7/18/97

                                    AGREEMENT

         AGREEMENT made as of the 1st day of January,  1997, by and between Blue
Cross & Blue Shield of Rhode Island,  a nonprofit  hospital and medical  service
corporation  organized  under  the laws of the  State of Rhode  Island,  with an
address  at 444  Westminster  Street,  Providence,  Rhode  Island  02903  ("Blue
Cross"),  and  CareAdvantage  Health  Systems,   Inc.,  a  business  corporation
organized  under the laws of the State of  Delaware,  with an  address  at 485-C
Route 1 South, Iselin, New Jersey 08830-3037 ("CareAdvantage").

                              W I T N E S S E T H:

          WHEREAS,  Blue  Cross is a  nonprofit  hospital  and  medical  service
corporation  organized  for  the  purpose,   inter  alia,  of  underwriting  and
administering various hospital and medical service plans; and

          WHEREAS,  CareAdvantage  is  a  business  corporation  which  provides
various  health  care  management   services,   including   without   limitation
utilization  review and medical management  services,  to third party payors and
administrators of health benefit plans; and

          WHEREAS, CareAdvantage has previously provided and desires to continue
to provide certain medical management services to Blue Cross, in connection with
their existing and new health care plans and Blue Cross desires to enter into an
agreement with CareAdvantage for the provision of such services; and

         WHEREAS,  the  parties  hereto  desire  to  set  forth  the  terms  and
conditions of their  agreement for the provision to Blue Cross by  CareAdvantage
of certain health care management services;

          NOW,  THEREFORE,  in  consideration  of the  mutual  covenants  herein
contained,  and for good and  valuable  consideration,  the  receipt of which is
hereby acknowledged, the parties hereto agree as follows:

     1. Term and  Termination.  (a) This Agreement  shall commence on January 1,
1997 for a period to end no later than December 31, 1999 (the "Term").

          (b) This  Agreement  shall be terminable by either party without cause
upon ninety (90) days' prior written notice.

          (c) This Agreement  shall be terminable by either party for cause upon
not less than twenty (20) days' prior written notice to the other party, setting
forth in detail the cause,  and providing that the agreement is to be terminated
upon the  expiration  of twenty (20) days or such longer period which may be set
forth in the notice,  unless the condition giving rise to the cause is corrected
within that time period.  "Cause" shall  include  breach of the  Agreement,  the
insolvency of either party,  or the seeking by either party of protection  under
bankruptcy or receivership laws.

          (d) On or before  September 1, 1999 the parties  hereto shall meet for
the purpose of discussing an extension of this Agreement on terms to be mutually
agreed. Absent the mutual written agreement of the parties hereto to extend this
Agreement  on mutually  acceptable  terms,  this  Agreement  shall  terminate on
December 31, 1999.

     2.  Health  Care   Management   Services.   (a)  During  the  Term  hereof,
CareAdvantage shall provide to Blue Cross, when requested by Blue Cross, certain
care management services as more particularly specified herein and in Attachment
I attached  hereto  and  incorporated  herein by  reference  for the  purpose of
assisting  Blue Cross in the proper and effective  administration  of its health
benefit  programs  (underwritten  and  administered)  and  in the  reduction  of
inappropriate  claims liability for its  underwritten  and  administered  health
benefit plans.

<PAGE>

          (b) During the Term, the services provided by CareAdvantage under this
Agreement shall be supervised by Stephan D. Deutsch,  M.D. or another  physician
with similar qualifications  approved by Blue Cross, which approval shall not be
unreasonably  withheld;  provided,  however,  that during the term hereof,  Blue
Cross may withdraw its approval of any physician providing  supervisory services
hereunder  if Blue  Cross  reasonably  determines  that  the  supervisor  is not
providing effective  supervision in a manner which is compatible with Blue Cross
procedures,  whereupon CareAdvantage shall remedy the supervisory problem to the
satisfaction of Blue Cross or replace such supervisor with a supervisor approved
by Blue Cross, with such action to be taken within ninety (90) days of a written
request from Blue Cross.  Dr. Deutsch (or such other physician) shall spend half
time at Blue  Cross  in  order  to  properly  supervise  the  provision  of such
services.

          (c)  In  fulfilling  its   responsibilities   under  this   Agreement,
CareAdvantage  shall  provide at least  three and  one-half  medical  management
physicians on a full-time  equivalent basis: (i) one of which shall serve as the
Medical Director for Blue Cross;  (ii) one-half of which shall act as a Director
responsible   for  the   coordination   of  the  provision  of  services   which
CareAdvantage  shall provide in accordance with the terms of Section 2(b); (iii)
two of which shall serve as Associate  Medical Director and Physician Adviser to
conduct utilization review and case reviews for Blue Cross as required under the
terms of this Agreement;  and (iv) such other physicians,  nurses,  experts, and
other personnel,  which  individuals shall be employed by, or under contract to,
CareAdvantage,   as  shall  be  necessary  for   CareAdvantage  to  perform  its
obligations under this Agreement.

          The  Medical  Director,   Associate  Medical   Directors,   and  other
physicians,  individuals  and/or  entities  employed  by, or under  contract  to
CareAdvantage  to provide services under this Agreement shall in all respects be
satisfactory  to Blue Cross in its  reasonable  judgment,  including  in medical
education, training, experience,  judgment, and ability to effectively work with
and relate to Blue Cross  employees,  physicians under contract with Blue Cross,
and others in the medical community.  The number, quality and performance of the
physicians and other individuals  and/or entities employed by, or under contract
to,  CareAdvantage to perform  services  hereunder shall be satisfactory to Blue
Cross in its reasonable  judgment and shall be as required for  CareAdvantage to
effectively and efficiently deliver such services.

          CareAdvantage  shall  ensure the timely  availability  of  appropriate
physicians,  nurses and other  personnel  to  provide  the  services  under this
Agreement,  as well as the reasonable continuity of such physicians,  nurses and
personnel in order to provide stability to the medical management services being
performed and to maximize efficiency and productivity.

          (d) In  the  performance  of the  utilization  review  services  to be
provided by CareAdvantage pursuant to the terms of this Agreement, CareAdvantage
shall be responsible for recommending to Blue Cross what constitutes  "medically
necessary" treatment and services, "medically indicated" treatment and services,
"emergency"  treatment and services,  "urgent  care" and  "experimental"  and/or
"investigational"  treatment  and  services,  as such terms are  defined by Blue
Cross  pursuant  to  its  contracts,   administrative  policies  and  rules  and
regulations,  and for  recommending  other  medical  determinations  required to
properly perform utilization review and case management  functions and the other
services,  and in order to allow Blue Cross to  determine  whether  benefits are
payable under health benefit plans  administered  or underwritten by Blue Cross.
Notwithstanding  anything to the contrary  contained in this  Section  2(d),  it
shall be Blue Cross' determination, and not CareAdvantage's determination, as to
whether  benefits are payable under any Blue Cross  underwritten or administered
health  benefit  plans.  In making such  determination  of whether  benefits are
payable under health benefit plans  administered  or underwritten by Blue Cross,
Blue  Cross may rely upon  CareAdvantage's  determinations  of what  constitutes
"medically  necessary" treatment and services,  "medically  indicated" treatment
and  services,  "emergency"  treatment and  services,  and upon  CareAdvantage's
determinations  on other  matters  within the scope of its  responsibilities  to
provide services pursuant to and in accordance with the terms of this Agreement.

          As a  part  of the  utilization  review  services  to be  provided  by
CareAdvantage  pursuant  to  the  terms  of  this  Agreement,  CareAdvantage  is
responsible for conducting a periodic formal program for training, on-going


                                       2
<PAGE>

monitoring,  and evaluation of the performance of all staff physicians  involved
in all levels of the review  process.  Included as part of the training shall be
orientation in the principles and procedures of utilization review,  Utilization
Review  Accreditation  Committee  Standards,   National  Committee  for  Quality
Assurance, and peer review.

          CareAdvantage  shall meet  regularly with the management of the Health
Benefits  Management  Department of Blue Cross and appropriate senior management
to provide  guidance on the use of staff and  resources  of the Health  Benefits
Management Department to implement agreed upon utilization management strategies
and to provide  proposals for  CareAdvantage to effect  reductions in per member
claims liability.  The utilization  management  strategies and proposals made by
CareAdvantage  must be  reasonable  and  consistent  with Blue Cross  contracts,
policies and procedures.  In the event that  CareAdvantage  determines that Blue
Cross  has  failed  to take  action  with  regard to  utilization  review,  case
management, and/or a health care management proposal in a way so as to refuse to
adopt the  recommendation  of  CareAdvantage,  or dilute,  alter,  or materially
change the  recommendation of CareAdvantage,  and CareAdvantage  determines that
the result of such action or inaction by Blue Cross is that the  measurement  of
CareAdvantage's performance for purposes of compensation under this Agreement is
materially and adversely  affected,  CareAdvantage shall so notify Blue Cross in
writing, and if Blue Cross does not alter or change its utilization review, case
management,  and health care management policies in a manner which CareAdvantage
determines,  in good faith,  is  reasonably  acceptable to  CareAdvantage,  then
CareAdvantage  shall have the right to terminate  this  Agreement by giving Blue
Cross ninety (90) days' prior written notice of such termination.

