<PAGE>1

                            STOCK PURCHASE AGREEMENT


                                     BETWEEN


                          PREFERRED HEALTH CHOICE, INC.


                                       AND


                     UNITED PAYORS & UNITED PROVIDERS, INC.


                                OCTOBER 22, 1996




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                            STOCK PURCHASE AGREEMENT


         Agreement  made as of October 22, 1996,  but  effective as of September
30, 1996, between Preferred Health Choice, Inc., an Illinois Corporation ("PHC")
and a wholly-owned  indirect subsidiary of Pioneer Financial  Services,  Inc., a
Delaware  corporation  ("PFS"),  and United Payors & United  Providers,  Inc., a
Delaware corporation ("Buyer").

                                    RECITALS

         WHEREAS,  PHC owns an aggregate of 8,499,998  shares (the  "Shares") of
Common Stock, without par value,  constituting all of the issued and outstanding
capital  stock of  National  Health  Services,  Inc.,  a  Wisconsin  corporation
("NHS");

         WHEREAS,  NHS owns an  aggregate  of 1,000  shares of capital  stock of
Healthcare Review  Corporation,  a Kentucky  corporation  ("HRC"),  which shares
represent all of the issued and outstanding shares of capital stock of HRC;

         WHEREAS,  NHS and PFS desire to enter into a Health Care Administrative
Services Agreement, dated as of October 24, 1996 (the "Services Agreement");

         WHEREAS,  NHS and National  Group Life Insurance  Company,  an Illinois
corporation and an affiliate of PHC ("NGL"), desire to enter into a Lease, dated
as of October 24, 1996 (the "Lease ");

         WHEREAS,  Buyer desires to acquire from PHC, and PHC desires to sell to
Buyer, all of the Shares.

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


                                    ARTICLE I
                                 THE TRANSACTION

         1.1 On the terms and subject to the conditions set forth herein, at the
closing (the "Closing") on the Closing Date (as hereinafter defined):

         (a)      PHC shall sell,  transfer and assign to Buyer, and Buyer shall
                  purchase  from PHC,  the  Shares  for a  purchase  price  (the
                  "Purchase Price") of Five Million Dollars ($5,800,000) and the
                  warrants  (the  "Warrants")  described  in  the  forms  of the
                  Warrant  Certificates  attached as Exhibits A-l and A-2 hereto
                  (the "Warrant Certificates").



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         (b)      Buyer shall pay the Purchase Price as follows:

                  (i)      Buyer   shall   pay   to  PHC  Five  Million  Dollars
                           in the form of a  wire   transfer  to a bank  account
                           designated  by PHC of  readily available U.S. funds,

                  (ii)     Buyer  shall  (A)  issue  to PHC  the  Warrants,  (B)
                           execute and deliver to PHC the Warrant  Certificates,
                           and (C) thereafter  perform its obligations under the
                           Warrant Certificates fully and in a timely manner.

         (c)      The parties shall deliver the  documents and  instruments  and
                  take the actions referred to in Article VII hereof.

         (d)      The  closing  shall  be held at the  offices  of Buyer at 2:00
                  p.m.,  local time,  on October 23, 1996 or at such other date,
                  time and  place as the  parties  may  agree  in  writing  (the
                  "Closing Date"); however, the transactions contemplated herein
                  shall be deemed for all purposes to have taken  place,  and to
                  be effective, as of September 30, 1996.

         1.2      On  the  terms,  and  subject  to  the  conditions  set  forth
herein, immediately following the Closing:

         (a)      PFS and NHS shall enter into the Services Agreement.

         (b)      NGL and NHS shall enter into the Lease.


                                   ARTICLE II
                      REPRESENTATIONS AND WARRANTIES OF PHC

         Except as may  otherwise be set forth in a letter (the "PHC  DISCLOSURE
LETTER") delivered to Buyer concurrently with the execution and delivery of this
Agreement and initialed for identification purposes by Buyer and PHC, PHC hereby
represents and warrants to Buyer, its successors and assigns as follows:

          2.1  Organization  and  Qualification.
               --------------------------------    Paragraph  2.1  of   the  PHC
Disclosure  Letter lists the name and  jurisdiction  of incorporation   of  NHS,
HRC and each of NHS' other direct and indirect  Subsidiaries  (the  subsidiaries
listed in paragraph 2.1 of the PHC  Disclosure Letter  are  herein  referred  to
collectively as the "Subsidiaries" and individually as a "Subsidiary"). PHC, NHS
and  each  Subsidiary  is  a  corporation and  in  good  standing  as a domestic
corporation  under the laws of  the state  of  its  incorporation,  and,  to the
knowledge  of PFS,  is duly  qualified  to do business as a  foreign corporation
and is in  good  standing  in  each other jurisdiction  in  which the  character
of  its  properties  or  the  nature  of  its  business makes such qualification
necessary, except in jurisdictions, if any, where the failure to be so qualified
would not prevent PHC from fulfilling



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its  obligations  hereunder or constitute or would result in a Material  Adverse
Event with respect to NHS. As used in this Agreement, the term "MATERIAL ADVERSE
EVENT"  when used in  reference  to NHS and/or its  Subsidiaries  shall mean any
event, circumstance,  condition, development or occurrence causing, resulting in
or having (or, with the passage of time,  reasonably likely to cause,  result in
or have) a material  adverse  effect on the condition  (financial or otherwise),
business, properties, business relationships, prospects or results of operations
of NHS and its  Subsidiaries  taken as a whole.  NHS and each Subsidiary has the
requisite  corporate  power and  authority to own,  use or lease its  respective
properties and to carry on its respective business as now being conducted.

         2.2   Capitalization  of NHS.
               ----------------------  The  authorized,  issued and  outstanding
capital  stock of NHS and each  Subsidiary  are as set forth in paragraph 2.2 of
the NHS Disclosure  Letter.  All of the issued and outstanding shares of capital
stock of NHS and each  Subsidiary  have been duly  authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights (whether created
by  statute or  otherwise).  Except as  disclosed  in  paragraph  2.2 of the NHS
Disclosure Letter, there are no options,  warrants or other rights,  commitments
or agreements of any character  which call for the issuance of shares of capital
stock  of  NHS or  any  Subsidiary  or any  securities,  instruments  or  rights
convertible into or exchangeable for shares of capital stock or other securities
of NHS or any  Subsidiary.  Neither NHS nor any Subsidiary  has any  obligation,
contingent or  otherwise,  to register any  securities of NHS or any  Subsidiary
under the federal securities laws.

         2.3   Title to  Shares.
               ----------------  All of the  issued  and  outstanding  shares of
capital  stock of NHS are,  and  immediately  prior to the Closing Date will be,
owned of record and  beneficially by PHC, free and clear of all liens,  charges,
pledges,  encumbrances,  equities,  rights of first  refusal,  options  or other
claims of any nature, except liens for current taxes not yet delinquent.  All of
the issued and  outstanding  shares of capital stock of each Subsidiary are, and
immediately  prior to the Closing Date will be, owned of record and beneficially
by NHS, free and clear of all liens, charges, pledges,  encumbrances,  equities,
rights of first refusal, options or other claims of any nature, except liens for
current taxes not yet delinquent.

          2.4    Authority.
                 ---------
          (a)    PHC   has  the  requisite  corporate  power  and  authority  to
                 execute  and  deliver  this   Agreement   an   to  fulfill  its
                 obligations   hereunder.     The   execution  and  delivery  of
                 this Agreement by PHC  and  the performance of its  obligations
                 hereunder  have  been  duly and validly authorized by the Board
                 of   Directors   and  sole  shareholder of  PHC,  and  no other
                 corporate  proceedings  on  the  part of PHC are necessary,  as
                 matter  of law  or  otherwise,  in  connection therewith.  This
                 Agreement has been duly and validly executed and  delivered  by
                 PHC  and,  assuming  this  Agreement  constitutes the valid and
                 binding  obligations  of  Buyer,  this Agreement constitutes  a
                 valid  and  binding  agreement  of PHC, enforceable against PHC
                 in accordance  with its terms, except (a)  as  such enforcement
                 may be subject  to   bankruptcy,   insolvency,  reorganization,
                 moratorium   or   other  similar   laws   now  or  hereafter in


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                  effect relating to creditors' rights, and (b) as the remedy of
                  specific   performance  and  injunctive  and  other  forms  of
                  equitable  relief may be subject to equitable  defenses and to
                  the  discretion  of the  court  before  which  any  proceeding
                  therefore may be brought.  All corporate action on the part of
                  PHC, its Board of Directors and its sole shareholder  which is
                  necessary, as a matter of law or otherwise, for the execution,
                  delivery  and  performance  of this  Agreement by PHC has been
                  duly and validly taken.

          (b)     PFS has the requisite corporate power and authority to execute
                  and   deliver  the  Services  Agreement  and  to  fulfill  its
                  obligations  thereunder.  The execution  and delivery  of  the
                  Services  Agreement  by  PFS  and   the   performance  of  its
                  obligations  thereunder  have been duly and validly authorized
                  by the Executive  Committee  of  the  Board  of  Directors  of
                  PFS,  and  no  other  corporate proceedings on the part of PFS
                  are necessary,  as   a   matter  of   law  or  otherwise,   in
                  connection therewith.  When  executed  and  delivered  by  PFS
                  as provided herein,  the  Services  Agreement  will  have been
                  duly and validly  executed  and  delivered by PFS and, validly
                  executed by NHS, will constitute a valid and binding agreement
                  of PFS,  enforceable  against  PFS  in  accordance   with  its
                  terms,   except  (a)  as  such enforcement  may be subject  to
                  bankruptcy,  insolvency,  reorganization, moratorium  or other
                  similar laws now or hereafter in effect relating to creditors'
                  rights, and (b)  as  the  remedy   of   specific   performance
                  and  injunctive  and  other  forms of equitable  relief may be
                  subject to equitable  defenses  and  to  the discretion of the
                  court before which any proceeding  therefore  may  be brought.
                  All corporate  action on the part of  PFS, and  its  Board  of
                  Directors which is necessary, as a matter of law or otherwise,
                  for the  execution, delivery and performance  of  the Services
                  Agreement by PFS has been duly and validly taken.

