<PAGE>
 
                                                                   EXHIBIT 10.12

                               SERVICES AGREEMENT


     This Services Agreement (this "Agreement") is entered into by and between
SUNSTAR HEALTH PLAN, INC., a Florida corporation ("SunStar"), and HEALTHPLAN
SERVICES, INC., a Florida corporation ("HPS"), effective as of March 7, 1997
(the "Effective Date").

     WHEREAS, SunStar desires that HPS assist and otherwise provide
administrative services to SunStar with respect to a managed care program
sponsored by SunStar; and

     WHEREAS, HPS is desirous of performing such services in accordance with the
terms of this Agreement.

     NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, SunStar and HPS hereby agree as follows:


                                     PART 1
                                     ------

                                  DEFINITIONS
                                  -----------

     Capitalized terms used in this Agreement shall have the meanings ascribed
to them in Exhibit A, which is attached hereto and incorporated herein by
           ---------
reference.

                                    PART 2
                                    ------

                             CLAIMS ADMINISTRATION
                             ---------------------

     2.1  CLAIMS PROCESSING. HPS shall perform the claims services set forth
          -----------------
below on behalf of SunStar, in accordance with written procedures reasonably
required by SunStar, using SunStar approved forms.

          (a)  HPS shall receive and correlate all information necessary to
          confirm eligibility for benefits with respect to claims received, and
          determine Program benefits due to Enrollees.

          (b)  HPS shall calculate the amount of benefits payable in connection
          with each claim.

          (c)  HPS shall determine whether the provider submitting each claim is
          a SunStar Provider. HPS shall perform such verification using a
          provider list supplied by SunStar. HPS shall follow reasonable
          SunStar written procedures with respect to any claim received from a
          provider that is not a SunStar Provider.
<PAGE>
 
          (d)  HPS shall assign a new payment amount to each claim submitted by
          a SunStar Provider in accordance with the repricing schedule supplied
          by SunStar.

          (e)  HPS shall pay claims by drafts drawn on a SunStar bank account
          established for that purpose, in accordance with written procedures
          and controls established by SunStar and submitted to HPS.

          (f)  HPS shall maintain claims records necessary for the processing of
          claims.

          (g)  HPS shall refer to a designated SunStar representative any issue
          relating to claim handling when HPS determines that SunStar's written
          claims payment guidelines are not reasonably clear.

          (h)  Any costs incurred by HPS for obtaining medical records in
          connection with the performance of claim services hereunder will be
          reimbursed to HPS by SunStar, provided that a designated SunStar
          representative has generally approved HPS's requests for such records
          (which approval shall not be unreasonably denied).

          (i)  SunStar will make the final determination as to the payment of
          any claim that is denied in whole or in part by HPS and with respect
          to which a request for claim review has been made.

          (j)  SunStar shall reimburse HPS for the cost of providing check stock
          to be used by HPS to pay claims on behalf of SunStar.

          (k)  HPS shall adhere to reasonable preauthorization protocols
          developed by SunStar.


     2.2  SPECIAL CLAIMS SERVICES. On behalf of SunStar, HPS shall provide the
          -----------------------
services set forth below with respect to Enrollee claims, in accordance with the
written policies and procedures reasonably required by SunStar.

          (a)  HPS shall identify certain claims that may be incorrectly billed,
          using criteria developed by one or more recognized experts in the
          health care field.

          (b)  HPS shall investigate, within agreed upon parameters, certain of
          such potentially incorrect claims and shall adjust such claims if
          appropriate.

          (c)  HPS shall identify potentially fraudulent practices and refer
          such practices to SunStar and/or other parties designated by SunStar.
<PAGE>
 
          (d)  HPS shall identify providers that may have improperly billed for
          services, or participated in overutilization of services, and shall
          implement procedures to monitor such providers' future billing and
          utilization practices.

     2.3  GENERALLY ACCEPTED CLINICAL STANDARDS.  To the extent reasonably
          -------------------------------------                           
required by SunStar, HPS shall utilize Generally Accepted Clinical Standards in
performing services pursuant to this Part 2.  For purposes of this Agreement,
                                     ------                                  
"Generally Accepted Clinical Standards" shall mean standards of clinical and
billing practice regarding inpatient and outpatient utilization of health care
services, as assessed by one or more recognized experts in the health care
field.

     2.4  IRS 1099 FORM.  On or before January 31 of each calendar year
          -------------                                                
beginning in 1998, HPS shall provide an IRS Form 1099 to each provider to whom
HPS has paid more than $600 on behalf of SunStar during the previous calendar
year.

     2.5  REPORTS.  HPS shall provide SunStar with monthly electronic
          -------                                                    
claims, utilization, and eligibility information in HPS's standard format.

     2.6  ACCESS TO INFORMATION. HPS shall provide SunStar with on-line access
          ---------------------
to view HPS computer files that contain information regarding claims processed
by HPS pursuant to this Agreement. HPS shall train designated SunStar
representatives to view HPS's claims processing system using such on-line
technology. At SunStar's reasonable request, HPS shall conduct such training at
SunStar's facility. Initial training shall be at no cost to SunStar. Subsequent
training shall be at SunStar's expense, at HPS's then-prevailing hourly rates.
SunStar shall pay for all equipment used at SunStar's facility to maintain such
on-line viewing access, and shall reimburse HPS for all software and connection
costs associated with such access. An HPS representative shall be generally
available during the business hours of each Business Day to respond to telephone
inquiries from SunStar regarding HPS claims processing services.

                                    PART 3
                                    ------

                             ENROLLMENT DOCUMENTS
                             --------------------

     3.1  IDENTIFICATION CARDS.  HPS shall arrange for the printing of all
          --------------------                                            
Enrollee identification cards for the Program.  The layout of the cards shall be
developed using HPS's form identification card, with such changes thereto as are
mutually agreed upon by the parties.  SunStar shall reimburse HPS for all costs
incurred by HPS to develop the layout for such identification cards and to print
such identification cards.

