<PAGE>   1

                                                                   EXHIBIT 10.18









                            THIRD MEDICAL ASSISTANCE

                           MEDICAL SERVICES AGREEMENT

                                     BETWEEN

                        PRUDENTIAL HEALTH CARE PLAN, INC.

                                       AND

                   JOHNS HOPKINS MEDICAL SERVICES CORPORATION











<PAGE>   2



                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                   PAGE
                                                                                   ----

<S>                                                                               <C>
RECITALS............................................................................1

ARTICLE I - DEFINITIONS.............................................................2

ARTICLE II - MARYLAND MEDICAID MANAGED CARE PROGRAM.................................7

ARTICLE III - PHCP ADMINISTRATIVE SERVICES.........................................11

ARTICLE IV - JHMSC OBLIGATIONS.....................................................14

ARTICLE V - EXCLUSIVITY............................................................21

ARTICLE VI - COMPENSATION..........................................................23

ARTICLE VII - DATA EXCHANGE........................................................27

ARTICLE VIII - TRANSITION PERIOD...................................................29

ARTICLE IX - SUBCONTRACTS..........................................................30

ARTICLE X - TERMS AND TERMINATION..................................................32

ARTICLE XI - DISPUTE RESOLUTION....................................................42

ARTICLE XII - COVERED PERSONS PROTECTIONS..........................................43

ARTICLE XIII - GENERAL PROVISIONS..................................................44
</TABLE>


                                       i
<PAGE>   3




                                    EXHIBITS
<TABLE>

<S>                     <C>
EXHIBIT A               EXCLUSIVE AREA

EXHIBIT B               EXHIBIT B PROVIDERS

EXHIBIT C               JHMSC CITY SITES

EXHIBIT D               BENCHMARKS

EXHIBIT E               PHCP ADMINISTRATIVE SERVICE RATES

EXHIBIT F               PHCP SUBCONTRACTORS

EXHIBIT G               FORM OF SUBCONTRACT

EXHIBIT H               INDEPENDENT EXPERTS

EXHIBIT I               METHODOLOGY FOR MEASURING CHANGES IN THE
                        COMPOSITE CAPITATION RATE

EXHIBIT J               DATA ELEMENTS
</TABLE>

                                       ii
<PAGE>   4




                            THIRD MEDICAL ASSISTANCE
                           MEDICAL SERVICES AGREEMENT
                                     BETWEEN
                        PRUDENTIAL HEALTH CARE PLAN, INC.
                                       AND
                   JOHNS HOPKINS MEDICAL SERVICES CORPORATION


     THIS AGREEMENT, to be effective as of the 1st day of July, 1996, is made
and entered into by and between PRUDENTIAL HEALTH CARE PLAN, INC. D/B/A
PRUDENTIAL HEALTH CARE PLAN OF THE MID-ATLANTIC, a corporation organized under
the Laws of the State of Texas (hereinafter referred to as "PHCP") and JOHNS
HOPKINS MEDICAL SERVICES CORPORATION, a corporation organized under the laws of
the State of Maryland (hereinafter referred to as "JHMSC"). The capitalized
terms used in the Recitals below are defined in Article I of this Agreement.

                                    RECITALS

     WHEREAS, PHCP operates a Maryland-certified health maintenance
organization;

     WHEREAS, PHCP has entered into Contracts with the Department to provide or
arrange for the provision of Covered Services on a prepaid capitated basis to
Eligible Persons and intends to continue to do so;

     WHEREAS, as of the Effective Date of this Agreement, approximately
twenty-five percent (25%) of the Maryland Medicaid population is voluntarily
enrolled in six HMOs (including one operated by PHCP) that contract with the
Department under the Maryland Voluntary Medicaid Managed Care Program. Another
fifty percent (50%) of the Maryland Medicaid population is served through the
MAC Program, a primary care case management program whereunder enrollment is
mandatory if the recipient is not enrolled in an HMO. The remaining twenty-five
percent (25%) of the Maryland Medicaid population is not enrolled in managed
care programs;

      WHEREAS, in May 1996, Senate Bill 750 was enacted in Maryland pursuant to
which the State of Maryland will seek from the Federal government a waiver of
various provisions in the Social Security Act so as to permit the State of
Maryland to



<PAGE>   5

require most of the Maryland Medicaid population to enroll in an MCO under the
Maryland Mandatory Medicaid Managed Care Program to be implemented pursuant to
the waiver and Senate Bill 750. Under the Maryland Mandatory Medicaid Managed
Care Program, entities that wish to qualify as MCOs (including HMOs that
currently contract with the Department) must apply to and be approved by the
Department. PHCP intends to qualify as an MCO and JHHC, an Affiliate, or a
related entity of either of JHHC's joint venturers intends to qualify as an MCO.
The Maryland Mandatory Medicaid Managed Care Program is scheduled to begin
implementation as of January 1, 1997; and

       WHEREAS, PHCP and JHMSC wish to enter into this Agreement to set forth
the terms under which JHMSC shall provide or arrange for the provision of
Covered Services and assume certain other responsibilities as set forth in this
Agreement for the Contract Year commencing July 1, 1996 and subsequent Contract
Years under PHCP's Contract(s) with the Department.

       NOW, THEREFORE, it is mutually agreed as follows:

                            ARTICLE I - DEFINITIONS

       A.     "Affiliate" means any person or entity which controls, is
controlled by, or is controlled in common with a party and, for such purposes,
the term "control" shall mean (a) an employer-employee relationship; (b) the
possession of, or right to exercise, fifty percent (50%) of the voting or
partnership rights in an entity or, if less, that percentage necessary to cause
the entity to take, or to prevent the entity from taking, an action; (c) the
right to elect, or approve the election of, fifty percent (50%) of the governing
body of an entity or, if less, that proportion of the governing body necessary
to veto or prevent an action of the entity; or (d) ownership of fifty percent
(50%) or more of the assets, or the right to receive fifty percent (50%) or more
of such assets upon dissolution, of an entity.

       B.     "Benchmarks" means those requirements set forth in Exhibit D which
must be met as a condition of the performance of JHMSC Service(s) being
transferred from PHCP to JHMSC.

       C.     "Business Agreement" means that certain Agreement between JHMSC
and PHCP dated February 4, 1995 and executed contemporaneously with a Settlement
Agreement between JHMSC and PHCP.



                                       2
<PAGE>   6

       D.     "Composite Capitation Rate" and "Adjusted Composite Capitation
Rate" means the per Member per month rate(s) calculated in accordance with the
methodology set forth in Exhibit I.

       E.     "Contract" means the then current agreement between PHCP and the
Department whereunder PHCP assumes risk for the provision or arrangement of
Covered Services to Members.

       F.     "Contract Year" means the period July 1, 1996 through June 30,
1997 and each successive twelve month period thereafter, or portion thereof,
during the term of this Agreement.

       G.     "Covered Services" means the health care services to which Members
are entitled under the terms of the Contract, excluding Program Carve-Outs and
subject to determinations of medical necessity when permitted under the
Contract.

       H.     "Department" means the Department of Health and Mental Hygiene of
the State of Maryland.

       I.     "Eligible Person" means any person eligible to receive services
and benefits through an HMO or MCO under the Maryland Medicaid Managed Care
Program as it may be amended from time to time.

       J.     "Exclusive Area" means the geographic area described in Exhibit A
of this Agreement.

       K.     "Exclusive Eligibles" means Eligible Persons living inside the
Exclusive Area.

       L.     "Exhibit B Provider(s)" means those health care provider(s) listed
in Exhibit B to this Agreement.

       M.     "EQRO" means the external quality review organization appointed by
the Department to conduct reviews of HMOs and/or MCOs.

       N.     "Gross Capitation Rates" means the actual capitation rates per
Member per month paid by the Department to PHCP under the Contract to assume
full risk for the provision of Covered Services to Members, which rates may vary
based upon Member demographics and other factors.



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<PAGE>   7

       O.     "Hopkins MCO" means an MCO operated by JHHC or an Affiliate or a
related entity of either of JHHC's joint venturers under the Maryland Mandatory
Medicaid Managed Care Program.

       P.     "JHHC" means Johns Hopkins HealthCare, LLC, a joint venture of The
Johns Hopkins Health System Corporation and The Johns Hopkins University.

       Q.     "JHMSC City Sites" means those six medical facilities in the
Exclusive Area operated by JHMSC and listed in Exhibit C of this Agreement,
subject to Article IV, Section B.1.

       R.     "JHMSC Medicaid Sale" means the payment of cash or other valuable
consideration to JHMSC or a JHMSC Affiliate by a party other than a JHMSC
Affiliate in return for the transfer, directly or indirectly, of Members to any
other entity including, but not limited to, an HMO or MCO (other than the
Hopkins MCO or JHMSC Affiliate). "Payment of cash or other valuable
consideration" shall not include fair market value compensation to JHMSC or a
JHMSC Affiliate from any other such entity including, but not limited to, an HMO
or MCO, for providing or arranging Covered Services to Members or the
performance of related administrative services.

       S.     "JHMSC Obligations" means JHMSC's provision or arranging for the
provision of Covered Services to Members, JHMSC's performance of JHMSC Services,
and JHMSC's performance of its other obligations under this Agreement, all of
the foregoing subject to the terms and conditions of this Agreement.

       T.     "JHMSC Primary Care Provider" means a Primary Care Provider who is
(1) an employee of JHMSC or an Affiliate or Subcontractor (including MAC
Providers and providers rendering medical services in school-based health
clinics) who renders medical services at a JHMSC City Site or in an office
located in the Exclusive Area; or (2) an Exhibit B Provider (and employees
thereof).

       U.     "JHMSC Services" means those services to be provided by JHMSC as
set forth in Article IV, Section B.

       V.     "MAC Program" means the Maryland Access to Care Program.

       W.     "MAC Provider" means a health care provider that participates in
the MAC Program or a health care provider that participated in the MAC Program
and



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<PAGE>   8

became a participating Primary Care Provider in one or more MCOs under the
Maryland Mandatory Medicaid Managed Care Program.

       X.     "Maryland Mandatory Medicaid Managed Care Program" means the
program adopted by the State of Maryland under Senate Bill 750 to implement the
Maryland Medicaid Section 1115 Health Care Reform Demonstration Proposal.

       Y.     "Maryland Medicaid Managed Care Program" means the Maryland
Voluntary Medicaid Managed Care Program and/or the Maryland Mandatory Medicaid
Managed Care Program.

       Z.     "Maryland Voluntary Medicaid Managed Care Program" means the
current program whereunder the Department contracts with HMOs to provide or
arrange Covered Services to Eligible Persons on a prepaid capitated basis.

       AA.    "Member" means any Eligible Person that enrolls in PHCP's HMO or
MCO under the Maryland Medicaid Managed Care Program, and who has selected or
been assigned to JHMSC or a JHMSC Primary Care Provider.

       BB.    "MCO" means a managed care organization, as defined in Maryland
Senate Bill 750.

       CC.    "NCQA" means the National Committee for Quality Assurance or such
other organizations from whom PHCP is seeking accreditation.

       DD.    "Primary Care Provider" means a physician or other health
professional that is eligible under the Maryland Medicaid Managed Care Program
to serve as the coordinator of Covered Services for Eligible Persons, including
providers rendering primary care services in school-based clinics subject to the
Maryland Medicaid Managed Care Program.

       EE.    "Program Carve-Outs" means specific populations and/or services
that are excluded from the general Maryland Medicaid Managed Care Program, and
addressed through a separate Department program, which may be a managed care
program or fee-for-service program. Program Carve-Outs shall not include
specific mental health and/or substance abuse populations or mental health
and/or substance abuse services so long as PHCP assumes full responsibility for
providing and/or arranging for the provision of such services to the applicable
population. In the event PHCP does not assume such responsibility for specified
services and/or



                                       5
<PAGE>   9

populations (as applicable to mental health and/or substance abuse), such
services and/or populations shall constitute "Program Carve-Outs."

       FF.    "PHCP MCO" means an MCO operated by PHCP under the Maryland
Mandatory Medicaid Managed Care Program.

       GG.    "PHCP Medical Director" means a duly licensed physician or his/her
designee who has been designated by PHCP to coordinate and supervise the
provision of Covered Services to Members.

       HH.    "PHCP Medicaid Sale" means (1) the transfer, whether by sale,
assignment, exchange or otherwise, to any person or entity that is not an
Affiliate of PHCP or Prudential of all or a material portion of the PHCP
services to be performed hereunder and/or PHCP's rights under this Agreement
subject to the balance of this Article I, Section HH; (2) the granting or
delegation to any person or entity other than an Affiliate of PHCP or Prudential
of the right to exercise (by veto or affirmative action or otherwise) all or a
material portion of the monitoring, supervising and approval rights over JHMSC
Obligations; (3) the transfer, whether by sale, assignment, exchange or
otherwise, of all or a material portion of the Contract to any person or entity
other than an Affiliate of PHCP or Prudential; (4) any transaction pursuant to
which PHCP is no longer an Affiliate of Prudential; or (5) any transaction which
effectuates a de facto sale or transfer of all or a material portion of the
Contract to an entity other than an Affiliate of PHCP or Prudential, except as
expressly permitted herein, and provided further that PHCP may delegate one or
more of its administrative services or obligations under this Agreement or the
Contract (a) to a PHCP Affiliate so long as PHCP assumes ultimate responsibility
hereunder and/or (b) to one or more parties that are not Affiliates so long as
PHCP or an Affiliate maintains the Contract with the Department.

       II.    "Prudential" shall mean The Prudential Insurance Company of
America, an Affiliate of PHCP.

       JJ.    "QI Program" means the PHCP quality improvement program designed
to objectively and systematically monitor and evaluate the quality and
appropriateness of health care, pursue opportunities to improve health care, and
resolve identified problems. The QI Program, at a minimum, shall satisfy the
quality assurance requirements of the Maryland Medicaid Managed Care Program.



                                       6
<PAGE>   10

       KK.    "Second MAMSA" means that certain Medical Assistance Medical
Services Agreement dated July 31, 1992 between JHMSC and PHCP.

       LL.    "Second Settlement Agreement" means that certain Second Settlement
Agreement and Release dated even date herewith by and between PHCP, Prudential,
The Johns Hopkins Health System Corporation and JHMSC.

       MM.    "Service Area" means Baltimore County, Baltimore City, Carroll
County, Frederick County, Prince George's County, Anne Arundel County,
Montgomery County and Howard County.

       NN.    "Subcontractor" means a health care provider that has entered into
a contract with JHMSC for the provision of Covered Services to Members.