          (c)     NGL  has the  requisite   corporate   power  and  authority to
                  execute and deliver the Lease and to  fulfill its  obligations
                  thereunder. The execution and delivery of the Lease by NGL and
                  the  performance of its obligations  thereunder have been duly
                  and validly  authorized by the Board of Directors of NGL,  and
                  no   other  corporate  proceedings on  the  part  of  NGL  are
                  necessary,   as   a    matter   of   law   or   otherwise,  in
                  connection therewith.  When executed and delivered  by  NGL as
                  provided  herein, the Lease will  have been  duly and  validly
                  executed  and  delivered   by  NGL  and,   assuming  the Lease
                  constitutes  the  binding obligations  of NHS,  the Lease will
                  constitute a valid and binding agreement  of NGL,  enforceable
                  against NGL in accordance with its  terms,  except (a) as such
                  enforcement   may   be  subject  to  bankruptcy,   insolvency,
                  reorganization,   moratorium   or  other  similar  laws now or
                  hereafter  in effect  relating to  creditors'  rights, and (b)
                  as  the remedy of  specific  performance  and  injunctive  and
                  other forms of equitable relief may  be  subject to  equitable
                  defenses  and to the discretion of the court before  which any
                  proceeding  therefore may be brought.   All  corporate  action
                  on  the  par  of  NGL  and  it   Board  of  Directors which is
                  necessary, as a matter of law or otherwise, for the execution,


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                  delivery   and   performance   of   this   Agreement   by  NGL
                  has   been   duly   and   validly taken.

          2.5     No  Other Investments or Subsidiaries.
                  -------------------------------------   NHS   has  no   equity
interest  or  investment  in   any   entity   other  than   the    Subsidiaries.

          2.6     Financial  Statements.
                  ---------------------    PHC  has  furnished to Buyer true and
complete copies of its consolidated  balance sheet dated August 31, 1996 and its
consolidated statement of operations for the eight month period ended August 31,
1996. Such financial  statements are in accordance with the books and records of
the  entities  covered  thereby,  and have  been  prepared  in  accordance  with
generally  accepted  accounting  principles  applied on a  consistent  basis and
present fairly the consolidated  financial  position of NHS and its Subsidiaries
as of the end of the period covered and the  consolidated  results of operations
for  the  period  covered  in  conformity  with  generally  accepted  accounting
principles. As used in this Agreement, the "Latest NHS Balance Sheet" shall mean
the August 31, 1996 consolidated  balance sheet of NHS attached as Schedule 1 to
paragraph 2.6 of the PHC Disclosure Letter.

         2.7      Absence  of  Certain  Changes.
                  -----------------------------  Except as contemplated by  this
Agreement  or  disclosed  in the PHC  Disclosure  Letter,  since the date of the
Latest NHS Balance Sheet,  NHS and each  Subsidiary has conducted its respective
business only in, and has not engaged in any  transaction  other than  according
to,  the  ordinary  and usual  course of such  business  consistent  with  prior
practices,  and,  since such date,  there has not been (a) any Material  Adverse
Event with  respect to NHS or its  Subsidiaries:  (b) any  declaration,  setting
aside or payment  of any  dividend  or other  distribution  with  respect to the
capital  stock  of NHS or any  Subsidiary;  (c)  any  change  in the  accounting
principles, practices or methods of NHS or any Subsidiary; (d) any labor dispute
or difficulty which is reasonably likely to result in any Material Adverse Event
with respect to NHS or any  Subsidiary;  (e) any asset of NHS or any  Subsidiary
having a value of $50,000 or more sold or disposed  of,  subjected  to any lien,
charge or other encumbrance; (f) any amendment or termination of any contract or
agreement to which NHS or any  Subsidiary is a party which  involves the payment
(in  any  form)  by or to NHS or  such  Subsidiary  of  $100,000  or more in any
twelve-month  period;  (g) any  repurchase  of issuances or other changes to the
outstanding  capital stock of NHS or any Subsidiary;  or (h) any increase in the
compensation  payable or which could become  payable by NHS or any Subsidiary to
any of their respective directors,  officers,  employees or consultants,  or any
amendment of any employee benefit plan.

          2.8     Absence of Undisclosed Liabilities.
                  ----------------------------------    To the knowledge of PHC,
except and to the extent reserved against or reflected in the Latest NHS Balance
Sheet  or  disclosed  in the PHC  Disclosure  Letter:  (a)  neither  NHS nor any
Subsidiary  had, at such date, any  liabilities  or  obligations  (contingent or
otherwise)  in excess  of  $50,000  in the  aggregate  which  were  required  by
generally accepted accounting  principles,  consistently applied, to be reserved
against or reflected  therein,  and (b) since the date of the Latest NHS Balance
Sheet,  except in the  ordinary  course  of its  business,  neither  NHS nor any
Subsidiary  has incurred any  liabilities or obligations in excess of $50,000 in
the   aggregate  which,  had  they  been  incurred  prior to  such  date,  would

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have been required by such principles, so applied, to have been reserved against
or reflected in the Latest NHS Balance Sheet.

         2.9      Consents    and    Approvals:    No    Violation.
                  ------------------------------------------------    Except  as
disclosed  in  the  PHC  Disclosure Letter,  the  execution and delivery of this
Agreement,  the Services  Agreement and the Lease do not and the consummation of
the transactions contemplated hereby will not:

         (a)      conflict with any provision of the articles  of  incorporation
                  or  bylaws  of  PLI,  NGL, PHC, NHS or any Subsidiary:

         (b)      require PLI,  NGL,  PHC, NHS or any  Subsidiary  to obtain any
                  consent,  approval,  authorization  or permit  of or from,  or
                  filing with or notification to, any governmental or regulatory
                  authority except as contemplated herein;

         (c)      conflict with, result in the breach of or constitute a default
                  (or give rise to any  right of  termination,  cancellation  or
                  acceleration) under any of the terms, conditions or provisions
                  of any note,  lease,  mortgage,  license,  agreement  or other
                  instrument or  obligation to which NHS or any  Subsidiary is a
                  party  or by  which  NHS or  any  Subsidiary  or any of  their
                  respective  assets  may be  bound  which  are  required  to be
                  disclosed  in  paragraphs  2.11,  2.14  or  2.15  of  the  PHC
                  Disclosure Letter; or

         (d)      violate any order, writ, injunction,  decree, statute, rule or
                  regulation applicable to PLI, NGL, PHC, NHS or any Subsidiary.

         2.10     Certain  Fees and  Expenses.
                  ---------------------------   No  person  or  entity  has been
authorized by PHC, NHS or any  Subsidiary to act for PHC, NHS or any  Subsidiary
in  connection  with the  transactions  provided for in this  Agreement in a way
which  would  entitle  such  person to receive  from NHS or any  Subsidiary  any
broker's  fees,  commissions,  finder's  fees,  investment  banking or financial
advisory fees in connection  with this  Agreement (or for  reimbursement  of any
expenses related thereto).

         2.11     Employment  and  Similar  Agreements.
                  ------------------------------------   Paragraph  2.11  of the
PHC Disclosure Letter sets forth  (a) all written employment, severance,  bonus,
consulting or indemnification arrangements,  agreements, understandings or plans
between NHS or any Subsidiary and any of their respective directors, officers or
employees  (including  without  limitation  any such  arrangements,  agreements,
understandings or plans which are conditioned upon a change of control involving
NHS or any Subsidiary);  (b) all written compensatory arrangements,  agreements,
understandings  or  plans  between  NHS or any  Subsidiary  and  any  consultant
(including without limitation any such arrangements,  agreements, understandings
or plans which are conditioned upon a change of control  involving NHS); and (c)
a list of current  employees of NHS and each Subsidiary  which  reflects,  among
other things, the current compensation of each such employee.


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         2.12  Litigation.
               ----------   Except as  disclosed  in  paragraph  2.12 of the PHC
Disclosure  Letter,  as of  the  date  hereof,  there  is no  claim,  action  or
proceeding,  including without limitation any claim of indemnification,  pending
or, to the  knowledge  of PHC,  NHS or any  Subsidiary,  threatened  against  or
relating  to NHS or any  Subsidiary.  Neither NHS nor any  Subsidiary  or any of
their  respective  officers,  directors or  employees  has been  permanently  or
temporarily enjoined by any order,  judgment or decree of any court or any other
governmental or regulatory  authority from engaging in or continuing any conduct
or practice in connection  with the business,  assets,  properties or affairs of
NHS or any  Subsidiary.  There is not in existence on the date hereof any order,
judgment  or decree  of any court or other  tribunal  or other  governmental  or
regulatory  authority  enjoining or requiring NHS or any  Subsidiary to take any
action of any kind with respect to its business, assets, properties or affairs.

         2.13 Taxes.
              -----  Except as disclosed in paragraph 2.13 of the PHC Disclosure
Letter:  NHS  and  each  Subsidiary,  either  on  their  own  or  as  part  of a
consolidated  group  of  corporations,  have  timely  filed  accurate,  true and
complete copies of all income,  franchise,  license, sales, payroll and property
tax  returns  and  reports  that are or have been  required to be filed with the
United  States  and with the  jurisdictions  in which they are  qualified  to do
business  or are  required  to file tax returns or reports and have paid in full
all taxes,  interest,  penalties,  assessments or deficiencies  that are or have
been due or payable or are or have been  claimed by any taxing  authority  to be
due and  payable  (whether or not it is  currently  known that such taxes are or
have  been  due and  payable).  NHS and  each  Subsidiary  have,  to the  extent
required, made estimated payments against all taxes that have not yet become due
and payable and have withheld or collected,  and, to the extent  required,  paid
over to the proper  governmental  authorities,  all taxes,  assessments and fees
required by law to have been withheld or collected. NHS and each Subsidiary have
duly paid or provided for all taxes with respect to any period prior to the date
of this representation and warranty. There are no liens for taxes,  assessments,
fees or other  governmental  charges upon any of the assets or properties of NHS
and each  Subsidiary.  Neither NHS nor any Subsidiary has waived or been granted
an extension which is still effective,  for any applicable limitation period for
the assertion of any tax liability for any federal income tax year.

         2.14 Benefit Plans. 
              -------------   Each employee  benefit plan covering  employees of
NHS or any  Subsidiary  which  is  maintained  or  contributed  to by NHS or any
Subsidiary  conforms in all material  respects to, and its  administration is in
conformity in all material  respects with, all applicable laws and  regulations;
no liability or penalty under the Employment  Retirement  Income Security Act of
1974,  as amended,  has been or will be incurred by NHS or any  Subsidiary  with
respect to any such plan; full payment has been made of all amounts which NHS or
any Subsidiary is required to have paid as contributions to such plans; there is
not in the aggregate any  accumulated  funding  deficiency  with respect to such
plans;  and the  current  value of accrued  benefits  of each such plan does not
exceed the current value of such plan's assets.

         2.15 Contracts.
              ---------   Paragraph 2.15 of the PHC Disclosure  Letter lists all
agreements, contracts, licenses, leases, and understandings,  whether written or
oral,  which  either  (a)  involve  payment  (in any  form)  by or to NHS or any
Subsidiary of $100,000 or more in any twelve-month period or (b) are material to
NHS  (except  that  such  list   may   exclude   agreements  which   are  listed

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elsewhere  in  the  PHC  Disclosure  Letter).  All  such  agreements  contracts,
licenses,  leases and  understandings  are in full force and effect and no party
thereto has given any notice of termination with respect thereto (except notices
of termination which have been withdrawn).  Neither NHS nor any Subsidiary is in
material  breach of any agreement,  contract,  license,  lease or  understanding
which is described or required to be described in the PHC Disclosure Letter, nor
does any event  exist  which,  with  notice or  passing  of time or both,  would
constitute or result in a material  breach by NHS or any  Subsidiary of any such
agreement,  contract, license, lease or understanding.  To the knowledge of PHC,
NHS and each  Subsidiary,  the other  party or parties  to each such  agreement,
contract,  license,  lease or  understanding  has  complied  with  all  material
commitments and obligations on its or their part.