          (e) Hiring of Employees. The parties agree that they shall not, except
with the prior written consent of the other,  employ or contract with any person
employed  by the other  then or  within  the  preceding  twelve  months  who was
directly or  indirectly  involved in the  performance  of this  Agreement.  This
restriction against hiring shall remain in effect for the life of this Agreement
and one (1) year thereafter.

          (f) Utilization Review Restrictions.  Notwithstanding  anything to the
contrary  contained  in this  Agreement,  Blue  Cross does not intend to utilize
CareAdvantage to provide first level utilization review services.  Rather,  Blue
Cross intends to contract with  individual  physicians to provide such services.
Accordingly,  CareAdvantage  shall not provide  first level  utilization  review
services  hereunder  unless  and until so  directed  by Blue  Cross in  writing,
whereupon  the parties  will adjust the  compensation  under this  Agreement  to
reflect the  termination  of the physicians  providing  first level review under
contract to Blue Cross.

     3.  Nature of  Relationship.  (a) The  parties  hereto  recognize  that the
relationship established by this Agreement is purely contractual in nature, that
such  parties are  independent  contractors,  and that this  Agreement  does not
establish a joint venture,  partnership,  or other arrangement pursuant to which
such parties  shall share  profits or losses or shall be bound to pay or perform
the obligations of the other party.  Neither party hereto shall be authorized to
act as an agent or  representative  for the other party hereto unless  expressly
authorized  in  writing  for each such  purpose,  and then only to the extent so
authorized. Neither party hereto may bind the other party in any respect, except
as previously  authorized in writing signed by such party to be bound,  and then
only to the extent  expressly so  authorized,  and neither party hereto may hold
itself out to or  represent  to third  parties  that such party has the power or
authority to bind the party hereto, and any such purported representations shall
be null and void and of no further  force and effect.  Neither  party hereto may
represent to any third party that the subject of this  Agreement  constitutes  a
partnership,  joint venture, or other risk-sharing arrangement or that any party
hereto is liable or responsible  for the  obligations of the other party hereto.
For all  purposes  hereof,  Blue Cross and  CareAdvantage  shall be deemed to be
independent  contractors,  and neither party hereto shall be responsible for the
acts or omissions of the other party.

          (b) Each party hereto  recognizes  and  acknowledges  that it makes no
representation  regarding,  and assumes no  responsibility  for,  the quality of
health  care  services  provided  by  providers  under any health  benefit  plan
underwritten or  administered  by Blue Cross,  and that neither party hereto has
any  control  over the kind and  quality of health  care  services  provided  by
providers  pursuant to health benefit plans administered or underwritten by Blue
Cross.


                                       3
<PAGE>

     4.   Compensation.   Effective   January  1,  1997  Blue  Cross  shall  pay
CareAdvantage   for  its  services  under  this  Agreement  in  accordance  with
Attachment II, attached hereto and incorporated herein by reference.

     5. Adjustments to Services and Compensation.  The parties  acknowledge that
the managed care business is continuously  changing, and that during the Term it
may be  desirable  to  reconfigure  the  services  provided by and to adjust the
compensation payable to CareAdvantage under this Agreement. The parties agree to
negotiate such matters in good faith, provided,  however, that in the event they
are unable to agree,  either party may terminate  this  Agreement  without cause
pursuant to Section 1(b).

     6.  Warranties  and   Representations.   (a)  CareAdvantage   warrants  and
represents to Blue Cross as follows,  such warranties and  representations to be
true as of the date hereof and during the Term hereof and any extension thereof:

          (i)  CareAdvantage is duly organized,  validly  existing,  and in good
          standing   under   the  laws  of  its   state  of   organization   and
          incorporation,  and is  qualified  to do business in all states  where
          such business qualification is required, including without limitation,
          Rhode Island;

          (ii)  CareAdvantage is duly licensed as a utilization  review agent in
          the State of Rhode Island, such Rhode Island license is valid, in full
          force  and  effect,  and  has  not  been  suspended  or  revoked,  and
          CareAdvantage  is not  the  subject  of any  pending  disciplinary  or
          administrative proceedings pertaining to such license not disclosed to
          Blue Cross,  and to its knowledge,  CareAdvantage  has otherwise taken
          all action to comply with all applicable  laws,  rules and regulations
          pertaining to acting as a utilization review agent in Rhode Island;

          (iii)  CareAdvantage  is in compliance  with all  applicable  federal,
          state and local laws,  rules and regulations  required or necessary in
          order to allow  CareAdvantage  to perform its obligations  pursuant to
          this Agreement.

          (iv)   CareAdvantage   does  not  now  have  any  material   lawsuits,
          administrative  actions,  claims,  grievances,  or other legal actions
          pending against it which, if adversely  determined,  would  materially
          impair its ability to perform its obligations under this Agreement;

          (v)  There   are  no   actions,   pending   or   threatened,   against
          CareAdvantage, and there are no conditions which are threatened or, to
          its knowledge,  exist,  including  actions by regulatory  authorities,
          relating  to the  obligations  of  CareAdvantage  set  forth  in  this
          Agreement,  which,  if they came to pass or continue  would  result in
          CareAdvantage  being in default  hereunder or would materially  impair
          CareAdvantage's   ability  to  perform  its  obligations   under  this
          Agreement; and

          (vi) CareAdvantage is adequately capitalized and has the financial and
          personnel  resources to perform its obligations  under this Agreement,
          and all of its  employees or parties  with whom it contracts  who will
          provide  services  under the terms of this  Agreement  are or shall be
          duly qualified,  licensed where required,  and otherwise competent and
          able to  effectively  perform the  services  and  responsibilities  of
          CareAdvantage as required under this Agreement.

          (b) Blue Cross  warrants and represents to  CareAdvantage  as follows,
such warranties and  representations to be true as of the date hereof and during
the Term hereof:

          (i)  Blue  Cross  is duly  organized,  validly  existing,  and in good
          standing   under   the  laws  of  its   state  of   organization   and
          incorporation,  and is  qualified  to do business in all states  where
          such business qualification is required, including without limitation,
          Rhode Island;


                                       4
<PAGE>

          (ii) Blue Cross is duly  licensed as a nonprofit  hospital and medical
          service  corporation  and a  utilization  review agent in the State of
          Rhode Island,  such licenses are valid, in full force and effect,  and
          have not been suspended or revoked,  and Blue Cross is not the subject
          of any pending disciplinary or administrative proceeding pertaining to
          such licenses not disclosed to  CareAdvantage,  and to its  knowledge,
          Blue  Cross  has  otherwise  taken  all  action  to  comply  with  all
          applicable  laws,  rules  and  regulations  pertaining  to acting as a
          nonprofit  hospital and medical service  corporation and a utilization
          review agent in Rhode Island;

          (iii) Blue Cross is in compliance with all applicable  federal,  state
          and local laws,  rules and regulations  required or necessary in order
          to allow  Blue  Cross to  perform  its  obligations  pursuant  to this
          Agreement;

          (iv)   Blue   Cross   does  not  now  have  any   material   lawsuits,
          administrative  actions,  claims,  grievances,  or other legal actions
          pending against it which, if adversely  determined,  would  materially
          impair its ability to perform its obligations under this Agreement;

          (v) There are no actions,  pending or threatened,  against Blue Cross,
          and there are no conditions which are threatened or, to its knowledge,
          exist,  including actions by regulatory  authorities,  relating to the
          obligations of Blue Cross set forth in this Agreement,  which, if they
          came to pass or continue  would  result in Blue Cross being in default
          hereunder or would  materially  impair Blue Cross'  ability to perform
          its obligations under this Agreement; and

          (vi) Blue Cross is  adequately  capitalized  and has the financial and
          personnel resources to perform its obligations under this Agreement.

     7.  Insurance.  (a) Each party hereto shall obtain and maintain  throughout
the Term of this Agreement  appropriate policies of insurance,  as shall protect
the named insured and the other party hereto from claims of bodily injury, death
or property damage that may arise from any activities of either party hereto, or
their respective agents,  servants or employees  associated with this Agreement.
Such policies shall provide  coverage for worker's  compensation,  comprehensive
general liability,  vehicular and all-risk property  insurance,  and "errors and
omissions"  liability  insurance,   and  in  the  case  of  CareAdvantage  only,
professional liability (i.e.,  malpractice) insurance, all such insurance having
such limits and deductibles,  and upon such terms and conditions,  as are common
and customary for comparable contracts,  and all such coverage and such carriers
providing  coverage  to be  mutually  acceptable  to the  parties.  A  duplicate
original of each policy and certificate of renewal of each policy required under
this Section 7 shall be given to the party upon request. Each of the policies of
insurance shall include  provisions naming the other party as one of the insured
and shall deny to the  insured  rights of  subrogation  against  the other party
(provided such provisions are reasonably  obtainable  without  invalidating  the
insurance so provided or disproportionately  increasing the premiums therefore);
provided,  however,  that in no event shall one party be required to maintain an
insurance  policy with a waiver of  subrogation  provision if the other party is
not able to procure such waiver of subrogation provision in its insurance policy
of the same type.  The  parties  hereto  each shall  exercise  good  faith,  and
diligent efforts, to ensure that such parties' policies of insurance as required
hereunder shall contain the aforesaid waiver of subrogation provisions.