       OO.    "UM Program" means PHCP's utilization management program, which is
part of the QI Program, and involves a comprehensive effort to monitor and
manage the effective, efficient and timely use of health care services. The UM
Program, at a minimum, shall satisfy the utilization management requirements of
the Maryland Medicaid Managed Care Program.

               ARTICLE II - MARYLAND MEDICAID MANAGED CARE PROGRAM

       A.     INTERPRETATION AND ENFORCEMENT OF STANDARDS, POLICIES, AND
PROCEDURES. Notwithstanding anything in this Agreement to the contrary, with
respect to all Benchmarks, standards, and PHCP and Prudential relevant policies,
procedures and guidelines of general application ("PHCP Policies and
Procedures") which JHMSC has agreed to comply with, follow and implement under
this Agreement (including, but not limited to, those set forth in this Article
II and in Article IV), the following numbered principles under this Article II,
Section A shall govern and control the interpretation, application and
enforcement of those Benchmarks, standards, and PHCP Policies and Procedures
("Compliance Activities"):

              1.     It is the express intention and desire of the parties that
                     JHMSC begin to perform all of the JHMSC Services not later
                     than January 1, 1997, or, in the event that, despite both
                     parties' best efforts, such deadline is missed for any of
                     the JHMSC Services, then as soon after January 1, 1997 as
                     reasonably possible. Further, it is the express intention
                     and desire of the parties that JHMSC continue the
                     performance of JHMSC Services on an uninterrupted basis
                     throughout the term of this Agreement. Should such
                     performance be interrupted notwithstanding the parties'
                     best efforts to maintain uninterrupted performance, then
                     the parties desire and intend that JHMSC's performance of
                     JHMSC Ser-







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<PAGE>   11

                     vices be resumed as soon as reasonably possible. The
                     parties will use their best efforts throughout the term of
                     this Agreement to ensure that the foregoing set forth in
                     this Article II, Section A.1. occurs.

              2.     JHMSC acknowledges that PHCP has implemented its own
                     policies and procedures, and will implement new policies
                     and procedures, to improve both the administration and
                     delivery of health care services beyond the standards
                     required by the Department. In addition, JHMSC acknowledges
                     that, because PHCP assumes ultimate responsibility for
                     performance of duties and obligations under the Contract,
                     PHCP must implement procedures to ensure that statutory and
                     Department requirements are met.

              3.     The parties acknowledge that interpretation may be required
                     with respect to the Compliance Activities, and agree to:

                     (a)    exercise discretion permitted hereunder as regards
                            Compliance Activities in a reasonable manner, acting
                            in good faith;

                     (b)    coordinate with the other party as reasonably
                            necessary to enable the other party to meet its
                            obligations under this Agreement or the Contract, as
                            the case may be;

                     (c)    reasonably take into account the structure and
                            characteristics of JHMSC as a mature delivery system
                            serving large numbers of persons under capitation
                            and risk arrangements, and as an organization that
                            assumes related medical management and other
                            responsibilities;

                     (d)    reasonably take into account the structure and
                            character of PHCP and Prudential as a national,
                            multi-line insurer, managed care organization and
                            administrator



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<PAGE>   12

                            of employee benefits programs which must address
                            policy issues, operational standards and data
                            requirements on a national basis to reflect their
                            lines of business and corporate goals; and

                     (e)    exchange data and information as reasonably
                            requested by one party to the other party as
                            reasonably necessary for the requesting party to
                            meet its obligations under this Agreement and/or the
                            Contract, subject to appropriate protection against
                            disclosure of proprietary information to third
                            parties or use of information other than as
                            contemplated under this Agreement, subject to
                            Article XIII, Section P.

       B.     JHMSC RESPONSIBILITIES. Subject to the terms of this Agreement,
JHMSC shall perform the JHMSC Obligations. In providing or arranging for Covered
Services, JHMSC shall have the option to utilize capitated single service
networks under contract to PHCP and pay, through PHCP, the applicable rates set
forth in those contracts without any mark-up or administrative load or fee being
paid to PHCP, consistent with the procedures set forth in Article VIII, Section
B. PHCP shall use its best efforts to ensure that future PHCP capitated vendor
contracts do not preclude JHMSC utilizing capitated single service networks
under contract to PHCP. In any event, use of capitated single service network
vendors by JHMSC is limited to those vendors serving Eligible Persons enrolled
in PHCP. JHMSC shall be compensated for performing the JHMSC Obligations in
accordance with Article VI. JHMSC shall accept such compensation as payment in
full.

       C.     APPLICATION OF STANDARDS, POLICIES AND PROCEDURES.

              1.     JHMSC and its Subcontractors shall comply with the
                     standards established by the Department for providers under
                     the Maryland Medicaid Managed Care Program including, but
                     not limited to, access standards, quality assurance
                     standards, utilization management standards, and
                     credentialing standards as reasonably interpreted by PHCP.
                     Such standards shall be interpreted and applied to JHMSC in
                     a manner generally consistent with the interpretation and
                     application of these standards to other PHCP providers
                     participating in the Maryland Medicaid Managed Care
                     Program.



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<PAGE>   13

              2.     JHMSC and its Subcontractors shall also comply with PHCP
                     Policies and Procedures including, but not limited to, PHCP
                     Policies and Procedures pertaining to access, quality
                     assurance, utilization management, claims adjudication and
                     payment and credentialing. PHCP Policies and Procedures
                     shall be interpreted and applied to JHMSC in a manner
                     generally consistent with the interpretation and
                     application of PHCP Policies and Procedures to other PHCP
                     providers.

              3.     PHCP shall use its best efforts to apply the standards
                     applicable to the Maryland Medicaid Managed Care Program
                     and PHCP's Policies and Procedures in a generally
                     consistent manner. In the event of a conflict between
                     different standards and/or different policies and
                     procedures, the standards and/or policies and procedures
                     that create a higher standard or more stringent
                     requirements than the other shall govern, unless PHCP
                     otherwise elects.

              4.     References in this Agreement to application of standards,
                     and/or PHCP Policies and Procedures in a "consistent"
                     manner shall mean application in a consistent manner and no
                     less stringent than generally applied.

       D.     MARYLAND MANDATORY MEDICAID MANAGED CARE PROGRAM SUBMISSIONS. PHCP
shall provide to JHMSC copies of all submissions with respect to PHCP's MCO
application and Contract application under the Maryland Mandatory Managed Care
Program (and any amendments thereto and/or filings made subsequent to the
initial filings) which submissions relate to quality improvement, utilization
management or provider service requirements as well as the service standards set
forth in Article IV. PHCP shall use its best efforts to provide such copies to
JHMSC with sufficient advance notice so as to permit JHMSC a meaningful
opportunity to review those submissions and provide comments to PHCP, which PHCP
shall consider in good faith in finalizing such submissions. Such documents may
only be used by JHMSC for purposes of implementing the terms of this Agreement.

       E.     IMPLEMENTATION. In no event shall any standard and/or policies and
procedures applicable to JHMSC be binding upon JHMSC until copies have first



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<PAGE>   14

been provided to JHMSC. PHCP shall use its best efforts to provide copies of any
such standards and/or policies and procedures to JHMSC at least thirty (30) days
in advance of their implementation date or as soon as reasonably possible if
thirty (30) days notice is not reasonably possible, and JHMSC shall comply with
such requirements promptly, unless a specific time period is required by law or
under the Contract, in which case JHMSC shall comply with the specified time
frames.

                   ARTICLE III - PHCP ADMINISTRATIVE SERVICES

       A.     PHCP ADMINISTRATIVE SERVICES. PHCP shall use its best efforts to
maintain Contract(s) with the Department under the Maryland Voluntary Medicaid
Managed Care Program and/or under the Maryland Mandatory Medicaid Managed Care
Program, as applicable. Subject to Article IV, PHCP shall retain full
administrative responsibility for the Contract(s) including, but not limited to,
the following functions:

              1.     Contract(s) with the State of Maryland. PHCP shall be
                     responsible to apply for, obtain and maintain the
                     Contract(s) and meet all requirements under the
                     Contract(s). PHCP shall provide to JHMSC a copy of each
                     Contract within five (5) business days following execution
                     of the Contract. Under the Contract(s), PHCP shall accept
                     payment for the highest option for risk assumption for
                     Covered Services as currently contemplated regarding
                     Covered Services.

              2.     Oversight of JHMSC Obligations. Consistent with Article IV,
                     Section A, PHCP shall monitor the performance of JHMSC
                     Obligations and shall have final authority over the
                     implementation of PHCP's Policies and Procedures by JHMSC
                     as well as JHMSC's implementation of Department standards.

              3.     Member Services. PHCP shall have responsibility for
                     establishing, maintaining and coordinating member services
                     under the Maryland Medicaid Managed Care Program and PHCP's
                     Policies and Procedures, including, but not limited to,
                     complaint and grievance processes. Such processes shall be
                     generally consistent with the processes maintained by PHCP
                     for other Eligible Persons enrolled in PHCP. JHMSC shall be
                     notified in writing of any complaint by a Member and



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<PAGE>   15

                     JHMSC's input regarding resolution of the complaint shall
                     be considered in good faith. Notification to JHMSC shall be
                     made as soon as possible if the Member complaint involves a
                     pending emergency or urgent care issue or a serious risk
                     management or quality of care issue. JHMSC shall receive
                     monthly summaries of all Member complaints in PHCP's
                     standard format. In the event JHMSC receives a Member
                     complaint of a serious nature directly, JHMSC shall provide
                     notice of the Member complaint to PHCP within two (2)
                     business days of receipt by JHMSC, and within ten (10)
                     business days with respect to all other complaints.

              4.     Enrollment and Disenrollment. Under the Maryland Medicaid
                     Managed Care Program, eligibility determinations (including
                     retroactive determinations) are made by the Department.
                     Under the Maryland Voluntary Medicaid Managed Care Program,
                     HMOs perform various functions under the enrollment and
                     disenrollment process. PHCP shall be responsible for all
                     such functions. Under the Maryland Mandatory Medicaid
                     Managed Care Program, PHCP shall be responsible for
                     complying with all Department requirements pertaining to
                     enrollment and disenrollment that are applicable to MCOs.

              5.     Marketing. PHCP shall have responsibility for and shall
                     assume all costs associated with marketing activities
                     permitted by the Department and initiated by PHCP. With
                     respect to any permitted marketing efforts directed to
                     Exclusive Eligibles, PHCP shall use its best efforts to
                     provide advanced notice of marketing activities and copies
                     of marketing materials to JHMSC with sufficient advance
                     notice so as to permit JHMSC a meaningful opportunity to
                     consider those activities and review those materials. PHCP
                     will seek JHMSC's input regarding marketing activities and
                     will consider, in good faith, any reasonable suggestions
                     made by JHMSC regarding such initiatives and materials. The
                     foregoing shall not apply to PHCP's general marketing
                     activities which are not targeted specifically to Exclusive
                     Eligibles. JHMSC shall not initiate any marketing
                     activities specifically aimed at enrollment of Exclusive
                     Eligibles on behalf of or for the benefit of PHCP



                                       12
<PAGE>   16

                     without the prior written consent of PHCP which consent
                     shall not be unreasonably withheld or delayed. Use of the
                     "Hopkins" name or "Prudential" name or any derivative
                     thereof, shall require the express written consent of JHMSC
                     or PHCP, as applicable, other than inclusion of JHMSC's
                     name or the names of JHMSC Primary Care Providers in PHCP
                     provider directories distributed to Eligible Persons.

              6.     Non-Contracted Benefits.

                     (a)    Under the Maryland Mandatory Medicaid Managed Care
                            Program, PHCP shall be free to offer non-contracted
                            benefits that are not Covered Services to all
                            Eligible Persons (including Members) enrolled with
                            PHCP and for which no payment is included in the
                            Gross Capitation Rates paid by the Department to
                            PHCP. JHMSC may propose to PHCP non-contracted
                            benefits that it would like offered to Eligible
                            Persons and PHCP shall consider in good faith any
                            reasonable proposals made by JHMSC. The final
                            decision of what non-contracted benefits, if any, to
                            be offered shall rest with PHCP.

                     (b)    The cost of such non-contracted benefits shall be
                            determined by PHCP on an actuarially sound per
                            member per month basis. With respect to Members, the
                            above-referenced cost of non-contracted benefits
                            shall be shared fifty percent (50%) by PHCP and
                            fifty percent (50%) by JHMSC; provided that JHMSC
                            shall not be required to contribute more than a per
                            Member per month amount that is equal to five tenths
                            of one percent (.5%) of the Gross Capitation Rates
                            received by PHCP for Members.

                     (c)    In the event PHCP requires substantially all of its
                            participating Primary Care Providers to provide
                            directly such non-contracted benefits, then JHMSC
                            Primary Care Providers shall provide such services.
                            JHMSC shall be paid at the highest rates paid by



                                       13
<PAGE>   17

                            PHCP to any other provider in the Service Area for
                            the same non-contracted benefits.

                     (d)    PHCP shall use its best efforts to include JHMSC and
                            JHMSC Affiliates in delivery networks established by
                            PHCP for arranging or providing non-contracted
                            benefits not falling within the scope of subsection
                            (c) above (particularly in cases affecting
                            continuity of care and member satisfaction), to the
                            extent consistent with PHCP's business objectives.

                     (e)    Regardless of whether JHMSC provides non-contracted
                            benefits, JHMSC shall inform Members of the
                            availability of such non-contracted benefits and
                            provide Members with information on how to access
                            such benefits so long as PHCP provides JHMSC with
                            sufficient information for such Member education.


                            ARTICLE IV - JHMSC OBLIGATIONS


       A.     PHCP CONTRACTING FOR JHMSC OBLIGATIONS. Pursuant to this Agreement
PHCP is contracting with JHMSC to perform the JHMSC Obligations. PHCP shall
retain final authority, responsibility and accountability for all such JHMSC
Obligations even though JHMSC shall perform associated services and assume
associated responsibilities as specified in this Article IV and elsewhere in
this Agreement.

       B.     JHMSC SERVICES. Subject to the terms set forth in this Agreement,
JHMSC shall perform the following services and functions with respect to
Members:

              1.     Network Development. JHMSC shall develop and maintain a
                     network of primary care, specialist, institutional,
                     ancillary service and pharmacy providers to furnish Covered
                     Services to Members. Such providers shall include
                     Subcontractors, and the applicable subcontracts shall be
                     subject to approval pursuant to Article IX. JHMSC shall
                     maintain the JHMSC City Sites listed on Exhibit C (as it
                     may be amended pursuant to the balance of this Article IV,
                     Section B.1. below) in accordance with applicable law and
                     regulation. JHMSC shall take



                                       14
<PAGE>   18

                     all reasonable steps to ensure that JHMSC Primary Care
                     Providers and Subcontractors are adequately staffed and
                     equipped and have adequate clinical hours sufficient to
                     provide acceptable Member access consistent with PHCP
                     Policies and Procedures and Department standards. To the
                     extent reasonably possible, JHMSC shall, subject to
                     Department requirements, provide PHCP with no less than one
                     hundred twenty (120) days notice of a change in the
                     location of a JHMSC City Site, or the opening of a new site
                     in the Exclusive Area. In the event there is a new site or
                     a change of location for a site, Exhibit C shall be amended
                     accordingly.