         2.16  Intellectual Property Rights.
               ----------------------------

          (a)  As  used  in  this  Agreement,   "INTELLECTUAL  PROPERTY  RIGHTS"
               includes   United  States  and  foreign   inventions,   invention
               disclosures,  patents,  inventors' certificates,  utility models,
               trademarks, service marks, trade names, copyrights, trade secrets
               (including  processes and software  programs),  registrations and
               applications  therefor,  and past,  present and future  causes of
               action and remedies  therefor.  To the  knowledge of PHC, NHS and
               each  Subsidiary,  NHS and each Subsidiary has full right,  title
               and interest in or to use (as  currently  used) all  Intellectual
               Property Rights which are material to the conduct of its business
               as now  conducted,  and  the  consummation  of  the  transactions
               contemplated hereby will not alter or impair in an adverse manner
               such  Intellectual  Property  Rights.  Paragraph  2.16 of the PHC
               Disclosure   Letter  lists  all  Intellectual   Property  Rights,
               including  computer software (whether owned by or licensed to NHS
               or any  Subsidiary)  which  is  material  to the  conduct  of the
               business of NHS as now conducted.

          (b)  To the knowledge of PHC, NHS and each Subsidiary, neither NHS nor
               any  Subsidiary  is  in  default  under  any  material  agreement
               pursuant to which it is licensing Intellectual Property Rights of
               a third  party  or  granting  licenses  to its  own  Intellectual
               Property Rights.  Neither NHS nor any Subsidiary has notified any
               other party of an alleged default of any such agreement.  Neither
               PHC,  NHS nor any  Subsidiary  has  received  any  communications
               alleging  that  NHS or any  Subsidiary  has  violated  any  other
               person's  Intellectual  Property  Rights or has engaged in unfair
               competition against such person.

          (c)  To the  knowledge of PHC, NHS and each  Subsidiary,  NHS and each
               Subsidiary do not infringe (nor has it misappropriated) any third
               party's  Intellectual  Property  Rights and  neither  NHS nor any
               Subsidiary has  any  material liability for any past infringement
               or   misappropriation.    No  material  dispute  or  disagreement
               involving NHS or any Subsidiary exists or is, to the knowledge of
               NHS or any Subsidiary,  threatened with regard to any third party
               Intellectual   Property   Right,   including  any  allegation  of
               Intellectual  Property Rights infringement or misappropriation or
               of

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                any   breach or default of an   Intellectual   Property   Rights
                license   or   similar  agreement.

         2.17   Properties,   Liens.
                -------------------    Except  for   statutory   mechanics   and
materialmen's liens and liens for current taxes not yet delinquent, NHS and each
Subsidiary own or lease, free and clear of any liens, claims,  charges,  options
or other  encumbrances  (it  being  understood  that,  with  respect  to  leased
properties,  such representation regarding the absence of liens claims, charges,
options or other  encumbrances  relates only to the leasehold interest of NHS or
any Subsidiary, as applicable), all tangible and intangible properties, real and
personal,  material  to the  operation  of their  respective  businesses  as now
conducted  whether or not  reflected  in the Latest NHS  Balance  Sheet  (except
property sold or disposed of in the ordinary  course of business  since the date
of the Latest NHS Balance  Sheet) and all such  property  acquired or used since
such date, and to the knowledge of NHS or any Subsidiary, there has not been any
violation of any law,  regulation  or ordinance  (including  without  limitation
laws,  regulations  and ordinances  relating to health,  fire,  safety,  zoning,
environmental,  building,  city  planning  or similar  issues)  relating to such
properties  or  businesses  which  may  reasonably  be  expected  to result in a
Material  Adverse  Event.  There  are  no  proceedings  affecting  any  of  such
properties pending or threatened which may reasonably be expected to, materially
and adversely, curtail the use of such property for the purpose for which it was
acquired  or the  purpose  for which it is now used.  Paragraph  2.17 of the PHC
Disclosure  Letter  lists  all  real  property  owned  or  leased  by NHS or any
Subsidiary.

         2.18   Compliance with Applicable  Laws.
                --------------------------------   To  the knowledge of PFS, NHS
and each Subsidiary holds all licenses, permits and authorizations necessary for
the lawful conduct of its business, as now conducted, except for such  licenses,
permits  and  authorizations  the absence of which will not result in a Material
Adverse  Event;  and neither PHC, NHS nor any Subsidiary has received any notice
from any authority or person which asserts that NHS or any Subsidiary  lacks any
license,  permit  or  authorization  necessary  for the  lawful  conduct  of its
business,  or that NHS or any  Subsidiary  is in violation of any material  law,
ordinance or regulation of material significance to NHS or any subsidiary.

         2.19   Environmental Liability.
                -----------------------    To  the  knowledge of PHC, NHS or any
Subsidiary:

         (a)    The businesses  of NHS and  each  Subsidiary  have  been and are
                operated in material compliance with all applicable statutory or
                regulatory   requirements  of  all  federal,   state  and  local
                governmental  authorities with jurisdiction over the environment
                or over  workplace  health and safety,  and  neither NHS nor any
                Subsidiary  have  caused or allowed  the  generation, treatment,
                storage, release or disposal of hazardous  substances  except in
                accordance with such statutes and regulations as they existed at
                the  time of such  generation,  treatment, storage,  release  or
                disposal.

         (b)    Neither  PHC,  NHS nor any Subsidiary  has  received any written
                notice or, to the best knowledge of PHC, NHS or any  Subsidiary,
                any   other  communication,   from  any  governmental  authority
                alleging or concerning any violation by NHS or any

                                              9

<PAGE>11



                Subsidiary of, or responsibility or  liability  of  NHS  or  any
                Subsidiary,   any   statute  or  regulation  relating   to   the
                environment.  There are no pending or threatened, claims, suits,
                proceedings  or investigations with respect to the businesses or
                operations of NHS or any  Subsidiary   alleging  or   concerning
                any  violation  of  or  responsibility  or  liability  under any
                statutes or regulations relating to the  environment,   nor does
                PHC,  NHS or any  Subsidiary  have  any knowledge of any fact or
                condition  which might  reasonably  be  expected  to  give  rise
                to  such a  claim,  suit, proceeding or investigation.

         (c)    There  are  no pending or  threatened  actions,  proceedings  or
                investigations  seeking   to  revoke or deny  renewal  of any of
                such approvals, permits  and licenses; nor does PHC, NHS  or any
                Subsidiary  have  knowledge of any fact or condition which might
                reasonably  be  expected to give rise to any action,  proceeding
                or  investigation  to  revoke or deny renewal of such approvals,
                permits   or   licenses  if  such  revocation  or  denial  would
                constitute a Material Adverse Event.

         2.20   Insurance.
                ---------   NHS and each  Subsidiary   has  in  place  insurance
coverage of the  types,  in the  coverage  amounts  and  subject  to  retention,
deductible  or  other  similar  terms as described in paragraph  2.20 of the PHC
Disclosure  Letter.    PFS  management  reasonably  believes such coverage to be
appropriate and adequate.

         2.21   Service  Agreements.
                -------------------  To the  knowledge  of  PHC,  NHS  and  each
Subsidiary,  all charges made to customers  of NHS or any  Subsidiary  have been
properly computed and billed in material  compliance with applicable  agreements
and procedures in place with respect to such customers, and no such customer has
any right to any material  refund,  price or fee  adjustments  offset or similar
right with respect to any such charges.

         2.22   Minute  Books and  Stock  Records.
                ---------------------------------   PHC  has  delivered  or made
available  to Buyer  true and  complete  copies  of the  minute  books and stock
records of NHS and each Subsidiary, which contain a complete and correct records
of all stock transactions of each such company and of all meetings of the Boards
of Directors of each such company (and  committees  thereof) and all meetings of
their  stockholders and all actions by written consent without a meeting by such
Boards of Directors (and  committees) and their  stockholders  since the date of
incorporation  and reflect  accurately  in all material  respects all actions by
such directors and by stockholders with respect to all transactions  referred to
in such minutes.

         2.23   Certain  Relationships.
                ----------------------   Neither  PHC, NHS  nor  any  Subsidiary
has any knowledge that any material customer of NHS or any Subsidiary  currently
plans to terminate its relationship with any such company.

         2.24   Affiliated Transactions.
                -----------------------  Section  2.24  of  the  PHC  Disclosure
Letter  lists  all  transactions  which  are  now  in  effect between NHS or any
Subsidiary, on the one hand,  and  any person or entity  affiliated  with NHS or
any  Subsidiary  (other  than  NHS  or  a  Subsidiary),   on   the  other  hand,
including  without  limitation   any  charge  for  services  (administrative  or
otherwise).
                                       10

<PAGE>12


         2.25  Full  Disclosure.  
               ----------------  PHC has delivered,  or made available to Buyer,
copies of all written instruments, agreements and other documents referred to in
the PHC  Disclosure  Letter  except as  otherwise  indicated.  All  instruments,
agreements,  schedules  and other  documents  referred to in the PHC  Disclosure
Letter  delivered or to be delivered,  or made  available,  to Buyer pursuant to
this Agreement are true and complete in all material respects. No representation
or warranty made in this Article II as supplemented by the PHC Disclosure Letter
contains or will  contain any untrue  statement  of a material  fact or omits or
will omit to state a material  fact  required to be stated  herein or therein or
necessary to make such  representation or warranty in light of the circumstances
in which it is made, not misleading.



                                   ARTICLE III
                     REPRESENTATIONS AND WARRANTIES OF BUYER

         Except as may  otherwise  be set forth in a letter  ("BUYER  DISCLOSURE
LETTER")  delivered to PHC concurrently with the execution of this Agreement and
initialed for identification  purposes by PHC and Buyer, Buyer hereby represents
and warrants to PHC, its successors and assigns as follows:

         3.1   Organization  and  Qualification.
               --------------------------------  Buyer  is  a  corporation  duly
organized, validly existing and in good standing as a domestic corporation under
the laws of the state of Delaware, is duly qualified to do business as a foreign
corporation  and is in good  standing  in each other  jurisdiction  in which the
character  of  its   properties  or  the  nature  of  its  business  makes  such
qualification necessary,  except in jurisdictions,  if any, where the failure to
be so qualified  would not  constitute or result in a Material  Adverse Event or
result  in a  Material  Adverse  Event.  As  used in this  Agreement,  the  term
"MATERIAL  ADVERSE  EVENT" when used in reference to Buyer shall mean any event,
circumstance,  condition,  development  or occurrence  causing,  resulting in or
having a material  adverse  effect on the condition  (financial  or  otherwise),
business, properties, business relationships, prospects or results of operations
of Buyer taken as a whole. Buyer has the requisite corporate power and authority
to own, use or lease its  respective  properties  and to carry on its respective
business as now being conducted.