     3.2  DISTRIBUTION.  As requested by SunStar, HPS shall distribute an
          ------------                                                   
enrollment package to each Member (an "Enrollment Package"), which package shall
include Enrollee identification cards for all Enrollees of such Member, and
other enrollment materials to be provided to HPS by SunStar.  SunStar shall
reimburse HPS for all postage and other delivery costs associated with such
distribution.
<PAGE>
 
                                    PART 4
                                    ------

                                    RECORDS
                                    -------

     4.1  RECORD RETENTION; DATA. To the extent required by Applicable Law,
          ----------------------
during the term of this Agreement and for a period of seven (7) years after
termination hereof, HPS shall maintain at its principal administrative office,
in original form or on electronic media, adequate books and records of all
transactions between HPS, SunStar, SunStar Providers, Members, and/or Enrollees
(the "Records"), in accordance with all laws that are specifically applicable to
third party administrators (including but not limited to state laws requiring
that HPS provide state officials with access to such books and records). HPS may
use the data recorded on such Records for any purpose, subject to the provisions
of this Agreement and Applicable Law (including laws protecting confidential
Enrollee information). HPS shall retain full ownership rights over all
compilations, analyses, and reports generated by HPS, as well as all proprietary
technology, software, and other data utilized by HPS in the performance of its
obligations under this Agreement, except to the extent that such compilations,
analysis, and reports are generated specifically for SunStar and contain SunStar
Confidential Information. Such ownership rights shall include, but are not
limited to, all rights associated with publication, trade secrets, copyrights,
trademarks, and patents.

     4.2  SUNSTAR ACCESS. SunStar retains the right to continuing access to the
          --------------
Records needed by SunStar to fulfill all its obligations to SunStar Providers,
Members and Enrollees, subject to the terms of this Agreement and Applicable
Law. All Records maintained by HPS hereunder shall be made available to SunStar
during normal business hours of any Business Day for review, inspection,
examination, and reproduction, provided that SunStar provides HPS with
reasonable notice of its intention to inspect the Records, and provided that
SunStar reimburses HPS for the cost of any reproduction. If HPS is required to
disclose any of such Records to any third party pursuant to Applicable Law, such
disclosure shall be at the expense of SunStar. Upon termination of this
Agreement, as reasonably required by SunStar, HPS shall transfer the Records
within a reasonable time after termination. SunStar shall reimburse HPS for all
costs incurred by HPS to transfer such Records. HPS may retain at its discretion
copies of all or a portion of the Records, subject to the terms of this
Agreement. Upon the reasonable request of SunStar, and at SunStar's expense, HPS
shall destroy all or part of the records, except to the extent prohibited by
Applicable Law.


                                    PART 5
                                    ------

                           SUNSTAR RESPONSIBILITIES
                           ------------------------

     5.1  IMPLEMENTATION. Notwithstanding any other provision of this Agreement,
          --------------
HPS shall not be obligated to begin performing services hereunder until the
thirtieth calendar day after SunStar provides HPS with all information necessary
for HPS to perform such services, including but not limited to the SunStar
repricing fee schedule and the SunStar Provider list, in an electronic format
acceptable to HPS, or in such other format as is reasonably requested by HPS.
<PAGE>
 
     5.2  ENROLLMENT INFORMATION. At least fifteen (15) Business Days before HPS
          ----------------------
is required by SunStar to distribute an Enrollment Package to a Member pursuant
to Part 3 above, SunStar shall provide to HPS, in an electronic format
acceptable to HPS, or in such other format as is reasonably requested by HPS:
(i) all enrollment materials that SunStar wishes HPS to distribute to such
Member, other than Enrollee identification cards; and (ii) all information
necessary for HPS to prepare and deliver the Enrollment Package, including the
Member's address and enrollment data.

     5.3  NOTICE OF CHANGES. SunStar shall notify HPS of any change in SunStar
          -----------------
policies, procedures, benefits, rates, forms, or other aspects of the Program,
and shall provide HPS with such change in an electronic format acceptable to
HPS, or in such other format as is reasonably requested by HPS: (i) at least
Fifteen (15) Business Days before the date on which SunStar requires HPS to
implement such change; and (ii) at least Fifteen (15) Business Days before
SunStar requires that HPS notify Members of such change (whether or not such
notice is required by Applicable Law).

                                    PART 6
                                    ------

                                     AUDIT
                                     -----

     To the extent required by Applicable Law, or as reasonably required by
SunStar to conduct its business, SunStar shall audit the books and accounts of
HPS relating to all transactions subject to this Agreement. SunStar shall
conduct any audits of HPS services in accordance with generally accepted
auditing principles and pursuant to guidelines to be provided by HPS to SunStar.
SunStar shall provide HPS with reasonable notice of such audits, consistent with
HPS guidelines.

                                     PART 7
                                     ------

                                  UNDERWRITING
                                  ------------

     7.1  APPLICANT PROCESSING.  HPS shall perform specified underwriting
          --------------------                                           
services on behalf of SunStar in accordance with policies and procedures
approved by SunStar, and shall communicate its underwriting determinations to a
designated SunStar representative.  SunStar shall provide HPS with all
information necessary to perform underwriting services with respect to each
applicant.  In the event that SunStar has not provided HPS with sufficient
information with respect to an application, HPS will return such application to
SunStar.

     7.2  AUTHORITY.  SunStar expressly retains sole authority and sole
          ---------                                                    
discretion to establish written underwriting guidelines for review of applicants
for coverage under the Program. HPS shall have authority to implement and apply
SunStar's underwriting guidelines, but may not modify any term or condition of
coverage under the Program or waive any provision thereof except to the extent
required by SunStar. HPS shall refer any questions regarding implementation of
SunStar's underwriting guidelines to SunStar. SunStar shall provide designated
HPS employees with sufficient training with respect to the SunStar underwriting
guidelines.
<PAGE>
 
                                     PART 8
                                     ------

                                  USE OF NAME
                                  -----------

     8.1  USE OF NAME. Neither Party shall use any written or oral communication
          -----------
that bears the other Party's name, or any other name used by the other Party to
identify any services such other Party provides, including but not limited to
any registered trademark of the other Party, without the other Party's prior
written consent.

     8.2  PROGRAM NAME. In providing services to SunStar under this Agreement,
          ------------
HPS shall use such name as may be selected by SunStar to refer to the Program.
The choice of a Program name is the exclusive right and responsibility of
SunStar.

                                     PART 9
                                     ------

                                  COMPENSATION
                                  ------------

     9.1  SERVICE FEE DEPOSIT.  In connection with HPS's implementation of
          -------------------                                             
services under this Agreement, SunStar shall pay HPS the nonrefundable Service
Fee Deposit in accordance with the terms of Exhibit B, which is attached hereto
                                            ---------                          
and incorporated herein by reference.