              2.     Claims. JHMSC shall provide claims adjudication, claims
                     processing, and claims payment services (and the related
                     customer service function) with respect to all claims for
                     Covered Services rendered to Members. JHMSC shall pay
                     claims in a timely manner in accordance with all Department
                     and PHCP requirements and any other applicable requirements
                     under Maryland law. Notwithstanding the foregoing in this
                     Article IV, Section B.2., in the event the Department
                     requires that MCOs be compensated for designated Covered
                     Services on a fee-for-service basis, and the Department's
                     requirements under such fee-for-service program would
                     prohibit an entity other than the MCO itself (such as
                     JHMSC) from adjudicating, processing, and submitting the
                     fee-for-service claims to the Department for payment,
                     and/or paying such claims, or the delegation of such
                     fee-for-service claims functions would preclude PHCP from
                     directly performing such functions with respect to Eligible
                     Persons other than Members, then PHCP shall assume
                     responsibility for such fee-for-service claims functions.
                     In such event, PHCP shall charge JHMSC a transaction fee
                     for such fees-for-service claims services. The transaction
                     fee shall be the lesser of (a) the lowest fee PHCP charges
                     any other provider or entity for similar services (if
                     applicable); or (b) PHCP's actual, reasonable costs.

              3.     Utilization Management. JHMSC shall assume responsibility
                     for performance of utilization management functions and
                     services pursuant to the UM Program. Notwithstanding that



                                       15
<PAGE>   19

                     responsibility for utilization management shall be JHMSC's
                     responsibility, PHCP shall retain the final authority to
                     determine whether a service is a Covered Service and
                     appropriate for payment. In the event of a disagreement
                     regarding whether a service is a Covered Service as between
                     JHMSC and PHCP, PHCP may require that such service be
                     provided and paid; provided that JHMSC may appeal its
                     financial liability for the cost of such service under the
                     dispute resolution process set forth in Article XI. A
                     determination by PHCP that a service is not a Covered
                     Service shall not prevent JHMSC or a Subcontractor from
                     providing the service on a case by case basis, and shall
                     not prevent JHMSC from paying for such service while
                     appealing its financial liability or otherwise. Subject to
                     any appeal, the provision of such services by JHMSC shall
                     be without cost, obligation or liability to PHCP.

              4.     Quality Management. JHMSC shall assume responsibility for
                     performance of quality management functions and services
                     pursuant to the QI Program.

              5.     Patient Education, Prevention and Outreach. JHMSC shall
                     provide patient education, prevention and outreach services
                     in accordance with applicable Department and PHCP
                     requirements.

              6.     Credentialing. JHMSC shall perform the credentialing and
                     recredentialing function with respect to all JHMSC Primary
                     Care Providers and Subcontractors utilizing standards that,
                     at a minimum, are consistent with PHCP credentialing
                     standards and requirements. With respect to providers who
                     are PHCP participating providers on the effective date of
                     this Agreement and retain that status subsequent to the
                     effective date, JHMSC shall be required only to
                     recredential such providers upon the expiration of their
                     current appointment/credentialing by PHCP.

       C.     ADDITIONAL SERVICES. In the event additional services relating to
medical management are required by the Department, by Maryland law or
regulation, or PHCP consistent with Article II, Section C, JHMSC shall be
responsible for



                                       16
<PAGE>   20

the provision of or arranging for the provision of such additional services.
JHMSC shall not be entitled to any additional compensation from PHCP for the
provision of those additional services. PHCP shall be responsible for any
administrative services including, but not limited to, services related to
Contract administration and compliance, such as provision of data and reports to
the Department and performing member satisfaction surveys.

       D.     STANDARDS APPLICABLE TO JHMSC OBLIGATIONS. JHMSC's performance of
JHMSC Obligations shall be subject to satisfaction by JHMSC of PHCP's national
delegation standards, as amended from time to time, a copy of which, including
amendments, shall be provided to JHMSC in advance of being applicable to JHMSC
and subject to a reasonable time period for compliance if compliance is not
reasonably possible immediately upon receipt of such standards. Such standards
shall be applied consistently to all entities performing similar delegated
services and functions. The standards shall include, but are not limited to, the
following:

              1.     In connection with JHMSC's performance of the quality
                     management, utilization management and credentialing
                     services pursuant to Article IV, Section B above, JHMSC's
                     internal quality management, utilization management and
                     credentialing plans (the "Plans"), as applicable to the
                     performance of JHMSC Obligations, shall be consistent with
                     the QI Program and the UM Program and shall meet all
                     applicable Department requirements. JHMSC shall provide
                     copies of JHMSC's Plans to PHCP for approval prior to the
                     transition of these functions to JHMSC in accordance with
                     Article IV, Section G below, and shall provide copies
                     annually as well. JHMSC shall obtain prior written approval
                     from PHCP of any material modifications to its Plans, as
                     applicable to the performance of JHMSC Obligations, which
                     approval shall not be unreasonably withheld or delayed.
                     JHMSC shall provide PHCP copies of all modifications to the
                     Plans applicable to the performance of JHMSC Obligations.
                     Furthermore, JHMSC Obligations shall be performed in
                     compliance with the procedures and criteria established by
                     the Department, the NCQA, and EQRO.

              2.     JHMSC shall seek PHCP's approval in the event it proposes
                     to waive or make exceptions to any requirements under its



                                       17
<PAGE>   21

                     Plan(s), as applicable to the performance of JHMSC
                     Obligations. Such approval shall not be unreasonably
                     withheld or delayed. As part of any such waiver or
                     exemption request, JHMSC shall provide PHCP with a copy of
                     all relevant documents related to the matter.


       E.     MONITORING OF JHMSC OBLIGATIONS. JHMSC agrees that PHCP, NCQA,
EQRO and/or Department staff shall have the right, consistent with the terms set
forth in Article XIII, Section A, to conduct periodic audits and/or assessments
of JHMSC's provision of JHMSC Obligations which shall include, but not be
limited to, reasonable access to all quality improvement, utilization
management, and provider files (including credentialling files), medical
documentation and related committee or subcommittee minutes. JHMSC agrees to
cooperate in good faith in any audit or assessment of its performance of JHMSC
Obligations, including providing information reasonably requested in a timely
fashion.

       F.     NON-COMPLIANCE WITH DELEGATION STANDARDS.

              1.     In the event PHCP, in good faith, determines that JHMSC is
                     not in compliance with the above requirements for JHMSC
                     Services, PHCP shall provide JHMSC with written notice of
                     non-compliance, including a detailed written description of
                     areas of non-compliance sufficient to permit JHMSC to
                     develop corrective actions. JHMSC shall have thirty (30)
                     days from receipt of notice to cure the deficiency, or, if
                     such deficiency is not capable of cure within thirty (30)
                     days, to commence a corrective action plan within that
                     thirty (30) day period that is satisfactory to PHCP, in
                     PHCP's reasonable discretion. The cure period may be
                     reduced or eliminated in the event that PHCP determines in
                     the exercise of its reasonable discretion that irreparable
                     harm to the health and safety of Members would result if
                     JHMSC were permitted to utilize the entire cure period.
                     During the thirty (30) day cure period, interim progress
                     reports shall be made. In the event the deficiency is not
                     cured within thirty (30) days in PHCP's reasonable
                     discretion, or the corrective action plan is not acceptable
                     to PHCP, in its reasonable discretion, then PHCP will have
                     the right, upon written notice to JHMSC, to assume
                     responsibility for performance of the applicable JHMSC
                     Service.



                                       18
<PAGE>   22

              2.     In the event PHCP assumes responsibility for such
                     service(s), PHCP may not unilaterally adjust the
                     compensation paid to JHMSC under this Agreement, unless
                     JHMSC agrees in writing as to a compensation adjustment. In
                     the event JHMSC objects to PHCP's assumption of any JHMSC
                     Service(s), JHMSC shall request that the dispute be
                     submitted to mediation within ten (10) days of PHCP's
                     assumption of such JHMSC Service(s), subject to Article XI.
                     In the event JHMSC does not file a request for mediation
                     within the above ten (10) days or file suit to contest
                     PHCP's assumption of responsibility of the applicable JHMSC
                     Service(s) within sixty (60) days following termination of
                     the mediation process set forth in Article XI, then PHCP
                     shall receive payment for the applicable JHMSC Service(s)
                     retroactive to the first day of the month following
                     assumption by PHCP. JHMSC's decision not to file a
                     mediation request or a suit within the above time frames
                     shall be without prejudice and shall not constitute a
                     waiver of any right to challenge PHCP's conduct at a future
                     time.

              3.     Payment to PHCP for any JHMSC Service(s) assumed by PHPC
                     shall be at the Administrative Service Rates set forth in
                     Exhibit F, not to exceed fifteen percent (15%) of the Gross
                     Capitation Rates, subject to the following adjustment. For
                     purposes of this Article IV, Section F only, the aggregate
                     per Member per month amount for all JHMSC Services shall be
                     adjusted beginning with the second Contract Year hereunder
                     by the increase, if any, in the general non-medical
                     expenses reflected in the Consumer Price Index, Baltimore
                     City Average, for the previous twelve (12) month period.
                     This adjustment shall then be applied pro rata to each
                     Administrative Service Rate set forth in Exhibit E,
                     provided that in no event shall the amount PHCP is paid for
                     assuming responsibility for the JHMSC Services, combined
                     with the amount PHCP is paid under Article VI, Section A,
                     exceed fifteen percent (15%) of the Gross Capitation Rates.



                                       19
<PAGE>   23

       G.     TRANSITION OF JHMSC SERVICES. Notwithstanding anything in this
Article IV to the contrary, JHMSC shall not begin to perform any JHMSC Services
until JHMSC has met the Benchmarks described in Article IV, Section H and
Exhibit D. Accordingly, PHCP shall, effective July 1, 1996, retain the
responsibility to perform all the JHMSC Services. Subject to JHMSC meeting the
Benchmarks, the responsibility to perform JHMSC Services shall be transitioned
to JHMSC on or prior to January 1, 1997. Subject to Article IV, Section H below,
each respective JHMSC Service shall be transitioned to JHMSC the first day of
the month following the month in which it is determined that JHMSC has met the
Benchmarks for that particular JHMSC Service.

       H.     BENCHMARKS FOR TRANSITION. Set forth in Exhibit D are Benchmarks
which must be achieved by JHMSC with respect to each JHMSC Service before the
responsibility for performing each such JHMSC Service will be transitioned to
JHMSC. The determination of whether JHMSC has achieved the respective Benchmarks
shall be made by PHCP in its reasonable discretion and in good faith in
accordance with the following. JHMSC shall notify PHCP when it believes that it
has satisfied the Benchmarks for one or more of the JHMSC Services. PHCP shall
then have fifteen (15) days to review that submission and determine whether
JHMSC has satisfied such Benchmarks and to notify JHMSC in writing of its
determination. JHMSC shall provide along with the above notification all
relevant information as well as access to JHMSC personnel and facilities
reasonably required by PHCP for the purpose of reviewing whether JHMSC has
satisfied the Benchmarks. In the event PHCP reasonably determines in good faith
that JHMSC has not met one or more of the Benchmarks for any given JHMSC
Service, PHCP shall, in its notice to JHMSC, specify the manner in which JHMSC
has not met the Benchmark(s) in sufficient detail such as to permit JHMSC to
develop remedial steps necessary for JHMSC to satisfy the Benchmark(s).
Following implementation of the remedial steps, JHMSC shall, at its discretion,
initiate the above notification process once again. In the event, as of January
1, 1997, there remains one or more JHMSC Service(s) which has not been
transitioned to JHMSC, JHMSC shall have the right to request that the issue of
whether the Benchmark(s) have been satisfied be submitted to mediation in
accordance with the procedures set forth in Article XI; provided, however, such
matter shall not be submitted to mediation until the process outlined above
(i.e., JHMSC notification and submission, PHCP response, and JHMSC resubmission)
has occurred once. The matter may be submitted to mediation, at JHMSC's
discretion, after the passage of fifteen (15) days following resubmission as
JHMSC deems appropriate, and after the mediation, such dispute may be resolved
pursuant to Article XI, Section B.



                                       20
<PAGE>   24

       I.     TRANSITION SUPPORT. In order to facilitate the transition of JHMSC
Services to JHMSC, the parties shall provide to each other information as may
reasonably be requested by the other (including, but not limited to, the
information set forth in Exhibit D) and shall make their employees,
representatives and agents reasonably available to meet with or consult with the
other party's representatives regarding the transition of JHMSC Services.

                             ARTICLE V - EXCLUSIVITY

       A.     EXCLUSIVITY WITHIN EXCLUSIVE AREA.

              1.     Subject to Article V, Section B and Section C, JHMSC City
                     Sites shall be available as Primary Care Provider sites
                     under the Maryland Medicaid Managed Care Program
                     exclusively through PHCP during the term of this Agreement.

              2.     Except for Exhibit B Providers, MAC Providers employed by
                     JHMSC or an Affiliate that provide services from office
                     locations in the Exclusive Area shall be available as
                     Primary Care Providers under the Maryland Medicaid Managed
                     Care Program exclusively through PHCP during the term of
                     this Agreement. In the event that a MAC Provider employed
                     by JHMSC or an Affiliate renders services from multiple
                     office locations, the above restriction shall apply only to
                     office locations in the Exclusive Area.

              3.     JHMSC shall use its best efforts to subcontract with MAC
                     Providers not employed by JHMSC or an Affiliate who have
                     offices in the Exclusive Area, with particular emphasis on
                     those providers designated by PHCP, to be available as
                     Primary Care Providers to PHCP to enroll Eligible Persons
                     under the Maryland Medicaid Managed Care Program. Those MAC
                     Providers who are not employees of JHMSC or an Affiliate
                     shall be free to participate in other MCOs as Primary Care
                     Providers in the Exclusive Area but not the Hopkins MCO
                     (and otherwise shall be free to participate in any contract
                     or arrangement to provide services to Medicaid recipients
                     and others). However, in the event any such MAC Providers


                                       21
<PAGE>   25

                     maintain multiple office locations, such providers may
                     participate in the Hopkins MCO with respect to office
                     locations outside of the Exclusive Area.