         3.2   Capitalization of Buyer.
               -----------------------

          (a)  The authorized,  issued and outstanding capital stock of Buyer is
               as set forth in paragraph 3.2 of the Buyer Disclosure Letter. All
               of the issued and  outstanding  shares of capital  stock of Buyer
               have been duly  authorized and validly issued and are fully paid,
               nonassessable  and free of preemptive  rights (whether created by
               statute or  otherwise).  Except as disclosed in paragraph  3.2 of
               the Buyer Disclosure  Letter,  there are no options,  warrants or
               other rights,  commitments  or agreements of any character  which
               call for the issuance of shares of capital  stock of Buyer or any
               securities,   instruments   or   rights   convertible   into   or
               exchangeable  for shares of capital stock or other  securities of
               Buyer. Neither Buyer nor any

                                          11

<PAGE>13



               affiliate  thereof  has  any obligation, contingent or otherwise,
               to   register  any   securities  of   Buyer   under  the  federal
               securities laws.

         (b)   The  Warrants  have been duly  authorized,  and  when  issued  as
               contemplated   herein, will  be  duly and validly issued; and the
               capital  stock  of  Buyer to  be issued to the  holder or holders
               of  the  Warrants  upon the exercise of the Warrants  will,  when
               so issued,  be  duly  authorized validly issued and nonassessable
               and will not be subject to preemptive rights.

         3.3   Authority Relative to this Agreement.
               ------------------------------------

         (a)   Buyer has the requisite  corporate power and authority to execute
               and deliver this  Agreement and the Warrant  Certificates  and to
               fulfill its obligations  hereunder and thereunder.  The execution
               and delivery of this  Agreement and the Warrant  Certificates  by
               Buyer  and  the  performance  of its  obligations  hereunder  and
               thereunder have been duly and validly authorized by the Executive
               Committee  of the  Board  of  Directors  of  Buyer,  and no other
               corporate  proceedings on the part of Buyer are  necessary,  as a
               matter  of  law  or  otherwise,  in  connection  therewith.  This
               Agreement has been,  and the Warrant  Certificates  when executed
               and  delivered  as  provided  herein,  shall have been,  duly and
               validly  executed  and  delivered  by Buyer  and,  assuming  this
               Agreement,  constitutes the valid and binding obligations of PHC,
               this Agreement  constitutes,  and the Warrant  Certificates  will
               constitute,  valid and binding  agreements of Buyer,  enforceable
               against Buyer in accordance with their respective  terms,  except
               (a) as such enforcement may be subject to bankruptcy, insolvency,
               reorganization, moratorium or other similar laws now or hereafter
               in effect relating to creditors' rights, and (b) as the remedy of
               specific  performance and injunctive and other forms of equitable
               relief may be subject to equitable defenses and to the discretion
               of the court before which any proceeding therefor may be brought.

          (b)  When  executed  and  delivered as provided  herein,  the Services
               Agreement   and  the  Lease  will  have  been  duly  and  validly
               authorized,  executed  and  delivered  by NHS and,  assuming  the
               Services Agreement and the Lease constitute the valid and binding
               obligations of the other parties thereto,  the Services Agreement
               and the Lease will  constitute  valid and binding  agreements  of
               NHS,  enforceable against NHS in accordance with their respective
               terms,   except  (a)  as  such  enforcement  may  be  subject  to
               bankruptcy,  insolvency,  reorganization,   moratorium  or  other
               similar laws now or hereafter  in effect  relating to  creditors'
               rights,  and  (b) as  the  remedy  of  specific  performance  and
               injunctive and other forms of equitable  relief may be subject to
               equitable  defenses  and to the  discretion  of the court  before
               which any proceeding therefor may be brought.

          3.4  Financial  Statements.
               --------------------- Buyer has furnished to PHC the consolidated
balance  sheets  of  Buyer  as  of December 31,  1995 and June 30,  1996 and the
consolidated statements of

                                       12

<PAGE>14



operations  and cash flows of Buyer for the year ended December 31, 1995 and the
six  month  periods  ended  June 30,  1995 and June  30,  1996.  Such  financial
statements,  with the notes thereto,  are, and, except as disclosed in paragraph
3.4 of the Buyer  Disclosure  Letter will be, in  accordance  with the books and
records  of Buyer  and  have  been,  or will be,  prepared  in  accordance  with
generally  accepted  accounting  principles  applied on a  consistent  basis and
present  fairly the  financial  condition  of Buyer as of the end of each period
covered and the results of its operations and cash flows for each of the periods
in accordance with generally  accepted  accounting  principles.  As used in this
Agreement, the "LATEST BUYER BALANCE SHEET" shall mean the June 30, 1996 balance
sheet of Buyer  attached as Schedule l to paragraph 3.4 of the Buyer  Disclosure
Letter.

         3.5  Absence  of  Certain  Changes.
              -----------------------------   Except  as  contemplated  by  this
Agreement or disclosed in paragraph 3.5 of the Buyer  Disclosure  Letter,  since
the date of the Latest Buyer  Balance  Sheet,  Buyer has  conducted its business
only in, and has not engaged in any  transaction  other than  according  to, the
ordinary and usual course of such business consistent with prior practices, and,
since such date,  there has not been (a) any Material Adverse Event with respect
to Buyer; (b) any declaration, setting aside or payment of any dividend or other
distribution  with respect to the capital stock of Buyer;  (c) any change in the
accounting  principles,  practices or methods of Buyer; (d) any labor dispute or
difficulty  which is reasonably  likely to result in any Material  Adverse Event
with respect to Buyer; (e) any asset of Buyer having a value of $100,000 or more
sold or disposed of, subjected to any lien, charge or other encumbrance; (f) any
amendment  or  termination  of any contract or agreement to which Buyer is party
which  involves  the payment (in any form) by or to Buyer of $250.000 or more in
any twelve-month period; or (g) any repurchase of, issuances or other changes to
the outstanding capital stock of Buyer.

         3.6  Absence of  Undisclosed  Liabilities.
              ------------------------------------   To the knowledge  of Buyer,
except  and to the extent  reserved  against or  reflected  in the Latest  Buyer
Balance  Sheet:  (a)  Buyer  had,  at such  date,  no  material  liabilities  or
obligations  (contingent or otherwise) which were required by generally accepted
accounting principles, consistently applied, to be reserved against or reflected
therein, and (b) since the date of the Latest Buyer Balance Sheet, except in the
ordinary course of its business, Buyer has not incurred any material liabilities
or obligations which, had they been incurred prior to such date, would have been
required  by such  principles,  so  applied,  to have been  reserved  against or
reflected in the Latest Buyer Balance Sheet.

         3.7  Financial Capability.
              --------------------    Buyer  has, and  on  and after the Closing
Date will have,  the  financial  capability  to effect the  consummation  of the
transactions contemplated in this Agreement and, the Warrant Certificates.

         3.8  Consents  and  Approvals:  No  Violation.
              ----------------------------------------   Except as  disclosed in
paragraph 3.5 of the Buyer Disclosure Letter, the execution and delivery of this
Agreement  and the Warrant  Certificates,  and the execution and delivery of the
Services  Agreement  and the Lease by NHS do not,  and the  consummation  of the
transactions contemplated hereby and thereby will not:


                                        13

<PAGE>15



          (a)  conflict  with any  provision of the articles or  certificate  of
               incorporation or bylaws of Buyer;

          (b)  require Buyer to obtain any consent,  approval,  authorization or
               permit of or from,  or make any filing with or  notification  to,
               any governmental or regulatory authority;

          (c)  conflict  with,  result in the breach of or  constitute a default
               (or  give  rise to any  right  of  termination,  cancellation  or
               acceleration) under any of the terms, conditions or provisions of
               any note, lease, mortgage, license, agreement or other instrument
               or  obligation to which Buyer is a party or by which Buyer or any
               of its assets may be bound; or

          (d)  violate any order, writ,  injunction,  decree,  statute,  rule or
               regulation applicable to Buyer.

          3.9  Certain  Fees and  Expenses.
               ---------------------------     No  person  or  entity  has  been
authorized  by  Buyer  to act for  Buyer in  connection  with  the  transactions
provided  for in this  Agreement  in a way which  would  entitle  such person to
receive  from PHC (or NHS or any  Subsidiary  prior to the Closing) any broker's
fees, commissions,  finder's fees, investment banking or financial advisory fees
in connection with this Agreement (or for  reimbursement of any expenses related
thereto).

         3.10   Litigation.
                ----------  Except as disclosed  in paragraph  3.10 of the Buyer
Disclosure Letter, as of the date hereof, there is no claim action or proceeding
including without  limitation any claim of  indemnification,  pending or, to the
best  knowledge  of Buyer,  threatened  against or  relating  to Buyer  which if
adversely  decided  would  result in a Material  Adverse  Event with  respect to
Buyer. Neither Buyer nor any of its respective officers,  directors or employees
has been permanently or temporarily enjoined by any order, judgment or decree of
any court or any other governmental or regulatory  authority from engaging in or
continuing  any conduct or practice in  connection  with the  business,  assets,
properties or affairs of Buyer. There is not in existence on the date hereof any
order,  judgment or decree of any court or other tribunal or other  governmental
or regulatory  authority  enjoining or requiring Buyer to take any action of any
kind with respect to its business, assets, properties or affairs.

         3.11   Taxes.
                -----    Buyer,  either  on its own or as part of a consolidated
group of  corporations,  has timely filed accurate,  true and complete copies of
all income,  franchise,  license,  sales,  payroll and  property tax returns and
reports  that are or have been  required to be filed with the United  States and
with the jurisdictions in which it is qualified to do business or is required to
file tax returns or reports and has paid in full all taxes, interest, penalties,
assessments or deficiencies  that are or have been due or payable or are or have
been claimed by any taxing authority to be due and payable (whether or not it is
currently known that such taxes are or have been due and payable). Buyer has, to
the extent required, made estimated payments against all taxes that have not yet
become  due and  payable  and has  withheld  or  collected,  and,  to the extent
required,  paid  over  to  the  proper  governmental  authorities,   all  taxes,
assessments and fees required by law to

                                        14

<PAGE>16



have been withheld or  collected.  Buyer has duly paid or provided for all taxes
with  respect  to any  period  prior  to the  date  of this  representation  and
warranty. There are no liens for taxes, assessments,  fees or other governmental
charges upon any of the assets or properties  of Buyer.  Buyer has not waived or
been granted an extension which is still  effective,  for applicable  limitation
period for the assertion of any tax liability for any federal income tax year.