          (b) The policies of insurance required to be maintained by the parties
under this Agreement shall be noncancelable  and  nonamendable  unless notice in
writing  is given to the other  party  not less than ten (10) days  prior to the
effective date of any cancellation or amendment (but such notice shall not limit
the continuing obligations to maintain insurance pursuant to this Agreement). If
any such  policy of  insurance  is a claims  made  policy and not an  occurrence
policy,  either appropriate claims made or tail insurance shall be maintained in
full  force  for that  period  of time,  after  termination  of this  Agreement,
required  under  applicable law to continue to provide  insurance  protection to
both parties  pursuant to this Agreement,  with respect to occurrences  prior to
the termination of this Agreement.


                                       5
<PAGE>

     8.  Indemnification.  (a) CareAdvantage hereby indemnifies,  exonerates and
holds  harmless  Blue Cross from and  against  any claim,  loss,  cost,  damage,
expense or other liability  arising out of the performance by  CareAdvantage  of
services under this  Agreement,  excepting only  liability  attributable  to the
willful misconduct or the willful, wanton or reckless failure by Blue Cross, its
agents,  servants,  employees or independent  contractors  engaged by Blue Cross
(but not  CareAdvantage)  to perform  their  respective  obligations  under this
Agreement or Blue Cross'  negligence or the  negligence  of Blue Cross'  agents,
servants,  employees or independent  contractors  engaged by Blue Cross (but not
CareAdvantage);  provided,  however,  that if such negligence is attributable in
part  to  CareAdvantage  or its  agents,  servants,  employees,  or  independent
contractors  engaged by  CareAdvantage  and in part to Blue Cross or its agents,
servants,  employees or independent  contractors  engaged by Blue Cross (but not
CareAdvantage), Blue Cross shall be entitled to indemnification by CareAdvantage
under this Section 8. If the attribution of negligence on a comparative basis is
not made by a court of competent jurisdiction for any reason,  including without
limitation,  because  such claim is settled by the  parties  involved,  then the
determination  of  respective  fault,  if any,  shall  be made by an  arbitrator
mutually  acceptable to Blue Cross and CareAdvantage.  This indemnity  agreement
shall include indemnity against all costs,  expenses and liabilities incurred in
and in connection  with any such claim or  liability,  and  proceedings  brought
thereunder,  and the reasonable  cost of the defense  thereof with legal counsel
reasonably  acceptable  to Blue Cross.  Notwithstanding  anything  herein to the
contrary, this Section 8 is not intended to obligate CareAdvantage to compensate
Blue Cross for  claims for  medical  services  that Blue Cross is  contractually
obligated to pay.

          (b) Blue  Cross  hereby  indemnifies,  exonerates  and holds  harmless
CareAdvantage from and against any claim,  loss, cost, damage,  expense or other
liability arising out of an act (or a failure to act) by Blue Cross contemplated
by or arising under this Agreement, excepting only liability attributable to the
willful misconduct or the willful,  wanton or reckless failure by CareAdvantage,
its  agents,   servants,   employees  or  independent   contractors  engaged  by
CareAdvantage (but not Blue Cross) to perform their respective obligations under
this   Agreement   or   CareAdvantage's   negligence   or  the   negligence   of
CareAdvantage's agents,  servants,  employees or independent contractors engaged
by  CareAdvantage  (but  not  Blue  Cross);  provided,  however,  that  if  such
negligence  is  attributable  in part to Blue  Cross  or its  agents,  servants,
employees,   or  independent   contractors   engaged  by  Blue  Cross  (but  not
CareAdvantage) and in part to CareAdvantage or its agents,  servants,  employees
or independent  contractors  engaged by  CareAdvantage,  CareAdvantage  shall be
entitled  to  indemnification  by  Blue  Cross  under  this  Section  8.  If the
attribution  of  negligence  on a  comparative  basis  is not made by a court of
competent  jurisdiction for any reason,  including without  limitation,  because
such  claim is  settled  by the  parties  involved,  then the  determination  of
respective fault, if any, shall be made by an arbitrator  mutually acceptable to
CareAdvantage and Blue Cross.  This indemnity  agreement shall include indemnity
against all costs,  expenses and liabilities  incurred in and in connection with
any  such  claim or  liability,  and  proceedings  brought  thereunder,  and the
reasonable cost of the defense thereof with legal counsel reasonably  acceptable
to CareAdvantage.

          Unless such claim or liability results from the willful  misconduct of
or the  willful,  wanton  or  reckless  failure  by Blue  Cross  or its  agents,
servants, employees or independent contractors engaged by Blue Cross (and not by
CareAdvantage) to perform their respective  obligations under this Agreement (in
which case no such maximum or  aggregate  amount  shall  obtain) this  indemnity
agreement  shall in each  instance  be  limited  by and  shall  not  exceed  the
aggregate  amount equal to the amount of the proceeds of insurance  available to
satisfy the obligations of Blue Cross under this indemnity agreement.

          (c) In no event shall  either  party  hereunder be liable to the other
for lost  profits  or  punitive  damages  on  account  of a default  under  this
Agreement or otherwise; provided, however, that the scope of the indemnification
provided by each party hereto may require the indemnitor hereunder to compensate
the  indemnitee  hereunder for damages which  include  punitive  damages or lost
profits awarded to or incurred by a third party.

          (d) An  indemnitee  entitled to  indemnification  under this Section 8
shall give notice to the indemnitor of a claim or other circumstances  likely to
give rise to a request for indemnification promptly after the indemnitee becomes
aware of the same. An indemnitor  shall be afforded the opportunity to undertake
the defense of


                                       6
<PAGE>

and to settle by compromise or otherwise any claim for which  indemnification is
available  under this Section 8, with legal counsel  approved by the  indemnitee
(which approval shall not be unreasonably withheld or delayed). If an indemnitor
so assumes the defense of any claim,  the  indemnitee  may  participate  in such
defense with legal counsel of the  indemnitee's  selection and at the expense of
the indemnitee.  If the indemnitor,  prior to the expiration of twenty (20) days
after receipt of notice of a claim by the  indemnitee  under this Section 8, has
not assumed the defense  thereof,  the  indemnitee  may thereupon  undertake the
defense  thereof on behalf of, and at the risk and expense  of, the  indemnitor,
with  all  reasonable  costs  and  expenses  of such  defense  to be paid by the
indemnitor.  No compromise or settlement of any such claim shall be made without
the prior consent in writing of the indemnitee.

     9. Notice of Certain New  Business.  During the term hereof,  CareAdvantage
shall provide Blue Cross with prior notice, in the manner hereinafter  provided,
before  CareAdvantage  provides any  consulting  services for the benefit of any
entity  engaged in the health care  industry (a "Health  Care  Entity").  In the
event that such Health Care Entity engages or conducts,  directly or indirectly,
business in the States of Rhode Island or Massachusetts (a "Competitor Entity"),
CareAdvantage  shall  provide  Blue Cross with one  hundred  (100)  days'  prior
written notice prior to providing  services to such  Competitor  Entity.  In the
event that such entity is not a Competitor Entity,  CareAdvantage  shall provide
Blue Cross with  fifteen  (15)  business  days' prior  written  notice  prior to
providing  services to such  entity.  It is the  intention  of Blue Cross not to
continue  in  a  business   relationship   with   CareAdvantage   in  the  event
CareAdvantage provides services to a Competitor Entity. Accordingly,  within ten
(10) business days after the receipt of either of the  aforesaid  notices,  Blue
Cross shall notify CareAdvantage whether it considers such Health Care Entity to
be a  Competitor  Entity,  whether  or not  designated  a  Competitor  Entity by
CareAdvantage, and in the event Blue Cross determines such Health Care Entity to
be a Competitor  Entity,  whether or not Blue Cross  intends to  terminate  this
Agreement on ninety (90) days' prior  written  notice,  as allowed under Section
1(b) hereof. In no event shall  CareAdvantage be required to give notice to Blue
Cross in the event it  intends  to provide  services  to a licensee  of the Blue
Cross Blue Shield Association,  provided,  however,  that CareAdvantage shall be
required to give notice in the manner  required for a  Competitor  Entity in the
event that such Health Care Entity is a subsidiary or affiliate of such licensee
of the Blue Cross Blue Shield  Association,  and such  subsidiary  or  affiliate
conducts or engages in business,  directly or indirectly, in the States of Rhode
Island or Massachusetts.