              4.     Except as set forth in Article V, Section B and Section C
                     below, neither PHCP nor its Affiliates shall contract,
                     directly or indirectly, with any Primary Care Providers
                     within the Exclusive Area for services to Eligible Persons
                     other than JHMSC (and indirectly with JHMSC Primary Care
                     Providers by virtue of JHMSC's contracts and arrangements
                     with JHMSC Primary Care Providers). However, in the event
                     any such Primary Care Providers maintain multiple office
                     locations, PHCP and its Affiliates may contract with such
                     providers with respect to office locations outside of the
                     Exclusive Area.

              5.     JHMSC shall subcontract with the Exhibit B Providers to
                     serve as JHMSC Primary Care Providers for PHCP, except that
                     JHMSC shall not be required to subcontract with any such
                     provider which is precluded by legal or financial status
                     from providing services to Eligible Persons or any such
                     provider that does not otherwise generally provide services
                     to the Medicaid population. Exhibit B Providers shall not
                     be subject to any exclusivity or non-competition covenants
                     or restrictions under this Agreement whatsoever (i.e.,
                     Exhibit B Providers shall be free to participate in the
                     Hopkins MCO and in other MCOs as Primary Care Providers for
                     Eligible Persons) and otherwise shall be free to
                     participate in any contract or arrangement to provide
                     services to Medicaid recipients and others.

              6.     All Eligible Persons who enroll in PHCP under the Contract
                     shall have the option of selecting JHMSC Primary Care
                     Providers. Neither PHCP nor its Affiliates shall take any
                     action to influence Eligible Persons not to select JHMSC
                     Primary Care Providers. In the event PHCP or its Affiliates
                     has the ability to assign Exclusive Eligibles and/or
                     Eligible Persons living outside the Exclusive Area that
                     were previously enrolled at JHMSC City Sites or influence
                     the assignment of



                                       22
<PAGE>   26

                     such Eligible Persons to Primary Care Providers, PHPC and
                     its Affiliates shall use its best efforts to maximize
                     enrollment of such Eligible Persons at JHMSC City Sites,
                     subject to access requirements.

              7.     Except as expressly provided in this Agreement, JHMSC and
                     its Affiliates and PHCP and its Affiliates shall not be
                     bound by any exclusivity restrictions or non-competition
                     covenants specifically pertaining to the provision of
                     services to Medicaid recipients.

       B.     UNION MEMORIAL EXCEPTION. PHCP shall be permitted to enroll
Exclusive Eligibles (not to exceed 42,000 member months per Contract Year) who
select Primary Care Providers located in the area known as the "Union Memorial
Hospital Campus," as designated in Exhibit A to this Agreement. PHCP shall
submit to JHMSC biannually a report specifying the number of Exclusive Eligibles
who select a Primary Care Provider in the Union Memorial Hospital Campus area.

       C.     PROGRAM CARVE-OUTS. PHCP and JHMSC and their Affiliates shall be
free to contract directly with the State of Maryland or contract with other
organizations and entities with respect to Program Carve-Outs. For Program
Carve-Outs, PHCP shall have access to providers in the Exclusive Area employed
by entities controlled by The Johns Hopkins Health System Corporation or The
Johns Hopkins University, including, but not limited to, The Johns Hopkins
University School of Medicine and Exhibit B Providers (to the extent such
providers participate in the same carve-out(s) through the Hopkins MCO or
another Hopkins Affiliate), at the same pricing then in place between such
providers and the Hopkins MCO or Hopkins Affiliate for such carve-out(s). As
permitted in Article V, Section A.1. above, PHCP may contract with Primary Care
Providers in the Exclusive Area, other than JHMSC, for participation in its
delivery network solely for such Program Carve-Outs.

                            ARTICLE VI - COMPENSATION

       A.     RETENTION BY PHCP. For each Member selecting or assigned to JHMSC
Primary Care Providers, ten percent (10%) of the monthly Gross Capitation Rates
paid by the Department to PHCP shall be retained by PHCP for provision of the
administrative services set forth in Article III, Section A. Payment of this 10%
shall be full compensation for all PHCP Services and other obligations of PHPC



                                       23
<PAGE>   27

under this Agreement, except as provided in Article VIII, Section A and Article
IV, Section F.

       B.     PAYMENTS TO JHMSC. Subject to Article VIII, Section A, for each
Member selecting or assigned to JHMSC Primary Care Providers, ninety percent
(90%) of the monthly Gross Capitation Rates paid by the Department to PHCP shall
be paid by PHCP to JHMSC by the fifteenth (15th) day of each month for the
enrollment for the current month (e.g., capitation payments for Covered Services
provided in January shall be made by January 15). In consideration of such
payments, JHMSC shall perform the JHMSC Obligations, subject to Article VIII,
Section A. This shall include payment for any stop-loss coverage JHMSC may elect
to purchase, any stop-loss coverage MCOs may be required to obtain for Covered
Services as well as stop-loss coverage required under State or Federal law,
including, but not limited to, the Federal Physician Incentive Regulations (if
applicable). JHMSC shall be entitled to receive payment for the actual number of
Member months for which PHCP has been paid by the Department, including, but not
limited to, retroactive payment adjustments. Retroactive payment adjustments
shall be made monthly and shall be included with the monthly capitation payments
made by PHCP to JHMSC.

       C.     REDUCTION IN COMPOSITE RATES. The defined terms in this Article
VI, Section C shall have the meanings set forth in Exhibit I. In the event the
Comparison Year Composite Capitation Rate for a Contract Year is lower than the
Adjusted Composite Capitation Rate Threshold (without an attendant reduction in
Covered Services or population carve-out such that the effective rate decrease
is less than nine percent (9%), adjusted for inflation, as contemplated in
Exhibit I, or a material increase in Covered Services or the introduction of new
populations as Eligible Persons causes the same effect, as determined on an
actuarially sound basis), JHMSC shall have the option to: (1) continue the
compensation arrangement set forth above in this Article VI, Sections A and B;
or (2) elect to be compensated by PHCP on the basis of (a) a multi-specialty
capitation (for a market basket of Covered Services substantially equivalent to
the services for which JHMSC received a multi-specialty capitation under the
Second MAMSA) and (b) a shared bonus pool which pool will receive an actuarial
allocation for all Covered Services other than multi-specialty capitated
services, with any surplus in the pool at the end of the Contract Year, less an
incurred but not reported ("IBNR") claims adjustment (subject to final
reconciliation and payment within six months after the end of the applicable
Contract Year(s)), divided equally between PHCP and JHMSC. The methodology set
forth in Exhibit I shall be used to determine whether there has been a nine

                                       24
<PAGE>   28

percent (9%) reduction in the Composite Capitation Rate, adjusted for inflation,
as described above. In the event JHMSC elects this option, JHMSC shall be paid
under a most favored nations rate methodology. Subject to Article VI, Sections D
and E below, under such methodology, JHMSC shall receive the most favorable
combination of multi-specialty capitation and shared bonus pool allocation then
in effect between PHCP and other multi-specialty groups, subject to any benefit
specific actuarial adjustments necessary to reflect the services provided by
JHMSC under the Second MAMSA, and any actuarial adjustments necessary to reflect
any differences in administrative services provided by the respective groups as
specified by PHCP.

       D.     ALTERNATIVE TO MOST FAVORED NATIONS METHODOLOGY.

              1.     In the event JHMSC elects to accept a multi-specialty
                     capitation pursuant to Article VI, Section C above, the
                     most favored nations rate methodology will apply so long as
                     at least two (2) multi-specialty providers in the Service
                     Area that contract with PHCP to provide or arrange Covered
                     Services for Eligible Persons enrolled in PHCP have
                     accepted such capitation and allocation rates and not less
                     than 2,500 Eligible Persons enrolled in PHCP have selected
                     each such provider as a Primary Care Provider.

              2.     In the event the conditions set forth in Article VI,
                     Section D. 1. above are not met, the multi-specialty
                     capitation and allocation rates shall be determined based
                     upon the following procedure. The parties shall retain the
                     firm of Milliman and Robertson or its successor (and share
                     the cost equally), to establish market capitation and
                     allocation rates utilizing the methodology set forth below.
                     JHMSC shall have the right to designate the independent
                     actuary (i.e., a Fellow of the Society at Actuaries and
                     qualified member of the American Academy of Actuaries),
                     within Milliman and Robertson to perform and/or supervise
                     the engagement, and shall inform PHPC of the designation
                     prior to notifying Milliman and Robertson; provided that,
                     in the event PHCP presents a compelling reason why the
                     independent actuary designated by JHMSC is not suitable or
                     appropriate for this engagement, JHMSC shall make another
                     selection, subject to PHCP's right to object for a
                     compelling reason.



                                       25
<PAGE>   29

              3.     In establishing market rates, it shall be presumed that the
                     utilization assumptions used by PHCP in its own actuarial
                     rate model(s) to establish provider payment and allocation
                     rates under the Maryland Medicaid Managed Care Program in
                     the Service Area are reasonable. The independent actuary
                     shall use such assumptions unless the actuary finds or is
                     presented with clear and convincing evidence that one or
                     more utilization assumptions in the PHCP rate model(s) is
                     not reasonable, in which case the independent actuary may
                     use such other assumption(s) as he or she deems reasonable.
                     With respect to pricing of particular services and
                     categories of services in determining market rates, the
                     independent actuary shall consider the pricing factors used
                     in the PHCP actuarial rate model(s), but the independent
                     actuary may also rely on and use any other managed care
                     pricing data in the Service Area he or she believes is
                     appropriate. The independent actuary shall also make any
                     necessary adjustments to reflect any factors relevant to
                     JHMSC specifically not included or reasonably reflected in
                     the PHCP actuarial model(s) (but not including utilization
                     and pricing factors which shall be addressed as set forth
                     in this subsection), shall incorporate any state-mandated
                     medical loss ratio requirements into the determination of
                     market rates and shall treat any stop-loss expense
                     (incurred as a result of State or Federal law requirements)
                     as a medical expense of JHMSC.

              4.     The actuary's determination of market rates shall be made
                     on an annual basis for remaining Contract Year(s) in the
                     initial term or renewal term unless the multi-specialty
                     groups referenced in the first sentence of this Section
                     then exist, in which event the most favored rate
                     methodology in Article VI, Section C above shall apply. The
                     rates determined by the independent actuary pursuant to
                     this Section shall be final and binding upon the parties
                     and not subject to appeal.

       E.     VERIFICATION OF MOST FAVORED RATES. In the event JHMSC elects to
accept a multi-specialty capitation and shared bonus pool allocation pursuant to
Article VI, Section C above, and the conditions precedent to application of the
most



                                       26
<PAGE>   30

favored nations methodology set forth in Article VI, Section D above are met,
Milliman and Robertson shall be retained pursuant the process set forth in
Article VI, Section D.2. to advise which is the most favored rate pursuant to
Article VI, Section C.

       F.     RATE CLASSIFICATION. All multi-specialty capitation and allocation
rates utilized pursuant to Article VI, Sections C, D and E above, shall employ
the demographic rate classifications and other factors used by the Department in
the then current Contract.

       G.     TIMING OF ELECTION. JHMSC shall make its election under Article
VI, Section C within thirty (30) days after most favored rates or market rates,
as applicable, are determined pursuant to the procedures set forth in Article
VI, Sections C, D, E and F above.

       H.     PERFORMANCE OF JHMSC SERVICES. In the event JHMSC elects under
Article VI, Section C to be paid most favored rates or market rates, as
applicable, PHCP shall assume responsibility for JHMSC Services to the extent
JHMSC is not otherwise compensated for all or part of those services under the
most favored rates or market rates, as the case may be.

                          ARTICLE VII - DATA EXCHANGE

       A.     CLAIMS WITH DATES OF SERVICE ("DOS") PRIOR TO DATE OF TRANSITION
OF CLAIMS PAYMENT FUNCTION TO JHMSC. In connection with all claims for Covered
Services rendered to Members having a DOS prior to the date the claims payment
function is transitioned to JHMSC, PHCP shall provide to JHMSC the data elements
and management reports specified in Section A.6. of the Business Agreement, and
the Exhibits thereto.

       B.     CLAIMS WITH DOS ON OR AFTER DATE OF TRANSITION OF CLAIMS PAYMENT
FUNCTIONS TO JHMSC. In connection with all claims for Covered Services rendered
to Members having a DOS on or after the date that the claims payment function is
assumed by JHMSC as a JHMSC Service, JHMSC shall provide to PHCP the data and
information as set forth in Exhibit J. The parties acknowledge that JHMSC will
be required to provide PHCP with certain reports, but agree that they will work
together in good faith to identify data elements to be provided by JHMSC in
accordance with Exhibit J, so that, where reasonably feasible, PHCP will produce
its own reports.



                                       27
<PAGE>   31

       C.     ENROLLMENT AND CAPITATION INFORMATION. PHCP shall provide to JHMSC
enrollment data via tape or other mutually acceptable electronic medium not less
frequently than weekly. As soon as PHCP and JHMSC systems reasonably permit,
such data shall be exchanged through electronic data interchange on an
agreed-upon frequency. PHCP shall also make available (on a call-in basis) to
JHMSC its then-standard Maryland Medicaid Managed Care Program enrollment
verification system which it may use to verify enrollment as a supplement to the
foregoing. Further, at the time capitation payments are made to JHMSC pursuant
to Article VI, PHCP shall provide to JHMSC supporting detail for such payments,
on tape or other mutually acceptable electronic medium on a monthly basis, in a
form and format to facilitate reconciliation of capitation payments to
enrollment electronically.

                        ARTICLE VIII - TRANSITION PERIOD

       A.     COMPENSATION DURING THE TRANSITION PERIOD. The allocation of the
monthly Gross Capitation Rates between PHCP and JHMSC in accordance with Article
VI, Sections A and B presumes that JHMSC shall perform all the JHMSC
Obligations. With respect to those JHMSC Services which PHCP retains during the
transition period in accordance with Article IV, Section G, JHMSC shall
compensate PHCP at the per Member per month rates set forth on Exhibit E, for
the period of time from July 1, 1996 until each respective JHMSC Service is
transitioned from PHCP to JHMSC; provided that, in no event, shall the total
compensation paid to PHCP for its administrative services under Article VI,
Section A and the amount paid to PHCP under this Article VIII exceed fifteen
percent (15%) of the monthly Gross Capitation Rates paid by the Department to
PHCP each month. Notwithstanding the preceding sentence, JHMSC shall pay to
PHCP, in addition to the Administrative Service Rates set forth in Exhibit E a
fee of $28,800 per month for the twelve (12) month period beginning July 1, 1996
and ending June 30, 1997 for services provided by PHCP to facilitate and
expedite the transition of JHMSC Services from PHCP to JHMSC. The obligation set
forth in the preceding sentence shall survive the termination of this Agreement
for any reason. In accordance with Article VI, Section B, PHCP will pay to JHMSC
ninety percent (90%) of the Gross Capitation Rates not later than the fifteenth
(15th) day of each month. Any compensation to PHCP from JHMSC for administrative
services to be performed by PHCP during the transition period shall be deducted
by PHCP from the monthly capitation payment to JHMSC.