         3.12  Benefit Plans.
               -------------  Each employee  benefit plan covering  employees of
Buyer which is maintained or  contributed  to by Buyer  conforms in all material
respects to, and its  administration  is in conformity in all material  respects
with, all  applicable  laws and  regulations;  no liability or penalty under the
Employment  Retirement Income Security Act of 1974, as amended. has been or will
be incurred by Buyer with  respect to any such plan;  full payment has been made
of all amounts  which Buyer is  required to have paid as  contributions  to such
plans;  there is not in the aggregate any  accumulated  funding  deficiency with
respect to such plans;  and the current  value of accrued  benefits of each such
plan does not exceed the current value of such plan's assets.

         3.13  Intellectual Property Rights.
               ----------------------------

          (a)  As used in this Agreement "INTELLECTUAL PROPERTY RIGHTS" includes
               United  States and  foreign  inventions,  invention  disclosures,
               patents,  inventors'  certificates,  utility models,  trademarks,
               service marks, trade names, copyrights,  trade secrets (including
               processes and software programs),  registrations and applications
               therefor,  and past,  present  and  future  causes of action  and
               remedies  therefor.  To the  knowledge  of Buyer,  Buyer has full
               right,  title and interest in or to use (as  currently  used) all
               Intellectual Property Rights which are material to the conduct of
               its  business  as now  conducted,  and  the  consummation  of the
               transactions  contemplated  hereby will not alter or impair in an
               adverse manner such Intellectual Property Rights.

          (b)  To the  knowledge  of Buyer,  Buyer is not in  default  under any
               material agreement pursuant to which it is licensing Intellectual
               Property Rights of a third party or granting  licenses to its own
               Intellectual  Property  Rights.  Buyer has not notified any other
               party of an alleged default of any such agreement.  Buyer has not
               received any communications  alleging that Buyer has violated any
               other  person's  Intellectual  Property  Rights or has engaged in
               unfair competition against such person.

          (c)  To the best knowledge of Buyer,  Buyer is not infringing (nor has
               it  misappropriated)  any  third  party's  Intellectual  Property
               Rights  and does not have  any  material  liability  for any past
               infringement  or   misappropriation.   No  material   dispute  or
               disagreement  involving  Buyer exists or is, to the  knowledge of
               Buyer,  threatened  with regard to any third  party  Intellectual
               Property Right, including any allegation of Intellectual Property
               Rights infringement or misappropriation by

                                          15

<PAGE>17



               Buyer  or  of any  breach or default by Buyer of an  Intellectual
               Property Rights license or similar agreement.

         3.14  Properties,  Liens.
               ------------------   Except    for    statutory    mechanics  and
materialmen's  liens and liens for current taxes not yet delinquent,  Buyer owns
or  leases,  free and clear of any  liens,  claims,  charges,  options  or other
encumbrance (it being understood that, with respect to leased  properties,  such
representation regarding the absence of liens, claims, charges, options or other
encumbrances  relates only to the leasehold interest of Buyer), all tangible and
intangible  properties,  real and  personal,  material for the  operation of its
business as  currently  conducted  whether or not  reflected in the Latest Buyer
Balance  Sheet (except  property  sold or disposed of in the ordinary  course of
business since the date of the Latest Buyer Balance Sheet) and all such property
acquired or used since such date, and, to the knowledge of Buyer,  there has not
been any  violation  of any law,  regulation  or  ordinance  (including  without
limitation laws,  regulations and ordinances  relating to health,  fire, safety,
zoning,  environmental,  building,  city planning or similar issues) relating to
such  properties or businesses  which may  reasonably be expected to result in a
Material  Adverse  Event.  There  are  no  proceedings  affecting  any  of  such
properties pending or threatened which may reasonably be expected to, materially
and adversely, curtail the use of such property for the purpose for which it was
acquired or the purpose for which it is now used.

         3.15  Compliance with Applicable Laws.
               -------------------------------  Except as disclosed in paragraph
3.10 of the Buyer  Disclosure  Letter Buyer has not received any notice from any
authority  or person  which  asserts  that Buyer  lacks any  license,  permit or
authorization necessary for the lawful conduct of its business, or that Buyer is
in  violation  of  any  material  law,   ordinance  or  regulation  of  material
significance to Buyer.

         3.16  Environmental Liability.
               -----------------------    To the knowledge of Buyer:

          (a)  The  business  of  Buyer  has been and is  operated  in  material
               compliance   with  all   applicable   statutory   or   regulatory
               requirements  of  all  federal,   state  and  local  governmental
               authorities  with  jurisdiction  over  the  environment  or  over
               workplace health and safety.  Buyer has not caused or allowed the
               generation,  treatment, storage, release or disposal of hazardous
               substances   except  in   accordance   with  such   statutes  and
               regulations  as they  existed  at the  time  of such  generation,
               treatment, storage, release or disposal.

          (b)  Buyer has not received any written notice or, to the knowledge of
               Buyer, any other communication,  from any governmental  authority
               alleging   or   concerning   any   violation   by  Buyer  of,  or
               responsibility  or  liability  of Buyer  under,  any  statute  or
               regulation  relating to the environment.  There are no pending or
               threatened  claims,  suits,  proceedings or  investigations  with
               respect  to the  business  or  operations  of Buyer  alleging  or
               concerning any violation of or  responsibility or liability under
               any statutes or regulations relating to the environment, nor does
               Buyer have any

                                         16

<PAGE>18



               knowledge  of  any  fact or  condition which might  reasonably be
               expected   to  give  rise  to  such  a claim, suit, proceeding or
               investigation.

          (c)  There are no  pending  or  threatened,  actions,  proceedings  or
               investigations  seeking to revoke or deny  renewal of any of such
               approvals, permits and licenses; nor does Buyer have knowledge of
               any fact or condition which might  reasonably be expected to give
               rise to any action, proceeding or investigation to revoke or deny
               renewal of such approvals, permits or licenses if such revocation
               or denial would  constitute a Material Adverse Event with respect
               to Buyer.

         3.17  Insurance.
               ---------  Buyer  has in place  insurance coverage of such types,
in  such coverage  amounts and  subject  to  such retention, deductible or other
terms as management reasonably believes to be appropriate.

         3.18  Service Agreements.
               ------------------   To the knowledge of  Buyer, all charges made
to  customers  of  Buyer  have  bee  properly  computed  and  billed in material
compliance with applicable agreements and procedures in place  with  respect  to
customers,  and no such  customer has any right to any material  refund price or
such fee adjustments offset or similar right with respect to any such charges.

         3.19  Minute Books and Stock  Records. 
               -------------------------------  Buyer has made  available to PHC
true and complete copies of the minute books of Buyer,  which contain a complete
and correct  record of all stock  transactions  of Buyer and all meetings of the
Boards of  Directors of Buyer (and  committees  thereof) and all meetings of its
stockholders and all actions by written consent without a meeting by such Boards
of  Directors  (and  committees)  and  its   stockholders   since  the  date  of
incorporation  and reflect  accurately  in all material  respects all actions by
such directors and by stockholders with respect to all transactions  referred to
in such minutes.

         3.20  Certain  Relationships.
               ----------------------    Buyer   has  no   knowledge   that  any
material  customer of Buyer  currently plans to terminate or alter in any manner
materially detrimental to Buyer its relationship with Buyer.

         3.21  Full  Disclosure.
               ----------------  Buyer has  delivered,  made  available  to PHC,
copies of all written instruments, agreements and other documents referred to in
the Buyer  Disclosure  Letter except as otherwise  indicated.  All  instruments,
agreements,  schedules and other documents delivered or to be delivered, or made
available,  to PHC  pursuant  to this  Agreement  are true and  complete  in all
material  respects.  No  representation  or warranty made in this Article III as
supplemented by the Buyer Disclosure  Letter contains or will contain any untrue
statement  of a  material  fact or omits or will omit to state a  material  fact
required to be stated herein or therein or necessary to make such representation
or warranty, in light of the circumstances in which it is made, not misleading.




                                         17

<PAGE>19



                                   ARTICLE IV
         CONDUCT OF BUSINESS OF NHS AND EACH SUBSIDIARY PRIOR TO CLOSING

         During the period from the date of this  Agreement  until the  Closing,
PHC agrees  (except  as  expressly  contemplated  by this  Agreement  or the PHC
Disclosure  Letter or to the  extent  that  Buyer  shall  otherwise  consent  in
writing,  such consent not to be unreasonably  withheld or delayed) to take such
actions or refrain  from  taking  such  actions,  as the case may be,  which are
necessary to maintain compliance with the following covenants:

         4.1  Ordinary  Course. 
              ----------------   NHS and each  Subsidiary  shall  carry on their
respective   businesses  in  the  usual,   regular  and  ordinary   course,   in
substantially  the same manner as heretofore  conducted  and use all  reasonable
efforts  consistent  with past  practice and  policies to preserve  intact their
present business  organizations,  keep available the services of their employees
and preserve their relationships with customers,  suppliers  licensor,  lessors,
lessees  and others  having  business  dealings  with them to the end that their
goodwill and ongoing businesses shall be unimpaired at the Closing. NHS and each
Subsidiary will continue to maintain a standard system of accounting established
and administered in accordance with generally  accepted  accounting  principles.
Neither NHS nor any Subsidiary will prepay any costs,  fees or charges to NHS or
any Subsidiary, or incur any new liability for any costs, fees or charges to NHS
or any Subsidiary except in the ordinary course.

         4.2  Dividends:  Changes in Stock.
              ----------------------------   Neither NHS nor any Subsidiary will
(a) declare or pay any  dividends on or make other  distributions  in respect of
any shares of its capital stock, (b) split,  combine or reclassify any shares of
its capital stock or issue or authorize the issuance of any other  securities in
respect of, in lieu of or in substitution for any shares of its capital stock or
(c) propose to do any of the foregoing.

         4.3  Issuance  or  Repurchase  of  Securities.
              ----------------------------------------    Neither  NHS  nor  any
Subsidiary  will  issue,  pledge,  deliver or sell or  authorize  or propose the
issuance,  pledge,  delivery or sale of, or repurchase or propose the repurchase
of, any shares of its capital stock, or any options, warrants or other rights to
purchase or acquire,  or securities  convertible  into or exchangeable  for, any
such shares.

         4.4  Governing  Documents.
              --------------------    Neither  NHS  nor  any   Subsidiary  will
propose or adopt any amendment to their respective charter documents.

         4.5  Acquisitions.
              ------------  Neither NHS nor any Subsidiary will acquire or agree
to acquire (a) any business or any corporation  partnership association or other
business  organization or division thereof  (whether by merger,  stock purchase,
asset acquisition or otherwise);  (b) any capital stock of any person or entity;
or (c) any asset having a value of $50,000 or more.

         4.6  Dispositions.
              ------------   Neither  NHS  nor  any  Subsidiary will sell, lease
or otherwise dispose of any asset having a value of $50,000 or more.