     10.  Confidentiality.  (a) Blue  Cross and  CareAdvantage  have  executed a
Nondisclosure  Agreement  governing  the handling of  "Proprietary  Information"
between the parties, as such term is defined in the Nondisclosure Agreement. The
Nondisclosure  Agreement between the parties, a copy of which is attached hereto
as Attachment III and incorporated herein by reference, shall continue to govern
the obligations of the parties with regard to Proprietary Information.

          (b) Should Blue Cross enter into a contract  with a vendor  other than
CareAdvantage  to manage a discrete  segment of its business that is not managed
by CareAdvantage, then CareAdvantage will enter into a confidentiality agreement
with that vendor  similar to the  confidentiality  agreement Blue Cross has with
the vendor.

     11. Third-Party  Beneficiaries.  No individuals or entities are intended by
the parties hereto to be third-party  beneficiaries to this Agreement,  and this
Agreement  shall not be construed or interpreted to confer rights or benefits on
any  third-party  and shall not be enforceable by any entity not a party to this
Agreement.

     12.  Further  Contracts.  The  decision  by Blue  Cross to enter  into this
Agreement  with   CareAdvantage   shall  not  be  construed  or  interpreted  by
CareAdvantage  as the  intention of Blue Cross to enter into any other  contract
with  CareAdvantage  for any other  services,  during the Term or following  the
termination of this Agreement, and the parties hereto expressly acknowledge that
Blue Cross has no  obligation  to enter into any further  contract or  agreement
with CareAdvantage for the provision of any services,  either during the Term or
following the termination of this Agreement.  CareAdvantage is not authorized to
make  representation  to, and shall not make  representation to, any third party
that Blue  Cross  has any  obligation  to enter  into any  other  contract  with
CareAdvantage  either  during  the Term or  following  the  termination  of this
Agreement.


                                       7
<PAGE>

     13. Rights to Proprietary  Data. (a) The parties  hereto  acknowledge  that
Blue Cross has entered into a license agreement with Milliman & Robertson,  Inc.
("M&R")  pursuant to which Blue Cross has licensed from M&R certain  Health Care
Management  Guidelines  for use by medical  personnel  in  managing  health care
delivery systems (the "M&R  Guidelines").  The parties further  acknowledge that
CareAdvantage  has  provided  certain  services  to Blue  Cross  with  regard to
modification  of the M&R  Guidelines,  including  meeting  with  physicians  and
proposing and drafting modifications to the M&R Guidelines. CareAdvantage hereby
agrees that it has no right, title, or interest in the M&R Guidelines,  and that
the M&R Guidelines are the property of Blue Cross,  subject to the rights of M&R
under the license  agreement  between Blue Cross and M&R for the M&R Guidelines,
and  CareAdvantage  hereby  forever  remises,  releases,  and  relinquishes  any
interest,  right, claim, or title in the M&R Guidelines, in any form whatsoever,
including as such M&R  Guidelines  may have been modified with the assistance of
CareAdvantage.  Notwithstanding  anything  to the  contrary  contained  in  this
Section 13(a), this Agreement shall not limit  CareAdvantage  from entering into
any separate licensing agreement with M & R or with any other licensor of health
care  delivery  products,  nor shall it prevent  CareAdvantage  from  making any
modification to any such separately licensed product, whether with M & R or with
any other licensor of health care delivery products.

          (b) CareAdvantage  further hereby acknowledges and agrees that it has,
and shall have, no right, title or interest in any other manuals,  instructions,
treatment protocols, critical path guidelines,  materials,  guidelines, studies,
analysis,  case  management  programs,  processes,  procedures,   modifications,
operating codes,  methods of access,  or access codes,  produced or developed by
CareAdvantage  and  provided  for the use or benefit  of Blue  Cross  and/or its
subscribers or providers as part of the services provided by  CareAdvantage,  or
as part of any other  services  provided by  CareAdvantage  under this Agreement
(collectively,  the "Work Product"), and that all such Work Product shall be the
property of Blue Cross.  CareAdvantage shall have no right, title or interest in
such Work  Product,  unless (i)  CareAdvantage  has rights to such Work  Product
pursuant  to a  valid,  previously-existing  patent,  trademark,  copyright,  or
license, and then only to the extent of such patent,  trademark,  copyright,  or
license,  (ii) CareAdvantage  shall have notified Blue Cross in writing prior to
the creation of such Work Product  setting forth in detail the existence of such
patent, trademark, copyright, or license, and the proposed use of such patented,
trademarked,   copyrighted  or  licensed  material  (hereafter  referred  to  as
"CareAdvantage  Protected  Material") in any such Work  Product,  and (iii) Blue
Cross and  CareAdvantage  shall  have  agreed in  writing  in  advance as to the
respective  rights of Blue Cross and  CareAdvantage  to any Work  Product  which
would   or   could   contain   any  such   CareAdvantage   Protected   Material.
Notwithstanding  anything to the contrary contained in this Section 13(b), "Work
Product"  shall not be deemed to  include  (i)  information  (regardless  of the
medium in which  maintained),  which is or becomes  generally  available  to the
public,  other than as a result of the disclosure thereof by CareAdvantage,  its
agents or  representatives,  or (ii)  information  in any  medium  which is made
available  to  CareAdvantage  on a  non-confidential  basis by a third party not
bound  by  a   confidentiality   agreement   with  or  under  an  obligation  of
confidentiality to Blue Cross.

     14.  Interpretation and Amendments.  This Agreement  constitutes the entire
understanding of the parties hereto and supersedes all prior representations and
understanding,  whether oral or written. Any changes, amendments, or alterations
hereto shall not be effective unless agreed upon in writing signed by authorized
representatives of the parties hereto.

     15. Notices. Any notices required to be given under this Agreement shall be
by certified  mail,  return receipt  requested.  Notice shall be directed to the
parties at the addresses  listed below, or such other addresses as the party may
designate by written notice.

         If to Blue Cross:             Blue Cross & Blue Shield
                                                 of Rhode Island
                                                444 Westminster Street
                                                Providence, RI 02903
                                                Attention: Chief Medical Officer


                                       8
<PAGE>

     With a copy to:       Elia Germani, Esq.
                                           General Counsel
                                           Blue Cross & Blue Shield
                                             of Rhode Island
                                           444 Westminster Street
                                           Providence, RI 02903

                       and                 John M. Boehnert, Esq.
                                           Partridge, Snow & Hahn
                                           180 South Main Street
                                           Providence, RI 02903

          If to CareAdvantage:             Thomas Reilly
                                           President and Chief Executive Officer
                                           CareAdvantage Health Systems, Inc.
                                           485-C Route 1 South
                                           Iselin, NJ 08830-3037

          With a copy to:         President and Chief Executive Officer
                                           CareAdvantage, Inc.
                                           485-C Route 1 South
                                           Iselin, NJ 08830-3037

     16. Binding  Effect.  This Agreement shall be binding upon and inure to the
benefit of the parties  hereto and their  respective  successors and assigns (if
permitted),  and this Agreement  shall not be assigned,  except by prior written
agreement of the other party  hereto,  which  agreement  may be withheld in such
party's absolute and sole discretion.  Any purported  assignment in violation of
this Section 16 shall be null and void and of no further force and effect.

     17.  Waiver.  A waiver of any breach of this  Agreement by any party hereto
shall not be construed to be a continuing waiver for a similar breach.

     18.  Severability.  In the event that any  provision  of this  Agreement is
found  by a court of  competent  jurisdiction  to be  unenforceable  because  it
extends for too long a period of time or over too broad a range of activities or
in too large a geographic  area,  such provision  shall be interpreted to extend
only after the maximum period of time,  range of activities or geographic  areas
to which it may be enforceable.

     19.  Governing  Law.  This  Agreement  has  been  negotiated,  entered  and
delivered  in Rhode  Island,  is intended  to be  performed  primarily  in Rhode
Island,  and this  Agreement  shall be governed,  construed and  interpreted  in
accordance  with the laws of the  State of Rhode  Island.  CareAdvantage  hereby
irrevocably  consents to the jurisdiction of the state and federal courts in the
State of Rhode Island for the  adjudication of all rights and remedies  pursuant
to the terms of this Agreement.


                                       9
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their representatives  thereunto duly authorized on the day and date first above
written.

                                              Blue Cross & Blue Shield
                                               of Rhode Island

                                              By:_______________________________

                                              Its duly authorized_______________

                                              CareAdvantage Health Systems, Inc.

                                              By:_______________________________

                                                 Stephan D. Deutsch, M.D.
                                                 Senior Vice President and
                                                 National Medical Director

                                       10
<PAGE>

                                                                   ATTACHMENT I.