     9.2  SERVICE FEE. As compensation to HPS for the services that HPS provides
pursuant to this Agreement, and in addition to the other amounts to be paid by
SunStar to HPS hereunder, SunStar shall pay HPS a Service Fee in accordance with
the terms of Exhibit B hereto.
             ---------        

                                    PART 10
                                    -------

                                CUSTOMER SERVICE
                                ----------------

     10.1 CUSTOMER SERVICE. HPS shall maintain a full-time WATTS line on each
          ----------------
Business Day (from 8:00 A.M. to 6:00 P.M., Eastern Standard Time, Monday through
Thursday, and 8:00 A.M. to 5:00, P.M., Eastern Standard Time, on Fridays), to
respond to Enrollee and Member requests for information or assistance regarding
enrollment and Premium payments, in accordance with procedures reasonably
required by SunStar. HPS shall not provide any information to Members or
Enrollees regarding SunStar Providers, coverage under any Plan,
preauthorization, or other Enrollee services, and shall forward all such
inquiries to SunStar in accordance with reasonable SunStar procedures.

                                    PART 11
                                    -------

                   PREMIUM COLLECTION AND COMMISSION PAYMENTS
                   ------------------------------------------
                                        

     11.1 BILLING. On behalf of SunStar, HPS shall bill each Member for Premium
          -------
amounts owed by such Member to SunStar, in accordance with procedures reasonably
required by SunStar.
<PAGE>
 
     11.2 RECEIPT OF PREMIUM PAYMENTS. On behalf of SunStar, HPS shall receive
          ---------------------------
and credit all Premium payments made by any Member, and shall make all cash
adjustments for Premium refunds and enrollment adjustments, and other required
cash transfers with respect to such Premium payments, in accordance with
procedures reasonably required by SunStar. HPS shall forward Premium refunds to
the appropriate Member. Any Premium payments that are received by HPS shall be
deemed to have been received by SunStar, but the payment of return Premium
amounts by SunStar to HPS shall not be deemed payment to an insured or claimant
until such payment is received by such insured or claimant. Nothing in this
Section 11.2 shall limit any right or remedy of SunStar against HPS resulting
------------
from HPS's failure to forward payments to SunStar or to any insured claimant,
including any payment to be forwarded to a Member.

     11.3 REMITTANCE. HPS shall immediately remit each Premium payment it
          ----------
receives from a Member to SunStar by depositing such payment in an interest-
bearing SunStar account at a bank selected by HPS (the "Cash Account"). HPS
shall have sole and exclusive authority to make withdrawals from the Cash
Account. Before the close of the Business Day following the date on which HPS
receives a report indicating that funds have been deposited in the Cash Account
(a "Deposit Report"), HPS shall order the transfer of funds by Automated
Clearing House transfer ("ACH Transfer") to an account specified by SunStar (the
"SunStar Account"). The amount of funds transferred to the SunStar Account
pursuant to the previous sentence shall equal 91% of the amount of funds
deposited in the Cash Account, less the amount necessary for HPS to pay Agent
commissions, as calculated by HPS in accordance with the SunStar Agent
Commission fee schedule, and based on information provided in the Deposit
Report. HPS may use the remaining funds in the Cash Account, including any
accrued interest thereon, for HPS's own purposes, subject to the terms of this
Agreement.

     11.4 RECONCILIATION. On or before the last Business Day of each month, HPS
          --------------
shall deliver to SunStar a reconciliation report of the Cash Account for the
previous month (the "Reconciliation Report"), which Reconciliation Report shall
set forth: (i) the total amount of Premium payments deposited in the Cash
Account during such month, as adjusted for Premium refunds and other required
cash transfers under this Agreement with respect to such Premium payments (the
"Collected Premium"); (ii) the total amount of funds that HPS transferred to
SunStar during such month with respect to the Collected Premium for such month
(the "Prior Remittance"); and (v) the total amount of funds that SunStar is
entitled to receive with respect to the Collected Premium pursuant to this
Agreement (the "Remittance Due"). At the time HPS delivers the Reconciliation
Report to SunStar, HPS shall: (a) transfer to the SunStar Account (by ACH
Transfer) the amount, if any, by which the Remittance Due for the previous month
exceeds the Prior Remittance with respect to such month; or (b) reduce the
amount of funds that HPS would otherwise transfer to the SunStar Account on that
day (or any subsequent days on which HPS transfers funds to SunStar) by the
amount, if any, by which the Prior Remittance for the previous month exceeds the
Remittance Due with respect to such month. HPS may use the remaining funds in
the Cash Account, including any accrued interest thereon, for HPS's own
purposes, subject to the terms of this Agreement. HPS may offset amounts to be
transferred to the SunStar Account pursuant to this Part 11 by any amount that
                                                    -------
SunStar owes to HPS pursuant to this Agreement
<PAGE>
 
     11.5 AGENT COMMISSION PAYMENT. SunStar shall determine the amount of Agent
          ------------------------
commission payments under the Program, and SunStar shall fund such commission
payments. In addition to withholding 9% of Collected Premium as its service fee,
HPS shall reduce the portion of such Collected Premium to be forwarded to the
SunStar Account by the amount of Agent commissions relating to such Collected
Premium, based on a commission fee schedule determined by SunStar. On behalf of
SunStar, HPS shall pay Agent commissions from such withheld Collected Premium.
HPS shall only be obligated to pay Agent commissions to the extent it has
retained Collected Premium designated to cover such commissions.

     11.7 DEPOSITS.  Any Premium payment received from a party prior to the
          --------                                                         
final coverage determination with respect to such party (any "Deposit") shall
not at that time be deemed to be a "Premium" for purposes of this Part 11 or any
                                                                  -------       
other provision of this Agreement. As reasonably required by SunStar, HPS shall
place each applicant's Deposit in an interest-bearing suspense account at a bank
selected by HPS (the "Suspense Account"). HPS shall have sole and exclusive
authority to make withdrawals from the Suspense Account, subject to the terms of
this Agreement. In the event that such applicant is not accepted for coverage
under a Policy, then HPS shall return the Deposit to such applicant in
accordance with procedures reasonably required by SunStar. In the event that
such applicant is accepted for coverage under a Policy in accordance with the
terms of this Agreement, such applicant's Deposit will be deemed to be a
"Premium" for purposes of this Agreement, and will be credited to the Cash
Account. HPS may use any remaining funds in the Suspense Account, including any
accrued interest thereon, for its own purposes, subject to the terms of this
Agreement.
                                    PART 12
                                    -------

                            RELATIONSHIP OF PARTIES
                            -----------------------

     12.1 CONTRACTUAL RELATIONSHIP. The only relationship between HPS and
          ------------------------
SunStar is the contractual relationship established by this Agreement. Nothing
contained in this Agreement shall be construed to create the relationship of
employer and employee, or the relationship of principal and agent, between
SunStar and HPS. Each Party's authority shall be limited to that which is
expressly stated in this Agreement. Except as specifically provided elsewhere in
this Agreement, neither Party shall exercise any control over the hours, office
location, rentals, or employees of the other Party.