                                        18

<PAGE>20



         4.7 Incurrence of  Indebtedness. 
             ---------------------------    Neither  NHS   nor   any  Subsidiary
will incur, guarantee, become subject to, or agree to incur, guarantee or become
subject to any obligation or liability (absolute or contingent),  except current
liabilities  incurred,  and  obligations  under  contracts  entered into, in the
ordinary course of business consistent with prior practice;  provided,  however,
that  neither  NHS nor any  Subsidiary  shall enter into any  material  lease or
extension of any material lease with respect to any real or personal property or
issue or sell, or guaranty the  repayment  of, any debt  securities or otherwise
incur any indebtedness for borrowed money.

         4.8  Employees.
              ---------    Neither   NHS  nor  any   Subsidiary  will  make  any
change in the compensation  payable or to become payable to any of its officers,
directors,   employees,   agents  or   consultants   (other  than  increases  in
compensation  called  for by the  terms of any  employment  or  other  agreement
currently in effect which are in the ordinary  course of business and consistent
with  prior  practice),  or enter  into to or amend any  employment,  severance,
termination  or other  agreement  with or make any loans to any of its officers,
directors,  employees,  agents or consultants or make any change in its existing
borrowing  or  lending  arrangements  for or on behalf  of any of such  persons,
whether  contingent on consummation of the transactions  contemplated  hereby or
otherwise.

         4.9  Benefit Plans.
              -------------  Neither NHS nor any Subsidiary  will (a) pay, agree
to pay or make any accrual or  arrangement  for payment of any employee  benefit
pursuant to any existing plan, agreement or arrangement to any officer, director
or employee  except in the ordinary  course of business and consistent with past
practice; (b) pay or agree to pay or make any accrual or arrangement for payment
to employees of any amount relating to unused  vacation or sick days,  except in
the ordinary course of business and consistent with past practice;  (c) adopt or
commit  itself to adopt or agree to, or pay,  grant,  issue or accrue  salary or
benefits  pursuant to, any  additional  pension,  profit-sharing,  bonus,  extra
compensation,  incentive,  deferred  compensation stock purchase,  stock option,
stock appreciation  right, group insurance,  severance pay,  retirement or other
employee benefit plan, agreement or arrangement, or any employment or consulting
agreement with or for the benefit of any director,  officer,  employee, agent or
consultant,  whether past or present;  or (d) amend in any material  respect any
such existing plan, agreement or arrangement.

         4.10 Additional Matters.
              ------------------   Neither NHS nor any Subsidiary will:

         (a)  enter into any new  agreements,  commitments  or  contracts  which
              either  (i)  involve  payment  by  NHS of  $50,000  or more in any
              twelve-month  period or (ii) are  outside the  ordinary  course of
              business;

         (b)  pay  any obligation or liability  (absolute or  contingent)  other
              than current liabilities in the ordinary course of business;

         (c)  cancel or agree to cancel any material debts or claims;

         (d)  waive or relinquish any rights of substantial value;


                                            19

<PAGE>21

         (e)  otherwise make any  material change in the conduct of its business
              or operations;

         (f)  settle any  litigation  or other claims  involving  the payment by
              NHS of more than  $25,000 in any one instance and  $100,000 in the
              aggregate;

         (g)  make any investment in any third person or entity; or

         (h)  agree  in  writing  or  otherwise  to  take  any of the  foregoing
              actions or to take any action  which NHS reasonably believes would
              constitute  a Material  Adverse  Event  with respect to NHS or any
              Subsidiary.


                                    ARTICLE V
                  CONDUCT OF BUSINESS OF BUYER PRIOR TO CLOSING

         During the period from the date of this  Agreement  until the  Closing,
Buyer agrees  (except as expressly  contemplated  by this Agreement or the Buyer
Disclosure  Letter or to the extent that PHC shall otherwise consent in writing,
such consent not to be unreasonably withheld or delayed) to take such actions or
refrain from taking such  actions,  as the case may be,  which are  necessary to
maintain compliance with the following covenants:

         5.1  Ordinary  Course.
              ----------------   Buyer shall carry on its business in the usual,
regular and ordinary  course,  in  substantially  the same manner as  heretofore
conducted  and use all  reasonable  efforts  consistent  with past  practice and
policies to preserve intact its present business, keep available the services of
its key  employees  and  preserve its  relationships  with  material  customers,
suppliers,  licensors, lessors, lessees and others having business dealings with
it to the end that its  goodwill and ongoing  business  shall be  unimpaired  at
Closing.  Buyer  will  continue  to  maintain a  standard  system of  accounting
established and  administered in accordance with generally  accepted  accounting
principles.

         5.2 Dividends: Changes in Stock.
             ---------------------------   Buyer will not (a) declare or pay any
dividends on or make other distributions in respect of any shares of its capital
stock, (b) split, combine or reclassify any shares of its capital stock or issue
or authorize  the issuance of any other  securities in respect of, in lieu of or
in substitution  for any shares of its capital stock or (c) propose to do any of
the foregoing.

         5.3 Issuance or Repurchase of Securities.
             ------------------------------------  Buyer will not issue, pledge,
deliver or sell or authorize or propose the issuance,  pledge,  delivery or sale
of, or  repurchase,  or propose  the  repurchase  of, any shares of its  capital
stock,  or any  options,  warrants or other  rights to  purchase or acquire,  or
securities convertible into or exchangeable for, any such shares.

         5.4 Governing Documents.  
             -------------------    Buyer  will  not  propose   or   adopt   any
amendment  to its charter documents.


                                      20

<PAGE>22



         5.5  Other  Extraordinary  Transactions.
              ----------------------------------   Buyer will not enter  into or
consummate  any other  transaction  or agreement  which would have the effect of
preventing  consummation of the transactions  contemplated hereby or which would
result in a Material Adverse Effect with respect to Buyer.



                                   ARTICLE VI
                              ADDITIONAL COVENANTS

         6.1  Access to Information.
              ---------------------

         (a)  Between  the date of this Agreement and the Closing, PHC shall (i)
              give  Buyer and its authorized representatives full access, during
              normal business hours and  upon reasonable  notice, to all plants,
              offices,  warehouses  and  other  facilities and to all contracts,
              internal  reports,  data  processing  files and records,  federal,
              state,  local and foreign  tax returns and  records,  commitments,
              books,  records and  affairs of NHS and each  Subsidiary,  whether
              located  on  the  premises  of NHS or at  another  location,  (ii)
              permit  Buyer  and  its  authorized  representatives  to make such
              inspections as  Buyer may reasonably require,  (iii) furnish Buyer
              such financial,  operating,  technical  and product data and other
              information   with  respect  to   the  business,   properties  and
              operations of NHS and  each  Subsidiary as Buyer from time to time
              may reasonably  request,  including  without limitation  financial
              statements and schedules, (iv) provide Buyer and  their authorized
              representatives the opportunity, during normal  business hours and
              upon   reasonable   notice,  to  interview   employees,   vendors,
              customers, sales representatives, distributors and other personnel
              of  NHS  and  its Subsidiaries; and (v) assist and cooperate  with
              Buyer and its authorized  representatives  in  the development  of
              integration  plans  for  implementation  by  Buyer  following  the
              Closing.

         (b)  Between  the date of this  Agreement and the Closing,  Buyer shall
              furnish  PHC and its authorized representatives such financial and
              other  information  with  respect to the business as PHC from time
              to time may  reasonably   request,  including  without  limitation
              financial statements and schedules.

         (c)   All information and documents  obtained  pursuant to this Section
               6.1,  shall  be  subject  to the  terms  of  the  Confidentiality
               Agreement  between the parties  dated  September  1, 1996,  which
               remains  in  full  force  and  effect  and  shall   survive   any
               termination of this  Agreement.  From and after the Closing Date,
               the provisions of such Confidentiality  Agreement shall in no way
               limit the right of Buyer or any of its  affiliates to make use of
               any information concerning NHS or any Subsidiary.

         6.2   Governmental  Filings.
               ---------------------    PHC  and  Buyer  shall,  as  promptly as
reasonably   practicable,   make  all  filings  necessary  under any  applicable
federal, state, local and foreign laws

                                         21

<PAGE>23



and to obtain any required  regulatory  approvals,  clearances or expirations of
waiting  periods  in  connection  with  the  transactions  contemplated  by this
Agreement.  Each party shall use all  reasonable  efforts to cooperate  with the
other party in preparing its  respective  governmental  filings and in obtaining
all  required  regulatory  approvals,  clearances  and  expirations  of  waiting
periods.

          6.3  Notice of Defaults.
               ------------------

          (a)  PHC will give prompt notice to Buyer of (i) any written notice of
               default received by NHS or any Subsidiary  subsequent to the date
               of this  Agreement and prior to the Closing under any  instrument
               or  agreement  to which  NHS or any  Subsidiary  is a party or by
               which  either of them or any of their  properties  is bound,  and
               (ii) any suit,  action or proceeding  instituted  or, to the best
               knowledge  of  NHS  or  any  Subsidiary,  threatened  against  or
               affecting  NHS or any  Subsidiary  subsequent to the date of this
               Agreement and prior to the Closing.

          (b)  Buyer  will give  prompt  notice  to NHS of any  suit,  action or
               proceeding   instituted  or,  to  the  best  knowledge  of  Buyer
               threatened  against or affecting Buyer  subsequent to the date of
               this  Agreement  and prior to the Closing  which might  adversely
               affect   Buyer's   ability   to   consummate   the   transactions
               contemplated hereunder.

          6.4  Communications.
               --------------     No    party    will    furnish   any   written
communications  to the public generally if the subject matter thereof relates to
the  transactions  contemplated  by this  Agreement  without  the prior  written
approval of the other parties as to the content thereof, which approval shall be
provided  promptly  and  shall not be  unreasonably  withheld.  Nothing  in this
Section 5.4, however,  shall be deemed (a) to prohibit any disclosure reasonably
required by any  applicable law or by any competent  governmental  or regulatory
authority or (b) to prevent  either party from  disclosing the general nature of
the transactions  contemplated hereby without identifying the other party or any
of its  affiliates.  Immediately  following the Closing,  Buyer shall notify all
employees  of NHS and the  Subsidiaries  of the  purchase  of NHS by  Buyer in a
manner and in form and substance reasonably satisfactory to PHC.

          6.5  Expenses.
               --------  Whether or not the transactions contemplated hereby are
consummated,  all costs and expenses  (including  without  limitation,  fees and
expenses of counsel and accountants)  incurred in connection with this Agreement
and the  transactions  contemplated  hereby shall be paid by the party incurring
such  expense  except as  otherwise  specifically  set forth  herein;  provided,
however,  that Buyer shall bear all  expenses  relating to the  obtaining of all
regulatory  approvals  required  in  connection  with  the  consummation  of the
transactions hereunder.

