federal and state income tax matters on the consolidated balance sheet, the recognition of all of which would impact the Company’s effective tax rate.

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Changes in the balance of the liability for tax uncertainties are as follows (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2009		2008		2009		2008
Beginning balance	$	308	$	219	$	297	$	202
Effect of change in accounting position for income tax uncertainties		3		42		3		42
Increase in interest related to tax positions taken in prior years		10		9		21		26
Balance at June 30	$	321	$	270	$	321	$	270

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company does not expect the liability to change significantly in the next twelve months.

The Company and its subsidiaries file income tax returns in Canadian and U.S. federal jurisdictions, and various provincial, state and local jurisdictions. With a few exceptions, the Company is no longer subject to tax examinations by tax authorities for years prior to 2004.

12. Contingencies

From time to time in connection with its operations, the Company is named as a defendant in actions for damages and costs allegedly sustained by the plaintiffs. The Company has considered these proceedings and disputes in determining the necessity of any reserves for losses that are probable and reasonably estimable. In addition, various aspects of the Company’s business may subject it to litigation and liability for damages arising from errors in the processing of prescription drug claims, failure to meet performance measures within certain contracts relating to its services or its ability to obtain certain levels of discounts for rebates on prescription purchases from retail pharmacies and drug manufacturers or other actions or omissions. The Company’s recorded reserves are based on estimates developed with consideration given to the potential merits of claims or quantification of any performance obligations. The Company takes into account its history of claims, the limitations of any insurance coverage, advice from outside counsel, and management’s strategy with regard to the settlement or defense of such claims and obligations. While the ultimate outcome of those claims, lawsuits or performance obligations cannot be predicted with certainty, the Company believes, based on its understanding of the facts of these claims and performance obligations, that adequate provisions have been recorded in the consolidated financial statements where required.

The Company provides routine indemnification to its customers against liability if the Company’s products infringe on a third party’s intellectual property rights. The maximum amount of these indemnifications cannot be reasonably estimated due to their uncertain nature. Historically, the Company has not made payments related to these indemnifications.

During the routine course of securing new clients, the Company is sometimes required to provide payment and performance bonds to cover client transaction fees and any funds and pharmacy benefit claim payments provided by the client in the event that the Company does not perform its duties under the contract. The terms of these payment and performance bonds are typically one year in duration and may require renewals for the length of the contract period.

13. Derivative Instruments and Fair Value

The Company uses variable-rate LIBOR debt to finance its operations. These debt obligations expose the Company to variability in interest payments on its long term-debt due to changes in interest rates. If interest rates increase, interest expense increases. Conversely, if interest rates decrease, interest expense also decreases.

Pursuant to the terms of the Company’s $48 million credit agreement, the Company entered into interest rate contracts with notional amounts equal to 50% of the borrowed amount, or $24 million, for a three-year period from the date of issue. The Company entered into a 3-year interest rate swap agreement with a notional amount of $14 million to fix the LIBOR rate on $14 million of the term loan at 4.31%, resulting in an effective rate of 7.56% after adding the 3.25% margin per the credit agreement – see Note 7 for more information. Under the interest rate swap, the Company receives LIBOR-based variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent to fixed-rate debt. The Company also entered into a 3-year interest rate cap with a notional amount of $10 million to effectively cap the LIBOR rate on $10 million of the term loan at 4.50%, resulting in a maximum effective rate of 7.75% after adding the 3.25% margin per the credit agreement, excluding the associated fees, to help manage exposure to interest rate fluctuations. These instruments were designated as cash flow hedges during 2008.

The two derivative instruments mentioned above were entered into to manage fluctuations in cash flows resulting from interest rate risk attributable to changes in the benchmark interest rate of LIBOR, and to comply with the terms of the credit agreement.

As of June 30, 2009, both derivative instruments are “out of the money” and the Company is not currently exposed to any credit risk for amounts classified on the consolidated balance sheet should the counterparty in the agreement fail to meet its obligations under the agreement. To manage credit risks, the Company selects counterparties based on credit assessments, limits overall exposure to any single counterparty and monitors the market position with each counterparty. At June 30, 2009, the Company concluded that it was probable that the counterparty would be able to comply with the contractual terms of the agreements and that the forecasted transactions are probable of occurring.

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The Company assesses interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. The Company does not enter into derivative instruments for any purpose other than hedging identified exposures. That is, the Company does not speculate using derivative instruments and has not designated any instruments as fair value hedges or hedges of the foreign currency exposure of a net investment in foreign operations.

Cash flow hedge accounting may be elected only for highly effective hedges, based upon an assessment, performed at least quarterly, of the historical and prospective future correlation of changes in the fair value of the derivative instrument to changes in the expected future cash flows of the hedged item. To the extent cash flow hedge accounting is applied, the effective portion of any changes in the fair value of the derivative instruments is initially reported as a component of accumulated other comprehensive income or loss (“AOCI”). Ineffectiveness, if any, is immediately recognized in the statement of operations. The amount in AOCI is reclassified to earnings when the forecasted transaction occurs, even if the derivative instrument is sold, extinguished or terminated prior to the transaction occurring, if it is still probable that the forecasted transactions will occur. If the forecasted transaction is no longer probable of occurring, the amount in AOCI is immediately reclassified to earnings.

There was no hedge ineffectiveness subsequent to the implementation of cash flow hedge accounting related to the interest rate swap. SFAS No. 133 and SFAS No. 138 require that all derivative instruments are recorded on the balance sheet at their respective fair values.

Changes in the fair value of the interest rate swaps designated as hedging instruments of the variability of cash flows associated with floating-rate, long-term debt obligations subsequent to the implementation of cash flow hedge accounting are reported in AOCI. These amounts are subsequently reclassified into interest expense in the same period in which the related interest on the floating-rate debt obligations affects earnings. The amount recorded in AOCI at June 30, 2009 was $0.4 million before income taxes.

As of June 30, 2009, approximately $0.5 million of losses in AOCI related to the interest rate swap are expected to be reclassified into interest expense as a yield adjustment of the hedged debt obligation within the next 12 months.

Effective January 1, 2008, SFAS No. 157 defines a three-level hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, with level 1 considered the most reliable. For assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheet, the table below categorizes fair value measurements across the three levels as of June 30, 2009 (in thousands):

					Significant
	Quoted Prices in		Significant		Unobservable
	Active Markets		Observable Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Derivatives	$	—	$	14	$	—	$	14
Liabilities:
Derivatives	$	—	$	829	$	—	$	829

When available and appropriate, the Company uses quoted market prices in active markets to determine fair value, and classifies such items within Level 1. Level 1 values only include derivative instruments traded on a public exchange. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability or can be derived principally from or corroborated by observable market data. If the Company were to use one or more significant unobservable inputs for a model-derived valuation, the resulting valuation would be classified in Level 3.

The Company has classified derivative assets as other noncurrent assets and derivative liabilities as other noncurrent liabilities on the consolidated balance sheet. The fair values represent quoted prices from a financial institution. Derivative assets relate to the interest rate cap for which the Company paid $0.2 million upon entering into the agreement. At June 30, 2009, the fair value of the asset was insignificant. Derivative liabilities relate to the interest rate swap, which had a fair value of $0.8 million at June 30, 2009.

The following table below categorizes the fair value changes in the derivative agreements during the current period (in thousands):

			Effective portion of loss on
			interest rate contracts during
Effective portion of gain on	Ineffective portion of loss on	Total change in fair	term of hedging relationship
interest rate contracts	interest rate contracts	value of interest rate	reclassed into interest expense
included in AOCI	included in interest expense	contracts	during the current period
$114	$1	$113	$209

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

The following discussion should be read in conjunction with the Management’s Discussion and Analysis (“MD&A”) section of the Company’s 2008 Annual Report on Form 10-K. Results of the interim periods presented are not necessarily indicative of the results to be expected for the full year ending December 31, 2009.

Caution Concerning Forward-Looking Statements

Certain information in this MD&A, in various filings with regulators, in reports to shareholders and in other communications contains forward-looking statements within the meaning of certain securities laws and is subject to important risks, uncertainties and assumptions. These forward-looking statements include, among others, statements with respect to the Company’s industry, objectives, competitive strengths and strategies, future financial performance and market opportunities. These statements are often, but not always, made through the use of words or phrases such as as “expects,” “anticipates,” “believes,” “estimates,” and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could.” There are a number of important factors that could cause actual results to differ materially from those indicated by such forward-looking statements. Such factors include, but are not limited to, the ability of the Company to adequately address: the risks associated with further market acceptance of the Company’s products and services; its ability to manage its growth effectively; its reliance on key customers and key personnel; industry conditions such as consolidation of customers, competitors and acquisition targets; the Company’s ability to acquire a company, manage integration and potential dilution; the impact of technology changes on its products and service offerings, including impacts on the intellectual property rights of others; the impacts of regulation and legislation changes in the healthcare industry; and the sufficiency and fluctuations of its liquidity and capital needs.

When relying on forward-looking information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. In making the forward-looking statements contained in this MD&A, the Company does not assume any significant acquisitions, dispositions or one-time items. It does assume, however, the renewal of certain customer contracts. Every year, the Company has major customer contracts that are subject to renewal. In addition, the Company also assumes new customer contracts. In this regard, the Company is pursuing large opportunities that present a very long and complex sales cycle which substantially affect its forecasting abilities. The Company has made certain assumptions with respect to the timing of the realization of these opportunities which it thinks are reasonable but which may not be achieved. Furthermore, the pursuit of these larger opportunities does not ensure a linear progression of revenue and earnings since they may involve significant up-front costs followed by renewals and cancellations of existing contracts. The Company has also assumed that the material factors referred to in the previous paragraph will not have an impact such that the forward-looking information contained herein will differ materially from actual results or events. The foregoing list of factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors. For additional information with respect to certain of these and other factors, refer to the “Risk Factors” sections of the Company’s filings with the Securities and Exchange Commission, including its 2008 Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. The forward-looking statements contained in this MD&A represent the Company’s current expectations and, accordingly, are subject to change. However, the Company expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

PBM Business

The Company provides comprehensive PBM services to customers, which include managed care organizations, local governments, unions, corporations, HMOs, employers, workers’ compensation plans, third party health care plan administrators, and federal and state government programs through its network of licensed pharmacies throughout the United States. The PBM services include electronic point-of-sale pharmacy claims management, retail pharmacy network management, mail service pharmacy claims management, specialty pharmacy claims management, Medicare Part D services, benefit design consultation, preferred drug management programs, drug review and analysis, consulting services, data access and reporting and information analysis. The Company owns a mail service pharmacy (“Mail Service”) and a specialty service pharmacy (“Specialty Service”). In addition, the Company is a national provider of drug benefits to its customers under the federal government’s Medicare Part D program.

Revenue primarily consists of sales of prescription drugs, together with any associated administrative fees, to customers and participants, either through the Company’s nationwide network of pharmacies, Mail Service pharmacy or Specialty Service pharmacy. Revenue related to the sales of prescription drugs is recognized when the claims are adjudicated and the prescription drugs are shipped. Claims are adjudicated at the point-of-sale using an on-line processing system.

Participant co-payments related to the Company’s nationwide network of pharmacies are not recorded as revenue. Under the Company’s customer contracts, the pharmacy is solely obligated to collect the co-payments from the participants. As such, the Company does not include participant co-payments to retail pharmacies in revenue or cost of revenue. If these amounts were included in revenue and cost of revenue, operating income and net income would not have been affected.

The Company evaluates customer contracts to determine whether it acts as a principal or as an agent in the fulfillment of prescriptions through its retail pharmacy network. The Company acts as a principal in most of its transactions with customers and revenue is recognized at the prescription price (ingredient cost plus dispensing fee) negotiated with customers, as well as an administrative fee (“Gross Reporting”). Gross Reporting is appropriate because the Company (i) has separate contractual relationships with customers and with pharmacies, (ii) is responsible to validate and manage a claim through the claims adjudication process, (iii) commits to set prescription prices for the pharmacy, including instructing the pharmacy as to how that price is to be settled (co-payment requirements), (iv) manages the overall prescription drug relationship with the patients, who are participants of customers’ plans, and (v) has credit risk for the price due from the customer. In instances where the Company merely administers a customer’s network pharmacy contract to which the Company is not a party and under which the Company does not assume credit risk, the Company only records an administrative fee as revenue. For these customers, the Company earns an administrative fee for collecting payments from the customer and remitting the corresponding amount to the pharmacies in the customer’s network. In these transactions, the Company acts as a conduit for the customer. As the Company is not the principal in these transactions, the drug ingredient cost is not included in revenue or in cost of revenue. As such, there is no impact to gross profit based upon whether gross or net reporting is used.

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HCIT Business

The Company is also a leading provider of HCIT solutions and services to providers, payers and other participants in the pharmaceutical supply chain in North America. The Company’s product offerings include a wide range of software products for managing prescription drug programs and for drug prescribing and dispensing. The Company’s solutions are available on a license basis with on-going maintenance and support or on a transaction fee basis using an Application Service Provider (“ASP”) model. The Company’s payer customers include over 70 managed care organizations, Blue Cross Blue Shield organizations, government agencies, employers and intermediaries such as Pharmacy Benefit Managers. The Company’s provider customers include over 1,400 independent, regional chain, institutional, and mail-order pharmacies. The solutions offered by the Company’s services assist both payers and providers in managing the complexity and reducing the cost of their prescription drug programs and dispensing activities.

The Company’s profitability from HCIT depends primarily on revenue derived from transaction processing services, software license sales, hardware sales, maintenance, and professional services. Recurring revenue remains a cornerstone of the Company’s business model and consists of transaction processing services and maintenance. Growth in revenue from recurring sources has been driven primarily by growth in the Company’s transaction processing business in the form of claims processing for its payer customers and switching services for its provider customers. Through the Company’s transaction processing business, where the Company is generally paid based on the volume of transactions processed, the Company continues to benefit from the growth in pharmaceutical drug use in the United States. The Company believes that aging demographics and increased use of prescription drugs will continue to benefit the transaction processing business. In addition to benefiting from this industry growth, the Company continues to focus on increasing recurring revenue in the transaction processing area by adding new transaction processing customers to its existing customer base. The recognition of revenue depends on various factors including the type of service provided, contract parameters, and any undelivered elements.

Operating Expenses

The Company’s operating expenses primarily consist of cost of revenue, product development costs, selling, general and administrative (“SG&A”) costs, depreciation and amortization. Cost of revenue includes the costs of drugs dispensed as well as costs related to the products and services provided to customers and costs associated with the operation and maintenance of the transaction processing centers. These costs include salaries and related expenses for professional services personnel, transaction processing centers’ personnel, customer support personnel, any hardware or equipment sold to customers and depreciation expense related to data center operations. Product development costs consist of staffing expenses to produce enhancements and new initiatives. SG&A costs relate to selling expenses, commissions, marketing, network administration and administrative costs, including legal, accounting, investor relations and corporate development costs. Depreciation expense relates to the depreciation of property and equipment used by the Company. Amortization expense relates to definite-lived intangible assets acquired through business acquisitions.

Industry

The PBM industry is intensely competitive, generally resulting in continuous pressure on gross profit as a percentage of total revenue. In recent years, industry consolidation and dramatic growth in managed healthcare have led to increasingly aggressive pricing of PBM services. Given the pressure on all parties to reduce healthcare costs, the Company expects this competitive environment to continue for the foreseeable future. The Company looks to continue to drive purchasing efficiencies of pharmaceuticals to improve operating margins as well as targeting the acquisition of other businesses as ways to achieve its strategy of expanding its product offerings and customer base to remain competitive. The Company also looks to retain and expand its customer base by improving the quality of service provided by enhancing its solutions and lowering the total drug spend for customers.

