SETTLEMENT AGREEMENT

         SETTLEMENT AGREEMENT ("Settlement  Agreement") among Horizon Healthcare
of  New  Jersey,   Inc.   ("Horizon")  f/k/a  Medigroup  of  New  Jersey,   Inc.
("Medigroup");  Allied Specialty Care Services,  Inc.  ("Allied"),  successor in
interest to Allied  Health  Group,  Inc.  ("AHG") now d/b/a  Magellan  Specialty
Health ("MSH"); and CareAdvantage,  Inc.  ("CareAdvantage").  Horizon,  MSH, and
CareAdvantage collectively shall be referred to as the "Parties."

                              W I T N E S S E T H :

         WHEREAS,   Horizon  has  operated  a  health  maintenance  organization
(commonly  referred to as an "HMO") in New Jersey,  which  arranged  for medical
services for its enrollees  through  contracts with family and general  practice
physicians, hospitals and other providers;

         WHEREAS, on or about January 2, 1997, Horizon's predecessor, Medigroup,
and AHG entered into an Administrative Services Agreement, pursuant to which AHG
agreed,  inter alia, to provide Horizon with certain utilization  management and
administrative services in connection with the review, processing and payment of
claims for services rendered submitted by certain specialist  physicians for the
enrollees in the HMO and point of service ("POS") plans operated or administered
by Medigroup;

         WHEREAS, the foregoing Administrative Service Agreement was modified by
a  Letter   Agreement   dated  March  1,  1997  between   Medigroup,   AHG,  and
CareAdvantage;




<PAGE>


         WHEREAS,  on or about October 16, 1997, AHG assigned  substantially all
of its right,  title and  interest in and to its  agreement  with  Medigroup  to
Allied, and Allied assumed substantially all of AHG's obligations thereunder;

         WHEREAS,  Horizon  instituted  suit against Allied in the United States
District Court for the District of New Jersey,  entitled  Horizon  Healthcare of
New Jersey,  Inc. vs. Allied Specialty Care Services,  Inc., Civil Action No. 99
Civ.  2819 (AJL),  to which action Allied joined  CareAdvantage  as  Third-Party
Defendant;

         WHEREAS,  the Parties have asserted claims between and among themselves
with respect to alleged breaches of the Administrative Service Agreement;

         WHEREAS,  the Parties now seek to resolve the claims  among and between
them as more fully set forth in the form of Release attached hereto as Exhibit A
and in this Settlement Agreement; and

         WHEREAS,  the  parties  further  recognize  the  commercial  advantages
accruing to the parties from the  continuing  relationship  between  Horizon and
MHS,  and seek to resolve the claims  among and  between  them in the context of
continuing contractual relations;

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

         1. Settlement Payments.  MSH and CareAdvantage agree, severally and not
jointly, as follows:

            (a)  MSH agrees to pay the sum of $722,611.28 to Horizon pursuant to
                 the  payment   schedule   annexed  hereto  as  Exhibit  C;

            (b)  CareAdvantage (i) upon execution of this Settlement  Agreement,
                 shall  execute and deliver to Horizon a promissory  note in the
                 amount  of  $419,500,  payable  to the  order  of  Horizon  and
                 otherwise  in the form  annexed  hereto as  Exhibit D (the "CAI
                 Note"),  and (ii) agrees to pay to Horizon,  in addition to any
                 amounts due under the CAI Note, the sum of $419,500  within six
                 months following execution of this Settlement Agreement;



                                       2
<PAGE>

            (c)  MSH agrees to pay an  additional  sum to Horizon  not to exceed
                 $425,000, following implementation of services under agreements
                 between  Horizon,  or any of its  affiliates,  and  MSH,  which
                 agreements  shall  include  and be  subject  to  the  following
                 provisions:

                 o The  services  shall  include  any  combination  of  provider
                   profiling, patient profiling, call center, disease management
                   and DXM;

                 o The services shall be provided at market rates;

                 o The  agreements  for the provision of such services shall not
                   be subject to termination  without cause during the first two
                   years of contract term;

         (d)      The additional sum set forth in  subparagraph  "c" above shall
                  be calculated on the basis of:

                 o $1 for each $2 of projected annualized revenue;  with respect
                   to the first $250,000 of such revenues; and

                 o $1 for each $3 of projected annualized revenue,  with respect
                   to the next $900,000 of such revenues calculated in each case
                   according to the terms of the executed agreement(s).