     12.2 SUBCONTRACTS. HPS may subcontract for the performance of services that
          ------------
HPS is obligated to provide hereunder, subject to the approval of SunStar (which
approval shall not be unreasonably withheld).

     12.3 CHANGES IN OBLIGATIONS. In the event that any Applicable Law or any
          ----------------------
change in the Program (including but not limited to any change in the policies
or procedures of SunStar) results in a material change in the nature or
financial impact of either Party's obligations or compensation hereunder (any
"Material Change"), then such Party may provide the other Party 
<PAGE>
 
with notice of such Material Change, and the Parties shall negotiate in good
faith an amendment to this Agreement that shall set forth the terms under which
each Party shall continue to perform its obligations hereunder. In the event
that the Parties cannot reach agreement on an amendment to this Agreement within
thirty (30) calendar days after the delivery of a Material Change notice
pursuant to this Section 12.3, then either Party may terminate this Agreement in
                 ------------
accordance with Section 17.4 below.
                ------------

     12.4 AMENDMENT OF AGREEMENT. In the event that any Applicable Law requires
          ----------------------
the Parties to amend this Agreement, then the Parties shall negotiate in good
faith to amend this Agreement in order to comply with such Applicable Law. In
the event that the Parties cannot reach agreement with respect to an amendment
of this Agreement pursuant to this Section 12.4, then either Party may terminate
                                   ------------
this Agreement pursuant to Section 17.5 below.
                           ------------

                                    PART 13
                                    -------

                           COMPLAINTS AND LITIGATION
                           -------------------------

     13.1 NOTICE OF REGULATORY ACTION. Each Party shall promptly notify the
          ---------------------------
other Party of any complaint to or from any federal or state regulatory agency
of which such Party becomes aware in connection with any transaction covered by
this Agreement. In the event that HPS receives a complaint letter from any state
insurance department, then HPS shall forward such complaint letter to SunStar
promptly in accordance with Applicable Law. SunStar shall be responsible for
responding to any such complaint letters.

     13.2 NOTICE OF LITIGATION. Each Party shall promptly notify the other Party
          --------------------
of any litigation or attorney's letter threatening litigation of which such
Party becomes aware in connection with any transaction covered by this
Agreement. Each Party shall forward to the other Party promptly any summons or
complaint received by such Party in connection with any matter covered by this
Agreement.

                                    PART 14
                                    -------

                    INDEMNIFICATION AND INSURANCE; PENALTIES
                    ----------------------------------------

     14.1 HPS INDEMNIFICATION OF SUNSTAR; PENALTIES. HPS agrees to indemnify and
hold harmless SunStar, and its parents, subsidiaries, affiliates, officers,
agents, and employees, from and against any and all losses, costs, claims,
demands, and damages, including but not limited to attorneys' fees, arising out
of or caused by proven negligence, fraudulent conduct, or embezzlement by HPS,
its officers, agents, or employees. In addition to such indemnification, HPS
agrees to pay SunStar any applicable performance penalties as required by
Exhibit C, which is attached hereto and incorporated herein by reference.
---------

     14.2 SUNSTAR INDEMNIFICATION OF HPS. Except as set forth in Section 14.1
          ------------------------------                         ------------
above, SunStar agrees to indemnify and hold harmless HPS, and its parents,
subsidiaries, affiliates,
<PAGE>
 
officers, agents, and employees, from and against any and all losses, costs,
claims, demands, and damages, including but not limited to attorneys' fees,
arising out of or caused by:

          (a)  any act done or alleged to have been done by SunStar, or any
          omission made or alleged to have been made by SunStar, in connection
          with the carrying out or performance of their respective obligations
          in connection with the Program or this Agreement, and any action or
          inaction that is taken or not taken by HPS at the direction or request
          of SunStar, or in accordance with SunStar policies and procedures;

          (b)  proven fraudulent conduct or embezzlement attributable to
          SunStar, or its officers, agents or employees; or

          (c)  the use of any name selected by SunStar to refer to the Program
          in accordance with Part 8 of this Agreement.
                             ------                   

     14.3 NOTICE. Any Party entitled to indemnification under this Part 14 shall
          ------                                                   -------
provide the other Party hereto with prompt notice of the basis of such
indemnification; provided, however, that the failure of the Party entitled to
                 --------  -------
indemnification to provide such notice shall not preclude the indemnified
Party's right to such indemnification, except to the extent that the
indemnifying Party is prejudiced by such failure or delay in notification.

     14.4 LEGAL FEES. In the event that HPS is named as a defendant in any
          ----------
action relating to HPS's performance of services hereunder, and with respect to
which HPS has notified SunStar that HPS is entitled to indemnification, then
SunStar must pay the outside legal fees incurred by HPS in connection with the
claim. SunStar may undertake the defense of such claim, to the extent agreed
upon by HPS. In the event that it is determined by a tribunal of competent
jurisdiction that HPS is liable to SunStar for the amount of such claim, then
HPS shall reimburse SunStar for the legal fees that SunStar incurred on behalf
of HPS in connection with such claim.

     14.5 INSURANCE.  During the term of this Agreement, HPS shall maintain
          ---------                                                        
insurance in effect that covers loss by reason of acts of fraud or dishonesty.
Such insurance shall be in an amount of no less than One Million Dollars
($1,000,000).  At SunStar's reasonable request, HPS shall cause the issuer of
said insurance policy to deliver to SunStar evidence of the existence of such
policy and shall require the insurer to give HPS sixty (60) calendar days
written notice prior to cancellation of, or any material change in, the policy.
HPS shall provide SunStar with prompt notice of any such change.

                                    PART 15
                                    -------

                         REGULATORY AND OTHER LIABILITY
                         ------------------------------

     15.1 HPS WARRANTIES, REPRESENTATIONS, AND COMPLIANCE. In the conduct of its
          -----------------------------------------------
business and the performance of its obligations under this Agreement, HPS
warrants and represents 
<PAGE>
 
to SunStar that it is in compliance with, and shall continue to comply with, all
law that is specifically applicable to third party administrators in the
Enrollment Area (including but not limited to applicable bond requirements).
Where required by Applicable Law, HPS shall hold a certificate of registration
as a third party administrator issued by the department of insurance or other
regulatory body. To the extent required by (and in accordance with the
requirements of) Applicable Law, HPS shall provide written notice to Members and
Enrollees of the terms of this Agreement.