The complicated environment in which the Company operates presents it with opportunities, challenges and risks. The Company’s clients are paramount to its success; the retention of existing and winning of new clients and members poses the greatest opportunity, and the loss thereof represents an ongoing risk. The preservation of the Company’s relationships with pharmaceutical manufacturers and retail pharmacies is very important to the execution of its business strategies. The Company’s future success will hinge on its ability to drive mail volume and increase generic dispensing rates in light of the significant brand-name drug patent expirations expected to occur over the next several years, and its ability to continue to provide innovative and competitive clinical and other services to clients and patients, including the Company’s active participation in the Medicare Part D benefit and the rapidly growing specialty pharmacy industry.

The frequency with which the Company’s customer contracts come up for renewal and the potential for one of the Company’s larger customers to terminate, or elect not to renew, its existing contract with the Company create the risk that the Company’s results of operations may be volatile. The Company’s customer contracts generally do not have terms longer than three years and, in some cases, are terminable by the customer on relatively short notice. The Company’s larger customers generally seek bids from other PBM providers in advance of the expiration of their contracts. In addition, many of the Company’s clients put their contract out for competitive bidding prior to expiration. If existing customers elect not to renew their contracts with the Company at the expiry of the current terms of those contracts, and in particular if one of the Company’s largest customers elects not to renew, the Company’s recurring revenue base will be reduced and results of operations will be adversely affected.

The Company operates in a competitive environment as clients and other payers seek to control the growth in the cost of providing prescription drug benefits. The Company’s business model is designed to reduce the level of drug cost. The Company helps manage drug cost primarily by its programs designed to maximize the substitution of expensive brand-name drugs by equivalent but much lower cost generic drugs, obtaining competitive discounts from brand-name and generic drug pharmaceutical manufacturers, obtaining rebates from brand-name pharmaceutical manufacturers, securing discounts from retail pharmacies, applying the Company’s sophisticated clinical programs and efficiently administering prescriptions dispensed through the Company’s Mail Service and Specialty Service pharmacies.

Various aspects of the Company’s business are governed by federal and state laws and regulations. Because sanctions may be imposed for violations of these laws, compliance is a significant operational requirement. The Company believes it is in substantial compliance with all existing legal requirements material to the operation of its business. There are, however, significant uncertainties involving the application of many of these legal requirements to its business. In addition, there are numerous proposed health care laws and regulations at the federal and state levels, many of which could adversely affect the Company’s business, results of operations and financial condition. The Company is unable to predict what additional federal or state legislation or regulatory initiatives may be enacted in the future relating to its business or the health care industry in general, or what effect any such legislation or regulations might have on it.

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The Company also cannot provide any assurance that federal or state governments will not impose additional restrictions or adopt interpretations of existing laws or regulations that could have a material adverse effect on its business or financial performance.

Competitive Strengths

The Company has demonstrated its ability to serve a broad range of clients from large managed care organizations and state governments to employer groups with fewer than a thousand members. The Company believes its principal competitive strengths are:

Flexible, Customized and Independent Services. The Company believes it is important to provide its clients with customized solutions and recommendations with their best interests in mind. Accordingly, the formulary and plan designs the Company suggests to clients are highly flexible and not influenced by manufacturer relationships. Some larger competitors that have manufacturer affiliations or retail pharmacy assets are often in a position where they may benefit from increasing the volume of drug utilization generally or that of certain specific drugs. These conflicts also arise where revenue from pharmaceutical manufacturers may support the inclusion of certain drugs on formulary which would not otherwise be included, serving as an important source of profit for the PBM. Prospective customers recognize the benefit of our independence from manufacturer affiliations and retail pharmacy assets.

Information-Based Cost-Containment Methods. Through the use of the Company’s customized information technology systems, the Company believes that it provides its clients and members with access to information on a rapid basis that allows the Company to work with its clients to manage the costs of prescription drugs. For example, the Company’s web-based systems allow clients to choose which metrics are most important to them when evaluating their PBM program. The Company then provides customized reporting solutions for these key performance indicators. In addition, members can access the web-based programs to evaluate their costs for selected drugs and pharmacies and the benefits of the options for prescription drugs. The Company believes these services allow it to further differentiate itself from its competitors.

Selected financial highlights for the three and six months ended June 30, 2009 compared to the same periods in 2008

NMHC Acquisition

Effective April 30, 2008, the Company completed its acquisition of National Medical Health Card Systems, Inc. (“NMHC”). The Company believes that NMHC is a complementary company, the acquisition of which has yielded benefits for health plan sponsors through more effective cost-management solutions and innovative programs. The Company believes that it has operated the combined companies more efficiently than either company could have operated on its own. The acquisition has enabled the combined companies to achieve significant synergies from purchasing scale and operating efficiencies. Purchasing synergies are largely comprised of purchase discounts and/or rebates obtained from generic and brand name manufacturers and cost efficiencies obtained from retail pharmacy networks. Operating synergies include decreases in overhead expense, as well as increases in productivity and efficiencies by eliminating excess capacity. The Company expects synergies to continue to be realized during the remainder of the year. In the long term, the Company expects that the acquisition will create significant incremental revenue opportunities. These opportunities are expected to be derived from a variety of new programs and benefit designs that leverage client relationships.

Effective with the acquisition, the Company is now comprised of two operating segments: PBM and HCIT.

Selected financial highlights for the three months ended June 30, 2009 and 2008 are noted below:

• Total revenue in 2009 was $320.8 million as compared to $227.8 million in 2008. The increase is largely attributable to an $89.0 million increase in the Company’s new PBM segment which included a full three months of activity in the second quarter of 2009 as compared to only two months of activity for the second quarter of 2008. Revenue from the PBM segment is a result of the acquisition of NMHC in April 2008.

• The Company reported net income of $12.0 million, or $0.47 per share (fully-diluted), for the three months ended June 30, 2009, compared to $3.3 million, or $0.14 per share (fully-diluted), for the same period in 2008. The increase is related to higher gross profit and control over SG&A costs, partially offset by increases in interest expense and income taxes.

Selected financial highlights for the six months ended June 30, 2009 and 2008 are noted below:

• Total revenue in 2009 was $611.8 million as compared to $252.1 million in 2008. The increase is largely attributable to the acquisition of NMHC and the inclusion of a full six months of revenue from the Company’s new PBM segment for the six months ended June 30, 2009 as compared to only two months for the same period last year.

• The Company reported net income of $19.7 million, or $0.79 per share (fully-diluted), for the six months ended June 30, 2009 compared to $6.6 million, or $0.29 per share (fully-diluted), for the same period in 2008. The 2009 period included $5.2 million of expense related to the amortization of intangible assets compared to $2.8 million in the 2008 period. The increase is related to higher gross profit and control over SG&A costs, partially offset by increases in interest expense and income taxes.

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Results of Operations

Three months ended June 30, 2009 as compared to the three months ended June 30, 2008

	Three months ended June 30,
In thousands, except per share data	2009		2008
Revenue	$	320,829	$	227,755
Gross profit		47,211		29,840
Product development costs		3,027		2,480
SG&A		21,907		19,557
Depreciation of property and equipment		1,405		1,433
Amortization of inangible assets		2,415		2,432
Interest expense, net		979		116
Other expense (income), net		283		29
Income before income taxes		17,195		3,793
Income tax expense		5,218		526
Net income	$	11,977	$	3,267
Diluted earnings per share	$	0.47	$	0.14

Revenue

Revenue increased $93.1 million to $320.8 million during 2009, primarily due to the NMHC acquisition, and consists primarily of PBM revenue of $293.9 million. Revenue under the contracts acquired in the NMHC acquisition are recorded gross as the Company acts as a principal in the transaction, whereas revenues from the majority of historical PBM contracts are recorded net as the Company functions as an agent. The increase in revenue is largely attributable to a full three months of activity in the second quarter of 2009 as compared to only two months of activity in the second quarter of 2008 resulting from the timing of the NMHC acquisition. In addition, new contracts launched in 2008 and 2009 contributed to the increase in revenue for 2009.

Cost of Revenue

Cost of revenue increased $75.7 million to $273.6 million during 2009, primarily due to the NMHC acquisition, and consists primarily of PBM cost of revenue of $259.4 million. Cost of revenue in the PBM segment relates to the actual cost of the prescription drugs sold. Cost of revenue for the HCIT segment relates primarily to the cost of labor to deliver the services provided.

Gross Profit

Gross profit increased $17.4 million to $47.2 million during 2009, primarily due to the NMHC acquisition and purchasing efficiencies realized in the cost of prescription drugs due to the increased size of the organization, as well as the launch of new contracts during 2008 and 2009.

Product Development Costs

Product development costs for the three months ended June 30, 2009 were $3.0 million compared to $2.5 million for the three months ended June 30, 2008. Product development continues to be a key focus of the Company as it continues to pursue enhancements of existing products, as well as the development of new offerings, to support its market expansion.

SG&A Costs

SG&A costs for the three months ended June 30, 2009 were $21.9 million compared to $19.6 million for the three months ended June 30, 2008. The increase is largely attributable to increased operating expenses due to the acquisition of NMHC. The second quarter of 2008 only reflected two months of expenses related to the acquired NMHC business as compared to a full three months in the second quarter of 2009. SG&A costs consist primarily of employee costs in addition to professional services costs, facilities and costs not related to cost of revenue.

SG&A costs include stock-based compensation cost of $0.6 million and $1.1 million for the three months ended June 30, 2009 and 2008, respectively. The decrease is primarily attributable to stock options that fully vested in 2008, partially offset by new grants during the second quarter of 2009.

Depreciation

Depreciation expense relates to property and equipment for all areas of the Company except for those depreciable assets directly related to the generation of revenue, which is included in the cost of revenue in the consolidated statements of operations. Depreciation expense was $1.4 million for the three months ended June 30, 2009 and 2008.

Amortization

Amortization expense for the three months ended June 30, 2009 and 2008 was $2.4 million. Amortization expense on all the Company’s intangible assets is expected to be approximately $9.7 million for the year ending December 31, 2009.

Interest Income and Expense

Interest income decreased $0.4 million for the three months ended June 30, 2009 as compared to the same period in 2008, due primarily to lower interest rates. Interest expense increased to $1.2 million for the three months ended June 30, 2009, primarily due to the long-term debt incurred to finance a portion of the NMHC acquisition.

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Income Taxes

The Company recognized income tax expense of $5.2 million for the three months ended June 30, 2009, representing an effective tax rate of 30%, compared to a $0.5 million income tax expense, representing an effective tax rate of 14%, for the same period in 2008. The change in the effective tax rate is due primarily to increased earnings in 2009.

Net Income

The Company reported net income of $12.0 million for the three months ended June 30, 2009, or $0.47 per share (fully-diluted), compared to $3.3 million, or $0.14 per share (fully-diluted), for the three months ended June 30, 2008.

Segment Analysis

Effective with the acquisition of NMHC, the Company evaluates segment performance based on revenue and gross profit. Results for periods reported prior to the three months ended June 30, 2008 were reported in one operating segment, HCIT. Prior period results have not been restated because to do so would be impracticable. A reconciliation of the Company’s business segments to the consolidated financial statements for the three months ended June 30, 2009 and 2008 is as follows (in thousands):

	PBM						HCIT						Consolidated
	2009			2008			2009			2008			2009			2008
Revenue	$	293,906		$	204,860		$	26,923		$	22,895		$	320,829		$	227,755
Gross profit	$	34,530		$	16,814		$	12,681		$	13,026		$	47,211		$	29,840
Gross profit %		11.7	%		8.2	%		47.1	%		56.9	%		14.7	%		13.1	%

PBM

Revenue was $293.9 million for the three months ended June 30, 2009 due to a full three months of activity in the second quarter of 2009 as compared to two months of activity in the second quarter of 2008 resulting from the acquisition of NMHC in April 2008. In addition, new contracts launched during 2008 and 2009 contributed to the increase in revenue.

For the three months ended June 30, 2009 and 2008, there was $2.8 million and $2.6 million of co-payments, respectively, included in revenue related to prescriptions filled at the Company’s Mail and Specialty Service pharmacy. Co-payments retained by retail pharmacies on prescriptions filled for participants are not included in revenue for the respective periods. Under customer contracts, the pharmacy is solely obligated to collect the co-payments from the participants and as such, the Company does not assume liability for participant co-payments in retail pharmacy transactions. Therefore, the Company does not include participant co-payments to retail pharmacies in revenue or cost of revenue.

Cost of revenue was $259.4 million for the three months ended June 30, 2009 compared to $188.0 million for the same period in 2008. Cost of revenue is predominantly comprised of the cost of prescription drugs. As a percentage of revenue, cost of revenue was 88.3% and 91.8% for the three months ended June 30, 2009 and 2008, respectively. The improvement in the percentage of revenue is due to the improved purchasing efficiencies for prescription drugs and the increased use of lower cost generic drugs.

Gross profit was $34.5 million for the three months ended June 30, 2009 due to a full three months of activity in the second quarter of 2009 as compared to two months of activity in the second quarter of 2008 resulting from the acquisition of NMHC in April 2008. In addition, new customers added and increased volumes from existing customers realized following the acquisition complemented the increase. Gross profit margin was 11.7% and 8.2% for the three months ended June 30, 2009 and 2008, respectively.

HCIT

HCIT revenue is comprised of the following components for the three months ended June 30, 2009 and 2008 (in thousands):

	2009		2008
Recurring
Transaction processing	$	15,663	$	11,888
Maintenance		4,477		4,130
Total recurring		20,140		16,018
Non-Recurring
Professional services		3,801		3,066
System sales		2,982		3,811
Total non-recurring		6,783		6,877
Total revenue	$	26,923	$	22,895

Total HCIT revenue increased $4.0 million for the three months ended June 30, 2009 as compared to the same period in 2008. On a percentage basis, recurring revenue accounted for 74.8% and 70.0% of total HCIT revenue for the three months ended June 30, 2009 and 2008, respectively. Recurring revenue consists of transaction processing and maintenance revenue.

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Recurring Revenue: Recurring revenue increased 25.7% to $20.1 million for the three months ended June 30, 2009 from $16.0 million for the same period in 2008. Recurring revenue is subject to fluctuations caused by the following: the number and timing of new customers, fluctuations in transaction volumes, and the number of contract terminations and renewals.

Transaction processing revenue, which consists of claims processing, increased $3.8 million, or 31.8%, to $15.7 million for the three months ended June 30, 2009 compared to $11.9 million for the same period in 2008, due primarily to the launch of new contracts during 2008 and 2009 as well as increased volumes on existing customers.

Maintenance revenue, which consists of maintenance contracts on system sales, increased $0.3 million to $4.5 million for the three months ended June 30, 2009 compared to $4.1 million for the same period in 2008, due primarily to the launch of new customer contracts during 2008 and 2009.

Non-Recurring Revenue: Non-recurring revenue decreased slightly to $6.8 million, or 25.2% of total HCIT revenue, for the three months ended June 30, 2009 from $6.9 million, or 30.0% of total HCIT revenue, for the same period in 2008.