                                       3

<PAGE>

         2. Releases. In the form attached hereto as Exhibit A, Horizon,  Allied
and CareAdvantage  will execute Releases which will be effective upon receipt of
a fully executed version of this Settlement Agreement.

         3. Dismissal of the Settled  Claims.  Promptly after  execution of this
Settlement Agreement by all Parties, and the Releases by Horizon,  CareAdvantage
and Allied,  Horizon  shall file in the  federal  court  action a Consent  Order
dismissing with prejudice the Settled  Claims.  The Consent Order is attached as
Exhibit B.

         4. No  Admission of  Liability.  The Parties  recognize  that this is a
commercial  settlement  of disputed  matters and that this  settlement  does not
constitute  (and shall not be argued to  constitute)  an admission by any of the
Parties, or evidence of any kind concerning any of the positions taken by any of
the Parties or the relationships between or among the Parties.

         5. Representation by Counsel; Construction of Settlement Agreement. The
Parties  represent and warrant that they have been  represented by legal counsel
with respect to the negotiation of this Settlement Agreement; that each has been
advised  by legal  counsel as to its  respective  rights  and  obligations  with
respect to this  Settlement  Agreement;  and that each has  participated  in the
review and drafting of this  Settlement  Agreement such that no  construction of
the terms or effect of this Settlement Agreement shall be made against any Party
as principal drafter of this Settlement Agreement.

         6. Press Release. Horizon and MSH shall jointly develop a press release
or other public announcement regarding the new business between them.

                                       4
<PAGE>

         7. Confidentiality.

         A. Other  than  the  press  release  referenced  in  Paragraph  6, this
Settlement Agreement,  all matters relating to the terms and negotiation of this
Settlement  Agreement,  and  the  implementation  of any  and  all of its  terms
(collectively  referred to in this Paragraph as the  "Agreement")  are and shall
remain  confidential;  provided however,  the fact that the Parties have entered
into a settlement, without disclosing any of the other details of the Agreement,
may be disclosed  by the  Parties.  Notwithstanding  the  foregoing,  (i) MSH or
Horizon may disclose the Agreement to related or affiliated  corporate entities,
and  its  attorneys,   general  counsel,  corporate  counsel,   accountants  and
actuaries,   auditors,  lending  institutions,   and  investment  bankers;  (ii)
CareAdvantage may disclose the Agreement to (x) related or affiliated  corporate
entities, and its attorneys, general counsel, corporate counsel, accountants and
actuaries,  auditors,  lending institutions,  and investment bankers and (y) any
state,  federal,  or  governmental  authority,  including  but  not  limited  to
disclosures in SEC filed documents  and/or their state or local  equivalent,  to
which CareAdvantage upon advice of counsel reasonably believes it has a legal or
contractual obligation to report or disclose its terms.

         B. In the event any  Party  believes  disclosure  of the  Agreement  is
required  by  operation  of law  (other  than,  in the  case  of  CareAdvantage,
disclosure  permitted  pursuant to subparagraph  (A)(ii) above),  or that MSH or
Horizon  believes   disclosure  of  the  Agreement  is  permitted   pursuant  to
subparagraph (A)(i) above,

                                       5
<PAGE>

            (i) the Party  receiving  any such request or demand for  disclosure
shall give the other Parties  written  notice at least twenty (20) days prior to
disclosing  the  information,  unless the receiving  Party is required by law or
court order to disclose such  information  at an earlier date, in which case the
receiving Party shall give the other Parties as much notice as is possible under
the  circumstances.  Such notice shall set forth all information which the Party
intends to disclose,  the identity of each person to whom the  information is to
be disclosed,  the statute or other legal  authority  purportedly  requiring the
disclosure, and the circumstances pursuant to which disclosure is proposed to be
made, and

            (ii) the Parties each agree to assert  objections to such disclosure
based on  confidentiality,  Rule 408 of the New Jersey  and/or  Federal Rules of
Evidence and similar state and foreign  jurisdiction legal provisions  regarding
settlements.  In the event  disclosure  is required  by  operation  of law,  the
receiving Party shall request the court  requiring  disclosure to order that any
such disclosure be made in camera and sealed from the public record.