     15.2 SUNSTAR WARRANTIES, REPRESENTATIONS AND COMPLIANCE. In the conduct of
          --------------------------------------------------
its business and the performance of its obligations under this Agreement,
SunStar warrants and represents to HPS that it is in compliance with, and shall
continue to comply with, all Applicable Law (including but not limited to all
state law requirements that SunStar be authorized and approved to conduct its
business and to administer the Program). Except as otherwise specifically
provided in this Agreement, SunStar shall be solely liable for, and shall comply
with all Applicable Law with respect to, all aspects of the design and
implementation of the Program, including but not limited to: (i) underwriting
criteria; (ii) the rights and obligations of Members and Enrollees; (iii) the
scope of benefits under the Program; (iv) the content of the Enrollment Packages
and Enrollee identification cards; (v) determinations regarding whether health
care services provided to an Enrollee are covered under such Enrollee's Plan;
(vi) the Generally Accepted Clinical Standards used by HPS in its performance of
services pursuant to this Agreement; and (vii) the procedures used by HPS with
respect to potentially fraudulent or improper billing practices. SunStar shall
approve written guidelines to be used by HPS in connection with these matters.
SunStar shall notify HPS of any SunStar obligation under Applicable Law that HPS
is required to perform on behalf of SunStar in accordance with this Agreement.

                                    PART 16
                                    -------

                    CONFIDENTIAL AND PROPRIETARY INFORMATION
                    ----------------------------------------

     16.1 CONFIDENTIAL INFORMATION. For purposes of this Agreement,
          ------------------------
"Confidential Information" of a Party shall mean any confidential and/or
proprietary information belonging to such Party, including but not limited to
information concerning: (i) the terms of this Agreement and discussions of the
matters described herein; (ii) the business and operations of such Party, such
as the costs to each Party of performing its obligations under this Agreement;
and (iii) SunStar's business activities, including but not limited to rate
schedules, utilization data, or any combination thereof. Notwithstanding the
foregoing, "Confidential Information" shall not include:

          (a)  information that, at the time of disclosure to the Party
          receiving the information (the "Receiving Party"), is in the public
          domain;

          (b)  information that, after disclosure, is published or otherwise
          becomes part of the public domain through no fault of the Receiving
          Party;
<PAGE>
 
          (c)  information that was in the Receiving Party's possession or the
          possession of an affiliate of the Receiving Party at the time of
          disclosure to the Receiving Party;

          (d)  information that is received by the Receiving Party in good faith
          from an independent source that has no duty of nondisclosure with
          respect to the information (or, if such source does have a duty of
          nondisclosure, the Receiving Party was unaware of such duty); or

          (e)  information that the Receiving Party is required by Applicable
          Law to disclose to a third party, to the extent of such disclosure.

     16.2 PROTECTION OF CONFIDENTIAL INFORMATION. Except as otherwise
          --------------------------------------
specifically provided in this Agreement or as agreed to by the Parties, or as
otherwise required by Applicable Law, each Party: (a) shall hold in confidence
and not disclose any Confidential Information which belongs to the other Party,
and shall take such precautions with respect to such Confidential Information as
it normally takes with its own confidential and/or proprietary information; and
(b) shall not use the Confidential Information of the other Party for any
purpose other than the performance of its obligations under this Agreement.

     16.3 JUDICIAL PROCEEDINGS. Each Party shall endeavor to keep and assist the
          --------------------
other Party's keeping the Confidential Information confidential in judicial or
administrative hearings or proceedings, and shall provide assistance in
obtaining confidential treatment under Applicable Law. If a Party finds it
necessary to disclose any Confidential Information in any such judicial or
administrative hearing or proceeding, the Party shall attempt to disclose such
Confidential Information in camera, or subject to protective order, or on some
other non-public basis.

     16.4 MEMBER OR ENROLLEE INFORMATION. HPS shall not supply information
          ------------------------------
regarding any Member or Enrollee to any party that is not affiliated with HPS or
SunStar, except as may be required by this Agreement or Applicable Law, or as
permitted by such Member or Enrollee.

                                    PART 17
                                    -------

                              TERM AND TERMINATION
                              --------------------

     17.1 TERM. The term of this Agreement shall commence on the Effective Date,
          ----
and shall continue until December 31, 1998, and thereafter shall be renewed
automatically for successive terms of one (1) year unless terminated in
accordance with the provisions of this Part 17.
                                       -------

     17.2 TERMINATION WITHOUT CAUSE. Either Party may terminate this Agreement
          -------------------------
for any reason upon ninety (90) calendar days notice to the other Party;
provided, however, that such notice shall not be delivered to the other Party
--------  -------
before December 31, 1998 (and no termination pursuant to this Section 17.2 shall
                                                              ------------
take effect before ninety (90) calendar days after December 31, 1998).
<PAGE>
 
     17.3 TERMINATION FOR CAUSE.  In the event that a Termination Event has
          ---------------------                                            
occurred with respect to a Party (the "Defaulting Party"), then the other Party
may terminate this Agreement upon thirty (30) calendar days written notice to
the Defaulting Party.  Such notice shall be given within a reasonable time after
the occurrence of the Termination Event, and shall describe such Termination
Event in reasonable detail.  For purposes of this Agreement, the occurrence of
any of the events specified below in this Section 17.3 shall constitute a
                                          ------------                   
"Termination Event" with respect to a Party.


          (a)  Breach of Agreement. A Termination Event shall be deemed to occur
               -------------------
          with respect to a Party if such Party Breaches this Agreement, and the
          Breach continues for a period of sixty (60) calendar days after such
          Party receives written notice of the Breach from the other Party.
          Notwithstanding the foregoing, if such Breach is not reasonably
          susceptible to correction within such sixty-day period, then a
          Termination Event shall not be deemed to have occurred if the Party in
          Breach commences and diligently pursues corrective action within such
          sixty-day period, and the Breach is cured within a reasonable time
          thereafter.

          (b)  Dissolution; Insolvency.  A Termination Event shall be deemed to
               -----------------------                                         
          occur with respect to a Party upon the occurrence of any of the
          following:

               (i)   the entry of a decree or order for relief of such Party by
               a court of competent jurisdiction in any involuntary case
               involving such Party under any bankruptcy, insolvency, or other
               similar law now or hereafter in effect, or the filing with
               respect to such Party of a petition in any such involuntary
               bankruptcy or similar case, which petition remains undismissed
               for a period of ninety (90) calendar days;

               (ii)  the appointment of a receiver for such Party or
               substantially all the assets of such Party; or

               (iii) the commencement by such Party of a voluntary case under
               any bankruptcy or insolvency law (or other similar law now or
               hereafter in effect), or the dissolution of the business and
               operations of such Party necessary for such Party to perform its
               obligations hereunder.