                                       28
<PAGE>   32

       B.     USE OF PHCP SUBCONTRACTORS.

              1.     During the period from July 1, 1996 up to and including
                     December 31, 1996, PHCP shall continue to assume
                     responsibility for the provision of home health and
                     ambulance services and PHCP shall be paid by JHMSC for the
                     provision of such services in the amount of eight tenths of
                     one percent (.8%) of the Gross Capitation Rates. PHCP may
                     deduct such amount from the payments due JHMSC pursuant to
                     Article VI. No later than October 1, 1996, JHMSC may elect
                     for PHCP to continue to assume responsibility for the
                     provision of home health and ambulance services, and PHCP
                     shall be paid by JHMSC for the provision of such services
                     in the amount of eight-tenths of one percent (.8%) of the
                     Gross Capitation Rates unless the prices paid by PHCP to
                     its home health and ambulance vendors have increased from
                     the prices in effect on July 1, 1996. In the event such
                     prices have increased, the eight-tenths of one percent
                     (.8%) shall be adjusted by PHCP to reflect the increase.

              2.     For those Covered Services which, as of July 1, 1996, were
                     delivered under the Second MAMSA though PHCP subcontractors
                     under capitation arrangements, JHMSC shall continue to use
                     such subcontractors during the term of this Agreement
                     unless JHMSC provides notice to PHCP of its desire to
                     discontinue using those subcontractors upon ninety (90)
                     days prior written notice and provided further that PHCP's
                     subcontractor(s) may be discontinued without violation of
                     the applicable PHCP subcontract in effect as of July l,
                     1996. A list of applicable PHCP subcontractors is set forth
                     in Exhibit F.

              3.     Notwithstanding Article VIII, Section A above, JHMSC agrees
                     to continue using CMG as the mental health/substance abuse
                     subcontractor through at least the expiration or
                     termination of the current contract between PHCP and CMG,
                     which shall not be later than March 31, 1997. JHMSC may
                     utilize PHCP's mental health/substance abuse subcontractor
                     that will replace CMG if notice is received by PHCP no
                     later than



                                       29
<PAGE>   33

                     September 1, 1996. PHCP may deduct payments made to CMG
                     from payments due to JHMSC pursuant to Article VI.

              4.     JHMSC shall have the right to utilize other PHCP single
                     service capitated contractors pursuant to Article II,
                     Section B on behalf of Members, upon no less than ninety
                     (90) days prior notice that it intends to use such
                     subcontractors. However, once JHMSC elects to use such
                     subcontractors, JHMSC may not end such use until the
                     expiration of the then-current contract year for the
                     applicable subcontract and shall provide not less than
                     ninety (90) days prior notice to PHCP in advance of the
                     expiration of the contract year for the applicable
                     subcontract. With respect to existing and future PHCP
                     subcontracts, PHCP shall provide JHMSC with all relevant
                     pricing information reasonably requested by JHMSC within
                     ten (10) days of JHMSC's request. In the event JHMSC elects
                     to utilize a PHCP single service capitated contractor, PHCP
                     shall pay such contractor on behalf of JHMSC and deduct
                     such payment from the amount otherwise due JHMSC pursuant
                     to Article VI. PHCP shall provide JHMSC supporting detail
                     for any such deductions. PHCP shall not be entitled to any
                     transaction fee regarding such payments.

                            ARTICLE IX - SUBCONTRACTS

              A.     AUTHORITY.

                     1.     JHMSC shall have the express authority to engage the
                            services of Subcontractors to provide Covered
                            Services to Members. All Subcontractors shall comply
                            with State licensure regulations for providers and
                            shall be subject to the credentialing and
                            recredentialing standards and procedures implemented
                            by JHMSC under this Agreement. All Subcontractors
                            and related subcontracts shall be subject to
                            approval by PHCP, which approval shall not be
                            unreasonably withheld and shall be provided as
                            promptly as reasonably possible upon submission of
                            proposed subcontracts by JHMSC. JHMSC shall require
                            that Subcontractors comply with the terms of this
                            Agreement applicable to JHMSC Primary Care Providers
                            (including, but



                                       30
<PAGE>   34

                            not limited to, provision of encounter data), unless
                            the context otherwise requires.

                     2.     PHCP agrees that the form subcontract attached to
                            this Agreement as Exhibit G is in form and substance
                            acceptable to and approved by PHCP, which approval
                            shall remain in effect unless or until a change in
                            applicable law or regulation or in Department
                            standards or PHCP Policies and Procedures would
                            require modification of the form. JHMSC may use this
                            form without further approval required by PHCP;
                            provided that material changes to the form or any
                            specific subcontract shall require PHCP's advance
                            written approval, which shall not be unreasonably
                            withheld or delayed. PHCP shall be provided with a
                            copy of all non-material changes to the form or any
                            specific subcontract within fifteen (15) days of
                            adoption by JHMSC.

                     3.     JHMSC shall submit all subcontracts to be entered
                            into after the effective date of this Agreement for
                            approval by PHPC prior to execution. PHCP shall,
                            within fifteen (15) days of receipt of a proposed
                            subcontract from JHMSC, either approve such
                            subcontract in writing or provide JHMSC with an
                            itemized list of those proposed modifications to the
                            subcontract necessary for compliance with Department
                            requirements or PHCP Policies and Procedures. The
                            parties agree to use their best efforts, in good
                            faith, to address PHCP's objections, if any, and to
                            agree upon an approved subcontract as promptly as
                            reasonably possible following submission by JHMSC.
                            When submitting subcontracts for PHCP approval,
                            JHMSC shall highlight any changes from the approved
                            form, and shall include with such submissions any
                            attachments or exhibits to the subcontract, provided
                            that JHMSC shall not be required to provide any
                            compensation provisions unless the provision of the
                            same is required by State or Federal law or
                            regulation and then only to the extent required by
                            such law or regulation, consistent with Article
                            XIII, Section P.

                     4.     JHMSC shall provide PHCP with notice of termination
                            of any subcontract 0within fifteen (15) days after
                            JHMSC gives or



                                       31
<PAGE>   35

                            receives notice of termination, or, in the event
                            JHMSC or a Subcontractor terminates a Subcontract
                            for cause, then JHMSC shall provide PHCP with notice
                            of the same within two (2) business days after
                            notice is given or received from the Subcontractor,
                            as applicable.

       B.     COOPERATION. The parties hereby agree to cooperate and use their
best efforts to ensure that the approval process for subcontracts is efficient
so as to facilitate, to the maximum extent possible, JHMSC's performance
hereunder through the use of its designated Subcontractors.

                        ARTICLE X - TERMS AND TERMINATION

       A.     TERMS. Unless sooner terminated in accordance with the provisions
of this Article, the initial term of this Agreement shall be from July 1, 1996
through June 30, 2001 and this Agreement shall continue on a year-to-year basis
after the initial term, unless either party shall provide notice of termination
to the other not less than twelve (12) months prior to the expiration of the
initial term or renewal term.

       B.     PAYMENT UPON TERMINATION BY JHMSC. Subject to the limitations set
forth in this Article X, Section B, in the event JHMSC elects to terminate this
Agreement under Article X, Section A (i.e., at the expiration of the initial
term or a renewal term by delivery of notice under Article X, Section A), the
following shall apply:

              1.     JHMSC shall pay PHCP an amount equal to fifty percent (50%)
                     of the fair market value of the Members, not to exceed Five
                     Million Dollars ($5,000,000).

              2.     Fair market value of the Members shall be determined by
                     Ernst & Young or its successor, and shall be determined as
                     of the date notice is delivered under Article X, Section A
                     above. PHCP and JHMSC shall jointly engage Ernst & Young.
                     The independent valuation shall be completed within ninety
                     (90) days after notice of termination is provided. The
                     engagement of Ernst & Young, or its successor, shall
                     expressly include that time frame as a performance
                     requirement.



                                       32
<PAGE>   36

              3.     Except as provided in Article V, Section B and Section C
                     and in Article X, Section B.4.b. below, PHCP and its
                     Affiliates shall not contract, directly or indirectly, with
                     Primary Care Providers located in the Exclusive Area to
                     provide Covered Services to Eligible Persons during the
                     remaining term of the Agreement and during the one year
                     period following the termination date.

              4.     In the event fifty percent (50%) of fair market value of
                     the Members exceeds Five Million Dollars ($5,000,000), the
                     following shall apply:

                     (a)    JHMSC may elect to pay to PHCP the difference
                            between Five Million Dollars ($5,000,000) and fifty
                            percent (50%) of the fair market value of the
                            Members, and the non-competition restriction set
                            forth in Article X, Section B.3. above shall apply;
                            or

                     (b)    JHMSC may elect not to pay the difference between
                            Five Million Dollars ($5,000,000) and fifty percent
                            (50%) of the fair market value of the Members or to
                            pay only a portion of the difference between Five
                            Million Dollars ($5,000,000) and fifty percent (50%)
                            of fair market value of the Members, and, in either
                            case, PHCP may contract with one Primary Care
                            Provider in the Exclusive Area (e.g., a single
                            full-time equivalent physician or other full-time
                            equivalent health professional, or more than one
                            part-time physician or health professional which in
                            combination constitutes a full time equivalent) for
                            each One Hundred Thousand Dollars ($100,000) of the
                            amount such fifty percent (50%) of the fair market
                            value of the Members exceeds the amount paid by
                            JHMSC. PHCP's Primary Care Provider contracts may
                            become effective and PHCP may begin to enroll
                            Eligible Persons with such Primary Care Provider(s)
                            as of the ninety first (91st) day following the
                            issuance of the notice of termination, in accordance
                            with the procedures set forth in Article X, Section
                            B.4.d. below.



                                       33
<PAGE>   37

                     (c)    In the event fair market value of the Members is not
                            determined within ninety (90) days after notice of
                            termination as contemplated under Article X, Section
                            B.2. above, and it is determined subsequent to PHCP
                            entering into any of the above-referenced contracts
                            with Primary Care Providers that insufficient
                            credits exist for one or more such contracts, PHCP
                            shall assign one or more of such contracts to JHMSC
                            (as designated by JHMSC), or revise such contracts
                            as appropriate, subject to the terms of those
                            contracts. If the terms do not permit such
                            assignment, PHCP shall terminate the contract(s), as
                            applicable, as soon as possible

                     (d)    In the event PHCP contracts with one or more JHMSC
                            Primary Care Providers (i.e., JHMSC Subcontractors)
                            prior to termination of this Agreement, as permitted
                            in Article X, Section B.4.b. above, it is agreed
                            that: (1) all Eligible Persons that selected or were
                            assigned to such JHMSC Primary Care Providers as of
                            the date of delivery of the notice of termination
                            through the ninetieth (90th) day following the
                            delivery of notice of termination shall remain
                            Members subject to the terms of this Agreement
                            (including those Eligible Persons that involuntarily
                            disenroll during the period between the dates of
                            delivery of notice and ninety (90) days following
                            such notice and re-enroll within ninety (90) days of
                            disenrollment provided the Department permits
                            automatic reassignment to JHMSC); and (2) Eligible
                            Persons that enroll with PHCP and select or are
                            assigned to such JHMSC Primary Care Provider(s)
                            subsequent to the ninetieth (90th) day following the
                            delivery of notice of termination (including former
                            Members who voluntarily disenrolled) shall be
                            allocated equally to this Agreement and to PHCP
                            separate and apart from this Agreement.



                                       34
<PAGE>   38

              5.     In the event of a JHMSC Medicaid Sale within the three-year
                     period following the termination date, PHCP shall be
                     entitled to share in the proceeds of the sale in an amount
                     equal to the difference between (a) fifty percent (50%) of
                     fair market value of the Members determined pursuant to
                     Article X, Section B.2., and (b) the amount paid by JHMSC
                     under Article X, Section B.2. above plus One Hundred
                     Thousand Dollars ($100,000) for each Primary Care Provider
                     in the Exclusive Area with whom PHCP contracts as set forth
                     in Article X, Section B.4.b. above.

              6.     Any payments due under this Section shall be made within
                     thirty (30) days after termination of this Agreement, and
                     thirty (30) days after proceeds of the JHMSC Medicaid Sale
                     have been received by JHMSC (if applicable), as the case
                     may be.

       C.     TERMINATION BY PHCP. In the event PHCP elects to terminate this
Agreement under Article X, Section A (i.e., upon expiration of the initial term
or renewal term), the following shall apply:

              1.     JHMSC shall not be required to make any payment to PHCP;
                     provided, however, JHMSC may elect to restrict PHCP and its
                     Affiliates from contracting, directly or indirectly, with
                     Primary Care Providers in the Exclusive Area (other than as
                     permitted under Article V, Sections B and C) to provide
                     services to Eligible Persons during the remaining term of
                     this Agreement and during the two (2) year period following
                     the termination date by electing to pay PHCP twenty-five
                     percent (25%) of the fair market value of the Members as of
                     the date of the notice of termination, not to exceed Five
                     Million Dollars ($5,000,000).

              2.     Fair market value of the Members shall be determined as set
                     forth in Article K, Section B.2. above.

              3.     Article X, Section B.4.b. shall not apply.

              4.     Any payments due under this Section shall be made within
                     thirty (30) days after termination of this Agreement.



                                       35
<PAGE>   39

       D.     PHCP MEDICAID SALE. In the event of a PHCP Medicaid Sale, then
JHMSC shall have the right to accelerate the termination of this Agreement, as
provided in this Article X, Section D. PHCP shall provide JHMSC notice of the
sale promptly after execution of definitive agreement(s) or prior thereto at
PHCP's election, which notice shall set forth the scheduled closing date. JHMSC
shall provide notice of its election upon the earlier to occur of: thirty (30)
days after its receipt of notice of the pending sale; or thirty (30) days prior
to the scheduled closing date of the sale.

              1.     In the event JHMSC elects to accelerate termination, the
                     purchaser does not operate an MCO or, during the period
                     prior to commencement of the Maryland Mandatory Medicaid
                     Managed Care Program in the Exclusive Area, an HMO under
                     the Maryland Medicaid Managed Care Program in the Exclusive
                     Area, and the purchaser is an assignee under Article XIII,
                     Section K, then the following shall apply:

                     (a)    Termination shall be effective twelve (12) months
                            after closing of the sale.