            8. Notice  Provision.  All notices to be given hereunder shall be in
writing and given by hand delivery, telecopy,  facsimile transmission,  telegram
or registered or certified mail,  postage prepaid,  return receipt  requested to
the respective Parties as follows:

                If to Horizon:

                           Thomas J. Calvocoressi
                           Vice President, General Counsel and Secretary
                           Horizon Blue Cross Blue Shield of New Jersey
                           3 Penn Plaza, East, PP-16F
                           Newark, New Jersey  07105

                cc:        None


                                       6
<PAGE>

                If to MHS:

                           Megan M. Arthur, Esq.
                           Executive Vice President & General Counsel
                           6950 Columbia Gateway Dr.
                           Suite 400
                           Columbia, MD. 21046
                           Fax: 410-953-4715


                cc:        Thomas F. Quinn, Esq.
                           Wilson Elser Moskowitz Edelman & Dicker LLP
                           Gateway Two
                           Newark, NJ 07102


                If  to CareAdvantage:

                           Richard Freeman, M.D.
                           President & Chief Operating Officer
                           CareAdvantage, Inc.
                           485-C Route One South

                cc:        George Neidich, Esq.
                           General Counsel
                           9301 Morison Lane
                           Great Falls, VA 22066
                           Fax: 703-757-0274

Any notice given in accordance  with this Paragraph 8, shall be deemed given and
received  within  three (3) days after  mailing  (in the case of notice  sent by
registered  or  certified  mail) or upon receipt (in the case of notice given by
hand delivery, telecopy, facsimile transmission, or telegram).

         9. Waiver of  Compliance.  The failure  of any Party to comply with any
obligation,  covenant,  agreement or condition herein may be expressly waived in
writing by the other  Parties,  but such waiver or failure to insist upon strict
compliance  with such  obligation,  covenant,  agreement or condition  shall not
operate as a waiver of, or estoppel  with  respect to, any  subsequent  or other
failure.



                                       7
<PAGE>


         10. Binding Nature of Terms and Representations of the Parties. Each of
the terms of this  Settlement  Agreement is binding upon each of the signatories
hereto,  their respective  successors,  transferees,  assigns,  representatives,
principals, agents, officers, directors and employees; provided however, that no
Party may assign its rights under this Settlement  Agreement without the consent
of the other Parties, which consent shall not be unreasonably withheld.

         11. Representations  of  Parties.  Each  of the Parties  hereto  hereby
represents and warrants to the other to the extent applicable that:

             A.  Such  party  has  all  power  and  authority,  and  all  or any
                 necessary  regulatory  consents,  to  enter  and  perform  this
                 Agreement;

             B.  Such party has taken all  necessary  actions to  authorize  the
                 execution of this Agreement in accordance with its terms; and

             C.  Such party,  without further  consideration,  shall execute and
                 deliver such other  documents and take such other action as may
                 be necessary to give full force and effect to this Agreement.

         12. Headings.  The headings contained in this Settlement  Agreement are
merely for convenience of reference and shall not under any circumstances affect
the meaning or interpretation of this Settlement Agreement.

         13.  Counterparts.  This  Settlement  Agreement  may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same  instrument.  Signatures may
be delivered via telecopy.


                                       8
<PAGE>


         14.  Governing Law. This Settlement  Agreement shall be governed by the
laws of the State of New Jersey,  without  giving effect to New Jersey choice of
law principles.





                                       9
<PAGE>


         IN WITNESS  WHEREOF,  the  parties to this  Agreement  have caused this
Agreement to be executed by their authorized  representatives as of the date and
year set forth below:

                         HORIZON HEALTHCARE OF NEW JERSEY, INC.