     17.4 TERMINATION UPON MATERIAL CHANGE. In the event that a Material Change
          --------------------------------
Termination Event has occurred, then either Party may terminate this Agreement
upon thirty (30) calendar days written notice to the other Party. For purposes
of this Agreement, a "Material Change Termination Event" shall be deemed to have
occurred if the Parties have been unable to negotiate an amendment to this
Agreement within thirty (30) calendar days after delivery of a Material Change
notice pursuant to Section 17.3 above.
                   ------------       
<PAGE>
 
     17.5 TERMINATION UPON FAILURE TO AGREE. In the event that the Parties are
          ---------------------------------
unable to reach agreement with respect to (i) an amendment of this Agreement in
accordance with Section 12.4 above, or (ii) any matter about which the
                   ------------                                          
Parties are required to agree pursuant to this Agreement, then either Party may
terminate this Agreement upon thirty (30) calendar days notice to the other
Party, unless the Parties reach Agreement with respect to such amendment or such
matter within the thirty-day notice period.

     17.6 TERMINATION FOR FAILURE TO PAY. Notwithstanding any other provision of
          ------------------------------
this Agreement, in the event SunStar fails to pay any fee or other amount owed
to HPS hereunder within twenty (20) calendar days of the date on which HPS
provides SunStar with notice that such amount is past due, then HPS may, at its
sole discretion, terminate this Agreement upon thirty (30) calendar days written
notice to SunStar.

     17.7 SUSPENSION OF UNDERWRITING AUTHORITY.  To the extent required by
          ------------------------------------                            
Applicable Law, SunStar shall have the right to suspend the underwriting
authority of HPS during the pendency of any dispute between the Parties
regarding the cause for termination of this Agreement.  SunStar shall fulfill
all of SunStar's lawful obligations with respect to the Program, regardless of
any dispute between SunStar and HPS.

     17.8 HPS OBLIGATIONS.  In event of termination of this Agreement, all
          ---------------                                                 
obligations of HPS to adjudicate claims or perform any other services hereunder
shall be terminated and extinguished as of the effective date of termination,
except with respect to claims properly filed with and received by HPS prior to
the effective date of termination.  However, during the period commencing with
the written notice of termination of this Agreement and ending on the 30th day
after such effective termination date, HPS shall release all SunStar information
to, and fully cooperate with, HPS' successor provider of administrative services
to ensure a successful transition thereof, subject to the terms of this
Agreement.

                                    PART 18
                                    -------

                            MISCELLANEOUS PROVISIONS
                            ------------------------

     18.1 MODIFICATION; WAIVERS. No modification, amendment or waiver of this
          ---------------------
Agreement, or any part of it, shall be valid unless in writing, signed by the
Party sought to be charged therewith. No waiver of any Breach or condition of
this Agreement shall be deemed to be a waiver of any subsequent Breach or
condition, whether of like or different nature.

     18.2 GOVERNING LAW. This Agreement shall be subject to and construed under
          -------------
the laws of the State of Florida (but not including the choice of law rules
thereof).

     18.3 REFERENCES AND SECTION HEADINGS. Any reference to the singular shall
          -------------------------------
include reference to the plural, and vice versa. Part and section headings are
intended for the purpose of description only and shall not be used for purposes
of interpretation of this Agreement. 
<PAGE>
 
All pronouns and variations thereof shall be deemed to refer to the masculine,
feminine, or neuter, as the case may be.

     18.4 SEVERABILITY. In the event any court of competent jurisdiction holds
          ------------
that a particular provision or requirement of this Agreement is in violation of
any Applicable Law, such provision or requirement shall be enforced only to the
extent it is not in violation of such Law or is not otherwise unenforceable, and
all other provisions and requirements of this Agreement shall remain in full
force and effect.

     18.5 NOTICES. Any notice, demand or other document required or permitted to
be delivered hereunder shall be in writing and shall be (i) mailed by first-
class, registered or certified United States mail, postage prepaid, (ii)
delivered in person, (iii) sent by telegram, or (iii) transmitted by facsimile,
and shall be addressed to the recipient Party at the address indicated below, or
at such other address as such Party shall indicate in a notice to the other
Party sent in accordance with this Section 18.5:
                                   ------------ 

          (a)  If to HPS:                    HealthPlan Services, Inc.
                                             Attention: Phillip S. Dingle
 
               If Delivered By Hand:         3501 Frontage Road
                                             Tampa, Florida  33607
 
               If Delivered By U.S. Mail:    P.O. Box 30098
                                             Tampa, Florida 33630-3098
 
               If Delivered By Fax:          (813) 287-6629

          (b)  If to SunStar:

 

                                              SunStar Health Plan, Inc.
                                              521 East State Road 434
                                              Longwood, FL 32750
                                              Attn:  David A. Jesse


               If Delivered By Fax:


                                              407/339-4151

Each notice, demand or other document that is delivered in the manner described
above shall be deemed to be sufficiently delivered, given, served, sent,
provided, and received for all purposes at such time as it is delivered to the
addressee (with the return receipt, delivery receipt, affidavit of messenger or,
with respect to a facsimile transmission, the answerback being conclusive, but
not exclusive, evidence of such delivery), or at such time as delivery is
refused upon presentation.
<PAGE>
 
     18.6   ENTIRE AGREEMENT. This Agreement and the attached Exhibits hereto
            ----------------
contain the whole of the understanding between the Parties hereto relating in
any manner of its subject matter, and any representation, warranty, covenant,
understanding or agreement not contained or incorporated in it by reference
shall be of no force or effect. As of the Effective Date, this Agreement
supersedes all prior proposals, discussions, writings, and agreements between
any of the parties to this Agreement relating the subject matter hereof.

     18.7   BINDING AGREEMENT; ASSIGNMENT. This Agreement and all the provisions
            -----------------------------
hereof will be binding upon and inure to the benefit of the parties hereto and
their permitted assigns. Neither this Agreement nor any other rights, interests,
or obligations hereunder my be assigned by either Party without the prior
written consent of the other Party hereto, which consent will not be
unreasonably withheld. Any assignment in violation of this Agreement shall be
void and to no effect. Notwithstanding the foregoing, HPS may assign its rights
and obligations hereunder to any corporate affiliate of HPS without the written
consent of SunStar.

     18.8   THIRD PARTY BENEFICIARIES. This Agreement shall not, and is not
            -------------------------
intended to, confer upon any party, other than the Parties hereto and their
successors and permitted assigns, any rights, remedies, obligations or
liabilities, except as expressly provided herein.