                          CAREADVANTAGE HEALTH SYSTEMS
                         Health Care Management Services
                       January 1997 through December 1999

The services to be provided  during the term of this Agreement shall include the
following health care management services:

Health Care Management Services

--       CareAdvantage will provide physician and administrative support to
         review and develop Blue Cross medical policies, interpret benefits,
         assist with general provider relations, assist with Blue Cross quality
         management, and assist with other general Blue Cross business.

--       CareAdvantage will provide physician and administrative support to
         develop, delineate the use of, credential and provide quality control
         for different levels of care.

--       CareAdvantage will provide physician and administrative support to
         accomplish preauthorization, concurrent review, retrospective review,
         and case management of medical and surgical admissions and inpatient
         days within Blue Cross's service area.

--       CareAdvantage will analyze out of state utilization and develop, along
         with Blue Cross, strategies for enhanced utilization management of
         these cases. Blue Cross will support CareAdvantage data requirements
         for analysis and implementation of initiatives.

--       CareAdvantage will continue to develop, in conjunction with Blue Cross
         Specialty Advisory Committees, new admission and length of stay
         guidelines, revise previously established guidelines as necessary and
         assist in the development of specific treatment guidelines (e.g., for
         community acquired pneumonia) as indicated by ongoing data analysis and
         the implementation of new disease management programs.

--       CareAdvantage will conduct periodic audits of specific services
         provided by the Health Benefits Management Department and,
         collaboratively with the department, develop a work plan to enhance the
         effectiveness of these services such as general utilization management
         and case management for catastrophic and high risk patients.

--       CareAdvantage will conduct continuing inservice programs for Blue Cross
         personnel regarding issues concerning utilization and case management
         including treatment of specific diseases, use of levels of care and as
         requested by the client in conjunction with the institution of new
         programs. CareAdvantage will also participate with Blue Cross in
         dissemination of new information to hospitals regarding these issues.

--       CareAdvantage will assist Blue Cross in the development of specific
         "real-time" daily case management reports that will compliment periodic
         claims data analysis.

--       CareAdvantage will assist Blue Cross in the development of innovative
         approaches for physician education regarding new programs and data
         feedback to physicians.

--       CareAdvantage will provide the necessary physician and administrative
         support to assist Blue Cross in contracting and medically managing
         cases at out of state facilities designated as Centers of Excellence.


                                       11
<PAGE>

--       CareAdvantage will provide the necessary physician and administrative
         support to identify and implement "infrastructure" changes at inpatient
         facilities.

--       CareAdvantage will develop strategies to manage care delivered in
         patients' homes (including home health care and infusion therapy) and
         skilled nursing facilities.

Case and Disease Management

--       CareAdvantage will analyze the need for Disease Management Programs for
         specific diseases (populations) including but not limited to
         cardiology, oncology, asthma, diabetes, peptic ulcer disease,
         gastroesophageal reflux and high risk pregnancies.

--       CareAdvantage will assist and support ongoing general and specific Blue
         Cross data analyses and assist in the development of new approaches to
         data evaluation for disease/care management.

Other Initiatives

--       CareAdvantage will choose specific inpatient and outpatient surgical
         procedures, based on data analysis including incidence rates, and
         develop appropriateness criteria for these procedures and tests based
         on indications and levels of care. Initial focus will be in the
         specialties of gynecology, general surgery, gastroenterology and
         orthopedic surgery.

--       CareAdvantage will assist Blue Cross in the further development of
         office surgery for specific specialties including cost benefit
         analysis, delineation of appropriate procedures, credentialing, and
         quality control.

--       CareAdvantage will develop and with Blue Cross support implement a
         utilization review/managed care initiative for observation units.

Provider Reimbursement

--       CareAdvantage will assist and support Blue Cross in the development of
         physician incentive and sharing programs including analysis to
         establish specific targets, implementation, and ongoing monitoring of
         outcomes.

--       CareAdvantage will assist Blue Cross in the designing and implementing
         of a pilot program to include community physicians in the medical cost
         management process.


                                       12
<PAGE>

7/23/97                                                            Attachment II

                             COMPENSATION AGREEMENT

In consideration of the services provided by CareAdvantage to Blue Cross in
accordance with Attachment I, Blue Cross shall pay CareAdvantage as compensation
the Monthly Service Fees and the Performance Service Fees in accordance with
this Attachment II.

1.   Monthly Service Fees

     (a) Computation for 1997. Except as provided in section 1(c), for each
     month during 1997, Blue Cross shall pay CareAdvantage an amount ("Monthly
     Service Fee") equal to the difference between

          (i) the sum of:

               (A) for the group AFA business, the product of $0.48 and the
               number of members in such group for such month, plus

               (B) for the fully insured group business, the product of $0.156
               and the number of members in such group for such month, and

          (ii) the sum of:

               (A) for the period July 1, 1997, through December 31, 1997, the
               product of $0.48 and the number of BlueCHIP members (not to
               exceed 30,000 members) for such month, plus

               (B) for the period July 1, 1997, through December 31, 1997, one
               thousand five hundred ($1,500) dollars for each such month.

     (b) Payment. The payments provided by subsection (a) shall be made on the
     tenth (10th) working day of each month based upon enrollment projections
     from the previous month's enrollment. At such time as actual enrollment
     becomes available, appropriate adjustments will be made to correct for any
     increase or decrease to the projections.

     (c) Certain Adjustments. In the event the State of Rhode Island ("SORI")
     account moves from group AFA business to fully insured group business, or
     in the event of the movement of any other account or accounts representing
     more than two and one-half (2.5%) percent of the combined members of the
     group AFA business and the fully insured group business, then the rates
     provided by section 1(a)(i)(B) shall be adjusted so that the Monthly
     Service Fee payable after the move of such account is the same as that
     which would have been payable had such account not moved.

     (d) Computation for 1998 and 1999. The parties agree to negotiate in good
     faith Monthly Service Fees for 1998 and 1999; provided, however, that until
     such time as the parties agree otherwise or the termination of this
     Agreement, the Monthly Service Fee for 1997 shall remain in effect
     throughout 1998 and 1999.

2. Performance Service Fees

     (a) Generally. For each calendar year during the term of this Agreement, in
     addition to the amounts provided by Section 1, Blue Cross shall pay
     CareAdvantage the amounts computed in accordance with this section
     ("Performance Service Fees").


                                       13
<PAGE>

     (b) Savings. Performance Service Fees for each calendar year will be based
     on CareAdvantage's share of Savings for such year. Savings shall equal the
     product of (i) the excess, if any, of (A) Projected PMPM over (B) Actual
     PMPM for claims costs for health care services managed by CareAdvantage,
     and (ii) the number of member months in each such calendar year for the
     fully insured group business.

          (i) Projected PMPM. Projected PMPM for a calendar year will be
          computed in accordance with this subsection (i) and subsection (iii).

               (A) For 1997, Projected PMPM will be calculated based on actual
               experience for the fully insured group business for calendar
               1996, paid through May 1998. Blue Cross will finalize Projected
               PMPM for 1997 no later than June 30, 1998; Blue Cross will
               estimate Projected PMPM for 1997 no later than April 30, 1997.

               (B) For 1998, Projected PMPM will be calculated based on actual
               experience for the fully insured group business for 1997, paid
               through May 1999. Blue Cross will finalize Projected PMPM for
               1998 no later than June 30, 1999; Blue Cross will estimate
               Projected PMPM for 1998 no later than April 30, 1998.

               (C) For 1999, Projected PMPM will be calculated based on actual
               experience for the fully insured group business for 1998, paid
               through May 2000. Blue Cross will finalize Projected PMPM for
               1999 no later than June 30, 2000; Blue Cross will estimate
               Projected PMPM for 1999 no later than April 30, 1999.

          (ii) Actual PMPM. Actual PMPM for a calendar year will be calculated
          180 days after the close of such year based on actual experience for
          the fully insured group business for such calendar year, paid through
          150 days after the close of such year, in accordance with subsections
          2(b)(iii) and 2(e)(ii). Projections of Actual PMPM for a calendar year
          shall be made in accordance with subsections 2(b)(iii) and 2(e)(i).

          (iii) Certain Adjustments. Projected PMPM and Actual PMPM will be
          computed in accordance with this subsection (iii) to remove, as
          appropriate, claims costs for health care services that CareAdvantage
          does not manage, the effect of unit cost increases or decreases (e.g.,
          cost per day, admission, outpatient services), and age/gender changes
          in the population, and to incorporate utilization trends in premium
          rates.

               (A) Claims Costs. Projected PMPM and Actual PMPM shall be
               computed as follows:

                    (I) Hospital Inpatient. Projected PMPM and Actual PMPM shall
                    include all claims costs for hospital inpatient facilities
                    except those for mental health, substance abuse, maternity,
                    and ITS claims, and excluding professional fees. Any other
                    inclusions or exclusions will be prospectively agreed upon
                    by the parties.