                         By:  /s/ Donna M. Celestini

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

                         Dated:  August 9, 2000


                         ALLIED SPECIALTY CARE SERVICES, INC.
                         d/b/a MAGELLAN SPECIALTY HEALTH

                         By:  /s/
                            ----------------------------------

                         Dated:  August 9, 2000

                         CAREADVANTAGE, INC.

                         By:  /s/ R. Christopher Minor

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

                         Dated:  August 9, 2000




                                       10
<PAGE>




                                     RELEASE

         This Release  dated August 9, 2000, is given and exchanged by and among
Horizon  Healthcare  of New  Jersey,  Inc.("Horizon"),  f/k/a  Medigroup  of New
Jersey, Inc.  ("Medigroup");  Allied Specialty Care Services,  Inc.  ("Allied"),
successor in interest to Allied Health Group, Inc.  ("AHG"),  now d/b/a Magellan
Specialty Health ("MSH"); and CareAdvantage,  Inc., ("CareAdvantage") and all of
their successors,  predecessors and affiliate companies; as Releasors, to and in
favor of each  other,  as  Releasees,  each  party  hereby  releasing  the other
parties,  pursuant to the terms of this Release.

         Each party hereby  irrevocably  releases and forever discharges each of
the other parties from the following claims:

         A. All claims for, or relating, to the Administrative Service Agreement
dated  January  2,  1997,  by and  between  Medigroup  and AHG,  and the  Letter
Agreement dated March 1, 1997 by and among Medigroup, AHG and CareAdvantage; and

         These  include,  but are not  limited  to, all claims for breach of the
foregoing agreements by any party thereto, or by their successors or assigns.

         B. All  claims  which  have  been or  which  could  have  been  made in
connection  with either of the  foregoing  agreements in either of the following
proceedings:

         (1) The action  entitled  Horizon  HealthCare  of New  Jersey,  Inc. v.
         Allied  Specialty Care Services,  Inc.,  Civil Action No. 99-CIV.  2819
         (AJL),  pending in the United States District Court for the District of
         New Jersey;
<PAGE>

         The  consideration  for the  Release  exchanged  is as set forth in the
Settlement  Agreement,  and further includes the mutual release and discharge of
the parties' respective claims for breach of the foregoing agreements.

         IN WITNESS WHEREOF, the parties have caused this Release to be executed
by their authorized representatives as of the date and year set forth below:

                         HORIZON HEALTHCARE OF NEW JERSEY, INC.



                         By:/s/ Donna M. Celestini

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

                         Dated:  August 9, 2000



                         ALLIED SPECIALTY CARE SERVICES, INC.
                         d/b/a MAGELLAN SPECIALTY HEALTH



                         By:/s/

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

                         Dated:  August 9, 2000



                         CAREADVANTAGE, INC.



                         By:/s/ R. Christopher Minor

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

                         Dated:  August 9, 2000





                                       2
<PAGE>





WILSON, ELSER MOSKOWITZ, EDELMAN & DICKER LLP
TFQ-3063
33 Washington Street
Newark, New Jersey 07102
Tel: (973) 624-0800 Fax: (973) 624-0808
Attorneys for Defendant Counterclaimant/Third-Party Plaintiff
Allied Specialty Care Services, Inc..
--------------------------------------------------

HORIZON HEALTHCARE OF NEW         UNITED STATES DISTRICT COURT FOR THE DISTRICT
JERSEY, INC.,                     THE DISTRICT
                                  OF NEW JERSEY

            Plaintiff,
                                  Civil No.  99-W2819 (AJL)
v.

ALLIED SPECIALTY CARE SERVICES, INC.,

            Defendant Counter-
            claimant/Third-Party  CONSENT ORDER OF
            Plaintiff,            DISMISSAL
v.

CAREADVANTAGE, INC.,

            Third-Party Defendant.