          6.6  Brokers  or  Finders.
               --------------------  Neither  Buyer  nor PHC  nor  any of  their
respective  affiliates  shall enter into any agreement or  arrangement  with any
agent, broker,  investment banker or other firm or person pursuant to which such
person shall be entitled to any broker or finder's fee or

                                        22

<PAGE>24



any  other  commission  or  similar  fee  from  any  other  party  in connection
with any of the transactions contemplated by this Agreement.

         6.7   Additional  Actions.
               -------------------   Subject to the terms and conditions of this
Agreement,  each of the parties hereto agrees to use all  reasonable  efforts to
take,  or cause to be taken,  all  reasonable  action  and to do, or cause to be
done, all things reasonably necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the  transactions  contemplated
by this  Agreement as promptly as  reasonably  practicable.  In case at any time
after the Closing any further  action is necessary or desirable to carry out the
purposes of this Agreement,  each party to this Agreement,  to the extent within
such party's reasonable control, shall take all such necessary action.

         6.8   Interim Financial Statements.
               ----------------------------

         (a)   As promptly as practicable  following the end of each month prior
               to the Closing,  and at the Closing,  PHC shall  deliver to Buyer
               monthly  financial  statements of NHS and its  Subsidiaries  in a
               format  consistent  with its past  practices  which is reasonably
               acceptable to Buyer.

         (b)   As promptly as practicable  following the end of each month prior
               to the Closing,  and at the Closing,  Buyer shall  deliver to PHC
               monthly  financial  statements of Buyer and its subsidiaries in a
               format  consistent  with its past  practices  which is reasonably
               acceptable to PHC.

         6.9   Warrant  Certificates,  Services  Agreement and Lease.
               -----------------------------------------------------       Buyer
shall  perform fully and in a timely  manner its  obligations  under the Warrant
Certificates  and shall  cause NHS to perform  fully and in a timely  manner its
obligations under the Services Agreement and the Lease.

         6.10  Employee Benefit Plan Contributions.
               -----------------------------------   PHC   shall,  on  a  timely
basis, make all contributions to, and pay all costs and expenses related to, all
employee benefit plans covering employees of NHS insofar as such  contributions,
costs  or  expenses  have  historically  been  at the  expense  of PHC  and  are
attributable  to any period  through the Closing Date (whether the obligation to
fund such  contributions,  costs or expenses becomes fixed prior to or after the
Closing Date).

         6.11  Tax Matters.
               -----------   The following Tax provisions shall apply after  the
Effective Date:

         (a)   Section 338(h)(10) Election.  At the request of the Buyer, PHC or
               its  affiliates,  if applicable,  will join with PHC in making an
               election under Section 338(h)(10) of the Internal Revenue Code of
               1986,  as amended  (the "IRC") (and any  corresponding  elections
               under state or local law)  (collectively,  a "Section  338(h)(10)
               Election")  with respect to the  acquisition  of the stock of NHS
               hereunder.  In the event the Section 338(h)(10) Election is made,
               the parties shall timely  comply with the election  requirements,
               allocation of purchase price

                                           23

<PAGE>25



               requirements, tax return filing requirements and other applicable
               provisions of Treas. Reg.  1.338(h)(10) and applicable provisions
               cross-referenced therein. The parties shall bear their respective
               administrative expenses of complying with the requirements of the
               Section 338(h)(10) Election.  Buyer shall reimburse PHC within 15
               days after request therefor for up to $50,000 in the aggregate of
               any financial loss or detriment incurred by PHC or its affiliates
               as a result of the Section 338(h)(10) Election.

          (b)  Cooperation on Tax Matters.
               --------------------------

               (i)  PHC and Buyer shall cooperate fully, as and  to  the  extent
                    reasonably requested by the other party,  in connection with
                    the filing  of  tax returns and  any  audit,  litigation  or
                    other  proceeding with respect to taxes.   Such  cooperation
                    shall  include  the  retention  and  (upon the other party's
                    request) the provision of records and information  which are
                    reasonably  relevant to any such audit,  litigation or other
                    proceeding  and  making  employees  available  on a mutually
                    convenient   basis  to  provide   additional information and
                    explanation of any material  provided  hereunder.   PHC  and
                    the  Buyer agree  (A)  to retain all books and records  with
                    respect  to  tax matters  pertinent  to  NHS relating to any
                    taxable period  beginning before the Closing Date  until the
                    expiration of the statute of limitations (and, to the extent
                    notified by PHC or the Buyer, any extensions thereof) of the
                    respective tax periods, and to abide by all record retention
                    agreements entered into with any taxing authority,  and  (B)
                    to give the other party reasonable written  notice prior  to
                    transferring,  destroying  or  discarding any such books and
                    records  and, if the other party so  requests, PHC or Buyer,
                    as  the  case  may  be,  shall allow the other party to take
                    possession of such books and records.

              (ii)  PHC  and  Buyer  further   agree,   upon   request,  to  use
                    their  best  efforts  to  obtain  any  certificate  or other
                    document  from   any  governmental authority  or  any  other
                    person   or  entity  as  may  be   necessary   to  mitigate,
                    reduce  or   eliminate   any  tax  that   could  be  imposed
                    (including,   but  not  limited  to,  with   respect  to the
                    transactions contemplated hereby).

              (iii) Except   as   otherwise   stated   herein,   PHC  and  Buyer
                    shall   each   have  the   right  to   control   any and all
                    disputes  and  proceedings  with  tax  authorities   arising
                    in   respect   of  taxes  for  which  it may be the  subject
                    of  an   indemnification   claim  under  this  Agreement  or
                    under  which  it  may  be  entitled  to a tax reimbursement,
                    refund or credit.

          6.12 Reimbursement of Intercompany Amounts.
               -------------------------------------   Within  fifteen (15) days
after request therefor, supported by appropriate documentation:


                                           24

<PAGE>26



          (a)  Buyer shall, or shall cause NHS or its  Subsidiaries,  to pay (to
               the  extent  unpaid)  (x)  all  amounts  payable  by  NHS  or its
               Subsidiaries  to PFS or its  subsidiaries  which are reflected on
               the  Closing  Balance  Sheet,  and  (y)  all  amounts   advanced,
               allocated or to be  allocated,  or  otherwise  owed to PFS or its
               subsidiaries  by NHS or its  Subsidiaries  for or with respect to
               the period from September 30, 1996 through the Closing Date.

          (b)  PHC shall, or shall cause PFS and its Subsidiaries to pay (to the
               extent   unpaid)  (x)  all  accounts   payable  by  PFS  and  its
               subsidiaries  to NHS or its  Subsidiaries  which are reflected on
               the Closing Balance Sheet, and (y) all amounts owed by PFS or its
               subsidiaries  to NHS or its  Subsidiaries  for or with respect to
               the period from September 30, 1996 through the Closing Date.



                                   ARTICLE VII
                   CONDITIONS PRECEDENT TO CONSUMMATION OF THE
                                   TRANSACTION

          7.1  Conditions  to the  Obligations  of Both Parties.
               ------------------------------------------------   The respective
obligations of PHC and Buyer to effect the transactions contemplated to occur at
the Closing  hereunder  shall be subject to the  satisfaction on or prior to the
Closing of the following conditions:

          (a)  Governmental Approvals.
               ----------------------   All material  authorizations,  consents,
               orders or  approvals  of, or  declarations  or filings  with,  or
               expiration of waiting periods imposed by, any competent  federal,
               state,  local or foreign  governmental  or  regulatory  authority
               necessary for the consummation of the  transactions  contemplated
               by  this  Agreement  shall  have  been  filed,  occurred  or been
               obtained.

          (b)  Legal  Action.
               -------------   No  temporary   restraining  order,   preliminary
               injunction or permanent  injunction or other order preventing the
               consummation of the transactions  contemplated  hereby shall have
               been  issued  by any  federal,  state or  foreign  court or other
               competent  governmental  or  regulatory  authority  and remain in
               effect,  and no litigation  seeking the issuance of such an order
               or injunction,  or seeking  substantial damages against any party
               hereto if the transactions  contemplated  hereby are consummated,
               shall  be  pending  which,  in the  good  faith  judgment  of the
               President of PHC or NHS (acting  upon advice of their  respective
               counsel) has a reasonable probability of resulting in such order,
               injunction or substantial damages. In the event any such order or
               injunction  shall have been issued,  each party agrees to use its
               reasonable efforts to have any such injunction lifted.


                                       25

<PAGE>27

          (c)  Statutes.
               --------   No federal,  state, local or foreign statute,  rule or
               regulation   shall  have  been  enacted   which  would  make  the
               consummation of the transactions contemplated hereby illegal.

          7.2  Further  Conditions  to   the  Obligations  of  Buyer.
               -----------------------------------------------------         The
obligations of Buyer to effect the transactions  contemplated hereby are subject
to the  satisfaction  on or prior to the  Closing of the  following  conditions,
unless waived by Buyer:

          (a)  Representations   and   Warranties.
               ----------------------------------    The   representations   and
               warranties of PHC set forth in this  Agreement  shall be true and
               correct in all material respects as of the Closing as though made
               at and  as of the  Closing,  and  Buyer  shall  have  received  a
               certificate (the "PHC Bring-Down Certificate"), dated the date of
               Closing to the foregoing  effect signed by an authorized  officer
               of  PHC.  The  PHC  Bring-Down   Certificate  will  also  include
               certified  copies of  resolutions  of the Board of Directors  and
               sole shareholder of PHC approving the  transactions  contemplated
               by this Agreement.

          (b)  Performance  of  Obligations  of PHC.
               ------------------------------------  PHC shall have performed in
               all material respects all obligations required to be performed by
               it  under  this  Agreement  prior  to the  Closing,  and  the PHC
               Bring-Down  Certificate shall include a statement to such effect.

          (c)  No  Litigation.
               --------------   There  shall  not have  been  instituted  and be
               continuing  or, to the  knowledge of PHC,  NHS or any  Subsidiary
               threatened,  against NHS or any Subsidiary  any claim,  action or
               proceeding  the result of which could  reasonably  be expected to
               result in a Material  Adverse  Event  with  respect to NHS or any
               Subsidiary (except such matters, if any, as were disclosed in the
               PHC Disclosure Letter).

          (d)  No Material Adverse Event.
               -------------------------  No Material Adverse Event with respect
               to NHS or any  Subsidiary  (except such matters,  if any, as were
               described in the NHS Disclosure Letter) shall have occurred.

          (e)  Resignations  of Officers  and  Directors.
               -----------------------------------------   There shall have been
               tendered to Buyer the  written  resignation  of each  officer and
               each member of the Board of Directors of NHS and each  Subsidiary
               from their capacities as officers or directors,  effective at the
               Closing.

          (f)  Third-Party  Approvals.
               ----------------------   Any and all consents (or novations) from
               third parties relating to contracts,  licenses,  leases and other
               agreements and instruments disclosed or required to be disclosed,
               pursuant  to  Section  2.15  hereof,  to  the  extent  reasonably
               required to preserve  the benefits of such  contracts,  licenses,
               leases  and  other  agreements  and  instruments   following  the
               Closing, shall have been obtained.