                    (II) Hospital Outpatient. Projected PMPM and Actual PMPM
                    shall include claims costs for hospital outpatient
                    facilities only for those categories of services subject to
                    CareAdvantage review activities, i.e., ambulatory surgery,
                    home health care, home infusion, and observation room.
                    Hospital outpatient claims costs shall exclude claims costs
                    incurred for mental health, substance abuse and ancillary
                    services not provided in conjunction with those categories
                    of services subject to CareAdvantage review activities,
                    maternity-related services and ITS claims, as well as
                    professional fees. Any other inclusions or exclusions will
                    be prospectively agreed upon by the parties.


                                       14
<PAGE>

                    (III) Classification. Classification of claims costs for
                    hospital inpatient, hospital outpatient, and professional
                    fees will be consistent with Blue Cross provider contracts
                    and administrative policies.

                    (IV) Future Agreements. Based on managed care initiatives
                    designated by Blue Cross to be performed by CareAdvantage,
                    the parties will agree on claims costs to be included or
                    excluded from PMPM calculations.

               (B) Adjustment for Cost and Utilization Factors. On a quarterly
               basis, the projected cost PMPMs are adjusted up or down in
               concert with the updating of the hospital differential for base
               period claims and specific cost factors. The utilization factor
               is adjusted quarterly as trends included in rating are updated.
               Performance is then measured by comparing Blue Cross's latest
               actual PMPM cost estimate to the updated projected PMPM value.
               (See Exhibit II.B. for an illustration of this process.)

                    (I) Hospital Price Factors. Estimates of hospital price
                    increases or decreases are calculated quarterly on a
                    liability per unit basis. For DRG hospitals, the inpatient
                    measure is liability per case and for others it is liability
                    per day. For outpatient services, liability per visit is
                    used for all hospitals. The time frame for measuring
                    increases are hospital fiscal years (ending September 30).

                    For the current fiscal year, liability for year-to-date
                    claims data is annualized/completed and then modified to
                    reflect any applicable year-end adjustments as provided for
                    in the hospital contracts. For DRG hospitals, a projection
                    of case mix change is provided separately and incorporated
                    into the calculations. Prior year liabilities are then
                    updated for all hospitals before calculating the price
                    increases.

                    For subsequent fiscal years, the factors reflect best
                    estimates available for inflationary increases or decreases,
                    as well as projected changes in case mix based on historical
                    trends. In addition, other types of influences--either known
                    or anticipated--are incorporated into the calculations
                    whenever possible, provided that some basis exists for
                    estimating the impact.

                    (II) Hospital Utilization Trend Factors. On a quarterly
                    basis, updated utilization trend factors are incorporated
                    into premium rates. The trend factor to project the base
                    period forward is based on a matrix that calculates the
                    overall utilization trend factor for the period being used.
                    This overall factor is also based on estimated enrollment
                    for that period, and the distribution of the quarterly
                    utilization trend factors weighted by the enrollment.
                    Quarterly, at the request of CareAdvantage, Blue Cross will
                    review with CareAdvantage (or its representative) the
                    utilization trend factors.

               (C) Age/Gender Adjustment. At the time of final settlement for
               each payment period, the Actual PMPM used to measure the
               incremental change from the Projected PMPM will be age/gender
               adjusted to account for any shifts in enrollment demographics.


                                       15
<PAGE>

               (D) SORI Adjustment. SORI claims experience will be included in
               the calendar year 1996 base period experience used to calculate
               the 1997 Projected PMPM. The SORI claims experience used in the
               1996 base period will coincide with the timing of the shift of
               the SORI account to fully insured status in 1997. For example, if
               the entire SORI account shifts on July 1,1997, then the SORI
               claims experience will be included in the calendar year 1996 base
               period from July 1, 1996 to December 31, 1996. In the event that
               different groups of the SORI account shift to fully insured
               status at different times, the inclusion of these groups into the
               calendar year 1996 base period experience will match the timing
               of the shift of each group in 1997.

     (c) Allocation of Savings for 1997. For calendar year 1997 of this
     Agreement, Savings shall be allocated between Blue Cross and CareAdvantage
     as provided herein. (See Exhibit II.A. for an illustration of this
     process.)

          (i) Blue Cross Recoupment of Monthly Service Fee for Fully Insured
          Business. Blue Cross shall be allocated 100% of Savings for such year
          up to an amount equal to the amount paid to CareAdvantage for the
          fully insured group business for such year pursuant to Section
          1(a)(i)(B). 

          (ii) CareAdvantage Recoupment of Certain Expenses. CareAdvantage shall
          be allocated 100% of Savings for such year in excess of that allocated
          to Blue Cross pursuant to Section 2(c)(i) up to an amount equal to (A)
          $1,400,000, less (B) the amount paid to CareAdvantage for the group
          AFA business and the fully insured group business for such year
          pursuant to Section 1(a)(i). For interim payment periods,
          CareAdvantage shall be allocated 100% of Savings in excess of that
          allocated to Blue Cross pursuant to Section 2(c)(i) up to an amount
          equal to (A) the appropriate pro rata share of $1,400,000, less (B)
          the amount paid to CareAdvantage for the group AFA business and the
          fully insured group business for that interim period.

          (iii) Sharing of Remaining Savings. Savings in excess of that
          allocated in (i) and (ii) of this subsection shall be allocated 65% to
          Blue Cross and 35% to CareAdvantage.

          (iv) Allocation of Savings for 1998 and 1999. The parties agree to
          negotiate in good faith the allocation of Savings for 1998 and 1999;
          provided, however, that until such time as the parties agree otherwise
          or the termination of this Agreement, the allocation of Savings for
          1997 shall remain in effect throughout 1998 and 1999.

     (d) Reports and Interim Payment Schedule. Blue Cross will provide
     CareAdvantage with monitoring reports showing projected Savings (including
     Projected PMPM and projected Actual PMPM computed in accordance with
     subsection 2(e)(i) in conjunction with the following interim payment
     schedule:

          (i) 1997. Interim payment periods for 1997:

               (A) January 1, 1997, through March 31, 1997, with claims payments
               through March 31, 1997;

               (B) January 1, 1997, through June 30, 1997, with claims payments
               through June 30, 1997;

               (C) January 1, 1997, through September 30, 1997, with claims
               payments through September 30, 1997;

               (D) January 1, 1997, through December 31, 1997, with claims
               payments through


                                       16
<PAGE>

               December 31, 1997;

               (E) January 1, 1997, through December 31, 1997, with claims
               payments through March 31, 1998.


                                       17
<PAGE>

          (ii) 1998. Interim payment periods for 1998:

               (A) January 1, 1998, through March 31, 1998 with claims payments
               through March 31, 1998;

               (B) January 1, 1998, through June 30, 1998, with claims payments
               through June 30, 1998;

               (C) January 1, 1998, through September 30, 1998, with claims
               payments through September 30, 1997;

               (D) January 1, 1998, through December 31, 1998, with claims
               payments through December 31, 1998;

               (E) January 1, 1998, through December 31, 1998, with claims
               payments through March 31, 1999.

          (iii) 1999. Interim payment periods for 1999:

               (A) January 1, 1999, through March 31, 1999, with claims payments
               through March 31, 1999;

               (B) January 1, 1999, through June 30, 1999, with claims payments
               through June 30, 1999;

               (C) January 1, 1999, through September 30, 1999, with claims
               payments through September 30, 1999;

               (D) January 1, 1999, through December 31, 1999, with claims
               payments through December 31, 1999;

               (E) January 1, 1999, through December 31, 1999, with claims
               payments through March 31, 2000.

     (e) Payments.

          (i) Interim Payments. Blue Cross will for each calendar year make
          interim settlements with CareAdvantage in accordance with this
          subsection (i). Interim settlements will be based on CareAdvantage's
          share of projected Savings as calculated 45 days following the close
          of each of the five interim payment periods for each year. In
          calculating projected Savings, the Actual PMPMs used for the first
          three interim settlements in a calendar year will be seasonally
          adjusted and projected to reflect the fact that the experience
          available will not be from a complete calendar year; in calculating
          CareAdvantage's share of projected Savings for the first three interim
          settlements, the amounts paid pursuant to this section shall be based
          on the member months for the interim payment period. Any amounts owing
          CareAdvantage shall be paid by Blue Cross within 90 days of the close
          of each interim payment period; for each calendar year beginning with
          the third interim payment for such year, any amounts owing Blue Cross
          (after adjusting for previous interim payments) may be offset by Blue
          Cross against amounts otherwise payable by Blue Cross for such year
          pursuant to Section 1(a).