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


         This matter  having been opened to the Court by Horizon  Healthcare  of
New Jersey,  Inc. and Allied  Specialty Care Services,  Inc., now d/b/a Magellan
Specialty  Health;  and this Court having  considered  the matter,  and for good
cause shown:

         It is on this ____ day of November, 2000;




<PAGE>


        ORDERED,  that this action be and hereby is  dismissed  in its entirety
with prejudice and without costs; and it is;

         ORDERED  that a copy of this  Order be served on all  counsel of record
within 7 days.




                         ---------------------------------
                         ALFRED J. LECHNER, JR., U.S.D.J.

CONSENTED TO:
Horizon Health Care of New Jersey, Inc.


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


Allied Specialty Care Services, Inc.
d/b/a Magellan Specialty Health


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


CAREADVANTAGE, INC.



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



                                       2
<PAGE>




The following is the payment  schedule  from MSH to Horizon of the  $722,611.28,
payable quarterly, over two(2) years:

Due Date                                                      Amount
--------                                                      ------
8/1/00                                                        $90,326.41
11/1/00                                                       $90,326.41
2/1/01                                                        $90,326.41
5/1/01                                                        $90,326.41
8/1/01                                                        $90,326.41
11/1/01                                                       $90,326.41
2/01/02                                                       $90,326.41
5/1/02                                                        $90,326.41




<PAGE>


          THIS NOTE HAS NOT BEEN REGISTERED  UNDER THE SECURITIES
          ACT OF 1933, AS AMENDED,  OR THE SECURITIES LAWS OF ANY
          STATE  AND MAY NOT BE SOLD  OR  OTHERWISE  DISPOSED  OF
          EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION STATEMENT
          UNDER SUCH ACT AND APPLICABLE  STATE SECURITIES LAWS OR
          AN   APPLICABLE    EXEMPTION   TO   THE    REGISTRATION
          REQUIREMENTS OF SUCH ACT OF SUCH LAWS.


                               CAREADVANTAGE, INC.
                                 PROMISSORY NOTE


$419,500.00                                                   Newark, New Jersey
                                                                  August 9, 2000

FOR VALUE RECEIVED, the undersigned, CAREADVANTAGE, INC., a Delaware corporation
with its principal place of business at 485-C Route 1 South,  Iselin, New Jersey
08830 (the "Payor"),  promises to pay to the order of HORIZON  HEALTHCARE OF NEW
JERSEY,  INC., a New Jersey  corporation with its principal place of business at
Three Penn Plaza East, Newark, New Jersey 07105 (the "Payee"),  by wire transfer
or in same day funds at its above-stated  address, as the Payee shall direct the
Payor in writing,  the principal  sum of FOUR HUNDRED  NINETEEN  THOUSAND,  FIVE
HUNDRED  DOLLARS  ($419,500.00),  together with all interest on the  outstanding
principal balance and other expenses, payable as set forth below in lawful money
of the United States of America.

         This  Promissory Note (this  "Promissory  Note") is the promissory note
referred to in Section 1(b) of the  Settlement  Agreement  dated as of August 9,
2000 (the  "Agreement") by and among the Payor,  the Payee and Allied  Specialty
Care  Services,  Inc.,  successor in interest to Allied Health Group,  Inc. (now
d/b/a Magellan Specialty Health), a Delaware corporation.

The  outstanding  principal  amount of this  Promissory Note shall bear interest
daily from August 9, 2000 until  payment in full of all of amounts due and owing
hereunder at the rate of six and sixteen  hundredths  percent (6.16%) per annum;
provided,  however, that the rate shall be adjusted on each November 1, February
1, May 1 and August 1 as of which any principal  hereof  remains  outstanding so
that,  following  each such  adjustment,  the interest rate is equal to the rate
most  recently  then  reported in The Wall Street  Journal  for  five-year  U.S.
Treasury notes.

Subject to the right of the Payee to accelerate the maturity of this  Promissory
Note as hereinafter  provided,  the entire  principal  amount of and interest on
this Promissory Note shall be November 1, 2000 (the "Maturity Date").