Professional services revenue increased $0.7 million, or 24.0%, to $3.8 million for the three months ended June 30, 2009 compared to $3.1 million for the same period in 2008. Professional services revenue is derived from providing support projects for both system sales and transaction processing clients, on an as-needed basis. This revenue is dependent on customers continuing to require the Company to assist them on both a fixed bid and time and materials basis.

System sales are derived from license upgrades and additional applications for existing and new clients, as well as software and hardware sales to pharmacies that purchase the Company’s pharmacy system. Systems sales revenue decreased $0.8 million, or 21.8%, to $3.0 million for the three months ended June 30, 2009 compared to $3.8 million for the three months ended June 30, 2008.

Cost of Revenue: Cost of revenue increased 44.3% to $14.2 million for the three months ended June 30, 2009 from $9.9 million for the three months ended June 30, 2008. The increase is due primarily to personnel and support costs related to the growing transaction processing business and related support services.

Cost of revenue includes depreciation expense of $0.6 million for the three months ended June 30, 2009 and $0.4 million for the same period in 2008.

Gross Profit: Gross profit margin was 47.1% for the three months ended June 30, 2009 compared to 56.9% for the three months ended June 30, 2008. Gross profit decreased $0.3 million to $12.7 million for the three months ended June 30, 2009 as compared to $13.0 million for the same period in 2008. The decrease is due to the reduction in system sales in the second quarter of 2009 as compared to the same period last year. In addition, the decrease is due to increased support costs for new customers added in 2009.

Six months ended June 30, 2009 as compared to the six months ended June 30, 2008

	Six months ended June 30,
In thousands, except per share data	2009			2008
Revenue	$	611,789		$	252,072
Gross profit		86,395			43,320
Product development costs		6,190			4,939
SG&A		42,704			25,428
Depreciation of property and equipment		2,887			2,194
Amortization of inangible assets		5,240			2,828
Interest expense (income), net		1,689			(903	)
Other expense (income), net		(42	)		35
Income before income taxes		27,727			8,799
Income tax expense		8,068			2,175
Net income	$	19,659		$	6,624
Diluted earnings per share	$	0.79		$	0.29

Revenue

Revenue increased $359.7 million to $611.8 million during 2009, primarily due the inclusion of a full six months of the activities of NMHC in 2009 as compared to only two months in the prior year. Revenue under the contracts acquired in the NMHC acquisition are recorded gross as the Company acts as a principal in the transaction, whereas revenues from the majority of historical PBM contracts are recorded net as the Company functions as an agent. In addition, revenue increased due to new contracts that began in 2008 and 2009.

Cost of Revenue

Cost of revenue increased $316.6 million to $525.4 million during 2009, primarily due to the increase in revenue over the prior year, and consists primarily of PBM cost of revenue of $498.4 million. Cost of revenue in the PBM segment relates to the actual cost of the prescription drugs sold. Cost of revenue for the HCIT segment relates primarily to the cost of labor to deliver the services provided.

Gross Profit

Gross profit increased $43.1 million during 2009, primarily due to the NMHC acquisition, as well as the launch of new contracts during 2008.

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Product Development Costs

Product development costs for the six months ended June 30, 2009 were $6.2 million compared to $4.9 million for the six months ended June 30, 2008. Product development continues to be a key focus of the Company as it continues to pursue enhancements of existing products, as well as the development of new offerings, to support its market expansion.

Product development costs include stock-based compensation cost of $0.1 million for the six months ended June 30, 2009 and 2008.

SG&A Costs

SG&A costs for the six months ended June 30, 2009 were $42.7 million compared to $25.4 million for the six months ended June 30, 2008. The increase is largely attributable to increased operating expenses due to the acquisition of NMHC. SG&A costs consist primarily of employee costs in addition to professional services costs, facilities and costs not related to cost of revenue.

SG&A costs include stock-based compensation cost of $1.1 million and $1.7 million for the six months ended June 30, 2009 and 2008, respectively. The decrease is primarily attributable to stock options that fully vested in 2008, partially offset by new grants late in 2008 as well as in 2009.

Depreciation

Depreciation expense relates to property and equipment for all areas of the Company except for those depreciable assets directly related to the generation of revenue, which is included in the cost of revenue in the consolidated statements of operations. Depreciation expense increased $0.7 million to $2.9 million for the six months ended June 30, 2009 from $2.2 million for the same period in 2008, due primarily to the expense related to assets associated with the acquisition of NMHC, as well as purchases related to the Company’s expansion of its Lisle, Illinois facility and network capacity.

Amortization

Amortization expense for the six months ended June 30, 2009 was $5.2 million compared to $2.8 million for the same period in 2008. The increase is due to amortization of intangible assets primarily associated with the acquisition of NMHC. Amortization expense on all the Company’s intangible assets is expected to be approximately $9.7 million for the year ending December 31, 2009.

Interest Income and Expense

Interest income decreased $1.2 million for the six months ended June 30, 2009 as compared to the same period in 2008 due to lower interest rates. Interest expense increased to $2.2 million for the six months ended June 30, 2009, primarily due to the long-term debt incurred to finance a portion of the acquisition.

Income Taxes

The Company recognized income tax expense of $8.1 million for the six months ended June 30, 2009, representing an effective tax rate of 30%, compared to a $2.2 million income tax expense, representing an effective tax rate of 25%, for the same period in 2008. The change in the effective tax rate is due primarily to increased earnings in 2009.

Net Income

The Company reported net income of $19.7 million for the six months ended June 30, 2009, or $0.79 per share (fully-diluted), compared to $6.6 million, or $0.29 per share (fully-diluted), for the six months ended June 30, 2008.

Segment Analysis

Effective with the acquisition of NMHC, the Company evaluates segment performance based on revenue and gross profit. Results for periods reported prior to the six months ended June 30, 2008 were reported in one operating segment, HCIT. Prior period results have not been restated because to do so would be impracticable. A reconciliation of the Company’s business segments to the consolidated financial statements for the six months ended June 30, 2009 and 2008 is as follows (in thousands):

	PBM						HCIT						Consolidated
	2009			2008			2009			2008			2009			2008
Revenue	$	561,686		$	204,860		$	50,103		$	47,212		$	611,789		$	252,072
Gross profit	$	63,312		$	16,814		$	23,083		$	26,506		$	86,395		$	43,320
Gross profit %		11.3	%		8.2	%		46.1	%		56.1	%		14.1	%		17.2	%

PBM

Revenue was $561.7 million for the six months ended June 30, 2009 as compared to $204.9 million for the same period last year. The increase is due to the inclusion of a full six months of revenue related to the NMHC business as compared to only two months for the same period in 2008.

For the six months ended June 30, 2009 and 2008, there was $5.7 million and $2.6 million of co-payments, respectively, included in revenue related to prescriptions filled at the Company’s Mail and Specialty Service pharmacy. Co-payments retained by retail pharmacies on prescriptions filled for participants are not included in revenue for the respective periods. Under customer contracts, the pharmacy is solely obligated to collect the co-payments from the participants and as such, the Company does not assume liability for participant co-payments in retail pharmacy transactions. Therefore, the Company does not include participant co-payments to retail pharmacies in revenue or cost of revenue.

Cost of revenue was $498.4 million and $188.0 million for the six months ended June 30, 2009, respectively, nearly all of which was due to the acquisition of NMHC. Cost of revenue is predominantly comprised of the cost of prescription drugs.

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Gross profit was 11.3% for the six months ended June 30, 2009 as compared to 8.2% for the same period last year. The increase is due to increased purchasing efficiencies achieved over the year resulting in lower cost of prescription drugs.

HCIT

HCIT revenue is comprised of the following components for the six months ended June 30, 2009 and 2008 (in thousands):

	2009		2008
Recurring
Transaction processing	$	29,390	$	26,536
Maintenance		8,951		8,340
Total recurring		38,341		34,876
Non-Recurring
Professional services		7,443		6,857
System sales		4,319		5,479
Total non-recurring		11,762		12,336
Total revenue	$	50,103	$	47,212

Total HCIT revenue increased $2.9 million for the six months ended June 30, 2009 as compared to the same period in 2008. On a percentage basis, recurring revenue accounted for 76.5% and 73.9% of total HCIT revenue for the six months ended June 30, 2009 and 2008, respectively. Recurring revenue consists of transaction processing and maintenance revenue.

Recurring Revenue: Recurring revenue increased 9.9% to $38.3 million for the six months ended June 30, 2009 from $34.9 million for the same period in 2008. Recurring revenue is subject to fluctuations caused by the following: the number and timing of new customers, fluctuations in transaction volumes, and the number of contract terminations and renewals.

Transaction processing revenue, which consists of claims processing, increased $2.9 million, or 10.8%, to $29.4 million for the six months ended June 30, 2009 compared to $26.5 million for the same period in 2008, due primarily to the launch of new contracts during 2008 as well as increased volumes on existing customers.

Maintenance revenue, which consists of maintenance contracts on system sales, increased $0.7 million to $9.0 million for the six months ended June 30, 2009 compared to $8.3 million for the same period in 2008, due primarily to the launch of new customer contracts during 2008 and 2009.

Non-Recurring Revenue: Non-recurring revenue decreased 4.7% to $11.8 million, or 23.5% of total HCIT revenue, for the six months ended June 30, 2009 from $12.3 million, or 26.1% of total HCIT revenue, for the same period in 2008.

Professional services revenue increased $0.6 million, or 8.5%, to $7.4 million for the six months ended June 30, 2009 compared to $6.9 million for the same period in 2008. Professional services revenue is derived from providing support projects for both system sales and transaction processing clients, on an as-needed basis. This revenue is dependent on customers continuing to require the Company to assist them on both a fixed bid and time and materials basis.

System sales are derived from license upgrades and additional applications for existing and new clients, as well as software and hardware sales to pharmacies that purchase the Company’s pharmacy system. Systems sales revenue decreased $1.2 million, or 21.2%, to $4.3 million for the six months ended June 30, 2009 compared to $5.5 million for the six months ended June 30, 2008.

Cost of Revenue: Cost of revenue increased 30.5% to $27.0 million for the six months ended June 30, 2009 from $20.7 million for the six months ended June 30, 2008. The increase is due primarily to personnel and support costs related to the growing transaction processing business.

Cost of revenue includes depreciation expense of $1.1 million for the six months ended June 30, 2009 and $0.8 million for the same period in 2008. In addition, cost of revenue includes stock-based compensation expense of $0.3 million for the six months ended June 30, 2009 and 2008.

Gross Profit: Gross profit margin was 46.1% for the six months ended June 30, 2009 compared to 56.1% for the six months ended June 30, 2008. Gross profit decreased $3.4 million to $23.1 million for the six months ended June 30, 2009 as compared to $26.5 million for the same period in 2008. The decrease is due primarily to the reduced system sales and the increased costs related to the support of the new business added since June 30, 2008.

Liquidity and Capital Resources

Historically, the Company’s sources of liquidity have primarily been cash provided by operating activities and proceeds from its public offerings. The Company’s principal uses of cash have been to fund working capital, finance capital expenditures, satisfy contractual obligations and to meet acquisition and investment needs. The Company anticipates that these uses will continue to be the principal demands on cash in the future.

At June 30, 2009 and December 31, 2008, the Company had cash and cash equivalents totalling $96.6 million and $67.7 million, respectively. The Company believes that its cash on hand, together with cash generated from operating activities and amounts available under its existing credit facility, will be sufficient to support planned operations for the foreseeable future. At June 30, 2009, cash and cash equivalents consist of cash on hand, deposits in banks, money market funds and bank term deposits with original maturities of 90 days or less. As of June 30, 2009, all of the Company’s cash and cash equivalents were exposed to market risks, primarily changes in U.S. interest rates. Declines in interest rates over time would reduce interest income related to these balances.

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Credit Agreement

On April 25, 2008, the Company’s U.S. subsidiary, SXC Health Solutions, Inc. (“US Corp.”), entered into a credit agreement (the “Credit Agreement”) providing for up to $58 million of borrowings, consisting of (i) a $10 million senior secured revolving credit facility (including borrowing capacity available for letters of credit and for borrowings on same-day notice, referred to as swing loans (the “Revolving Credit Facility”) and (ii) a $48 million senior secured term loan (the “Term Loan Facility” and, together with the Revolving Credit Facility, the “Credit Facilities”). On April 29, 2008, US Corp borrowed $48 million under the Term Loan Facility to pay a portion of the consideration in connection with the acquisition of NMHC and certain transaction fees and expenses related to the acquisition.

The interest rates applicable to the loans under the Credit Facilities are based on a fluctuating rate measured by reference to either, at US Corp.’s option, (i) a base rate, plus an applicable margin, subject to adjustment, or (ii) an adjusted London interbank offered rate (adjusted for maximum reserves) (“LIBOR”), plus an applicable margin. The initial margin for all borrowings is 2.25% with respect to base rate borrowings and 3.25% with respect to LIBOR borrowings. The interest rate at June 30, 2009 was 3.85%. During an event of default, default interest is payable at a rate that is 2% higher than the rate otherwise applicable. In addition to paying interest on outstanding principal under the Credit Facilities, US Corp. is required to pay an unused commitment fee to the lenders in respect of any unutilized commitments under the Revolving Credit Facility at a rate of 0.50% per annum. US Corp. is also required to pay customary letter of credit fees.

The Credit Facilities require US Corp. to prepay outstanding loans, subject to certain exceptions, with:

• 50% of the net proceeds arising from the issuance or sale by the Company of its own stock;

• 100% of the net proceeds of any incurrence of debt, other than proceeds from debt permitted under the Credit Facilities; and

• 100% of the net proceeds of certain asset sales and casualty events, subject to a right to reinvest the proceeds.

The foregoing mandatory prepayments will be applied first to the Term Loan Facility and second to the Revolving Credit Facility.

The Term Loan Facility will amortize in quarterly installments, which began on June 30, 2008, in aggregate annual amounts equal to 1% (year 1), 10% (years 2 and 3), 15% (years 4 and 5), and 49% (year 6) of the original funded principal amount of such facility. Principal repayments will be $3.7 million in 2009, $4.8 million in 2010, $6.6 million in 2011, $7.2 million in 2012, $19.4 million in 2013 and $5.9 million in 2014. Principal amounts outstanding under the Revolving Credit Facility are due and payable in full on April 30, 2013.

The Company and all material US subsidiaries of US Corp. guarantee the obligations under the Credit Agreement. All future material U.S. subsidiaries of the Company, as well as certain future Canadian subsidiaries, will guarantee the obligations under the Credit Agreement as well. In addition, the Credit Facilities and the guarantees are secured by the capital stock of US Corp. and certain other subsidiaries of the Company and substantially all other tangible and intangible assets owned by the Company, US Corp. and each subsidiary that guarantees the obligations of US Corp. under the Credit Facilities, subject to certain specified exceptions.

The Credit Agreement also contains certain restrictive covenants, including financial covenants that require the Company to maintain (i) a maximum consolidated leverage ratio, (ii) a minimum consolidated fixed charge coverage ratio and (iii) a maximum capital expenditure level. In addition, the Company was required to enter into interest rate contracts to provide protection against fluctuations in interest rates for 50% of the borrowed amount as required by the Credit Agreement.

Consolidated Balance Sheets

At June 30, 2009, cash and cash-equivalents totaled $96.6 million, up $28.9 million from $67.7 million at December 31, 2008. The increase is primarily related to favorable operating cash flows.