               Interim Payment 1: 20% of CareAdvantage's projected allocation of
                                  Savings


                                       18
<PAGE>

               Interim Payment 2: 40% of CareAdvantage's projected allocation of
                                  Savings (adjusted for any previous interim 
                                  payments)

               Interim Payment 3: 60% of CareAdvantage's projected allocation of
                                  Savings (adjusted for any previous interim 
                                  payments)

               Interim Payment 4: 80% of CareAdvantage's projected allocation of
                                  Savings (adjusted for any previous interim 
                                  payments)

               Interim Payment 5: 100% of CareAdvantage's projected allocation
                                  of Savings (adjusted for any previous interim 
                                  payments)

     (ii) Final Settlement. Final settlement for each calendar year will based
     on claims paid through 150 days after the close of each such calendar year.
     Final settlement will be adjusted to reflect prior interim payments for
     such year, as well as the items set forth in subsection 2(b)(iii). Any
     amounts owing CareAdvantage for a calendar year shall be paid by Blue Cross
     within 270 days of the close of such calendar year; any amounts owing Blue
     Cross shall be paid by CareAdvantage within 45 days after a receipt of an
     invoice from Blue Cross.

3. Applicable Products and Members. The computations required by this Schedule
II shall include the followings populations:

     (a) HealthMate 2000 (including HealthMate 2000 MHCF)

     (b) Other Plans:

             (i)     HealthMate
             (ii)    Classic Managed
             (iii)   Classic Non-Managed
             (iv)    Value Care 200
             (v)     Point of Service
             (vi)    Direct Pay--Age Rated
             (vii)   Direct Pay--Regular

             (viii)  Direct Pay--Students


                                       19


<PAGE>

                                                                  Attachment III

                            NONDISCLOSURE AGREEMENT

     This  NONDISCLOSURE  AGREEMENT (the  "Agreement")  is made and entered into
this 14th of  February,  1995,  by and between Blue Cross & Blue Shield of Rhode
Island, a Rhode Island nonprofit  hospital and medical service  corporation with
an address at 444  Westminster  Street,  Providence,  Rhode  Island 02903 ("Blue
Cross") and CareAdvantage,  Inc., a Delaware  corporation with an address at Two
Penn Plaza East, Newark, New Jersey 07105 ("CareAdvantage").

                              W I T N E S S E T H:

     WHEREAS,  the parties to this  Agreement are presently  engaged in business
discussions  regarding the provision of administrative and managed care services
to health benefit plans; and

     WHEREAS,  in connection  with such  discussions  each of the parties hereto
desires to evaluate and examine certain books,  records,  financial  information
and other confidential and/or proprietary  information  relating to the business
of the other party hereto; and

     WHEREAS,  the  information  which  may  be  disclosed  and/or  revealed  in
connection with such examination is confidential,  proprietary  and/or otherwise
of such a nature as to render public disclosure of the same potentially  harmful
to the interests of the parties hereto.

     NOW,  THEREFORE,  in  consideration  of  the  foregoing  recitals  and  the
agreements  and  covenants  set forth  herein,  and for other good and  valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

     SECTION 1. Proprietary Information.

     1.1 (a) As used in this Agreement, the term "Proprietary Information" shall
mean  with  regard  to  each  of  the  parties  hereto  all  trade  secrets  and
confidential,  proprietary  and other  information  disclosed  by such  party in
accordance with the terms hereof from the inception of the business  discussions
as aforesaid  (which  discussions  may have commenced  prior to the date of this
Agreement),  including without limitation,  any and all reimbursement  policies,
any and all financial, operational, policy, marketing, underwriting and customer
information,  any and all other business  information manuals,  know-how,  uses,
capabilities,  operating codes, methods of access,  access codes,  instructions,
materials,   studies,  analyses,   communications,   data,  methods,  processes,
procedures, patents, ideas, modifications, inventions, discoveries, developments
or improvements  relating to any existing or future developments or improvements
relating to any  existing  or future  product,  product  design,  or  packaging,
production,  marketing or  distribution  process,  method or facility,  research
project or result, and the like regarding such party or its products,  business,
technology,  employees,  customers,  systems,  computer programs or software, or
prospects,   whether   disclosed   directly   by  such   party  or  one  of  its
Representatives  to the other party hereto or obtained by the other party hereto
indirectly in whole or in part from such sources, and whether transmitted orally
or in written documents, memoranda, reports,  correspondence,  drawings or other
man or machine readable media, and all other  documentation and information with
respect to such party.  As used herein,  the term  "Representatives"  shall mean
such party's  directors,  officers,  employees,  advisors,  agents,  contractors
and/or controlling persons.

     (b)  Notwithstanding any other provision of this Agreement to the contrary,
the term "Proprietary Information" shall not be deemed to include the following:
(i) information  which is or becomes  generally  available to the public,  other
than as a result of the disclosure  thereof by a party hereto which has received
Proprietary Information in accordance with the terms hereof; or (ii) information
which is made available to a party hereto on a non-confidential basis by a third
party not bound by a  confidentiality  agreement  with or under an obligation of
confidentiality  to the other party hereto,  as evidenced by written  records of
said receiving party.

<PAGE>

     1.2  The  parties  hereto  agree  and  acknowledge   that  all  Proprietary
Information  shall be used  solely  for the  purpose  of  evaluating  a possible
transaction  between  Blue  Cross and  CareAdvantage  and in no event  shall any
Proprietary Information be utilized in any manner which is or may be detrimental
to either of the parties  hereto.  Blue Cross and  CareAdvantage  shall keep all
Proprietary  Information  that they receive in accordance  with the terms hereof
confidential and neither Blue Cross nor CareAdvantage  shall,  without the prior
written  consent of the party which has disclosed any  Proprietary  Information,
disclose,  or permit any of its  Representatives  to disclose,  such Proprietary
Information  to any other person or entity,  other than in  connection  with the
transaction  described  above.  Each of the parties  hereto  further  agrees and
acknowledges that it shall transmit and/or disclose the Proprietary  Information
such party  receives in  accordance  with the terms  hereof to only those of its
Representatives  who: (i) have been informed of the confidential and proprietary
nature of such Proprietary Information; (ii) have previously agreed, in writing,
to be bound by the terms and conditions set forth in this  Agreement;  and (iii)
need to review  such  Proprietary  Information  in order to permit said party to
properly evaluate the above-described potential transaction.

     Notwithstanding  anything  to the  contrary  contained  in the  immediately
preceding  paragraph  or elsewhere in this  Agreement,  CareAdvantage  shall not
disclose any of the Proprietary Information to anyone other than Paul Shoffeitt,
John  Lincoln,  and  Vincent  Achilarre,  and  without  limiting  the  foregoing
restriction, CareAdvantage shall not disclose the Proprietary Information to any
individual  who is an officer,  director,  shareholder,  or employee of Primedex
Health Systems, Inc. or Primedex Corporation. If CareAdvantage shall at any time
wish to disclose any of the Proprietary Information to anyone other than Messrs.
Shoffeitt,  Lincoln, and Achilarre,  CareAdvantage shall so notify Blue Cross in
writing,  designating the individual(s) to whom such Proprietary  Information is
requested  to be  conveyed,  stating  the reasons  for such  disclosure  to such
individual(s),  and warranting and  representing  that no such  individual(s) to
whom such  disclosure  is  sought  are an  officer,  director,  shareholder,  or
employee  of  Primedex  Health  Systems,  Inc.  or  Primedex  Corporation.  Such
information  shall not be  disclosed to any such  individuals  unless Blue Cross
shall consent to such disclosure in writing  following  receipt of the aforesaid
notice,  and Blue  Cross  may  without  such  consent  in its sole and  absolute
discretion.

     1.3 In the event that Blue Cross, CareAdvantage, or any of their respective
Representatives who have received any Proprietary Information in accordance with
the  terms  of  this  Agreement   becomes  legally  compelled  to  disclose  any
Proprietary  Information,  the party so  compelled  will provide  prompt  notice
thereof to the party hereto which has disclosed such Proprietary  Information in
accordance  with the  terms  hereof  so that  said  disclosing  party may seek a
protective  order or other  appropriate  remedy and/or waive compliance with the
provisions of this Agreement.  Any person or party which is legally compelled to
disclose  any  Proprietary  Information  shall  furnish  only the portion of the
Proprietary  Information  which it is legally required to disclose and shall use
his,  hers or its best  efforts to obtain a protective  order or other  reliable
assurances  that  confidential  treatment  will be accorded to such  Proprietary
Information.

     SECTION 2. Ownership of confidential Information.  The parties hereto agree
and acknowledge  that each of the parties hereto which discloses any Proprietary
Information  in  accordance  with the  terms  hereof  is and  shall  remain  the
exclusive owner of such Proprietary Information and all patent, copyright, trade
secret,  trademark and other intellectual property rights therein. No license or
conveyance  of  any  such  rights  to  the  party  receiving  said   Proprietary
Information is granted or implied under the terms of this Agreement.

     SECTION 3.  Nonduplication.  Neither of the  parties  hereto  shall copy or
duplicate, in any manner whatsoever,  any paper, material,  item, man or machine
readable   media   regarding  or  otherwise   relating  to  or  other   tangible
manifestations of any Proprietary Information, unless expressly authorized to do
so,  in  writing,  by the party  hereto  which has  disclosed  such  Proprietary
Information,  and  then  only  for  the  purpose  expressly  authorized  by said
disclosing party.