An "Event of Default" shall occur if:

         (a) the Payor  defaults in the payment of principal or interest of this
Promissory Note when the same becomes due and payable;




<PAGE>

         (b) the  Payor  fails  to  comply  with  any  other  provision  of this
Promissory  Note  and  such  failure  continues  for a  period  of five (5) days
following notice to the Payor of such failure;

         (c) the Payor pursuant to or within the meaning of any bankruptcy law:

             (i)   commences a voluntary case;

             (ii)  consents to the entry of an order for relief against it in an
                   involuntary case;

             (iii) consents  to  the  appointment  of  a  receiver,  liquidator,
                   assignee,  custodian,  trustee, sequestrator or other similar
                   official (a  "Custodian")  of it or for all or  substantially
                   all of its property; or

             (iv)  makes a general  assignment for the benefit of its creditors;
                   or

         (d) a court of competent  jurisdiction  enters an order or decree under
any bankruptcy law that:

             (i)   is for relief against the Payor in an involuntary case;

             (ii)  appoints a Custodian of the Payor or for all or substantially
                   all of its property; or

             (iii) orders  the  winding up or  liquidation  of the Payor and the
                   order or decree remains unstayed and in effect for sixty (60)
                   days.

If an Event of Default occurs as described above,  then the principal of and the
accrued   interest  on  this  Promissory  Note  shall  become  due  and  payable
immediately,  whether or not  notice of such  Event of  Default  shall have been
given by any holder of this Promissory  Note. The holder of this Promissory Note
may rescind an  acceleration  and its  consequences  if all  existing  Events of
Default  (other than  nonpayment  of principal  or interest  that has become due
solely  because  of the  acceleration)  have  been  cured or  waived  and if the
rescission would not conflict with any judgment or decree.

If an Event of Default occurs and is continuing,  the holder of this  Promissory
Note may  pursue  any  available  remedy  by  proceeding  at law or in equity to
collect the payment of  principal of or interest on this  Promissory  Note or to
enforce the performance of any provision of this Promissory Note.

Except as  otherwise  provided by law, a delay or omission by the holder of this
Promissory  Note in  exercising  any right or remedy  accruing  upon an Event of
Default  shall not  impair  the right or  remedy  or  constitute  a waiver of or
acquiescence in the Event of Default.  No waiver of any right shall be effective
unless in  writing  and  signed by the  Payee,  and no waiver on one (1) or more
occasions  shall be  conclusive  as a bar to or waiver of any right on any other
occasion. No remedy is exclusive of any other remedy. All available remedies are
cumulative.



                                       2
<PAGE>


The principal amount of this Promissory Note may be prepaid at the option of the
Payor upon five (5) days'  prior  written  notice to the  Payee,  in whole or in
part,  at any time or from time to time  without  premium or penalty;  provided,
however,  that any such prepayment  shall be accompanied by accrued  interest on
the principal amount so prepaid.

The Payor  represents  that it has  taken all  corporate  actions  necessary  to
authorize  it to issue  this  Promissory  Note and to  perform  its  obligations
hereunder.

The Payor waives diligence,  protest, presentment of any instrument,  demand for
payment, notice of nonpayment and acceleration and any and all other notices and
demands  whatsoever in connection  with the delivery,  acceptance,  performance,
default or enforcement of this Promissory Note.

All notices and other communications  hereunder shall be in writing and shall be
made in accordance with Section 8 of the Agreement.

The  obligations of the Payor under this  Promissory Note may not be transferred
or assigned by the Payor  without the prior written  consent of the Payee.  This
Promissory  Note shall be binding upon the permitted  assigns and  successors of
the Payor and shall inure to the benefit of and be enforceable by the Payee, its
successors and assigns.

The Payor agrees to pay all costs and expenses,  including,  without limitation,
reasonable  attorneys'  fees and  expenses,  incurred by the Payee in connection
with the collection and/or enforcement of this Promissory Note.

This  Promissory  Note shall be governed by and construed in accordance with the
internal laws of the State of New Jersey.

IN WITNESS  WHEREOF,  the undersigned has caused this Promissory Note to be duly
executed as of the date first above written.

                         CAREADVANTAGE, INC.



                         By:/s/ R. Christopher Minor

                            ------------------------------------
                            Name:
                            Title:



                                       3
<PAGE>