Selected balance sheet highlights at June 30, 2009 are as follows:

• Restricted cash totaling $14.1 million relates to cash balances required to be maintained in accordance with various state statutes, contractual terms with customers and other customer restrictions related to the PBM business. The Company continues to monitor changes in balance requirements that may release restrictions and allow the funds to be used for general corporate purposes.

• Rebates receivable of $22.5 million relate to billed and unbilled PBM receivables from pharmaceutical manufacturers in connection with the administration of the rebate program where the Company is the principal contracting party. The receivable and related payables are based on estimates, which are subject to final settlement. Rebates receivable decreased $7.1 million from $29.6 million at December 31, 2008, due primarily to improved collections of rebates.

• Prepaid expenses and other assets increased $1.2 million to $5.6 million at June 30, 2009 compared to $4.4 million at December 31, 2008, due primarily to the renewal of the Company’s corporate insurance policies in the second quarter of 2009 which expire in 2010.

• The Company’s inventory balance of $6.1 million consists predominately of prescription drugs and medical supplies at its Mail Service and Specialty Service pharmacies. Changes in the inventory balance from period to period are caused by some seasonality in certain products, taking advantage of buying opportunities and changing inventory levels to properly support sales.

• Other assets of $1.3 million consist primarily of security deposits related to the Company’s inventory facilities.

• Customer deposits payable of $12.6 million relate to deposits required by the Company from certain customers in order to satisfy liabilities incurred on the customer’s behalf for the adjudication of pharmacy claims, and is related to the restricted cash balances outlined above.

• Total long-term debt decreased $1.3 million to $46.3 million at June 30, 2009 from $47.6 million at December 31, 2008 due to quarterly installment payments made in 2009.

• Accrued liabilities decreased $6.2 million to $25.8 million at June 30, 2009 from $32.0 million at December 31, 2008 due primarily to final adjustments made to the fair values of assumed liabilities related to the NMHC acquisition. In addition, the decrease is due to payments on previously recorded liabilities related to the NMHC acquisition.

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Cash flows from operating activities:

For the six months ended June 30, 2009, the Company generated $31.7 million of cash through its operations. Cash from operations consisted of net income of $19.7 million adjusted for $9.2 million in depreciation and amortization, $1.4 million in stock-based compensation expense, a reduction of rebates receivable of $7.1 million, an increase in deferred revenue of $0.5 million, an increase in rebates payable of $9.5 million and an increase in customer deposits of $0.8 million. These were partially offset by a reduction of accrued liabilities of $6.0 million, an increase in prepaid expenses of $1.2 million and an increase in restricted cash of $1.6 million.

Changes in the Company’s cash from operations results primarily from the timing of collections on its accounts receivable and payment or processing of its various accounts payable and accrued liabilities. The Company continually monitors its balance of trade accounts receivable and devotes ample resources to collection efforts on those balances. Rebates receivable and the related payable are primarily estimates based on claims submitted. Rebates are typically paid to customers on a quarterly basis upon receipt of the billed funds from the pharmaceutical manufacturers. The timing of the payments to customers and collections from pharmaceutical manufacturers on rebates causes fluctuations on the balance sheet, as well as in the Company’s cash from operating activities.

Changes in non-cash items such as depreciation and amortization are caused by the purchase and acquisition of capital and intangible assets. In addition, as assets become fully depreciated or amortized, the related expenses will decrease.

Changes in operating assets and liabilities, as well as non-cash items related to income taxes, will fluctuate based on working capital requirements and the tax provision, which is determined by examining taxes actually paid or owed, as well as amounts expected to be paid or owed in the future.

For the six months ended June 30, 2008, the Company generated $17.0 million of cash through its operations. Cash from operations consisted of net income of $6.6 million adjusted for $5.9 million in depreciation and amortization, $2.1 million in stock-based compensation expense, a reduction of accounts receivable of $12.8 million, a reduction in rebate receivable of $1.2 million and an increase in accounts payable of $1.3 million. These were partially offset by a reduction of accrued liabilities of $5.7 million, an increase in restricted cash of $4.3 million, a reduction in pharmacy benefit claim payments payable of $1.5 million and a reduction in pharmacy benefit management rebates payable of $2.4 million.

Cash flows from investing activities

For the six months ended June 30, 2009, the Company used $7.9 million of cash for investing activities, which consisted primarily of purchases of property and equipment to support increased transaction volume. In addition, the Company used $2.0 million to purchase the assets of a small pharmacy system in June 2009 (see Note 4 to the unaudited consolidated financial statements for more information).

As the Company grows, it continues to purchase capital assets to support increases in network capacity and personnel. The Company monitors and budgets these costs to ensure the expenditures aid in its strategic growth plan.

For the six months ended June 30, 2008, the Company used $104.7 million of cash for investing activities, which consisted primarily of the acquisition of NMHC for $101.7 million in cash disbursements, along with the purchases of property and equipment to support increased transaction volume.

Cash flows from financing activities

For the six months ended June 30, 2009, the Company generated $5.1 million of cash from financing activities, which consisted of proceeds from the exercise of stock options of $4.3 million and a $2.1 million tax benefit on the exercise of stock options, partially offset by repayments of long-term debt of $1.3 million.

Cash flows from financing activities generally fluctuate based on the timing of option exercises by the Company’s employees, which is affected by market prices, vesting dates and expiration dates. In addition, the Company is required to make quarterly principal and interest payments on its long-term debt, which varies based on the loan’s repayment schedule and respective interest rates.

For the six months ended June 30, 2008, the Company generated $46.8 million of cash from financing activities, which consisted of the net proceeds from the issuance of long-term debt of $46.5 million along with proceeds from the exercise of stock options of $0.3 million.

Future Capital Requirements

The Company’s future capital requirements depend on many factors, including its product development programs. The Company expects to fund the growth of its business through cash flows from operations and its cash and cash equivalents. The Company expects that purchases of property and equipment will remain consistent with the prior year. The Company cannot provide assurance that its actual cash requirements will not be greater than expected as of the date of this report. The Company will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services and technologies, which might impact liquidity requirements or cause the issuance of additional equity or debt securities. Any issuance of additional equity or debt securities may result in dilution to shareholders, and the Company cannot be certain that additional public or private financing will be available in amounts or on terms acceptable to the Company, or at all.

If sources of liquidity are not available or if it cannot generate sufficient cash flow from operations during the next twelve months, the Company might be required to obtain additional funds through operating improvements, capital markets transactions, asset sales or financing from third parties or a combination thereof. The Company cannot provide assurance that these additional sources of funds will be available or, if available, will have reasonable terms.

If adequate funds are not available, the Company may have to substantially reduce or eliminate expenditures for marketing, research and development and testing of proposed products, or obtain funds through arrangements with partners that require the Company to relinquish rights to certain of its technologies or products. There can be no assurance that the Company will be able to raise additional capital if its capital resources are exhausted. A lack of liquidity and an inability to raise capital when needed may have a material adverse impact on the Company’s ability to continue its operations or expand its business.

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Contingencies

From time to time in connection with its operations, the Company is named as a defendant in actions for damages and costs allegedly sustained by the plaintiffs. The Company has considered these proceedings and disputes in determining the necessity of any reserves for losses that are probable and reasonably estimable. In addition, various aspects of the Company’s business may subject it to litigation and liability for damages arising from errors in processing prescription drug claims, failure to meet performance measures within certain contracts relating to its services or its ability to obtain certain levels of discounts for rebates on prescription purchases from retail pharmacies and drug manufacturers, or other actions or omissions. The Company’s recorded reserves are based on estimates developed with consideration given to the potential merits of claims or quantification of any performance obligations. The Company takes into account its history of claims, the limitations of any insurance coverage, advice from outside counsel, and management’s strategy with regard to the settlement or defense of such claims and obligations. While the ultimate outcome of those claims, lawsuits or performance obligations cannot be predicted with certainty, the Company believes, based on its understanding of the facts of these claims and performance obligations, that adequate provisions have been recorded in the accounts where required.

The Company provides routine indemnification to its customers against liability if the Company’s products infringe on a third party’s intellectual property rights. The maximum amount of these indemnifications cannot be reasonably estimated due to their uncertain nature. Historically, the Company has not made payments related to these indemnifications.

During the routine course of securing new clients, the Company is sometimes required to provide payment and performance bonds to cover client transaction fees and any funds and pharmacy benefit claim payments provided by the client in the event that the Company does not perform its duties under the contract. The terms of these payment and performance bonds are typically one year in duration and may require renewals for the length of the contract period.

Contractual Obligations

For the three months ended June 30, 2009, there have been no significant changes to the Company’s contractual obligations as disclosed in its 2008 Annual Report on Form 10-K.

Outstanding Securities

As of July 31, 2009, the Company had 24,644,964 common shares outstanding, 1,725,564 options outstanding and 266,633 restricted stock units outstanding. The options are exercisable on a one-for-one basis into common shares and, upon vesting, the restricted stock units convert into common shares on a one-for-one basis.

Critical Accounting Estimates

See Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates in the 2008 Annual Report on Form 10-K for a discussion of the Company’s critical accounting estimates.

Recent Accounting Standards

FASB Statement No. 165

In June 2009, the FASB issued Statement No. 165, Subsequent Events (“SFAS 165”), which establishes general requirements of accounting and disclosure of events that occur after the balance sheet date, but before the financial statements are issued. SFAS 165 was effective for the Company’s interim period ending June 30, 2009 and its adoption did not have a material impact to the Company’s consolidated financial statements.

FASB Statement No. 161

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133 (“SFAS 161”), which amends and expands the disclosure requirements of SFAS 133. SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 was effective for the Company’s fiscal year beginning January 1, 2009, and its adoption did not have a material impact to the Company.

FASB Statement No. 141(R)

In December 2007, the FASB issued Statement No. 141 (revised 2007), Business Combinations (“SFAS 141(R)”), which applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more businesses. SFAS 141(R) establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the assets, liabilities, noncontrolling interest and goodwill related to a business combination. SFAS 141(R) also establishes what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009.

FASB Statement No. 160

In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS 160”), which establishes accounting and reporting standards for entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. A noncontrolling interest (previously referred to as a minority interest) is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. SFAS 160 was effective for the Company’s fiscal year beginning January 1, 2009, and will be applied prospectively to all noncontrolling interests, including those that arose before the effective date, and its adoption did not have a material impact to the Company.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk in the normal course of its business operations, including the risk of loss arising from adverse changes in interest rates and foreign exchange rates with Canada.

There has been no material change in the Company’s exposure to market risk during the three months ended June 30, 2009.

ITEM 4. Controls and Procedures

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation”).

In designing and evaluating the disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. Based on the Evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q, were effective at the reasonable assurance level to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in United States Securities and Exchange Commission rules and forms, and were effective to ensure that the information required to be disclosed in the reports filed or submitted by the Company under the Exchange Act, was accumulated and communicated to management, including to the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure.

There has been no change in the Company’s internal controls over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f)) during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

In the ordinary course of business, the Company may become subject to legal proceedings and claims. The Company is not aware of any legal proceedings or claims, which, in the opinion of management, will have a material effect on its financial condition, results of operations or cash flows. However, the results of legal proceedings cannot be predicted with certainty. If the Company failed to prevail in any of these legal matters or if several of these legal matters were resolved against the Company in the same reporting period, the operating results of a particular reporting period could be materially adversely affected. The Company can give no assurance, however, that its operating results and financial condition will not be materially adversely affected, or that the Company will not be required to materially change its business practices, based on: (i) future enactment of new healthcare or other laws or regulations; (ii) the interpretation or application of existing laws or regulations, as they may relate to the Company’s business or the pharmacy benefit management industry; (iii) pending or future federal or state governmental investigations of the Company’s business or the pharmacy benefit management industry; (iv) institution of government enforcement actions against the Company; or (v) adverse developments in other pending or future legal proceedings against the Company or affecting the pharmacy benefit management industry.

ITEM 1A. Risk Factors

In the second quarter of 2009, there have been no material changes from the risk factors previously disclosed in Item 1A of the Company’s 2008 Annual Report on Form 10-K.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3. Defaults Upon Senior Securities

None.

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

The Annual and Special Meeting of Shareholders of the Company (the “Meeting”) was held on May 13, 2009. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to the board of directors’ solicitation. Voting results are for shares eligible to vote as of the record date.

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Nominees for directors, as listed in the proxy statement, were elected as indicated below. Votes were cast as follows:

Nominee	For		Withheld
Terrence C. Burke		21,723,278		61,955
William J. Davis		21,723,278		61,955
Philip R. Reddon		21,723,278		61,955
Mark A. Thierer		21,723,278		61,955
Steven Cosler		21,723,278		61,955
Curtis Thorne		21,723,278		61,955
Anthony Masso		21,723,278		61,955

The shareholders confirmed, ratified and approved the LTIP adopted by the board of directors of the Company on March 11, 2009 and attached as Appendix A to the proxy circular and proxy statement prepared in connection with the Meeting. There was a ballot conducted and 18,566,119 shares were voted FOR the resolution, being 89.8% of the shares voted at the Meeting, and 2,108,870 shares were voted against AGAINST the resolution, being 10.2% of the shares voted at the Meeting.

The shareholders ratified the appointment of KPMG LLP as the independent registered public accounting firm of the Company for 2009. Votes were cast as follows:

For	Withheld
21,587,491	197,743

ITEM 5. Other Information

None.