                     (b)    JHMSC shall pay to PHCP or its designee upon
                            termination of this Agreement, fifty percent (50%)
                            of the fair market value of the Members as of the
                            date of JHMSC's notice of its acceleration of
                            termination, not to exceed Five Million Dollars
                            ($5,000,000).

                     (c)    Fair market value shall be determined as set forth
                            in Article X, Section B.2.

                     (d)    PHCP and the purchaser and their respective
                            Affiliates shall be prohibited from contracting,
                            directly or indirectly, with Primary Care Providers
                            in the Exclusive Area (other than as permitted under
                            Article V, Sections B and C) for purposes of serving
                            Eligible Persons during the remaining term of this
                            Agreement and for one year thereafter.

                     (e)    Article X, Section B.4.b. shall not apply.



                                       36
<PAGE>   40

                     (f)    Any payments due under this Article X, Section D.1.
                            shall be made within thirty (30) days after
                            termination of this Agreement.


              2.     In the event JHMSC elects to accelerate termination, the
                     purchaser operates an MCO or, during the period prior to
                     commencement of the Maryland Mandatory Medicaid Program in
                     the Exclusive Area, an HMO under the Maryland Medicaid
                     Managed Care Program in the Exclusive Area and the
                     purchaser is an assignee under Article XIII, Section K, the
                     following would apply:

                     (a)    Termination shall be effective twelve (12) months
                            after closing of the sale.

                     (b)    JHMSC shall not be required to make any payment to
                            PHCP or its designees. After the termination of this
                            Agreement, neither the purchaser nor JHMSC or their
                            Affiliates would be subject to any non-competition
                            restrictions.

                     (c)    PHCP and its Affiliates shall be prohibited from
                            contracting, directly or indirectly, with Primary
                            Care Providers in the Exclusive Area (other than as
                            permitted under Article V, Sections B and C) for
                            purposes of serving Eligible Persons during the
                            remaining term of this Agreement and for one year
                            thereafter.

              3.     In the event JHMSC elects to accelerate termination, and
                     the purchaser is not an assignee under Article XIII,
                     Section K, then the following shall apply:

                     (a)    Termination shall be effective as of the date of the
                            closing of the sale; provided that, in the event the
                            PHCP Medicaid Sale closes prior to the actual start
                            date of the Maryland Mandatory Medicaid Managed Care
                            Program in the Exclusive Area, termination shall be
                            effective as of (i) the actual start date of the
                            Mary-



                                       37
<PAGE>   41

                            land Mandatory Medicaid Managed Care Program, or
                            (ii) such earlier date as JHMSC may elect.

                     (b)    JHMSC shall not be required to make any payments to
                            PHCP or its designee. After the termination of this
                            Agreement, neither the purchaser nor JHMSC or their
                            Affiliates would be subject to any non-competition
                            restrictions.

                     (c)    PHCP and its Affiliates shall be prohibited from
                            contracting, directly or indirectly, with Primary
                            Care Providers in the Exclusive Area (other than as
                            permitted under Article V, Sections B and C) for
                            purposes of serving Eligible Persons during the
                            remaining term of this Agreement and for one year
                            thereafter.

       E.     TERMINATION IN THE EVENT OF CONTRACT TERMINATION. In the event
PHCP receives a notice from the Department of the Department's intention to
terminate the Contract or not to enter into another Contract for an additional
term, PHCP shall provide a copy of such notification to JHMSC within two (2)
business days of receipt by PHCP. This Agreement shall automatically terminate
upon the effective date of termination or non-renewal contained in the
Department's notice to PHCP unless such notice is revoked, suspended or enjoined
or the effective termination date extended. This Article X, Section E shall
apply in the event PHCP fails to qualify as an MCO as of the actual start date
of the Maryland Mandatory Medicaid Managed Care Program affecting the Exclusive
Area. In the event of termination under this Article X, Section E, JHMSC shall
not be required to make any payments to PHCP, and neither party shall be subject
to any post-termination non-competition covenants.

       F.     TERMINATION FOR CAUSE. In the event of a default by either party
with respect to one or more of the substantive provisions of this Agreement, the
non-defaulting party may give written notice of such default to the defaulting
party and the defaulting party shall have sixty (60) days after receipt of
written notice to cure the default or, in the event the default is not capable
of being cured within such sixty (60) day period, to substantially commence the
cure of such default. Such notice shall include a description of the alleged
default with sufficient detail to fairly inform the defaulting party. If the
default is not cured, or the cure is not substantially commenced, within the
sixty (60) day period, the Agreement shall terminate as



                                       38
<PAGE>   42

of the expiration of the sixty (60) day notice period. In the event of a default
falling within the scope of Article IV, Section F, JHMSC's right to cure a for
cause termination shall be limited to the cure rights provided therein. In the
event of termination under this Article X, Section F, JHMSC shall not be
required to make any payments to PHCP, and neither party shall be subject to any
post-termination non-competition covenants.

       G.     TERMINATION IN EVENT PHCP FAILS TO MAINTAIN GOOD STANDING AS AN
MCO.

              1.     In the event PHCP is not in good standing as an MCO any
                     time during the term of this Agreement and, as a direct
                     result, (1) further enrollment of Eligible Persons in PHCP
                     in the Exclusive Area is suspended (except as provided in
                     this Article X, Section G below), (2) all or part of the
                     Gross Capitation Rates are withheld, or (3) another penalty
                     is imposed that would have a material adverse impact upon
                     JHMSC, then, unless the reason for the loss of good
                     standing is JHMSC's non-compliance with the terms and
                     conditions of this Agreement, JHMSC shall have the right to
                     terminate this Agreement upon not less than thirty (30)
                     days prior written notice to PHCP, subject to a right to
                     cure within the thirty (30) day notice period. If a cure is
                     achieved within the thirty (30) day notice period, JHMSC's
                     notice of termination shall be withdrawn and deemed void.
                     Cure shall be deemed to have been achieved if the adverse
                     impact referenced above is substantially eliminated. In the
                     event the default is not cured within the thirty (30) day
                     period, the Agreement shall terminate as of the expiration
                     period or the thirty (30) day notice period.

              2.     In the event PHCP receives notice of a sanction or penalty
                     by the Department directly related to services to Members
                     or which has a material adverse impact on the arrangements
                     contemplated under this Agreement, PHCP shall provide JHMSC
                     with a copy of any such notice within two (2) business days
                     of PHCP's receipt of the same. Notwithstanding Article X,
                     Section G.1. above, in the event enrollment of Exclusive
                     Eligibles in PHCP is suspended at any time subsequent to
                     one year after the start date of the Maryland Manda-



                                       39
<PAGE>   43

                     tory Medicaid Managed Care Program in the Exclusive Area,
                     the time period for PHCP to cure the suspension shall be
                     extended to one hundred eighty (180) days; provided that
                     commencing on the thirty-first (31st) day of the
                     suspension, JHMSC City Sites may participate in the Hopkins
                     MCO as Primary Care Providers. Upon the lifting of the
                     suspension by the Department, JHMSC City Sites shall cease
                     to be available as Primary Care Providers through the
                     Hopkins MCO.

              3.     In the event of termination under this Article X, Section
                     G, JHMSC shall not be required to make any payments to
                     PHCP, and neither party shall be subject to any
                     post-termination non-competition covenants.

       H.     MEDICAL LOSS RATIO REQUIREMENTS. Under the Maryland Mandatory
Medicaid Managed Care Program, the Department has the authority to reduce Gross
Capitation Rates paid to an MCO if the MCO's medical loss ratio is less than
mandated by applicable law. In the event the law sets, or the Department
defines, "medical loss ratio" in a manner that would require material
modification of the terms of this Agreement in order to avoid a reduction in
Gross Capitation Rates paid by the Department to PHCP, both parties shall take
all reasonable steps within the limits of applicable law and regulation,
including such lobbying efforts as may be permitted by law, to avoid a reduction
of Gross Capitation Rates while maintaining the substance of the financial terms
contemplated hereunder. In the event PHCP receives notification from the
Department of a possible or pending reduction in Gross Capitation Rates due to
the medical loss ratio requirements, PHCP shall provide a copy of said notice to
JHMSC within two (2) business days of receipt of the same. In the event of a
reduction in Gross Capitation Rates due to the medical loss ratio requirements,
either party would have the right to terminate this Agreement upon thirty (30)
days prior written notice to the other. In the event notice is provided by
either party, the following would apply:

              1.     If, during the notice period, either party takes steps to
                     eliminate any adverse impact of the reduced Gross
                     Capitation Rates upon the other party, such as by
                     supplementing the other party's compensation, the notice of
                     termination shall be withdrawn and deemed void.



                                       40
<PAGE>   44

              2.     In the event notice of termination is not withdrawn, then
                     either of the following options shall apply, at JHMSC's
                     election:

                     (a)    Termination of the Agreement shall be effective as
                            of the end of the then-current Contract Year, and,
                            for the balance of the then-current Contract Year,
                            JHMSC shall be compensated as a multi-specialty
                            provider on the basis set forth in Article VI,
                            Sections C and D. In addition, JHMSC shall pay to
                            PHCP twenty-five percent (25%) of the fair market
                            value of the Members, not to exceed Two Million Five
                            Hundred Thousand Dollars ($2,500,000), as of the
                            date notice was provided pursuant to the procedures
                            set forth in Article X, Section C, in which event
                            PHCP and its Affiliates shall not contract, directly
                            or indirectly, with Primary Care Providers located
                            in the Exclusive Area to provide Covered Services to
                            Members during the remaining term of the Agreement
                            and during the one-year period following the
                            termination date (except as provided in Article V,
                            Section B and C), and Article X, Section B.4.b.
                            shall not apply; or

                     (b)    This Agreement shall remain in effect until the
                            expiration of the initial term or renewal term, as
                            the case may be, and, for the balance of the
                            then-current term, JHMSC shall be paid as a
                            multi-specialty provider on the basis set forth in
                            Article VI, Sections C and D above. In such event,
                            JHMSC would not be required to make any payment to
                            PHCP under Article X, Section B upon the expiration
                            of the initial term or a renewal term, as the case
                            may be, and neither party shall be subject to any
                            post-termination non-competition covenants.

       I.     RE-ENROLLMENT COOPERATION. In the event this Agreement is
terminated pursuant to Article X, Section A, Section B, Section C, Section D.l.,
Section E, Section F (other than by PHCP), Section G, or Section H, PHCP will
take any and all actions reasonably requested by JHMSC to cause the efficient
re-enrollment of Members in the Hopkins MCO or other entity designed by JHMSC,
and to



                                       41
<PAGE>   45

facilitate such re-enrollment process with the least possible disruption to
Members. The foregoing shall be subject to PHCP's rights to enroll Eligible
Persons under Article X, Section B.4.b.

                         ARTICLE XI - DISPUTE RESOLUTION

       A.     MEDIATION. Disputes that arise between the parties under this
Agreement shall be subject to the following: The parties shall employ
non-binding mediation utilizing a single mediator under the rules of the
American Arbitration Association ("AAA"). The parties shall request the AAA, to
the extent reasonably possible, to provide a list of mediators that have
expertise in the substantive field in which the dispute falls. The parties shall
have five (5) business days from receipt of the list of mediators to mutually
agree upon a mediator from that list. If the parties fail to do so, the AAA may
select the mediator. The mediation shall be completed no later than sixty (60)
days from the submission date of the mediation request to the AAA and both
parties agree to seek completion of the mediation within that time frame. If the
mediation is not completed within that time frame, either party may terminate
the mediation and pursue such other rights as it may have, including litigation.
The mediator shall have the right, but not the obligation, to seek expert advice
on the dispute from the applicable lists of experts set forth in Exhibit H. The
mediation shall be conducted in a confidential manner and treated as settlement
negotiations. None of the documents, information, statements or similar
materials which are made part of the mediation by one party shall be admissible
in any subsequent litigation unless obtained independently of the mediation. All
costs of any mediation, including the costs of any experts used by the mediator,
shall be borne equally by the parties. Attorney's fees and the costs of a
party's own experts shall be borne by that party. The parties agree that any
applicable statute of limitation or of repose shall be deemed to be, and shall
be, tolled upon demand for mediation and for a period of sixty (60) days
following the end of the mediation process.

       B.     RESOLUTION OF DISPUTES. Disputes arising under this Agreement may
be resolved through litigation in a court of competent jurisdiction, unless
otherwise settled by the parties by mutual agreement, after non-binding
mediation, as applicable. Exhaustion of the mediation process as set forth in
Article XI, Section A above, shall not be a pre-condition to obtaining an
injunction or restraining order in a court of law or equity.



                                       42
<PAGE>   46

       C.     NO DEDUCTION OR SET-OFF. In the event a dispute arises regarding
whether either party is in compliance with the terms and conditions of this
Agreement, such dispute shall be resolved by the dispute resolution procedures
set forth in this Article XI. In no event shall PHCP or JHMSC have the
unilateral right to reduce the amount of any payments hereunder to the other or
make set-offs against such payments unless authorized by the other party in
writing.

                    ARTICLE XII - COVERED PERSONS PROTECTIONS

       A.     NON-DISCRIMINATION. JHMSC agrees not to differentiate or
discriminate in the treatment of Members on the basis of source of payment for
health care services, economic status, sex, age, race, color, religion, origin,
place of residence, health status or handicap. JHMSC will observe, protect and
promote the rights of Members as patients.

       B.     COMPLAINTS. JHMSC and PHCP agree to cooperate in resolving Member
complaints about services rendered by JHMSC Primary Care Providers or
Subcontractors. Such complaints will be resolved using the PHCP Member complaint
resolution and grievance procedures. PHCP shall have the final authority in
resolving any complaint or grievance except as otherwise provided by the
Contract or Department requirements.

       C.     HOLD-HARMLESS. JHMSC and its Subcontractors will look solely to
PHCP for payment for Covered Services provided to Members (except for any
permitted co-payments, if applicable). Neither JHMSC nor its Subcontractors
shall, under any circumstances including, but not limited to, PHCP's insolvency
or inability to pay, assert any claim for compensation for Covered Services
against Members (or persons acting on their behalf), the Department, the State
of Maryland or HCFA. JHMSC agrees that this Article XII, Section C shall survive
the termination of this Agreement regardless of the reason for termination,
shall be construed to be for the benefit of Members, the Department, the State
of Maryland and HCFA and shall supersede any other existing or future oral or
written agreement between JHMSC or a Subcontractor and a Member or a person
acting on a Member's behalf. Any modifications, additions or deletions to the
provisions of this Section shall become effective on a date no earlier than
thirty (30) days after the Maryland Commissioner of Insurance has received
written notice of such proposed changes.