     SECTION 4. Return of  Proprietary  Information.  Each of the parties hereto
shall return all Proprietary Information to the party hereto which has disclosed
the  same,  and  shall  return  to such  disclosing  party  any and all  papers,
materials,  items, man or machine readable media regarding or otherwise relating
to or other tangible  manifestations  of such Proprietary  Information,  and all
copies or duplications  thereof,  within two (2) days after: (i) said disclosing
party's  request  therefor;  or (ii) the  termination  of  business  discussions
between the parties hereto (the"Return Date"). In addition,  each of the parties
hereto shall,  within five (5) days after the Return Date, destroy all copies of
any analyses,  compilations,  studies or other documents  prepared by such party
for its internal 


                                       2
<PAGE>

use  which  reflect  or  otherwise  relate  in  any  manner  whatsoever  to  any
Proprietary  Information  such party has received in  accordance  with the terms
hereof and shall  certify,  in writing,  its  compliance  with the terms of this
Section  4.  Neither of the  parties  hereto  shall  disclose  any such  papers,
materials,  items, man or machine readable media regarding or otherwise relating
to  the  Proprietary   Information  or  other  tangible  manifestations  of  any
Proprietary  Information  such party has received in  accordance  with the terms
hereof or the  contents  thereof to any third party  without  the prior  written
consent of the party hereto which has disclosed such Proprietary  Information in
accordance with the terms hereof.

     SECTION 5.  Applicability.  The obligations of Blue Cross and CareAdvantage
set  forth  in this  Agreement  shall  be  binding  upon,  and  Blue  Cross  and
CareAdvantage  shall  be  responsible  for  all  actions  of,  their  respective
Representatives.

     SECTION 6. Enforcement.  The parties hereto expressly agree and acknowledge
that: (i) the restrictions on disclosure,  reproduction and misappropriation set
forth in this Agreement  represent a reasonable and necessary  protection of the
legitimate interests of the parties and that each party's failure to observe and
comply with the covenants and agreements  herein  contained  shall  constitute a
breach  of this  Agreement;  (ii) it is and will  continue  to be  difficult  to
ascertain the nature,  scope and extent of the damage caused by such breach; and
(iii) a remedy at law with  regard  to a breach  hereunder  will be  inadequate.
Accordingly,  it is the intention of the parties hereto that, in addition to any
other rights and remedies which any party may have in the event of any breach of
this Agreement,  such party shall be entitled,  and is expressly and irrevocably
authorized by the other party hereto, to demand and obtain specific  performance
and/or  temporary  and permanent  injunctive  relief with regard to said breach,
without  the  necessity  of  posting  a bond or other  security,  and all  other
appropriate equitable relief, against the other party hereto in order to prevent
any breach or  threatened  breach of this  Agreement  by such other  party.  The
parties hereby irrevocably  consent to the jurisdiction of the state and federal
courts of the State of Rhode Island.

     SECTION 7. Representations and Warranties of Blue Cross and CareAdvantage.

     7.1 Blue Cross,  and the  individual  executing this Agreement on behalf of
Blue Cross, represents and warrants to CareAdvantage that Blue Cross' execution,
delivery and  performance  of this  Agreement  has been duly  authorized  by the
appropriate  corporate action,  the person executing this Agreement on behalf of
Blue Cross is thereunto  duly  authorized,  and this Agreement  constitutes  the
legal,  valid  and  binding  obligation  of Blue  Cross  and is  enforceable  in
accordance with its terms.

     7.2 CareAdvantage, and the individual executing this Agreement on behalf of
CareAdvantage,  represents  and  warrants  to Blue  Cross  that  CareAdvantage's
execution,  delivery and  performance of this Agreement has been duly authorized
by the Agreement on behalf of CareAdvantage  is thereunto duly  authorized,  and
this  Agreement   constitutes  the  legal,   valid  and  binding  obligation  of
CareAdvantage and is enforceable in accordance with its terms.

     SECTION 8. Miscellaneous.

     8.1  Severability.  Nothing  contained  herein  shall be construed so as to
require the  commission  of any act contrary to law,  and wherever  there is any
conflict  between  any  provisions  contained  herein and any  present or future
statute,  law,  ordinance or  regulation,  the latter shall  prevail,  provided,
however,  that  the  provision  of this  Agreement  which is  affected  shall be
curtailed  and  limited  only to the  extent  necessary  to bring it within  the
requirements  of the law,  and the  remainder  of this  Agreement  shall  not be
affected thereby.

     8.2  Further  Assurances.  Each of the  parties  hereto  shall  execute and
deliver any and all additional agreements,  documents and other assurances,  and
shall  do  any  and  all  acts  reasonably  necessary  in  connection  with  the
performance  of their  obligations  hereunder,  to effectuate  the intent of the
Agreement.

     8.3 Survival.  The rights and  obligations  of the parties set forth herein
shall survive the execution and delivery of this  Agreement and the  termination
of business  discussions  between the parties  hereto and shall continue in full
force and effect.


                                       3
<PAGE>

     8.4 Waiver.  Failure or delay to insist upon  compliance with any provision
hereof  shall  not  operate  as,  and  shall  not be  construed  as, a waiver or
amendment of such  provision or a waiver of the right to insist upon  compliance
with such provision or to take remedial steps to recover damages or other relief
for  noncompliance.  Any express waiver of any provision of this Agreement shall
not operate and shall not be  construed  as a waiver of any  subsequent  breach,
regardless   of  whether  such  breach   occurs  under   similar  or  dissimilar
circumstances.  No term or  provision  of this  Agreement  shall be deemed to be
waived unless such waiver is set forth in a written  instrument signed by all of
the parties hereto.

     8.5 Assignment.  This Agreement shall be binding on, and shall inure to the
benefit of, Blue Cross and  CareAdvantage  and their  respective  successors and
assigns; provided, however, that neither Blue Cross nor CareAdvantage may assign
any of their respective  rights or delegate any of their respective  obligations
under this  Agreement  without the prior  written  consent of the other party to
this Agreement.

     8.6 Notice. All notices, authorizations or other communications required to
be delivered  in writing  under the terms of this  Agreement  shall be deemed to
have been duly  delivered on the date of service,  if served  personally  on the
receiving  party,  or on the third business day after mailing,  if mailed to the
receiving  party by  registered  or certified  mail,  and properly  addressed as
follows:

     If to Blue Cross:          Blue Cross & Blue Shield of Rhode Island
                                444 Westminster Street
                                Providence, Rhode Island 02903
                                Attn:  John H. Grant

     With a copy to:            Blue Cross & Blue Shield of Rhode Island
                                444 Westminster Street
                                Providence, Rhode Island 02903
                                Attn:  Elia Germani, Esq.

     If to CareAdvantage:       CareAdvantage, Inc.
                                Two Penn Plaza East
                                Newark, New Jersey 07105
                                Attn:  Vincent M. Achilarre

     CareAdvantage  or Blue  Cross may change  their  respective  addresses  for
purposes of this Section 8.6 by providing  the other  parties with notice of the
new address in the manner set forth above.

     8.7   Counterparts.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

     8.8  Integration.  This  Agreement  embodies  and  constitutes  the  entire
agreement and understanding between the parties with respect to the transactions
contemplated   hereunder,   and  all   prior  or   contemporaneous   agreements,
understandings,  representations  and statements,  whether oral or written,  are
hereby merged into this agreement.

     8.9 Amendment.  Neither this Agreement,  nor any provisions  hereof, may be
modified, amended,  supplemented or altered except by written agreement executed
and delivered by all of the parties hereto.

     8.10  Governing  Law. The parties  hereby agree and  acknowledge  that this
Agreement,  and the rights,  remedies and obligations of the parties  hereunder,
shall be governed by and construed in  accordance  with the laws of the State of
Rhode Island.

     8.11  Additional  Rights and  Remedies.  The rights and remedies  contained
herein  shall not be in lieu of,  but shall be in  addition  to,  the rights and
remedies of any party with  regard to a breach by the other party  hereto of the
Rhode Island Uniform Trade Secrets Act (R.I.  Gen. Laws ss.ss.  6-41-1 et seq.),
or any similar act which may apply (in accordance  with the terms hereof) to the
conduct governed and/or the information protected hereunder. 


                                       4
<PAGE>

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the day and year first above written.

Witness:                             BLUE CROSS & BLUE SHIELD OF RHODE ISLAND



/s/Donnamarie Cahill                 By:    /s/John H. Grant
-------------------------                   -------------------------
                                     Name:  John H. Grant
                                            -------------------------
                                     Title: Vice President
                                            -------------------------

                                     CAREADVANTAGE, INC.


/s/Donnamarie Cahill                 By:    /s/Vincent M. Achilarre
-------------------------                   -------------------------
                                     Name:  Vincent M. Achilarre
                                            -------------------------
                                     Title: Chief Financial Officer
                                            -------------------------


                                       5