ITEM 6. Exhibits

Exhibit
Number	Description of Document	Reference
10.1	SXC Health Solutions Corp. Long-Term Incentive Plan	Incorporated by reference to Exhibit 10.1 to SXC Health Solutions Corp.’s Current Report on Form 8-K filed on May 19, 2009.
10.2	Form of SXC Health Solutions Corp. Stock Option Agreement for certain Employees under the SXC Health Solutions Corp. Long-Term Incentive Plan	Filed herewith
10.3	Form of SXC Health Solutions Corp. Time-Vesting Restricted Stock Unit Award Agreement for certain Employees under the SXC Health Solutions Corp. Long-Term Incentive Plan	Filed herewith
10.4	Form of SXC Health Solutions Corp. Time-Vesting Restricted Stock Unit Award Agreement for Non-Employee Directors under the SXC Health Solutions Corp. Long-Term Incentive Plan	Filed herewith
10.5	Form of SXC Health Solutions Corp. Performance-Based Restricted Stock Unit Award Agreement for certain Employees under the SXC Health Solutions Corp. Long-Term Incentive Plan	Filed herewith
31.1	Rule 13a-14(a)/15d-14(a) Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act	Filed herewith
31.2	Rule 13a-14(a)/15d-14(a) Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act	Filed herewith
32.1	Section 1350 Certification of CEO as adopted by Section 906 of the Sarbanes-Oxley Act	Filed herewith
32.2	Section 1350 Certification of CFO as adopted by Section 906 of the Sarbanes-Oxley Act	Filed herewith

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SIGNATURE

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

	SXC Health Solutions Corp.
August 6, 2009	By:	/s/ Jeffrey Park
		Jeffrey Park
		Chief Financial Officer (on behalf of the registrant and as Chief Accounting Officer)

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EXHIBIT INDEX

Exhibit
Number	Description of Document	Reference
10.1	SXC Health Solutions Corp. Long-Term Incentive Plan	Incorporated by reference to Exhibit 10.1 to SXC Health Solutions Corp.’s Current Report on Form 8-K filed on May 19, 2009.
10.2	Form of SXC Health Solutions Corp. Stock Option Agreement for certain Employees under the SXC Health Solutions Corp. Long-Term Incentive Plan	Filed herewith
10.3	Form of SXC Health Solutions Corp. Time-Vesting Restricted Stock Unit Award Agreement for certain Employees under the SXC Health Solutions Corp. Long-Term Incentive Plan	Filed herewith
10.4	Form of SXC Health Solutions Corp. Time-Vesting Restricted Stock Unit Award Agreement for Non-Employee Directors under the SXC Health Solutions Corp. Long-Term Incentive Plan	Filed herewith
10.5	Form of SXC Health Solutions Corp. Performance-Based Restricted Stock Unit Award Agreement for certain Employees under the SXC Health Solutions Corp. Long-Term Incentive Plan	Filed herewith
31.1	Rule 13a-14(a)/15d-14(a) Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act	Filed herewith
31.2	Rule 13a-14(a)/15d-14(a) Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act	Filed herewith
32.1	Section 1350 Certification of CEO as adopted by Section 906 of the Sarbanes-Oxley Act	Filed herewith
32.2	Section 1350 Certification of CFO as adopted by Section 906 of the Sarbanes-Oxley Act	Filed herewith

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EX-10.2

Exhibit 10.2

Agreement Number#                    

SXC Health Solutions Corp.
STOCK OPTION AGREEMENT

THIS STOCK OPTION AGREEMENT dated the                       day of                      , 20          
BETWEEN:

SXC Health Solutions Corp.,
a corporation incorporated under the laws of the Yukon Territory, Canada,

(hereinafter called the “Corporation”)

- - and -

[Name]

(hereinafter called the “Optionee”),

as follows:

1) Pursuant to the SXC Health Solutions Corp. Long-Term Incentive Plan, as amended from time to time (the “Plan”), the Corporation hereby grants to the Optionee on the date hereof (the “Grant Date”) the option (the “Option”) to purchase up to                      common shares (the “Common Shares”) of the authorized and unissued capital stock of the Corporation, as presently constituted, for cash, at a price of US$           per Common Share, upon the terms and conditions set out herein. The Option is not intended to qualify as an incentive stock option within the meaning of Section 422(b) of the United States Internal Revenue Code of 1986, as amended (the “Code”), and the provisions hereof shall be construed consistent with that intent. Capitalized terms not defined herein shall have the meanings specified in the Plan.

a)

Date of Exercise. On the first, second, third and fourth anniversary of the Grant Date, the Option shall become exercisable with respect to twenty-five percent (25%) of the total number of Common Shares subject to the Option (computed in each case to the nearest full share) (the “Exercisable Portion”), and all or any part of the Common Shares as to which the Option shall have become exercisable may be purchased at any time, or from time to time, thereafter, until expiration or termination of the Option.

b)

Expiration of Option. The Option shall expire with respect to each Exercisable Portion, and all rights to purchase Common Shares comprising such Exercisable Portion hereunder shall cease and become null and void, at 5:00 o’clock p.m. (Chicago time) on the date which is seven years after the Grant Date (the “Expiration Date”) or upon the happening of certain events as hereinafter provided.

c) Method of Exercise. The Option may only be exercised by the Optionee, or by the person or persons entitled to exercise the same pursuant to the provisions of subparagraph (f) below, on or prior to the Expiration Date, by: (i) the delivery to the Corporation at its head office of written notice of election to exercise the same, specifying the number of Common Shares with respect to which the Option is being exercised, and accompanied by payment in full of the purchase price of the Common Shares then purchased and any taxes required to be paid in connection with such exercise by way of cash or certified check in favor of the Corporation, or (ii) under the terms of the Corporation’s cashless exercise program, which is subject to change, specifying the number of Common Shares with respect to which the Option is being exercised and accompanied by payment in full of any taxes required to be paid in connection with such cashless exercise. Concurrently with its receipt of any such notice and payment, the Corporation shall issue the Common Shares purchased by the Optionee. The Corporation may at its election require that this Agreement be presented for appropriate endorsement upon any such exercise.

d) Compliance with Applicable Law. THE GRANTING OF THE OPTION AND THE ISSUANCE OF COMMON SHARES UPON EXERCISE OF THE OPTION SHALL BE CARRIED OUT IN COMPLIANCE WITH APPLICABLE STATUTES AND WITH REGULATIONS OF GOVERNMENTAL AUTHORITIES AND APPLICABLE STOCK EXCHANGES AND SHALL BE CONDITIONAL UPON ALL NECESSARY APPROVALS BEING OBTAINED. IF THE FOREGOING CONDITION IS NOT SATISFIED, THIS AGREEMENT SHALL BE VOID AND OF NO FORCE OR EFFECT AS OF THE DATE OF EXECUTION AND THE CORPORATION AND THE OPTIONEE SHALL BE RELEASED FROM ANY AND ALL RIGHTS, BENEFITS, OBLIGATIONS AND LIABILITIES HEREUNDER OR ARISING HEREFROM. The Optionee hereby acknowledges and undertakes to comply, to the satisfaction of the Corporation and its counsel, with all applicable requirements of any stock exchange or exchanges upon which any securities of the Corporation may from time to time be listed and of any applicable securities regulatory authorities. Such requirements may include the placing of legends on share certificates restricting transfer of such Common Shares, the making of representations by the Optionee that he or she is acquiring such Common Shares for investment and not with a view to distribution, the filing of any required information or statements with the aforesaid authorities and the making of arrangements with the Optionee’s employer to withhold income taxes which may become payable under the Optionee’s exercise of the Option under this Agreement.

e) Options Not Assignable. The Option shall not be transferable or assignable other than by will or by the laws of descent and distribution or pursuant to Section 12.5 of the Plan on a beneficiary designation form approved by the Corporation.

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f) Exercise in the Event of Death or Termination of Employment. Subject to the terms of any written employment agreement between the Corporation or any affiliate or subsidiary of the Corporation and the Optionee or, in the absence of any such agreement, to the following provisions of this subparagraph 1(f), the Option and all rights to purchase Common Shares pursuant hereto shall expire and terminate immediately upon the Optionee ceasing to be an employee, officer or director of, or ceasing to provide services to, the Corporation or an affiliate or subsidiary of the Corporation:

i) Exercise Upon Death: If the Optionee shall die (A) while an employee, officer or director of or providing services to the Corporation, or of an affiliate or subsidiary of the Corporation, or (B) within thirty (30) days after termination of the Optionee’s employment, office or directorship with or service to the Corporation, or an affiliate or subsidiary of the Corporation, in accordance with clause (ii) or (iii) below, the Option may be exercised, to the extent that the Optionee shall have been entitled to do so at the date of death, by the person or persons to whom the Optionee’s rights under the Option pass by will or applicable law, or if no such person has such right, by the Optionee’s executors or administrators at any time, or from time to time, within twelve (12) months from the date when the Secretary of the Corporation shall have given notice of this clause to the executors or administrators of the Optionee following the Optionee’s death, but in no event later than the Expiration Date.

ii) Exercise Upon Permanent Disability: If an Optionee’s (or, if the Optionee is a personal holding company controlled by, or a registered retirement savings plan established by, an officer, director, employee or service provider, then if such person’s) employment, office or directorship with or services to the Corporation, or an affiliate or subsidiary of the Corporation, shall terminate because of the Optionee’s permanent disability, the Optionee may exercise the Option, to the extent the Optionee may be entitled to at the date of the termination of the Optionee’s employment, office, directorship or services, at any time, or from time to time, within six (6) months of the effective date of the termination of the Optionee’s employment, office, directorship or services, but in no event later than the Expiration Date. For purposes of this Agreement, “permanent disability” shall mean the inability of the Optionee to substantially perform his or her duties for a continuous period of at least six months as determined by the Compensation Committee (the “Committee”) of the Board of Directors of the Corporation.

iii) Exercise Upon Termination for Cause: If the Optionee’s (or, if the Optionee is a personal holding company controlled by, or a registered retirement savings plan established by, an officer, director, employee or service provider, then if such person’s) employment, office, directorship with or services to the Corporation, or an affiliate or subsidiary of the Corporation, shall be terminated for cause, the Optionee may exercise the Option, to the extent that the Optionee would be entitled to do so at the date of the termination of his or her employment, office, directorship or services, at any time or from time to time, within thirty (30) days of the date of termination of the Optionee’s employment, office, directorship or services, but in no event later than the Expiration Date.

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For purposes of this Agreement, “cause” shall have the meaning ascribed thereto in any written employment agreement between the Corporation or any affiliate or subsidiary of the Corporation and the Optionee and, in the absence of any such agreement, shall mean the willful and continued failure to substantially perform the duties assigned by the Corporation (other than a failure resulting from the Optionee’s disability), the willful engaging in conduct which is demonstrably injurious to the Corporation or any affiliate or subsidiary of the Corporation, monetarily or otherwise, including conduct that, in the reasonable judgment of the Corporation, no longer conforms to the standard of the Corporation’s executives or employees, any act of dishonesty, commission of a felony, or a significant violation of any statutory or common law duty of loyalty to the Corporation.

iv) Exercise Upon Other Terminations: If the Optionee’s (or, if the Optionee is a personal holding company controlled by, or a registered retirement savings plan established by, an officer, director, employee or service provider, then if such person’s) employment, office or directorship with or services to the Corporation, or an affiliate or subsidiary of the Corporation, shall terminate for any reason other than for cause or upon the Optionee’s death or permanent disability, the Optionee may exercise the Option, to the extent that the Optionee may be entitled to do so at the date of the termination of the Optionee’s employment, office, directorship or services, at any time or from time to time, within ninety (90) days of the date of termination of the Optionee’s employment, office, directorship or services; but in no event later than the Expiration Date.

g) Required Approvals. If at any time, the Committee shall determine, in its discretion, that the registration, qualification or other approval of or in connection with the Plan or the Common Shares covered thereby is necessary or desirable under any provincial, state, or federal law, then the Option may not be exercised, in whole or in part, unless and until such registration, qualification or approval shall have been obtained, free of any condition not acceptable to the Committee of the Corporation. The Optionee shall, to the extent applicable, cooperate with the Corporation in relation thereto and shall have no claim or cause of action against the Corporation or any of its officers, directors or shareholders as the result of any failure by the Corporation to take any steps to obtain any such registration, qualification or approval.

h) Adjustment to Number of Shares. Subject to any rules under Section 409A of the Code required to be applied to an Option in order for the Option to not constitute nonqualified deferred compensation under such Section, and subject to any required approvals of applicable regulatory authorities and stock exchanges, and in accordance with Section 12.4 of the Plan, in the event of any merger, reorganization, consolidation, recapitalization, dividend (other than a regular cash dividend) or distribution (whether in cash, shares or other property), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Common Shares or the value thereof, such adjustments and other substitutions shall be made to the Plan and to the Option as the Committee, in its sole discretion

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and in accordance with Section 409A of the Code, deems equitable or appropriate, including such adjustments in the aggregate number, class and kind of securities that may be delivered under the Plan and, in the aggregate or to any one Optionee, in the number, class, kind and option or exercise price of securities subject to outstanding Options granted under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) as the Committee may determine to be appropriate in its sole discretion; provided, however, that the number of Common Shares subject to any Option shall always be a whole number.

i) No Rights as Shareholder. The Optionee shall not have any rights as a shareholder with respect to any Common Shares subject to the Option prior to the date of issuance to the Optionee of such Common Shares.

2) Option and Employment. Nothing in this Agreement shall confer upon the Optionee any right with respect to continuance of employment or as an officer or director with or service provider to the Corporation, or any affiliate or subsidiary of the Corporation, nor shall it interfere in any way with the right of the Corporation, or any affiliate or subsidiary of the Corporation, by which the Optionee is employed or of which the Optionee is a director or service provider to terminate the Optionee’s employment or directorship or services at any time in accordance with applicable law.

3) Effect of Change in Control.

a) In the event of a Change in Control (as defined in Appendix A), notwithstanding the provisions of subsection 1(a) of this Agreement, the Option shall immediately become exercisable in full.

b) In the event of a Change in Control pursuant to paragraph (1) or (2) of Appendix A, the Board of Directors (as constituted prior to such Change in Control) may, in its discretion (subject to existing contractual arrangements), require that the Option, in whole or in part, be surrendered to the Corporation by the Optionee and be immediately cancelled by the Corporation, and provide for the Optionee to receive a cash payment from the Corporation in an amount equal to the number of Common Shares subject to the Option immediately prior to such cancellation (but after giving effect to any adjustment pursuant to Section 6(b) of the Plan in respect of any transaction that gives rise to such Change in Control), multiplied by the excess, if any, of (i) the greater of (A) the highest per share price offered to holders of common stock in any transaction whereby the Change in Control takes place and (B) the Fair Market Value of a Common Share on the date on which such Change of Control occurs over (ii) the exercise price.

c) In the event of a Change in Control pursuant to paragraph (3) or (4) of Appendix A, the Board of Directors (as constituted prior to such Change in Control) may, in its discretion (subject to existing contractual arrangements):

(i) require that shares of stock of the corporation resulting from such Change in Control, or a parent corporation thereof, be substituted for some or all of the Common Shares subject to the Option, with an appropriate and equitable adjustment to the exercise price of such Option, as determined by the Board of Directors, such adjustment to be made without an increase in the aggregate purchase price; and/or

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(ii) require the Option, in whole or in part, to be surrendered to the Corporation by the Optionee, and to be immediately cancelled by the Corporation, and provide for the Optionee to receive (a) a cash payment in an amount not less than the amount determined by multiplying the number of Common Shares subject to the Option immediately prior to such cancellation (but after giving effect to any adjustment pursuant to Section 6(b) of the Plan in respect of any transaction that gives rise to such Change in Control), by the excess, if any, of the highest per share price offered to holders of common stock in any transaction whereby the Change in Control takes place over the exercise price, (b) shares of stock of the corporation resulting from such Change in Control, or a parent corporation thereof, having a Fair Market Value not less than the amount determined under clause (a) above or (c) a combination of a payment of cash pursuant to clause (a) above and the issuance of shares pursuant to clause (b) above.

4) Plan Incorporated into Agreement. The Optionee acknowledges receipt of a copy of the Plan, the terms of which are incorporated into this Agreement by reference. In the event of any conflict between the terms of the Plan and this Agreement, the terms of the Plan shall prevail.