                                       43
<PAGE>   47

                        ARTICLE XIII - GENERAL PROVISIONS

       A.     CONFIDENTIALITY. Each party recognizes that all non-public
materials provided to it by the other party, including material prepared and/or
provided by the Department (unless available through applicable freedom of
information statutes and regulations) and encounter data supplied to PHCP by
JHMSC, are the proprietary property of the party providing the information and
the party receiving the information shall not disclose or release such material
to any third-party with the exception of the Department, EQRO, NCQA or as
otherwise required herein for PHCP's administration of this Agreement or the
Contract without the prior written consent of the party providing the
information, except as otherwise required by law or regulation or by order of a
court of competent jurisdiction. In addition, such materials shall only be used
by the receiving party to perform its obligations under this Agreement and for
the purpose of audits and accreditations and for no other purposes. Upon
termination of this Agreement, each party agrees to make a reasonable effort to
return all such materials to the party that provided the information, including
all copies thereof, unless otherwise waived in writing by the party to receive
the information. The parties agree that any violation of this provision shall
result in irreparable injury to the other party; therefore, notwithstanding
Article XI, in addition to any relief otherwise available to the parties, either
party is entitled to obtain an injunction enjoining and restraining the other
party and any related individuals or parties from violating this provision. If
it is determined that the scope of this provision is too extensive to be
enforceable by a court, then it shall be modified to the extent determined by a
court to be reasonable in order to obtain enforcement, and the parties hereto
agree to accept such determination subject to any appeals.

       B.     SOLICITATION. During the term of this Agreement, JHMSC or JHMSC
Primary Care Providers shall not solicit Members to disenroll from PHCP nor
solicit Exclusive Eligibles to enroll in another HMO or MCO under the Maryland
Medicaid Managed Care Program; provided that general marketing to Eligible
Persons (i.e., not specifically targeted to Exclusive Eligibles) shall not be
prohibited, nor shall any JHMSC Primary Care Providers be precluded from
informing the public of their participation in other HMOs or MCOs. In addition,
JHMSC Primary Care Providers may participate in, but not initiate, promotional
activities initiated by other HMOs and/or MCOs so long as such JHMSC Primary
Care Providers agree to participate in similar activities initiated by PHPC.



                                       44
<PAGE>   48

       C.     INDEMNIFICATION AND CONTRIBUTION. The parties agree to adhere to
and be bound by the Maryland common law and statutory principles of
indemnification and contribution.

       D.     SEVERABILITY. The provisions of this Agreement shall be severable.
If any portion of this Agreement is held to be unlawful or unenforceable, that
portion shall not affect any other portion of this Agreement, and the remaining
terms and conditions or portions will remain in effect. The portion held to be
unlawful or unenforceable shall be reformed in a manner so as to be lawful and
enforceable, as agreed to by the parties.

       E.     WAIVER. The waiver by either party of a breach or violation of any
provision of this Agreement shall not operate or be construed as a waiver of any
later breach or violation.

       F.     HEADINGS. The headings of the various Articles and Sections of
this Agreement are merely for convenience and do not, expressly or by
limitation, limit, define or extend the terms of the Articles and Sections to
which they apply.

       G.     REMEDIES CUMULATIVE. All rights and remedies under this Agreement
will be cumulative, and not alternative.

       H.     GOVERNING LAW. This Agreement shall be construed by and governed
according to the internal laws of the State of Maryland without regard to its
choice of laws or conflict of laws provisions, including, without limitation, in
relation to all matters of formation, interpretation, construction, validity,
performance and enforcement.

       I.     AMENDMENT. No term or provision of this Agreement may be changed,
discharged, modified or terminated orally or in any manner other than by an
instrument in writing signed by the parties hereto; provided that this Agreement
shall be self-amending in order to conform to any changes in Federal or State
laws or regulations unless any such self-amendment would materially alter the
obligations or benefits of either party under this Agreement.

       J.     COUNTERPARTS. This Agreement may be executed in any number of
counterparts, which, when read together, shall comprise one instrument.



                                       45
<PAGE>   49

       K.     ASSIGNMENT. This Agreement, including the rights, benefits, and
duties hereunder, shall not be assigned, sublet, delegated or transferred by
either party without the prior written consent of the other and the Department;
provided that PHCP may assign this Agreement to a purchaser of its Medicaid line
of business with the consent of the Department but without the consent of JHMSC.
Any such assignment shall be subject to provisions of Article X, Section D.
Notwithstanding the above, this Agreement may be assigned by PHCP to The
Prudential Insurance Company of America or an Affiliate.

       L.     INSURANCE. JHMSC shall maintain malpractice coverage for all
physicians and other health professionals employed by JHMSC or its subsidiaries
or its Affiliates. For each individual physician, the coverage limits shall be
no less than One Million Dollars ($1,000,000) per claim or occurrence and Three
Million Dollars ($3,000,000) per year. JHMSC agrees to submit to PHCP evidence
that it has obtained such insurance coverage. Subcontractors shall maintain
comparable coverage. JHMSC shall maintain general liability insurance and
liability insurance covering utilization management activities with coverage
limits customary for organizations of similar size and performing similar
functions.

       M.     SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon all permitted successors and assigns of the parties.

       N.     INDEPENDENT CONTRACTORS. The relationship among PHCP, JHMSC and
Subcontractors are those of independent contractors. None of the provisions of
this Agreement create nor are they intended to create or to be construed to
create an agency, partnership, joint venture or employer-employee relationship
between PHCP and JHMSC or its Subcontractors.

       O.     NOTICE. Any notice required to be given pursuant to the terms and
provisions hereof shall be in writing and shall be sent by either pre-paid,
certified mail return receipt requested, or overnight courier delivery service,
to:

                             Prudential Health Care Plan, Inc.
                             2800 North Charles Street
                             Baltimore, MD 21218
                             Attn:  President



                            46
<PAGE>   50

     with copies to:         Gnessin & Waldman
                             1300 19th Street, NW
                             Suite 408
                             Washington, D.C. 20036
                             Attn:  Alan M. Gnessin

                                    and

                             The Prudential Insurance Company of America
                             250 Gibraltor Road
                             Building 3 North
                             Horsham, PA 19044
                             Attn:  Counsel

                             Johns Hopkins Medical Services Corporation
                             3100 Wyman Park Drive
                             Baltimore, MD 21211
                             Attn:  President

     with a copy to:         The Johns Hopkins Health System Corporation
                             600 North Wolfe Street, Admin. Rm. 414
                             Baltimore, MD 21287-1914
                             Attn:  General Counsel

       Either party may, at any time, change the address for receipt of notices
by giving written notice to the other party.

       P.     PHCP DATA REQUESTS. In the event PHCP requests information from
JHMSC pursuant to this Agreement as needed for compliance by PHCP with PHCP
Policies and Procedures or Departmental standards, the Contract, NCQA, EQRO, or
applicable law, JHMSC shall provide such information. However, the parties agree
that, if any PHCP request involves JHMSC uniquely sensitive information, in the
reasonable opinion of JHMSC, JHMSC may request PHCP to provide a brief
description of the basis for the request and explore with PHCP the possibility
of limiting production of the information so as to avoid the provision of the
uniquely sensitive information. In addition, and subject to the balance of this
Article XIII, Section P, JHMSC shall provide PHCP with information in a manner
and form that will not cause JHMSC to waive any confidentiality privileges
available to it under applicable law. However, if such information cannot
reasonably be provided in a



                                       47
<PAGE>   51

manner and form as reasonably required by PHCP to meet its above informational
requirements, then, notwithstanding any confidentiality privileges available to
JHMSC, JHMSC will provide to PHCP the information required under the terms of
this Agreement. Notwithstanding the foregoing and anything in this Agreement to
the contrary, JHMSC shall not be required to provide PHCP with vendor or
provider pricing data; provided, however, in the event the Department, the EQRO,
or the NCQA requires such information, JHMSC shall provide such information
directly to such entity, if acceptable to such entity. In addition, JHMSC will
provide such information, as applicable, directly to PHCP to the extent
necessary for PHCP to perform and comply with applicable State or Federal law.
It is agreed by the parties that this Article XIII, Section P shall be read in
conjunction with all provisions of this Agreement pertaining to the provision of
information and data by JHMSC to PHCP.

       Q.     SCOPE OF AGREEMENT. Upon execution of this Agreement, the Second
MAMSA shall automatically terminate, effective at 12:00 midnight June 30, 1996
without further action of the parties. In addition, all terms and provisions
contained in the Asset Purchase Agreement entered into between The Johns Hopkins
Health Plan, Inc. and Prudential Health Care Plan, Inc. on May 20, 1991 (the
"Asset Purchase Agreement") and the Non-Competition Agreement entered into
between The Johns Hopkins Health System Corporation and Prudential Health Care
Plan, Inc. on May 20, 1991 (the "Non-Competition Agreement") pertaining to the
provision of services to Medicaid recipients are expressly superseded by this
Agreement. Other than the restrictions set forth in this Agreement, JHMSC, JHHC,
The Johns Hopkins Health System Corporation and their respective Affiliates or
related entities shall not be subject to any exclusivity or non-competition
restrictions whatsoever as regards the provision of, arranging of,
administration of or underwriting of services to Medicaid recipients. Paragraphs
6, 8 and 10 of the Second Settlement Agreement and Release are by reference
incorporated into this Agreement. Subject to the above in this Article XIII,
Section Q, this Agreement, together with any supplements, addenda, amendments,
modifications or attachments, is the complete Agreement. Neither party has made
any representations or warranties other than as set forth in this Agreement and
any Exhibits hereto.

       R.     SURVIVAL OF PROVISIONS. The following provisions of this Agreement
shall survive the termination of this Agreement: Article II, Section A; Article
III, Section A.5.; Article IV, Section B.2.; Article IV, Section B.3.; Article
IV, Section E; Article VII (with respect to dates of service prior to
termination date); Article X (except Section A); Article XI; Article XII;
Article XIII, Section A; Article XIII,




                                       48
<PAGE>   52

Section C; Article XIII, Section D; Article XIII, Section E; Article XIII,
Section G; Article XIII, Section H; Article XIII, Section O; Article XIII,
Section P; and Article XIII, Section Q.



                                       49
<PAGE>   53


       IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date first above written.

<TABLE>
<CAPTION>

<S>                                                                   <C>
JOHNS HOPKINS MEDICAL SERVICES CORPORATION                             PRUDENTIAL HEALTH CARE PLAN, INC.

By:   /s/ Martha D'Erasmo                                              By:   /s/   Dawn R. Walsh
   -------------------------------                                         ---------------------------------------
          Martha D'Erasmo                                               Print or
          President                                                    Type Name:   Dennis R. Walsh
                                                                                  --------------------------------
                                                                       Title:    Senior Vice President
Date:     8/2/96                                                       Date:   8/2/96
     ------------------------------------------------                  -------------------------------------------

</TABLE>


ACKNOWLEDGED AND AGREED:

In consideration of the mutual promises and good and valuable consideration
passing between PHCP and JHMSC for which the Johns Hopkins Health System
Corporation ("JHHS") derives considerable financial and non-financial benefits,
which consideration and benefits are hereby acknowledged, JHHS guarantees all of
the financial obligations of JHMSC under this Agreement. JHMSC and JHHS
recognize that but for such financial guarantee, PHCP would not have entered
into this Agreement.

                                                 THE JOHNS HOPKINS HEALTH
                                                 SYSTEM CORPORATION

                                                 By:[illegible  signature]
                                                    ---------------------------

                                                 Title: V.P. of General Counsel
                                                        -----------------------
                                                 Date:       8/2/96
                                                       ------------------------

                                       50

<PAGE>   54




In consideration of the mutual promises and good and valuable consideration
passing between PHCP and JHMSC for which Prudential derives considerable
financial and non-financial benefits, which consideration and benefits are
hereby acknowledged, Prudential agrees that it shall be bound by the provisions
set forth in Article V, Section A.4. and Section A.6. and Article X, Section
B.3., Section C.l., Section D.1.d., D.2.c. and D.3.c., and Section H.2.a., and
that it shall take no action, directly or indirectly, the effect of which would
be to cause PHPC not to perform fully its obligations under this Agreement.


                                              THE PRUDENTIAL INSURANCE
                                              COMPANY OF AMERICA

                                              By:
                                                 -----------------------------

                                              Title:
                                                    -------------------------

                                              Date:
                                                    ---------------
                                       51
<PAGE>   55





                           AMENDMENT AND ASSIGNMENT OF
                            THIRD MEDICAL ASSISTANCE
                           MEDICAL SERVICES AGREEMENT


       THIS AMENDMENT AND ASSIGNMENT amends that certain Third Medical
Assistance Medical Services Agreement ("Third MAMSA") between Prudential Health
Care Plan, Inc. ("PHCP") and Johns Hopkins Medical Service Corporation ("JHMSC")
dated as of July 1, 1996, and assigns the Third MAMSA to AMERIGROUP Maryland,
Inc., A Managed Care Organization ("AMERIGROUP"), a corporation organized under
the laws of Delaware with its principal place of business in Virginia Beach,
Virginia. Capitalized terms not defined when used below shall have the meanings
given such terms in Article I of the Third MAMSA.

                                    RECITALS

       WHEREAS, PHCP and JHMSC have previously entered into the Third MAMSA, and

       WHEREAS, PHCP contracted with AMERIGROUP on December 23, 1998 to transfer
certain assets related to PHCP's Maryland Medicaid managed care business to
AMERIGROUP (such contract the "Purchase Agreement"), and

       WHEREAS, the Department will enter into a contract with AMERIGROUP
effective June 1, 1999 (the "AMERIGROUP MCO Agreement") whereunder Medicaid
patients that do not elect to disenroll from PHCP during the 30-day period prior
to the sale of assets by PHCP to AMERIGROUP will be automatically re-enrolled
with AMERIGROUP, subject to voluntary disenrollment during the 90-day period
after the consummation of the sale, and

       WHEREAS, PHCP and JHMSC desire to amend the Third MAMSA as set forth
herein and PHCP desires to assign the Third MAMSA from PHCP to AMERIGROUP as set
forth below, and

       WHEREAS, PHCP and AMERIGROUP are also entering into this Amendment and
Assignment in reliance on the covenant of the Mid-Atlantic Association of
Community Health Centers in the Covenant Not to Sue attached hereto.



<PAGE>   56

       NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by each party, the parties agree as
follows:

              1.     SCOPE OF AMENDMENT: In the event of a conflict between the
                     terms of this Amendment and Assignment and the Third MAMSA,
                     the terms of Amendment and Assignment shall prevail.