     18.9   FORCE MAJEURE. Neither Party shall be liable for any delay or
            -------------
failure to perform its obligations under this Agreement arising out of a cause
beyond its control or without its fault or negligence. Such causes may include,
but are not limited to, fires, floods, and natural disasters.

     18.10  COUNTERPARTS.  This Agreement may be executed in two or more
            ------------                                               
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.

     18.12  SURVIVAL. Each applicable provision of Parts 1, 4, 8 through 16,
            --------                               -------  -  -         --
Sections 17.8 and 17.9, and this Part 18 of this Agreement, as well as any other
-------------     ----           -------
provision applicable to the implementation of such provisions, shall survive
termination of this Agreement for any reason, until by its terms it is no longer
applicable.
<PAGE>
 
     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf as of the Effective Date.


                                   HEALTHPLAN SERVICES, INC.

                                   By: _____________________________________

                                   Name: ___________________________________

                                   Title: __________________________________


                                   SUNSTAR HEALTH PLAN, INC.

                                   By: _____________________________________ 

                                   Name: ___________________________________

                                   Title: __________________________________ 
<PAGE>
 
                                   EXHIBIT A
                                   ---------

                                  DEFINITIONS
                                  -----------


          "ACH Transfer" shall have the meaning set forth in Section 11.3 of
           ------------                                      ------------
this Agreement.

          "Agent" shall mean any insurance agent or broker.
           -----                                           


          "Applicable Law" shall mean any applicable statute, ordinance, rule,
           --------------                                                     
or regulation of any federal, state, municipal, or other governmental authority.


          "Audited Claims" shall have the meaning set forth in Exhibit C
           --------------                                      ---------
hereto.

          "Breach" shall mean a Party's failure, or the act of a Party's
           ------                                                       
failing, to perform, observe, or satisfy any applicable obligation under this
Agreement, which failure or failing (i) constitutes a pattern of nonperformance,
and (ii) has a material adverse effect on the efficiency of the Program or the
profits that the other Party hereto realizes from the Program.

          "Cash Account" shall have the meaning set forth in Section 11.3 of
           ------------                                      ------------
this Agreement.

          "Business Day" shall mean any day other than a Saturday, Sunday, or
           ------------
HPS holiday.

          "Collected Premium" shall have the meaning set forth in Section 11.4
           -----------------                                      ------------
of this Agreement.

          "Confidential Information" shall have the meaning set forth in Section
           ------------------------                                      -------
16.1 hereof.
----
          "Defaulting Party" shall have the meaning set forth in Section 17.3 of
           ----------------                                      ------------
this Agreement.

          "Deposit" shall have the meaning set forth in Section 11.7 of this
           -------                                      ------------
Agreement.

          "Deposit Report" shall have the meaning set forth in Section 11.3 of
           --------------                                      ------------
this Agreement.

          "Effective Date" shall have the meaning set forth in the Recitals of
           --------------
this Agreement.

          "Enrollee" shall mean (i) a Member who is an individual, or (ii) an
           --------
individual who is covered under a Member's Plan.

          "Enrollment Area" shall mean the State of Florida, and/or any other
           ---------------
area agreed upon by the Parties.

          "Enrollment Package" shall have the meaning set forth in Section 3.2
           ------------------                                      -----------
of this Agreement.

          "Financial Accuracy Rate" shall have the meaning set forth in Exhibit
           -----------------------                                      -------
C of this Agreement.
-
<PAGE>
 
          "Generally Accepted Clinical Standards" shall have the meaning set
           -------------------------------------
forth in Section 2.3 of this Agreement.
         -----------

          "Independent Audit" shall have the meaning set forth in Exhibit C of
           -----------------                                      ---------
this Agreement.

          "Material Change" shall have the meaning set forth in Section 12.3 of
           ---------------                                      ------------
this Agreement.

          "Material Change Termination Event" shall have the meaning set forth
           ---------------------------------
in Section 17.4 of this Agreement.
   ------------

          "Member" shall mean an employer that maintains coverage for its
           ------                                                        
employees, a group that maintains coverage for its members, or an individual
that maintains coverage for himself or herself.

          "Party" shall mean either HPS or SunStar.
           -----                                   

          "Payment Error Amount" shall have the meaning set forth in Exhibit C
           --------------------                                      ---------
of this Agreement.

          "Plan" shall mean any agreement or health care plan under which
           ----
SunStar provides health care coverage to an Enrollee.

          "Premium" shall mean any amount that SunStar charges any Member or
           -------
Enrollee for participation in the Program.

          "Prior Remittance" shall have the meaning set forth in Section 11.4 of
           ----------------                                      ------------
this Agreement.

          "Processed Claim" shall have the meaning set forth in Exhibit C of
           ---------------                                      ---------
this Agreement.

          "Program" shall mean the program under which SunStar shall provide
           -------                                                          
health care coverage to individuals and small groups in the Enrollment Area.

          "Receiving Party" shall have the meaning set forth in Section 16.1(a)
           ---------------                                      ---------------
of this Agreement.

          "Reconciliation Report" shall have the meaning set forth in Section
           ---------------------                                      -------
11.4 of this Agreement.
----

          "Records" shall have the meaning set forth in Section 4.1 of this
           -------                                      -----------
Agreement.

          "Remittance Due" shall have the meaning set forth in Section 11.4 of
           --------------                                      ------------
this Agreement.

          "Service Fee" shall have the meaning set forth in Exhibit B of this
           -----------                                      ---------
Agreement.

          "Service Fee Deposit" shall have the meaning set forth in Exhibit B of
           -------------------                                      ---------
this Agreement.

          "SunStar Account" shall have the meaning set forth in Section 11.3 of
           ---------------                                      ------------
this Agreement.
<PAGE>
 
          "SunStar Provider" shall mean a provider of services that is
           ----------------                                           
designated by SunStar as a member of the SunStar provider network.

          "Suspense Account" shall have the meaning set forth in Section 11.7 of
           ----------------                                      ------------
this Agreement.

          "Termination Event" shall have the meaning set forth in Section 17.3
           -----------------                                      ------------
of this Agreement.