5) General. Time shall be of the essence hereof. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns, as the case may be. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

DATED as of the date first above written.
		SXC HEALTH SOLUTIONS CORP.
	)	By:
	)		Name:
			Title:
	)
Witness	)	Signature of Optionee
	) ) )
		Type or print name of Optionee

Plan Coordinator
Stacey Martinez
Director of Finance & Corporate Controller
2441 Warrenville Road Suite 610

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Lisle, IL 60532-3642
Telephone: 630-577-4644

E-mail: stacey.martinez@sxc.com

Chief Financial Officer
Jeff Park
2441 Warrenville Road Suite 610
Lisle, IL 60532-3642
Facsimile: 630-328-2190

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Appendix A to SXC Health Solutions Corp.
Stock Option Agreement for Employees

For purposes of this Agreement “Change in Control” shall mean:

(1) the acquisition by any individual, entity or group (a “Person”), including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of more than 50% of either (i) the then outstanding shares of common stock of the Corporation (the “Outstanding Corporation Common Stock”) or (ii) the combined voting power of the then outstanding securities of the Corporation entitled to vote generally in the election of directors (the “Outstanding Corporation Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Corporation (excluding any acquisition resulting from the exercise of a conversion or exchange privilege in respect of outstanding convertible or exchangeable securities unless such outstanding convertible or exchangeable securities were acquired directly from the Corporation), (B) any acquisition by the Corporation, (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation or (D) any acquisition by any corporation pursuant to a reorganization, merger or consolidation involving the Corporation, if, immediately after such reorganization, merger or consolidation, each of the conditions described in clauses (i), (ii) and (iii) of subsection (3) of this Appendix A shall be satisfied; and provided further that, for purposes of clause (B), if any Person (other than the Corporation or any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation) shall become the beneficial owner of more than 50% of the Outstanding Corporation Common Stock or more than 50% of the Outstanding Corporation Voting Securities by reason of an acquisition by the Corporation and such Person shall, after such acquisition by the Corporation, become the beneficial owner of any additional shares of the Outstanding Corporation Common Stock or any additional Outstanding Corporation Voting Securities and such beneficial ownership is publicly announced, such additional beneficial ownership shall constitute a Change in Control;

(2) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of such Board; provided, however, that any individual who becomes a director of the Corporation subsequent to the date hereof whose election, or nomination for election by the Corporation’s shareholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed to have been a member of the Incumbent Board; and provided further, that no individual who was initially elected as a director of the Corporation as a result of an actual or threatened solicitation by a Person other than the Board for the purpose of opposing a solicitation by any other Person with respect to the election or removal of directors or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall be deemed to have been a member of the Incumbent Board;

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(3) consummation of a reorganization, merger or consolidation unless, in any such case, immediately after such reorganization, merger or consolidation, (i) 50% or more of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and 50% or more of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals or entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and the Outstanding Corporation Voting Securities immediately prior to such reorganization, merger or consolidation and in substantially the same proportions relative to each other as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Corporation Common Stock and the Outstanding Corporation Voting Securities, as the case may be, (ii) no Person (other than the Corporation, any employee benefit plan (or related trust) sponsored or maintained by the Corporation or the corporation resulting from such reorganization, merger or consolidation (or any corporation controlled by the Corporation) and any Person which beneficially owned, immediately prior to such reorganization, merger or consolidation, directly or indirectly, more than 50% of the Outstanding Corporation Common Stock or the Outstanding Corporation Voting Securities, as the case may be) beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of common stock of such corporation or more than 50% of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such reorganization, merger or consolidation; or

(4) consummation of (i) a plan of complete liquidation or dissolution of the Corporation or (ii) the sale or other disposition of all or substantially all of the assets of the Corporation other than to a corporation with respect to which, immediately after such sale or other disposition, (A) 50% or more of the then outstanding shares of common stock thereof and 50% or more of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and the Outstanding Corporation Voting Securities immediately prior to such sale or other disposition and in substantially the same proportions relative to each other as their ownership, immediately prior to such sale or other disposition, of the Outstanding Corporation Common Stock and the Outstanding Corporation Voting Securities, as the case may be, (B) no Person (other than the Corporation, any employee benefit plan (or related trust) sponsored or maintained by the Corporation or such corporation (or any corporation controlled by the Corporation) and any Person which beneficially owned, immediately prior to such sale or other disposition, directly or indirectly, more than 50% of the Outstanding Corporation Common Stock or the Outstanding Corporation Voting Securities, as the case may be) beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of common stock thereof or more than 50% of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors thereof were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition.

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EX-10.3

Exhibit 10.3

SXC HEALTH SOLUTIONS CORP.
RESTRICTED STOCK UNIT AWARD AGREEMENT

SXC Health Solutions Corp., a corporation existing under the laws of the Yukon Territory of Canada (the “Company”), hereby grants                      (the “Employee”) as of                     ,                      (the “Grant Date”), pursuant to Section 7.2 of the SXC Health Solutions Corp. Long-Term Incentive Plan (the “Plan”), a restricted stock unit award (the “Award”) of  _____  restricted stock units, upon and subject to the restrictions, terms and conditions set forth below. Capitalized terms not defined herein shall have the meanings specified in the Plan.

1. Award Subject to Acceptance of Agreement. The Award shall be null and void unless the Employee shall accept this Agreement by executing it in the space provided below and returning it to the Company.

2. Restriction Period and Vesting. (a) Subject to Section 2(e), the Award shall vest (i) with respect to one-quarter (1/4) of the restricted stock units subject to the Award on the first anniversary of the Grant Date, an additional one-quarter (1/4) of the restricted stock units subject to the Award on the second anniversary of the Grant Date, an additional one-quarter (1/4) of the restricted stock units subject to the Award on the third anniversary of the Grant Date, and the remaining one-quarter (1/4) of the restricted stock units subject to the Award on the fourth anniversary of the Grant Date, or (ii) earlier pursuant to Section 2(b) or (d) hereof (the “Restriction Period”).

(b) Subject to Section 2(e), if the Company terminates the Employee’s employment by reason of permanent disability or the Employee’s employment terminates due to death, the Award shall become fully vested as of the effective date of the Employee’s termination of employment or the date of death, as the case may be. For purposes of this Agreement, “permanent disability” shall mean the inability of the Employee to substantially perform his or her duties for a continuous period of at least six months as determined by the Committee.

(c) Subject to Section 2(e), if the Employee’s employment by the Company terminates for any reason other than permanent disability or death, the portion of the Award, if any, which is not vested as of the effective date of the Employee’s termination of employment shall be forfeited and cancelled by the Company.

(d) (1) In the event of a Change in Control (as defined in Appendix A), the Award shall immediately vest in full.

(2) In the event of a Change in Control pursuant to paragraph (3) or (4) of Appendix A, the Board of Directors (as constituted prior to such Change in Control) may, in its discretion (subject to existing contractual arrangements):

(i) require that shares of stock of the corporation resulting from such Change in Control, or a parent corporation thereof, be substituted for some or all of the Shares (as defined in Section 3) issuable pursuant to the Award, as determined by the Board of Directors; and/or

(ii) require the Award, in whole or in part, to be surrendered to the Company by the Employee and to be immediately cancelled by the Company, and provide for the Employee to receive a cash payment in an amount not less than the amount determined by multiplying the number of restricted stock units subject to the Award immediately prior to such cancellation (but after giving effect to any adjustment pursuant to Section 12.4 of the Plan in respect of any transaction that gives rise to such Change in Control) by the highest per share price offered to holders of shares of the Company’s common stock, no par value per share (the “Common Stock”), in any transaction whereby the Change in Control takes place.

(3) The Company may, but is not required to, cooperate with the Employee if the Employee is subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to assure that any cash payment or substitution in accordance with the foregoing to the Employee is made in compliance with Section 16 and the rules and regulations thereunder.

(e) The vesting terms in any written employment agreement between the Company or any Affiliate of the Company and the Employee shall prevail over the terms of this Agreement.

3. Conversion of Restricted Stock Units and Issuance of Shares. Upon the vesting of all or any portion of the Award in accordance with Section 2 hereof, one share of the Common Stock shall be issuable for each restricted stock unit that vests on such date (the “Shares”), subject to the terms and provisions of the Plan and this Agreement, and not later than 30 days thereafter, the Company will transfer such Shares to the Employee upon satisfaction of any required tax withholding obligations. No fractional shares shall be issued under this Agreement.

4. No Rights as a Shareholder; Dividend Equivalents. Prior to the issuance and transfer of Shares upon vesting, the Employee will be credited with amounts equal to any cash dividends that would be payable to the Employee if the Employee had been transferred such Shares, which amounts shall accrue during the Restriction Period and be paid in cash upon lapse of the Restriction Period. This Section 4 will not apply with respect to record dates for dividends occurring prior to the Grant Date or after the Restriction Period has lapsed. During the Restriction Period, the Employee (and any person succeeding to the Employee’s rights pursuant to the Plan) will not be a shareholder of record of the Shares underlying the Award and will have no voting or other shareholder rights with respect to such Shares.

5. Termination of Award. In the event that the Employee shall forfeit all or a portion of the restricted stock units subject to the Award, the Employee shall promptly return this Agreement to the Company for cancellation. Such cancellation shall be effective regardless of whether the Employee returns this Agreement.

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6. Additional Terms and Conditions of Award.

6.1 Nontransferability of Award. During the Restriction Period, the restricted stock units subject to the Award and not then vested may not be transferred by the Employee other than by will, the laws of descent and distribution or pursuant to Section 12.5 of the Plan on a beneficiary designation form approved by the Company. Except as permitted by the foregoing, during the Restriction Period, the restricted stock units subject to the Award and not then vested may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Any such attempted sale, transfer, assignment, pledge, hypothecation or encumbrance, or other disposition of such shares shall be null and void.

6.2. Withholding Taxes. As a condition precedent to the delivery to the Employee of any of the Shares subject to the Award, the Employee shall, upon request by the Company, pay to the Company (or shall cause a broker-dealer on behalf of the Employee to pay to the Company) such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the “Required Tax Payments”) with respect to the Award. If the Employee shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Employee. The Employee may elect to satisfy his or her obligation to advance the amount of any Required Tax Payments incurred in connection with the issuance and transfer of the Shares by any of the following means: (1) a cash payment to the Company, (2) delivery (either actual delivery or by attestation procedures established by the Company) to the Company of Common Stock having an aggregate Fair Market Value, determined as of the date the obligation to withhold or pay taxes arises in connection with an award (the “Tax Date”), equal to the amount necessary to satisfy any such obligation, (3) with the consent of the Committee (other than for “officers” (as defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended) or Directors, with respect to whom the consent of the Committee shall not be required), authorizing the Company to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the Tax Date, or withhold an amount of cash which would otherwise be payable to a holder, equal to the amount necessary to satisfy any such obligation, or (4) any combination of (1) and (2). Shares of Common Stock to be delivered or withheld may not have an aggregate Fair Market Value in excess of the amount determined by applying the minimum statutory withholding rate.

6.3. Compliance with Applicable Law. The Award is subject to the condition that if the listing, registration or qualification of the Shares subject to the Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the vesting of the restricted stock units or the delivery of the Shares hereunder, the Shares subject to the Award may not be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval.

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6.4. Delivery of Certificates. Subject to Section 6.2, as soon as practicable after the vesting of the Award, in whole or in part, the Company shall deliver or cause to be delivered one or more certificates issued in the Employee’s name (or such other name as is acceptable to the Company and designated in writing by the Employee) representing the number of vested shares. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 6.2.

6.5. Award Confers No Rights to Continued Employment. In no event shall the granting of the Award or its acceptance by the Employee give or be deemed to give the Employee any right to continued employment by the Company or any Affiliate of the Company.

6.6. Decisions of Board or Committee. The Board of Directors of the Company or the Committee shall have the right to resolve all questions which may arise in connection with the Award. Any interpretation, determination or other action made or taken by the Board of Directors or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive.

6.7. Company to Reserve Shares. The Company shall at all times prior to the cancellation of the Award reserve and keep available, either in its treasury or out of its authorized but unissued shares of Common Stock, the full number of unvested restricted stock units subject to the Award from time to time.

6.8. Agreement Subject to the Plan; Section 409A of the Code. This Agreement is subject to the provisions of the Plan (including the adjustment provision set forth in Section 12.4 thereof) and shall be interpreted in accordance therewith. The Employee hereby acknowledges receipt of a copy of the Plan. This Award is intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), as a “short-term deferral,” within the meaning of regulations issued under Section 409A of the Code, and this Agreement shall be interpreted and construed in accordance with such intent and in a manner that avoids the imposition of taxes and other penalties under Section 409A of the Code. The Company reserves the right to amend this Agreement to the extent it determines in its sole discretion such amendment is necessary or appropriate to comply with applicable law, including but not limited to Section 409A of the Code. Notwithstanding the foregoing, under no circumstances shall the Company be responsible for any taxes, penalties, interest or other losses or expenses incurred by the Employee due to any failure to comply with Section 409A of the Code.

7. Miscellaneous Provisions.

7.1. Meaning of Certain Terms. As used herein, the term “vest” shall mean no longer subject to forfeiture and all rights hereunder shall be deemed to be vested. As used herein, employment by the Company shall include employment by an Affiliate of the Company.

7.2. Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Employee, acquire any rights hereunder in accordance with this Agreement or the Plan.

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7.3. Notices. All notices, requests or other communications provided for in this Agreement shall be made in writing by (a) actual delivery to the party entitled thereto, (b) mailing to the last known address of the party entitled thereto, via certified or registered mail, return receipt requested or (c) telecopy with confirmation of receipt. The notice, request or other communication shall be deemed to be received, in the case of actual delivery, on the date of its actual receipt by the party entitled thereto, in the case of mailing, on the tenth calendar day following the date of such mailing, and in the case of telecopy, on the date of confirmation of receipt; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company.

7.4. Governing Law. This Agreement and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to conflicts of laws principles.

7.5 Reports Filed with the Securities and Exchange Commission. The Company files periodic and current reports and proxy statements with the Securities and Exchange Commission (“SEC”). These documents are available, free of charge, on the website of the SEC (www.sec.gov) and on the Company’s website (www.sxc.com, under Investor Relations/ Regulatory Filings), as soon as reasonably practicable after the material is filed with, or furnished to, the SEC. Any of these documents are available to the Employee in paper format, without charge, upon written or oral request to the Company’s Investor Relations Department located at 2441 Warrenville Road, Suite 610, Lisle, Illinois 60532, U.S.A., phone number (800) 282-3232.

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7.6. Counterparts. This Agreement may be executed in two counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument.

SXC HEALTH SOLUTIONS CORP.

By:

Accepted this                      day of
                    _, 200_

Employee

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Appendix A
to SXC Health Solutions Corp.
Restricted Stock Unit Award
Agreement for Employees

For purposes of this Agreement “Change in Control” shall mean:

(1) the acquisition by any individual, entity or group (a “Person”), including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of more than 50% of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of a conversion or exchange privilege in respect of outstanding convertible or exchangeable securities unless such outstanding convertible or exchangeable securities were acquired directly from the Company), (B) any acquisition by the Company, (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a reorganization, merger or consolidation involving the Company, if, immediately after such reorganization, merger or consolidation, each of the conditions described in clauses (i), (ii) and (iii) of subsection (3) of this Appendix A shall be satisfied; and provided further that, for purposes of clause (B), if any Person (other than the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company) shall become the beneficial owner of more than 50% of the Outstanding Company Common Stock or more than 50% of the Outstanding Company Voting Securities by reason of an acquisition by the Company and such Person shall, after such acquisition by the Company, become the beneficial owner of any additional shares of the Outstanding Company Common Stock or any additional Outstanding Company Voting Securities and such beneficial ownership is publicly announced, such additional beneficial ownership shall constitute a Change in Control;

(2) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of such Board; provided, however, that any individual who becomes a director of the Company subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed to have been a member of the Incumbent Board; and provided further, that no individual who was initially elected as a director of the Company as a result of an actual or threatened solicitation by a Person other than the Board for the purpose of opposing a solicitation by any other Person with respect to the election or removal of directors or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall be deemed to have been a member of the Incumbent Board;

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(3) consummation of a reorganization, merger or consolidation unless, in any such case, immediately after such reorganization, merger or consolidation, (i) 50% or more of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and 50% or more of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals or entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation and in substantially the same proportions relative to each other as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than the Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or the corporation resulting from such reorganization, merger or consolidation (or any corporation controlled by the Company) and any Person which beneficially owned, immediately prior to such reorganization, merger or consolidation, directly or indirectly, more than 50% of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of common stock of such corporation or more than 50% of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such reorganization, merger or consolidation; or

(4) consummation of (i) a plan of complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, immediately after such sale or other disposition, (A) 50% or more of the then outstanding shares of common stock thereof and 50% or more of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such sale or other disposition and in substantially the same proportions relative to each other as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (other than the Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or such corporation (or any corporation controlled by the Company) and any Person which beneficially owned, immediately prior to such sale or other disposition, directly or indirectly, more than 50% of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of common stock thereof or more than 50% of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors thereof were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition.