              2.     TERMINATION OF EXCLUSIVITY: Effective as of the closing of
                     the sale of assets by PHCP to AMERIGROUP and the effective
                     date of the AMERIGROUP MCO Agreement (collectively "the
                     Closing"), Article V of the Third MAMSA shall be, and
                     hereby is, deleted and of no force or effect whatsoever.
                     Effective as of the execution of this Amendment and
                     Assignment (the "Execution Date"), the respective
                     obligations of the parties to the Third MAMSA are hereby
                     modified to permit each party to enter into contracts which
                     will become effective only at Closing contemporaneously
                     with the termination of Article V as described in the
                     preceding sentence. If Closing does not occur on or before
                     July 1, 1999, Article V will remain in full force and
                     effect and the contingent contracts entered into during the
                     period prior to and including July 1, 1999 will be null and
                     void.

              3.     TERMINATION OF BUYOUT AND NON-COMPETITION PROVISIONS:
                     Effective as of the Closing, Article X.B., Article X.C. and
                     Article X.D. of the Third MAMSA shall be deleted and of no
                     force or effect whatsoever. Accordingly, without limiting
                     the foregoing, Article I.HH. shall be of no force or effect
                     from and after such time.

              4.     TERM AND TERMINATION OF THIRD MAMSA: Effective as of the
                     Closing, Article X.A. of the Third MAMSA shall be deleted
                     and the following substituted in lieu thereof:

                     A.     TERM: Unless sooner terminated in accordance with
                            the provisions of this Article, the term of this
                            Agree-


                                       2
<PAGE>   57

                     ment shall be from July 1,1996 through and ending upon
                     December 31, 2000.

              Article X.H. shall be deleted as of the Closing and shall be of no
              further force or effect.

              5.     ASSIGNMENT OF THIRD MAMSA: Effective as of the Closing, the
                     Third MAMSA shall be hereby assigned from PHCP to
                     AMERIGROUP pursuant to Article XIII.K. of the Third MAMSA.
                     This Amendment and Assignment will be null and void if the
                     Closing does not occur on or before July 1, 1999. PHCP (and
                     Prudential, but only to the extent of the obligations it
                     assumed under the Third MAMSA relating to provisions not
                     otherwise terminated hereunder) shall remain liable for any
                     liabilities or obligations which arise under the Third
                     MAMSA prior to Closing (including obligations arising
                     before the Closing the performance of which is required
                     post-Closing) and AMERIGROUP shall not be deemed to have
                     assumed any of such liabilities or obligations; provided,
                     however, to the extent data or information related to such
                     obligations has been delivered by PHCP to AMERIGROUP,
                     AMERIGROUP covenants to PHCP to use commercially reasonable
                     efforts to provide PHCP with such data or information as
                     may be necessary to discharge such obligations (nothing
                     herein shall be deemed to modify or limit the respective
                     obligations of PHCP and AMERIGROUP under the Purchase
                     Agreement). Further, JHMSC shall remain liable to PHCP for
                     any liabilities and the performance of any obligations
                     arising prior to Closing. From and after Closing,
                     AMERIGROUP shall be solely liable for the liabilities and
                     obligations of "PHCP" under the Third MAMSA, the initial
                     performance of which is due after Closing, and PHCP shall
                     have no liability with respect to such liabilities and
                     obligations. From and after Closing, AMERIGROUP shall have
                     the rights, benefits and privileges of PHCP (and
                     Prudential) under the Third MAMSA, as amended hereby.
                     Notwithstanding the foregoing, PHCP is not hereby released
                     from its acts or omissions related to the transition of its
                     operations to AMERIGROUP pursuant to the Purchase Agreement
                     for which it shall remain

                                       3
<PAGE>   58

                     responsible; provided, however, that this sentence shall
                     not vest in JHMSC any rights as a third party beneficiary
                     or otherwise to enforce any of the obligations of PHCP owed
                     to AMERIGROUP under the terms of the Purchase Agreement.

              6.     COMPENSATION: Effective as of the Closing, Article VI.C.,
                     VI.D., VI.E., VI.F., VI.G. and VI.H. are deleted and of no
                     force or effect whatsoever. Article VI.B. is hereby
                     amended, effective as of the Closing, as it pertains to
                     stop-loss coverage, as set forth in this paragraph. Prior
                     to May 1, 1999, the Department provided to MCOs, on a
                     mandatory basis, stop-loss coverage at specified deductible
                     and coverage levels. As of May 1,1999, the Department will
                     no longer provide stop-loss coverage and MCOs shall have
                     the option, but not the obligation, to obtain stop-loss
                     coverage. JHMSC shall have the following three options with
                     respect to stop-loss coverage: (a) at JHMSC's request,
                     AMERIGROUP will provide stop-loss coverage for the benefit
                     of JHMSC at the levels provided by the State prior to May
                     1, 1999 (or such other coverage level as may be agreed by
                     the parties) at AMERIGROUP's actual cost in the event
                     AMERIGROUP purchases such coverage from a third-party
                     insurer or, in the event AMERIGROUP self-insures for
                     catastrophic claims, the cost to JHMSC shall be the
                     actuarially projected cost with no profit markup or risk
                     retention markup by AMERIGROUP; (b) JHMSC may elect to
                     purchase stop-loss coverage from a commercial insurer of
                     its choosing; or (c) JHMSC may elect to forego obtaining
                     stop-loss coverage and the Gross Capitation Rates upon
                     which JHMSC's percentage of premium is based shall not
                     reflect any deduction or charge for stop-loss coverage; the
                     foregoing notwithstanding, JHMSC also shall be responsible
                     to comply, at its expense, with any applicable stop-loss
                     and reporting requirements imposed upon AMERIGROUP under
                     the Federal Physician Incentive Plan Regulations by virtue
                     of JHMSC's contracts with its groups and physicians.

              7.     RE-ENROLLMENT COOPERATION: Effective as of the Closing,
                     Article X.I. shall be deleted and the following inserted in
                     lieu thereof:

                                       4
<PAGE>   59

                     I.     RE-ENROLLMENT COOPERATION. JHMSC hereby agrees that
                            its ability to send written notice to Members
                            pertaining to the participation of JHMSC and/or its
                            Subcontractors as providers in MCOs shall be limited
                            to, and AMERIGROUP agrees to cooperate in all
                            reasonable respects with JHMSC (upon JHMSC's
                            request) with respect to, the following: (a) the
                            provision of one notice by JHMSC and/or its
                            Subcontractors to Members on or after the Execution
                            Date of the MCOs (all listed similarly and including
                            AMERIGROUP) with whom JHMSC and/or its
                            Subcontractors then participate; and (b) the
                            provision of notice by JHMSC and/or its
                            Subcontractors to Members on or after December
                            1,1999 of the MCOs (all listed similarly and
                            including AMERIGROUP) with whom JHMSC and/or its
                            Subcontractors then participate as well as of the
                            termination date of the Third MAMSA and the Members'
                            option to select another MCO if necessary for the
                            Member to retain his or her selection of a JHMSC
                            Primary Care Provider, provided that the parties
                            will use their reasonable efforts (including but not
                            limited to AMERIGROUP's providing JHMSC with all
                            available data from the Department or otherwise in
                            AMERIGROUP's possession as to Member identity,
                            address and annual open enrollment renewal date)
                            from and after December 1, 1999 to enable JHMSC
                            periodically to provide such notice to Members
                            reasonably in advance of each Member's annual open
                            enrollment renewal date for switching to a new MCO.

              8.     SOLICITATION: As of the Closing, Article XIIL.B. shall be
                     deleted and the following inserted in lieu thereof:

                            B.     SOLICITATION. The parties (including, in the
                                   case of JHMSC, its Subcontractors) will
                                   comply with applicable law and Department
                                   regulations and requirements with respect to
                                   marketing to and solicitation of Eligible
                                   Persons

                                       5
<PAGE>   60


                                   (which is understood to include Members)
                                   including Department requirements pertaining
                                   to the contents of written communications
                                   with Eligible Persons. In accordance with
                                   Department requirements, all MCOs with whom
                                   JHMSC or its Subcontractors participate
                                   (including AMERIGROUP) will be similarly
                                   advertised, identified and displayed, as
                                   applicable, in the offices and clinics of
                                   JHMSC and its Subcontractors and in the
                                   member education materials disseminated by
                                   JHMSC and its Subcontractors.

              9.     ASSIGNMENT: As of the Closing, Article XIII.K. shall be
                     deleted and the following inserted in lieu thereof:

                     K.     ASSIGNMENT. This Agreement, including the rights,
                            benefits, and duties hereunder, shall not be
                            assigned, sublet, delegated or transferred by either
                            party without the written consent of the other. The
                            foregoing notwithstanding, AMERIGROUP may upon sixty
                            (60) days prior written notice to JHMSC assign this
                            Agreement without JHMSC's written consent to any
                            entity that acquires all or substantially all of
                            AMERIGROUP'S assets related to its Maryland Medicaid
                            business in a transaction approved by the
                            Department. In no event shall an assignment be
                            effective if it is prohibited by the Department.

              10.    NOTICE: As of the Closing, Article XIII.O. shall be amended
                     by inserting the following for notices to AMERIGROUP:

                     AMERIGROUP Maryland Inc.,
                        A Managed Care Organization
                     c/o AMERIGROUP Corporation
                     4425 Corporation Lane, Suite 300
                     Virginia Beach, VA 23462
                     Attn:     Jeffrey L. McWaters, CEO

                                       6
<PAGE>   61


                                   Stanley E. Baldwin, Esq., Senior Vice
                                   President and General Counsel

              11.    This Amendment and Assignment is being entered into by PHCP
                     and AMERIGROUP in reliance upon (a) JHMSC's non-objection
                     to the prompt mailing by the Department of the notice to
                     Members attached as Exhibit A and (b) the execution and
                     delivery by Mid-Atlantic Community Health Centers, Inc.,
                     People's Community Health Center, and Baltimore Medical
                     System, Inc. of the Covenant Not to Sue attached as Exhibit
                     B and by Park West Medical Center and South Baltimore
                     Family Health Center to the acknowledgment letter attached
                     as Exhibit C.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]






                                       7
<PAGE>   62


       IN WITNESS WHEREOF, the parties hereto have executed this Amendment and
Assignment as of the 30th day of April, 1999.


<TABLE>
<CAPTION>

<S>                                             <C>
JOHNS HOPKINS MEDICAL SERVICES CORPORATION       AMERIGROUP MARYLAND, INC.,
                                                 A MANAGED CARE ORGANIZATION

By:                                              By:  /s/  Stanley Baldwin
   ------------------------------                     ---------------------------------
         Michael A. Thompson                           Stanley F. Baldwin
            President                                   Vice President

PRUDENTIAL HEALTH CARE PLAN, INC.

By:
    ----------------------------
     Name:
           ---------------------
     Title:
           ---------------------
</TABLE>

                                       8

<PAGE>   63



GUARANTEE: In consideration of the mutual promises and good and valuable
consideration passing between AMERIGROUP and JHMSC, for which the Johns Hopkins
Health System Corporation ("JHHS") and AMERIGROUP Corporation ("AMERIGROUP
Parent") derive considerable financial and non-financial benefits under the
Third MAMSA and this Amendment and Assignment, JHHS and AMERIGROUP Parent each
guarantees all of the obligations of JHMSC and AMERIGROUP, as the case may be,
under the Third MAMSA and this Amendment and Assignment. JHMSC and JHHS and
AMERIGROUP and AMERIGROUP Parent acknowledge that, but for these guarantees,
JHMSC and AMERIGROUP would not have entered into this Amendment and Assignment.


<TABLE>
<CAPTION>

<S>                                                 <C>
AMERIGROUP CORPORATION                              JOHNS HOPKINS HEALTH SYSTEM
                                                    CORPORATION

By:Stanley F. Baldwin                               By:
   ---------------------------------------              -------------------------------
            Stanley F. Baldwin                                  Ronald R. Peterson
            Senior Vice President                               President
</TABLE>










                                       9








<PAGE>   64

                             AMENDMENT NO. 2 OF THE
               THIRD MEDICAL ASSISTANCE MEDICAL SERVICES AGREEMENT

THIS AMENDMENT NO.2 amends that certain Third Medical Assistance Medical
Services Agreement ("THIRD MAMSA") between AMERIGROUP MARYLAND, INC., A Managed
Care Organization ("AMERIGROUP") as assignee of PRUDENTIAL HEALTH CARE PLAN,
INC. and JOHNS HOPKINS MEDICAL SERVICES CORPORATION ("JHMSC") dated as of July
1, 1996 and amended pursuant to that certain Amendment and Assignment of the
Third Medical Assistance Medical Services Agreement dated as of April 30, 1999
("FIRST AMENDMENT").

RECITALS:

WHEREAS, AMERIGROUP and JHMSC have previously entered into the First Amendment;
and

WHEREAS, AMERIGROUP and JHMSC desire to modify the First Amendment as set forth
herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy
which are hereby acknowledged by each party, the parties agree as follows:

       1.     SCOPE OF AMENDMENT NO. 2. In the event of a conflict between the
terms of this Amendment No. 2 and the First Amendment and/or the Third MAMSA,
the terms of this Amendment No. 2 shall prevail.

       2.     TERM AND TERMINATION OF THIRD MAMSA. Paragraph "4" of the First
Amendment is hereby modified to provide that the term of the Third MAMSA shall
be from July 1, 1996 through and ending on December 31, 2000.

       3.     RE-ENROLLMENT COOPERATION. Paragraph "7" of the First Amendment is
hereby modified by substituting "December 1, 2000" for "December 1, 1999" in the
two places such date appears in subparagraph (b).



<PAGE>   65


IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 as of the 2nd
day of February, 2000.



                                            JOHNS HOPKINS MEDICAL SERVICES
                                            CORPORATION

                                            By:/s/ Michael A. Thompson
                                                   -------------------
                                                   Michael A. Thompson
                                                   Vice President

                                            AMERIGROUP MARYLAND, INC.
                                            A MANAGED CARE ORGANIZATION

                                            By:/s/ Stanley F. Baldwin
                                                   ------------------
                                                   Stanley F. Baldwin
                                                   Vice President







                                       2


<PAGE>   66


ACKNOWLEDGED:

The undersigned executed the First Amendment as guarantors of certain
obligations under the Third MAMSA and hereby execute this amendment to
acknowledge that their respective guarantees shall continue in full force and
effect with respect to the Third MAMSA as amended hereby.

<TABLE>
<S>                                                   <C>
AMERIGROUP CORPORATION                                JOHNS HOPKINS HEALTH SYSTEM
                                                      CORPORATION

By:  /s/ Stanley F. Baldwin                           By: /s/ Ronald R. Peterson
   ---------------------------------------                -----------------------------------
         Stanley F. Baldwin                                   Name:  Ronald R. Peterson
         Senior Vice President                                Title:    President
</TABLE>




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