          "Turnaround Time" shall have the meaning set forth in Exhibit C of
           ---------------                                      ---------
this Agreement.
<PAGE>
 
                                   EXHIBIT B
                                   ---------

                                 COMPENSATION
                                 ------------


I.   SERVICE FEE DEPOSIT
     -------------------

     On or before the Effective Date, SunStar shall pay HPS a nonrefundable
Service Fee deposit of Eighty-Five Thousand Dollars ($85,000) (the Service Fee
Deposit").  Such Service Fee Deposit shall be an advance on future Service Fee
amounts owed to HPS pursuant to Part II below.  In the event that the total
                                -------                                    
Service Fees retained by HPS pursuant to this Agreement are less than Eighty-
Five Thousand Dollars ($85,000), HPS shall retain the balance of such deposit;
in no event shall any portion of the Service Fee Deposit be returned to SunStar.


II.  SERVICE FEE
     -----------

     HPS shall retain a service fee of 9% of all Collected Premium (the "Service
Fee").  HPS shall not be obligated to pay Agent commissions from such Service
Fee.


III. OTHER AMOUNTS OWED
     ------------------

     A.   Invoice.  For each month during the term of this Agreement, HPS shall
          -------                                                              
forward to SunStar an invoice setting forth the following information:

     (a)  the postage costs incurred by HPS on behalf of SunStar during such
     month;

     (b)  the costs incurred by HPS during such month to (i) obtain check stock
     to be used to pay claims on behalf of SunStar, and (ii) create
     identification cards for SunStar Enrollees; and

     (c)  an itemization of all other amounts owed by SunStar to HPS with
     respect to such month.

     B.   Payment.  SunStar shall pay HPS the amount that SunStar owes to HPS
          --------                                                           
for each month, as calculated in III(A) above, on or before the thirtieth (30th)
calendar day following SunStar's initial receipt of an invoice with respect to
such amount.  In the event that SunStar does not remit payment to HPS when due,
interest will be charged on the fees due HPS at the rate of One and One Half
Percent (1 1/2%) per month, or the maximum rate allowed by law, whichever is
less.  SunStar acknowledges that if payments are not received by HPS within ten
(10) calendar days of the due date, HPS may cease providing services pursuant to
this Agreement, and if/when said administrative services are reinstated SunStar
shall pay HPS an additional fee of one month's administration fee for each month
or portion thereof that administrative services were ceased.  Each such
additional monthly fee will be equal to the amount of the administration fee for
the last full month for which SunStar paid HPS.
<PAGE>
 
                                   EXHIBIT C
                                   ---------

                             PERFORMANCE STANDARDS
                             ---------------------

                                    PART A
                                    ------
                                     AUDIT
                                     -----


     For each quarter during the term of this Agreement, HPS shall audit claims
submitted by Enrollees to determine the Turnaround Time (as defined below) for
each such audited claim, as well as the Financial Accuracy Rate (as defined
below) for such quarter.  In conducting such audit, HPS shall use a random
sample of SunStar Enrollee claims that have become Processed Claims during such
quarter.  For purposes of this Agreement, a claim shall be deemed to be a
"Processed Claim" when an HPS employee has entered such claim for payment,
prepared an explanation for denial of such claim, or pended such claim for
further review.  For purposes of calculating the Turnaround Time or the
Financial Accuracy Rate for any period, "Audited Claims" shall mean the Enrollee
claims audited by HPS to complete such calculation in accordance with this
Exhibit C
---------


                                    PART B
                                    ------

                                TURNAROUND TIME
                                ---------------

     B.1  CALCULATION OF TURNAROUND TIME.  For purposes of this Agreement, the
          ------------------------------                                      
"Turnaround Time" with respect to any claim shall be equal to the number of
Business Days beginning on (i) the first Business Day after the date on which
such claim is received by HPS, and ending on (ii) the date on which such claim
becomes a Processed Claim.

     B.2  PENALTY.  If more than Five Percent (5%) of all Audited Claims for a
          -------                                                             
quarter have a Turnaround Time of greater than Ten (10) Business Days, then HPS
shall pay SunStar a penalty equal to One Percent (1%) of all Service Fees
retained by HPS during such quarter.


                                    PART C
                                    ------

                              FINANCIAL ACCURACY
                              ------------------

     C.1  FINANCIAL ACCURACY RATE CALCULATION.  For purposes of this Agreement,
          -----------------------------------                                  
the "Financial Accuracy Rate" with respect to SunStar for any period means a
percentage equal to 100%, minus a percentage calculated by dividing: (i) the
Payment Error Amount with respect to Audited Claims for such period; by (ii) the
total dollar amount of all such Audited Claims, based on the amount of such
claims as originally submitted.  For purposes of this Agreement, the "Payment
Error Amount" for any period means the amount by which the aggregate amount that
HPS paid on behalf of SunStar with respect to Audited Claims for such period
exceeds the amount that HPS was required to pay with respect to such Audited
Claims.  For purposes of calculating the Payment Error Amount, 
<PAGE>
 
the amount that HPS is required to pay with respect to any claim shall be deemed
to be equal to the amount that HPS did pay with respect to such claim, unless a
different amount is explicitly required by written instructions from SunStar or
by this Agreement.

     C.2  BONUSES/PENALTIES.  In the event that the Financial Accuracy Rate with
          -----------------                                                     
respect to SunStar for any fiscal quarter is less than Ninety-Five Percent
(95%), then HPS shall pay to SunStar a penalty equal to One Percent (1%) of the
total Service Fees retained by HPS pursuant to Exhibit B hereto during such
                                               ---------                   
quarter.


                                    PART D
                                    ------

                                 SUNSTAR AUDIT
                                 -------------
                                       
     SunStar may, at its own expense, conduct up to two audits during any fiscal
year of the Turnaround Time and the Financial Accuracy Rate with respect to
Audited Claims.  Any such audit (each an "Independent Audit") shall be conducted
and the resulting report prepared in accordance with generally accepted auditing
standards for electronic data processing audits.  If the results of any
Independent Audit are submitted to HPS no later than sixty (60) calendar days
following the end of the period with respect to which the Independent Audit was
conducted, SunStar may make recommendations to HPS based on the results of the
Independent Audit, and the parties shall discuss any such recommendations in
good faith to determine what modifications, if any, HPS should make to improve
the Turnaround Time or the Financial Accuracy Rate for future periods.


                                    PART E
                                    ------

                          CALCULATION OF PERCENTAGES
                          --------------------------

     For purposes of calculating the Turnaround Time percentage and Financial
Accuracy Rate pursuant to this Exhibit C, each percentage shall be calculated in
                               ---------                                        
accordance with HPS auditing procedures.


                                    PART F
                                    ------

                                 GRACE PERIOD
                                 ------------
                                       
     Notwithstanding any other provision of this Agreement, HPS shall not pay
any penalty with respect to any quarter until the second quarter after HPS has
begun processing Enrollee claims.