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SXC HEALTH SOLUTIONS CORP.

Long-Term Incentive Plan

BENEFICIARY DESIGNATION FORM

You may designate a primary beneficiary and a secondary beneficiary. You can name more than one person as a primary or secondary beneficiary. For example, you may wish to name your spouse as primary beneficiary and your children as secondary beneficiaries. Your secondary beneficiary(ies) will receive nothing if any of your primary beneficiaries survive you. All primary beneficiaries will share equally unless you indicate otherwise. The same rule applies for secondary beneficiaries.

Designate Your Beneficiary(ies):

Primary Beneficiary(ies):

Secondary Beneficiary(ies):

I certify that my designation of beneficiary set forth above is my free act and deed.

Name of Employee	Employee’s Signature
(Please Print)
	Date

9

EX-10.4

Exhibit 10.4

SXC HEALTH SOLUTIONS CORP.
RESTRICTED STOCK UNIT AWARD AGREEMENT

SXC Health Solutions Corp., a corporation existing under the laws of the Yukon Territory of Canada (the “Company”), hereby grants             (the “Director”) as of                     ,                      (the “Grant Date”), pursuant to Section 7.2 of the SXC Health Solutions Corp. Long-Term Incentive Plan (the “Plan”), a restricted stock unit award (the “Award”) of           restricted stock units, upon and subject to the restrictions, terms and conditions set forth below. Capitalized terms not defined herein shall have the meanings specified in the Plan.

1. Award Subject to Acceptance of Agreement. The Award shall be null and void unless the Director shall accept this Agreement by executing it in the space provided below and returning it to the Company.

2. Restriction Period and Vesting. (a) Subject to Section 2(e), the Award shall vest (i) with respect to one-quarter (1/4) of the restricted stock units subject to the Award on the first anniversary of the Grant Date, an additional one-quarter (1/4) of the restricted stock units subject to the Award on the second anniversary of the Grant Date, an additional one-quarter (1/4) of the restricted stock units subject to the Award on the third anniversary of the Grant Date, and the remaining one-quarter (1/4) of the restricted stock units subject to the Award on the fourth anniversary of the Grant Date, or (ii) earlier pursuant to Section 2(b) or (d) hereof (the “Restriction Period”).

(b) Subject to Section 2(e), if the Director’s service terminates by reason of permanent disability or due to death, the Award shall become fully vested as of the effective date of the Director’s termination of service or the date of death, as the case may be. For purposes of this Agreement, “permanent disability” shall mean the inability of the Director to substantially perform his or her duties for a continuous period of at least six months as determined by the Committee.

(c) Subject to Section 2(e), if the Director’s service to the Company terminates for any reason other than permanent disability or death, the portion of the Award, if any, which is not vested as of the effective date of the Director’s termination of service shall be forfeited and cancelled by the Company.

(d) (1) In the event of a Change in Control (as defined in Appendix A), the Award shall immediately vest in full.

(2) In the event of a Change in Control pursuant to paragraph (3) or (4) of Appendix A, the Board of Directors (as constituted prior to such Change in Control) may, in its discretion (subject to existing contractual arrangements):

(i) require that shares of stock of the corporation resulting from such Change in Control, or a parent corporation thereof, be substituted for some or all of the Shares (as defined in Section 3) issuable pursuant to the Award, as determined by the Board of Directors; and/or

(ii) require the Award, in whole or in part, to be surrendered to the Company by the Director and to be immediately cancelled by the Company, and provide for the Director to receive a cash payment in an amount not less than the amount determined by multiplying the number of restricted stock units subject to the Award immediately prior to such cancellation (but after giving effect to any adjustment pursuant to Section 12.4 of the Plan in respect of any transaction that gives rise to such Change in Control) by the highest per share price offered to holders of shares of the Company’s common stock, no par value per share (the “Common Stock”), in any transaction whereby the Change in Control takes place.

(3) The Company may, but is not required to, cooperate with the Director if the Director is subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to assure that any cash payment or substitution in accordance with the foregoing to the Director is made in compliance with Section 16 and the rules and regulations thereunder.

3. Conversion of Restricted Stock Units and Issuance of Shares. Upon the vesting of all or any portion of the Award in accordance with Section 2 hereof, one share of the Common Stock shall be issuable for each restricted stock unit that vests on such date (the “Shares”), subject to the terms and provisions of the Plan and this Agreement, and not later than 30 days thereafter, the Company will transfer such Shares to the Director. No fractional shares shall be issued under this Agreement.

4. No Rights as a Shareholder; Dividend Equivalents. Prior to the issuance and transfer of Shares upon vesting, the Director will be credited with amounts equal to any cash dividends that would be payable to the Director if the Director had been transferred such Shares, which amounts shall accrue during the Restriction Period and be paid in cash upon lapse of the Restriction Period. This Section 4 will not apply with respect to record dates for dividends occurring prior to the Grant Date or after the Restriction Period has lapsed. During the Restriction Period, the Director (and any person succeeding to the Director’s rights pursuant to the Plan) will not be a shareholder of record of the Shares underlying the Award and will have no voting or other shareholder rights with respect to such Shares.

5. Termination of Award. In the event that the Director shall forfeit all or a portion of the restricted stock units subject to the Award, the Director shall promptly return this Agreement to the Company for cancellation. Such cancellation shall be effective regardless of whether the Director returns this Agreement.

6. Additional Terms and Conditions of Award.

6.1 Nontransferability of Award. During the Restriction Period, the restricted stock units subject to the Award and not then vested may not be transferred by the Director other than by will, the laws of descent and distribution or pursuant to Section 12.5 of the Plan on a beneficiary designation form approved by the Company. Except as permitted by the foregoing, during the Restriction Period, the restricted stock units subject to the Award and not then vested may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Any such attempted sale, transfer, assignment, pledge, hypothecation or encumbrance, or other disposition of such shares shall be null and void.

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6.2. Withholding Taxes. The Director understands and agrees that he or she is responsible for, and shall pay, all applicable federal, state or local taxes arising out of or relating to this Award. Notwithstanding the foregoing, if required by applicable law, as a condition precedent to the delivery to the Director of any of the Shares subject to the Award, the Director shall, upon request by the Company, pay to the Company (or shall cause a broker-dealer on behalf of the Director to pay to the Company) such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes with respect to the Award.

6.3. Compliance with Applicable Law. The Award is subject to the condition that if the listing, registration or qualification of the Shares subject to the Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the vesting of the restricted stock units or the delivery of the Shares hereunder, the Shares subject to the Award may not be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval.

6.4. Delivery of Certificates. As soon as practicable after the vesting of the Award, in whole or in part, the Company shall deliver or cause to be delivered one or more certificates issued in the Director’s name (or such other name as is acceptable to the Company and designated in writing by the Director) representing the number of vested shares.

6.5. Award Confers No Rights to Continued Service. In no event shall the granting of the Award or its acceptance by the Director give or be deemed to give the Director any right to continued service by the Company or any Affiliate of the Company.

6.6. Decisions of Board or Committee. The Board of Directors of the Company or the Committee shall have the right to resolve all questions which may arise in connection with the Award. Any interpretation, determination or other action made or taken by the Board of Directors or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive.

6.7. Company to Reserve Shares. The Company shall at all times prior to the cancellation of the Award reserve and keep available, either in its treasury or out of its authorized but unissued shares of Common Stock, the full number of unvested restricted stock units subject to the Award from time to time.

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6.8. Agreement Subject to the Plan; Section 409A of the Code. This Agreement is subject to the provisions of the Plan (including the adjustment provision set forth in Section 12.4 thereof) and shall be interpreted in accordance therewith. The Director hereby acknowledges receipt of a copy of the Plan. This Award is intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), as a “short-term deferral,” within the meaning of regulations issued under Section 409A of the Code, and this Agreement shall be interpreted and construed in accordance with such intent and in a manner that avoids the imposition of taxes and other penalties under Section 409A of the Code. The Company reserves the right to amend this Agreement to the extent it determines in its sole discretion such amendment is necessary or appropriate to comply with applicable law, including but not limited to Section 409A of the Code. Notwithstanding the foregoing, under no circumstances shall the Company be responsible for any taxes, penalties, interest or other losses or expenses incurred by the Director due to any failure to comply with Section 409A of the Code.

7. Miscellaneous Provisions.

7.1. Meaning of Certain Terms. As used herein, the term “vest” shall mean no longer subject to forfeiture and all rights hereunder shall be deemed to be vested.

7.2. Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Director, acquire any rights hereunder in accordance with this Agreement or the Plan.

7.3. Notices. All notices, requests or other communications provided for in this Agreement shall be made in writing by (a) actual delivery to the party entitled thereto, (b) mailing to the last known address of the party entitled thereto, via certified or registered mail, return receipt requested or (c) telecopy with confirmation of receipt. The notice, request or other communication shall be deemed to be received, in the case of actual delivery, on the date of its actual receipt by the party entitled thereto, in the case of mailing, on the tenth calendar day following the date of such mailing, and in the case of telecopy, on the date of confirmation of receipt; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company.

7.4. Governing Law. This Agreement and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to conflicts of laws principles.

7.5 Reports Filed with the Securities and Exchange Commission. The Company files periodic and current reports and proxy statements with the Securities and Exchange Commission (“SEC”). These documents are available, free of charge, on the website of the SEC (www.sec.gov) and on the Company’s website (www.sxc.com, under Investor Relations/ Regulatory Filings), as soon as reasonably practicable after the material is filed with, or furnished to, the SEC. Any of these documents are available to the Director in paper format, without charge, upon written or oral request to the Company’s Investor Relations Department located at 2441 Warrenville Road, Suite 610, Lisle, Illinois 60532, U.S.A., phone number (800) 282-3232.

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7.6. Counterparts. This Agreement may be executed in two counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument.

SXC HEALTH SOLUTIONS CORP.

By:

Accepted this                      day of
                    , 200_

Director

5

Appendix A
to SXC Health Solutions Corp.
Restricted Stock Unit Award
Agreement for Directors

For purposes of this Agreement “Change in Control” shall mean:

(1) the acquisition by any individual, entity or group (a “Person”), including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of more than 50% of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of a conversion or exchange privilege in respect of outstanding convertible or exchangeable securities unless such outstanding convertible or exchangeable securities were acquired directly from the Company), (B) any acquisition by the Company, (C) any acquisition by an Director benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a reorganization, merger or consolidation involving the Company, if, immediately after such reorganization, merger or consolidation, each of the conditions described in clauses (i), (ii) and (iii) of subsection (3) of this Appendix A shall be satisfied; and provided further that, for purposes of clause (B), if any Person (other than the Company or any Director benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company) shall become the beneficial owner of more than 50% of the Outstanding Company Common Stock or more than 50% of the Outstanding Company Voting Securities by reason of an acquisition by the Company and such Person shall, after such acquisition by the Company, become the beneficial owner of any additional shares of the Outstanding Company Common Stock or any additional Outstanding Company Voting Securities and such beneficial ownership is publicly announced, such additional beneficial ownership shall constitute a Change in Control;

(2) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of such Board; provided, however, that any individual who becomes a director of the Company subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed to have been a member of the Incumbent Board; and provided further, that no individual who was initially elected as a director of the Company as a result of an actual or threatened solicitation by a Person other than the Board for the purpose of opposing a solicitation by any other Person with respect to the election or removal of directors or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall be deemed to have been a member of the Incumbent Board;

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(3) consummation of a reorganization, merger or consolidation unless, in any such case, immediately after such reorganization, merger or consolidation, (i) 50% or more of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and 50% or more of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals or entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation and in substantially the same proportions relative to each other as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than the Company, any Director benefit plan (or related trust) sponsored or maintained by the Company or the corporation resulting from such reorganization, merger or consolidation (or any corporation controlled by the Company) and any Person which beneficially owned, immediately prior to such reorganization, merger or consolidation, directly or indirectly, more than 50% of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of common stock of such corporation or more than 50% of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such reorganization, merger or consolidation; or

(4) consummation of (i) a plan of complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, immediately after such sale or other disposition, (A) 50% or more of the then outstanding shares of common stock thereof and 50% or more of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such sale or other disposition and in substantially the same proportions relative to each other as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (other than the Company, any Director benefit plan (or related trust) sponsored or maintained by the Company or such corporation (or any corporation controlled by the Company) and any Person which beneficially owned, immediately prior to such sale or other disposition, directly or indirectly, more than 50% of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of common stock thereof or more than 50% of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors thereof were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition.

7

SXC HEALTH SOLUTIONS CORP.

Long-Term Incentive Plan

BENEFICIARY DESIGNATION FORM

You may designate a primary beneficiary and a secondary beneficiary. You can name more than one person as a primary or secondary beneficiary. For example, you may wish to name your spouse as primary beneficiary and your children as secondary beneficiaries. Your secondary beneficiary(ies) will receive nothing if any of your primary beneficiaries survive you. All primary beneficiaries will share equally unless you indicate otherwise. The same rule applies for secondary beneficiaries.

Designate Your Beneficiary(ies):

Primary Beneficiary(ies):

Secondary Beneficiary(ies):

I certify that my designation of beneficiary set forth above is my free act and deed.

Name of Director	Director’s Signature
(Please Print)
	Date

8

EX-10.5

Exhibit 10.5

SXC HEALTH SOLUTIONS CORP.
PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT

SXC Health Solutions Corp., a corporation existing under the laws of the Yukon Territory of Canada (the “Company”), hereby grants                      (the “Employee”) as of                     ,                      the (“Grant Date”), pursuant to Section 7.2 of the SXC Health Solutions Corp. Long-Term Incentive Plan (the “Plan”), a performance-based restricted stock unit award (the “Award”), upon and subject to the restrictions, terms and conditions set forth below. Capitalized terms not defined herein shall have the meanings specified in the Plan.

1. Award Subject to Acceptance of Agreement. The Award shall be null and void unless the Employee shall accept this Agreement by executing it in the space provided below and returning it to the Company.

2. Restriction Period and Vesting; Performance Target. (a) Subject to Sections 2(b), (d) and (e), and provided that (i) the Employee remains continuously employed by the Company or any Affiliate of the Company until December 31, 2011 (the “Performance Period End Date”) and (ii) the Committee has certified that the Company has achieved the minimum Performance Measure level for the three fiscal years ending December 31, 2011 (the “Performance Period,” and the date on which such certification is made is referred to as the “Vesting Date”), then that number of restricted stock units shall vest on the Vesting Date as set forth in Schedule I. For purposes of this Agreement, the three-year period ending December 31, 2011 (or earlier pursuant to Section 2(b) or (d) hereof) in which the restricted stock units subject to the Award may be subject to forfeiture is referred to as the “Restriction Period.”

(b) Subject to Section 2(e), if the Employee’s employment by the Company terminates prior to the Performance Period End Date by reason of termination without cause or termination by the Company due to permanent disability or death, the Award shall vest based on the actual Performance Measure achievement level of the Company to the effective date of the Employee’s termination of employment or the date of death, as the case may be, as described in Schedule I. For purposes of this Agreement, (i) “permanent disability” shall mean the inability of the Employee to substantially perform his or her duties for a continuous period of at least six months as determined by the Committee, and (ii) “cause” shall have the meaning ascribed thereto in any written employment agreement between the Company or any Affiliate of the Company and the Employee and, in the absence of any such agreement, shall mean the willful and continued failure to substantially perform the duties assigned by the Company (other than a failure resulting from the Employee’s disability), the willful engaging in conduct which is demonstrably injurious to the Company or any Affiliate of the Company, monetarily or otherwise, including conduct that, in the reasonable judgment of the Company, no longer conforms to the standard of the Company’s executives or employees, any act of dishonesty, commission of a felony, or a significant violation of any statutory or common law duty of loyalty to the Company.

(c) Subject to Section 2(e), if the Employee’s employment by the Company terminates for any reason other than termination without cause, permanent disability or death, the portion of the Award, if any, which is not vested as of the effective date of the Employee’s termination of employment shall be forfeited and cancelled by the Company.

(d) (1) In the event of a Change in Control (as defined in Appendix A), that number of restricted stock units equal to the number of restricted stock units that would vest upon achievement by the Company of the target Performance Measure level for the Performance Period (the “Target RSU Number”), as described further in Schedule I, shall immediately vest in full.

(2) In the event of a Change in Control pursuant to paragraph (3) or (4) of Appendix A, the Board of Directors (as constituted prior to such Change in Control) may, in its discretion (subject to existing contractual arrangements):

(i)

require that shares of stock of the corporation resulting from such Change in Control, or a parent corporation thereof, be substituted for some or all of the Shares (as defined in Section 3) issuable pursuant to the Award, as determined by the Board of Directors; and/or

(ii)

require the Award, in whole or in part, to be surrendered to the Company by the Employee and to be immediately cancelled by the Company, and provide for the Employee to receive a cash payment in an amount not less than the amount determined by multiplying the Target RSU Number (but after giving effect to any adjustment pursuant to Section 12.4 of the Plan in respect of any transaction that gives rise to such Change in Control) by the highest per share price offered to holders of shares of the Company’s common stock, no par value per share (the “Common Stock”), in any transaction whereby the Change in Control takes place.

(3) The Company may, but is not required to, cooperate with the Employee if the Employee is subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to assure that any cash payment or substitution in accordance with the foregoing to the Employee is made in compliance with Section 16 and the rules and regulations thereunder.

(e) The vesting terms in any written employment agreement between the Company or any Affiliate of the Company and the Employee shall prevail over the terms of this Agreement.

3. Conversion of Restricted Stock Units and Issuance of Shares. Upon the vesting of all or any portion of the Award in accordance with Section 2 hereof, one share of the Common Stock shall be issuable for each restricted stock unit that vests on such date (the “Shares”), subject to the terms and provisions of the Plan and this Agreement, and not later than 30 days thereafter, the Company will transfer such Shares to the Employee upon satisfaction of any required tax withholding obligations. No fractional shares shall be issued under this Agreement.

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4. No Rights as a Shareholder; Dividend Equivalents. Prior to the issuance and transfer of Shares upon vesting, the Employee will be credited with amounts equal to any cash dividends that would be payable to the Employee if the Employee had been transferred such Shares, which amounts shall accrue during the Restriction Period and be paid in cash upon lapse of the Restriction Period. This Section 4 will not apply with respect to record dates for dividends occurring prior to the Grant Date or after the Restriction Period has lapsed. During the Restriction Period, the Employee (and any person succeeding to the Employee’s rights pursuant to the Plan) will not be a shareholder of record of the Shares underlying the Award and will have no voting or other shareholder rights with respect to such Shares.

5. Termination of Award. In the event that the Employee shall forfeit all or a portion of the restricted stock units subject to the Award, the Employee shall promptly return this Agreement to the Company for cancellation. Such cancellation shall be effective regardless of whether the Employee returns this Agreement.

6. Additional Terms and Conditions of Award.

6.1 Nontransferability of Award. During the Restriction Period, the restricted stock units subject to the Award and not then vested may not be transferred by the Employee other than by will, the laws of descent and distribution or pursuant to Section 12.5 of the Plan on a beneficiary designation form approved by the Company. Except as permitted by the foregoing, during the Restriction Period, the restricted stock units subject to the Award and not then vested may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Any such attempted sale, transfer, assignment, pledge, hypothecation or encumbrance, or other disposition of such shares shall be null and void.

6.2. Withholding Taxes. As a condition precedent to the delivery to the Employee of any of the Shares subject to the Award, the Employee shall, upon request by the Company, pay to the Company (or shall cause a broker-dealer on behalf of the Employee to pay to the Company) such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the “Required Tax Payments”) with respect to the Award. If the Employee shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Employee. The Employee may elect to satisfy his or her obligation to advance the amount of any Required Tax Payments incurred in connection with the issuance and transfer of the Shares by any of the following means: (1) a cash payment to the Company, (2) delivery (either actual delivery or by attestation procedures established by the Company) to the Company of Common Stock having an aggregate Fair Market Value, determined as of the date the obligation to withhold or pay taxes arises in connection with an award (the “Tax Date”), equal to the amount necessary to satisfy any such obligation, (3) with the consent of the Committee (other than for “officers” (as defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended) or Directors, with respect to whom the consent of the Committee shall not be required), authorizing the Company to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the Tax Date, or withhold an amount of cash which would otherwise be payable to a holder, equal to the amount necessary to satisfy any such obligation, or (4) any combination of (1) and (2). Shares of Common Stock to be delivered or withheld may not have an aggregate Fair Market Value in excess of the amount determined by applying the minimum statutory withholding rate.

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6.3. Compliance with Applicable Law. The Award is subject to the condition that if the listing, registration or qualification of the Shares subject to the Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the vesting of the restricted stock units or the delivery of the Shares hereunder, the Shares subject to the Award may not be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval.

6.4. Delivery of Certificates. Subject to Section 6.2, as soon as practicable after the vesting of the Award, in whole or in part, the Company shall deliver or cause to be delivered one or more certificates issued in the Employee’s name (or such other name as is acceptable to the Company and designated in writing by the Employee) representing the number of vested shares. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 6.2.

6.5. Award Confers No Rights to Continued Employment. In no event shall the granting of the Award or its acceptance by the Employee give or be deemed to give the Employee any right to continued employment by the Company or any Affiliate of the Company.

6.6. Decisions of Board or Committee. The Board of Directors of the Company or the Committee shall have the right to resolve all questions which may arise in connection with the Award. Any interpretation, determination or other action made or taken by the Board of Directors or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive.

6.7. Company to Reserve Shares. The Company shall at all times prior to the cancellation of the Award reserve and keep available, either in its treasury or out of its authorized but unissued shares of Common Stock, the full number of unvested restricted stock units subject to the Award from time to time.

6.8. Agreement Subject to the Plan; Section 409A of the Code. This Agreement is subject to the provisions of the Plan (including the adjustment provision set forth in Section 12.4 thereof) and shall be interpreted in accordance therewith. The Employee hereby acknowledges receipt of a copy of the Plan. This Award is intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), as a “short-term deferral,” within the meaning of regulations issued under Section 409A of the Code, and this Agreement shall be interpreted and construed in accordance with such intent and in a manner that avoids the imposition of taxes and other penalties under Section 409A of the Code. The Company reserves the right to amend this Agreement to the extent it determines in its sole discretion such amendment is necessary or appropriate to comply with applicable law, including but not limited to Section 409A of the Code. Notwithstanding the foregoing, under no circumstances shall the Company be responsible for any taxes, penalties, interest or other losses or expenses incurred by the Employee due to any failure to comply with Section 409A of the Code.

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7. Miscellaneous Provisions.

7.1. Meaning of Certain Terms. As used herein, the term “vest” shall mean no longer subject to forfeiture and all rights hereunder shall be deemed to be vested. As used herein, employment by the Company shall include employment by an Affiliate of the Company.

7.2. Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Employee, acquire any rights hereunder in accordance with this Agreement or the Plan.

7.3. Notices. All notices, requests or other communications provided for in this Agreement shall be made in writing by (a) actual delivery to the party entitled thereto, (b) mailing to the last known address of the party entitled thereto, via certified or registered mail, return receipt requested or (c) telecopy with confirmation of receipt. The notice, request or other communication shall be deemed to be received, in the case of actual delivery, on the date of its actual receipt by the party entitled thereto, in the case of mailing, on the tenth calendar day following the date of such mailing, and in the case of telecopy, on the date of confirmation of receipt; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company.

7.4. Governing Law. This Agreement and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to conflicts of laws principles.

7.5 Reports Filed with the Securities and Exchange Commission. The Company files periodic and current reports and proxy statements with the Securities and Exchange Commission (“SEC”). These documents are available, free of charge, on the website of the SEC (www.sec.gov) and on the Company’s website (www.sxc.com, under Investor Relations/ Regulatory Filings), as soon as reasonably practicable after the material is filed with, or furnished to, the SEC. Any of these documents are available to the Employee in paper format, without charge, upon written or oral request to the Company’s Investor Relations Department located at 2441 Warrenville Road, Suite 610, Lisle, Illinois 60532, U.S.A., phone number (800) 282-3232.

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7.6. Counterparts. This Agreement may be executed in two counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument.

SXC HEALTH SOLUTIONS CORP.
By:
	Name:
	Title:

Accepted this                      day of
                    , 20  _____ 

Employee

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Appendix A
to SXC Health Solutions Corp.
Restricted Stock Unit Award
Agreement for Employees

For purposes of this Agreement “Change in Control” shall mean:

(1) the acquisition by any individual, entity or group (a “Person”), including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of more than 50% of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of a conversion or exchange privilege in respect of outstanding convertible or exchangeable securities unless such outstanding convertible or exchangeable securities were acquired directly from the Company), (B) any acquisition by the Company, (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a reorganization, merger or consolidation involving the Company, if, immediately after such reorganization, merger or consolidation, each of the conditions described in clauses (i), (ii) and (iii) of subsection (3) of this Appendix A shall be satisfied; and provided further that, for purposes of clause (B), if any Person (other than the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company) shall become the beneficial owner of more than 50% of the Outstanding Company Common Stock or more than 50% of the Outstanding Company Voting Securities by reason of an acquisition by the Company and such Person shall, after such acquisition by the Company, become the beneficial owner of any additional shares of the Outstanding Company Common Stock or any additional Outstanding Company Voting Securities and such beneficial ownership is publicly announced, such additional beneficial ownership shall constitute a Change in Control;

(2) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of such Board; provided, however, that any individual who becomes a director of the Company subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed to have been a member of the Incumbent Board; and provided further, that no individual who was initially elected as a director of the Company as a result of an actual or threatened solicitation by a Person other than the Board for the purpose of opposing a solicitation by any other Person with respect to the election or removal of directors or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall be deemed to have been a member of the Incumbent Board;

(3) consummation of a reorganization, merger or consolidation unless, in any such case, immediately after such reorganization, merger or consolidation, (i) 50% or more of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and 50% or more of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals or entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation and in substantially the same proportions relative to each other as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than the Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or the corporation resulting from such reorganization, merger or consolidation (or any corporation controlled by the Company) and any Person which beneficially owned, immediately prior to such reorganization, merger or consolidation, directly or indirectly, more than 50% of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of common stock of such corporation or more than 50% of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such reorganization, merger or consolidation; or

(4) consummation of (i) a plan of complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, immediately after such sale or other disposition, (A) 50% or more of the then outstanding shares of common stock thereof and 50% or more of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such sale or other disposition and in substantially the same proportions relative to each other as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (other than the Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or such corporation (or any corporation controlled by the Company) and any Person which beneficially owned, immediately prior to such sale or other disposition, directly or indirectly, more than 50% of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of common stock thereof or more than 50% of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors thereof were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition.

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Schedule I
to SXC Health Solutions Corp.
Restricted Stock Unit Award
Agreement for Employees

[Applicable performance measures to be determined]

• If the effective date of Employee’s termination of employment or the date of death, as the case may be, occurs on or after December 31, 2009 and prior to December 31, 2010, and the actual Performance Measure achievement level of the Company for the fiscal year ending December 31, 2009 equals or exceeds the 2009 earnings per share minimum of $0.90, then a pro rata portion of the restricted stock units subject to the Award shall immediately vest. The pro rata portion will be calculated by determining the number of restricted stock units that would have vested if the Performance Period was comprised of 2009 only, and multiplying that number by one-third (1/3). The remainder of the Award shall be forfeited and cancelled by the Company.

• If the effective date of Employee’s termination of employment or the date of death, as the case may be, occurs on or after December 31, 2010 and prior to December 31, 2011, and the actual Performance Measure achievement level of the Company for the fiscal years ending December 31, 2009 and December 31, 2010 equals or exceeds the cumulative earnings per share minimum for 2009 and 2010 of $1.93, then a pro rata portion of the restricted stock units subject to the Award shall immediately vest. The pro rata portion will be calculated by determining the number of restricted stock units that would have vested if the Performance Period was comprised of 2009 and 2020 only, and multiplying that number by two-thirds (2/3). The remainder of the Award shall be forfeited and cancelled by the Company.

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SXC HEALTH SOLUTIONS CORP.

Long-Term Incentive Plan

BENEFICIARY DESIGNATION FORM

You may designate a primary beneficiary and a secondary beneficiary. You can name more than one person as a primary or secondary beneficiary. For example, you may wish to name your spouse as primary beneficiary and your children as secondary beneficiaries. Your secondary beneficiary(ies) will receive nothing if any of your primary beneficiaries survive you. All primary beneficiaries will share equally unless you indicate otherwise. The same rule applies for secondary beneficiaries.

Designate Your Beneficiary(ies):

Primary Beneficiary(ies):

Secondary Beneficiary(ies):

I certify that my designation of beneficiary set forth above is my free act and deed.

Name of Employee	Employee’s Signature
(Please Print)
	Date

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Mark Thierer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SXC Health Solutions Corp.;

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

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

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15(f) and 15d—15(f)) for the registrant and we have:

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

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date: August 6, 2009
By:	/s/ Mark Thierer
	Mark Thierer
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Jeffrey Park, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SXC Health Solutions Corp.;

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

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

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15(f) and 15d—15(f)) for the registrant and we have:

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

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date: August 6, 2009
By:	/s/ Jeffrey Park
	JEFFREY PARK
	Chief Financial Officer

EX-32.1

Exhibit 32.1

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

I, Mark Thierer, the chief executive officer of SXC Health Solutions Corp., certify that (i) the Quarterly Report on Form 10-Q of SXC Health Solutions Corp. for the quarter ended June 30, 2009 (the “Form 10-Q”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of SXC Health Solutions Corp.

/s/ Mark Thierer  

Mark Thierer 

Chief Executive Officer 

August 6, 2009 

EX-32.2

Exhibit 32.2

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

I, Jeffrey Park, the chief financial officer of SXC Health Solutions Corp., certify that (i) the Quarterly Report on Form 10-Q of SXC Health Solutions Corp. for the quarter ended June 30, 2009 (the “Form 10-Q”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of SXC Health Solutions Corp.

/s/ Jeffrey Park  

Jeffrey Park 

Chief Financial Officer 

August 6, 2009