                                              26

<PAGE>28



          (g)  Delivery  of  Share   Certificates.
               ----------------------------------    The  stock   certificate(s)
               representing  all issued and  outstanding  Shares shall have been
               delivered to Buyer, duly assigned to Buyer, in form and substance
               reasonably satisfactory to Buyer and its counsel.

          (h)  Employment.
               ----------  Anthony J. Pino shall have entered into an employment
               agreement with Buyer or NHS.

          (i)  PHC shall have received  from A. Clark Waid III,  counsel to PHC,
               PFS and NGL, a signed legal opinion to the following effects: (i)
               NHS and each Subsidiary is a corporation duly organized,  validly
               existing and in good standing as a domestic corporation under the
               laws  of  the  jurisdiction  of  its  incorporation;   (ii)  this
               Agreement,  has been, and, when executed and delivered by PFS and
               NGL, respectively,  as contemplated herein the Services Agreement
               and the Lease will have been duly  executed and delivered by PHC,
               PFS or NGL, as the case may be, and, assuming this Agreement, the
               Services Agreement and the Lease constitute  binding  obligations
               of the other parties thereof,  constitute, or will constitute, as
               the case may be,  valid and binding  obligations  of PHC,  PFS or
               NGL, as the case may be, enforceable  against PHC, PFS or NGL, as
               the case may be, in accordance with the respective  terms of such
               agreements,  except  (A) as such  enforcement  may be  subject to
               bankruptcy,  insolvency,  reorganization,   moratorium  or  other
               similar laws now or hereafter  in effect  relating to  creditors'
               rights, (B) as the remedy of specific  performance and injunctive
               and other forms of  equitable  relief may be subject to equitable
               defenses  and to the  discretion  of the court  before  which any
               proceeding  therefor  may be  brought,  and  (C)  insofar  as the
               enforceability of indemnification  provisions contained in any of
               such  agreements may be limited by public policy  considerations;
               (iii) all of the issued and  outstanding  shares of capital stock
               of NHS and each  Subsidiary  are  owned of record as set forth in
               paragraph 2.2 of the PHC  Disclosure  Letter;  (iv) the execution
               and delivery of this  Agreement,  the Services  Agreement and the
               Lease by PHC, PFS or NGL, as the case may be, and the performance
               of their  respective  obligations  hereunder and thereunder  have
               been  duly and  validly  authorized  by all  requisite  corporate
               action on the part of PHC,  PFS or NGL,  as the case may be;  and
               (v) such  counsel  is not  aware  of any  pending  or  threatened
               litigation  involving  NHS  or any  Subsidiary  except  for  such
               matters, if any, as are listed in the PHC Disclosure Letter.


          7.3  Further Conditions to the  Obligations of PHC.
               ---------------------------------------------    The  obligations
of PHC to effect  the  transactions  contemplated  hereby  are  subject  to  the
satisfaction  on or prior to the  Closing of the  following  conditions,  unless
waived by PHC.


          (a)  Representations  and  Warranties.
               --------------------------------       The   representations  and
               warranties  of  Buyer  set  forth in  this  Agreement   shall  be
               true and correct in all material  respects as of the  Closing  as
               though  made  at  and  as  of  the  Closing,  and  PHC shall have
               received  a  certificate  to  the  foregoing  effect signed by an
               authorized officer of Buyer (the "Buyer Bring-Down Certificate").
               The Buyer Bring-Down Certificate will also

                                            27

<PAGE>29

               include   certified  copies  of  resolutions  of   the  Board  of
               Directors  of  Buyer  approving the transactions  contemplated by
               this Agreement.

          (b)  Performance of Obligations of Buyer.
               -----------------------------------   Buyer shall have  performed
               in all material respects all obligations required to be performed
               by Buyer under this  Agreement prior  to  the  Closing,  and  the
               Buyer Bring-Down Certificate  shall  include  a statement to such
               effect.

          (c)  Delivery of Closing  Consideration.
               ----------------------------------  Buyer shall have delivered to
               PHC the cash and the Warrant Certificates referred to in  Section
               1.1(b) above.

          (d)  No  Litigation.
               --------------   There  shall  not  have been  instituted  and be
               continuing  or,  to  the knowledge of Buyer  threatened,  against
               Buyer  any  claim,   action,  or proceeding  which materially and
               adversely   affects   Buyer's  ability to fulfill its obligations
               hereunder  or  which  could reasonably be expected to result in a
               Material  Adverse  Event  with  respect  to  Buyer  (except  such
               matters,  if  any,  as  were described in of the Buyer Disclosure
               Letter).

          (e)  No Material  Adverse  Event.
               ---------------------------   No   Material  Adverse  Event  with
               respect  to  Buyer  (except  such  matters,   if   any,  as  were
               described in the Buyer Disclosure Letter) shall have occurred.

          (f)  Third-Party  Approvals.
               ----------------------    Any   and  all  consents (or novations)
               required  from  third  parties  relating to contracts,  licenses,
               leases and other agreements and instruments  material to  NHS and
               the   Subsidiary,   taken  as  a  whole, to the extent reasonably
               required  to  preserve  the benefits of such contracts, licenses,
               leases   and  other  agreements  and  instruments  following  the
               Closing, shall have been obtained.


                                  ARTICLE VIII
                        TERMINATION, AMENDMENT AND WAIVER

         8.1   Termination.
               -----------   This  Agreement may be terminated at any time prior
  to the Closing:

         (a)   By Mutual Consent.
               -----------------   By mutual consent of PHC and Buyer;

         (b)   By PHC or Buyer.
               ---------------  By either PHC, on the one hand, or Buyer, on the
               other hand:

               (i)  if the Closing shall not have occurred on  or before October
                    25,  1996;   provided  the  failure  of  the transactions to
                    be consummated by the applicable date is not caused  by  any
                    breach   of   this  Agreement  by  the  party  seeking  such
                    termination;


                                           28

<PAGE>30



              (ii)  if a court of  competent  jurisdiction  or  other  competent
                    governmental  or  regulatory  authority  shall  have  issued
                    an  order,  decree  or  ruling,  or  taken  any other action
                    permanently  restraining, enjoining or otherwise prohibiting
                    the consummation of the transactions contemplated hereby and
                    such order, decree, ruling or other action shall have become
                    final and not appealable; or

              (iii) if any statute, rule or regulation  is enacted,  promulgated
                    or deemed applicable to the consummation of the transactions
                    contemplated  hereby  by   any  competent   governmental  or
                    regulatory  authority  which  makes the consummation of such
                    transactions illegal.

         (c)  By PHC.
              ------   By PHC, if a material default under or a material  breach
              of this  Agreement by Buyer shall have  occurred and be continuing
              thirty  (30)  days  after  receipt of written  notice thereof from
              PHC;

         (d)  By Buyer.
              --------   By  Buyer  if  a  material  default under or a material
              breach  of  this  Agreement  by  PHC  shall  have  occurred and be
              continuing  thirty  (30)  days  after  receipt  of written  notice
              thereof from Buyer.

         8.2  Effect  of  Termination.
              -----------------------   In the  event  of  termination  of  this
Agreement  as provided  in Section 8.1 above,  this  Agreement  shall  forthwith
terminate  and there shall be no liability or  obligation  on the part of either
party  hereto or their  respective  officers,  directors,  employees  or agents,
except that (a)  nothing  set forth  herein  shall  relieve a party  hereto from
liability  for  its  breach  of  this  Agreement  and  (b)  the  confidentiality
provisions referred to in Section 6.l(c) shall survive any such termination.

         8.3  Amendment.
              ---------   This  Agreement  may  not  be  amended  except  by  an
instrument in writing signed by or on behalf of each of the parties hereto.

         8.4  Extension: Waiver.
              -----------------  At any time prior to the Closing, to the extent
legally  allowed,  PHC, on the one hand,  and Buyer,  on the other hand, (a) may
extend the time for the  performance of any of the  obligations or other acts of
the other party hereto,  (b) may waive any  inaccuracies in the  representations
and  warranties  made by the other  party  contained  herein or in any  document
delivered  pursuant  hereto and (c) may waive the other party's  compliance with
any of the  agreements or conditions  contained  herein.  Any such  extension or
waiver shall be valid only if set forth in an instrument in writing signed by or
on behalf of PHC or Buyer (as  applicable)  and shall be  effective  only to the
extent  set forth in such  instrument.  No  extension  or  waiver of any  single
condition,  covenant,  agreement,  representation,  warranty, breach, default or
other  matter  hereunder  shall be  deemed an  extension  or waiver of any other
condition,  covenant,  agreement,  representation,  warranty, breach, default or
other matter theretofore or thereafter occurring.



                                        29

<PAGE>31

                                   ARTICLE IX
                                 INDEMNIFICATION

         9.1  Indemnification  By PHC.
              -----------------------   Subject to the limitations  contained in
this  Section  9.1,  PHC shall,  from and after the  Closing  Date,  jointly and
severally,  indemnify,  defend  and  hold  harmless  Buyer  and  NHS  and  their
respective officers directors, agents, employees and representatives, successors
and assigns (collectively, "Buyer Indemnified Parties") from and against any and
all  claims,  actions,  suits,  proceedings,  demands,  assessments,  judgments,
losses, expenses, liabilities,  damages, recoveries and deficiencies,  including
without limitation  interest,  penalties and reasonable  attorneys' fees, expert
witness fees,  costs and other  expenses  (collectively,  "Losses")  borne by or
asserted against any of such indemnified parties in any way relating to, arising
out of or resulting from:

         (a)  any  misrepresentation  or  breach  of  warranty  made  by  PHC in
              this Agreement;

         (b)  any  breach  by PHC of any covenant or agreement contained in this
              Agreement; and

         (c)  the  matters referred  to  in paragraph 2.12 of the PHC Disclosure
              Letter; and

         (d)  no  Buyer  Indemnified  Party  shall  have  the  right  to recover
              from  PHC based  on  claims for indemnification made under Section
              9.1 (a) or  9.1 (b)  or  for  breach  of  the  representations  or
              warranties of PHC in Article II of this Agreement: (i) unless  and
              until the  aggregate  Losses on a cumulative  basis   attributable
              to  such  claims exceed  $300,000,  and then only to the extent of
              such  excess, and (ii) if such claim is  asserted with  respect to
              claims    under   Section   9.1(a)  or   with   respect   to   the
              representations  and  warranties  of  PHC  in  Article  II of this
              Agreement,  such  claim  is  asserted  prior  to   the  date  such
              representations and warranties  terminate pursuant to Section 10.1
              below.

         9.2  Indemnification By Buyer.
              ------------------------

         (a)  Buyer  shall,  from  and  after  the  Closing  Date,  jointly  and
              severally, indemnify, defend and hold harmless PHC, its  officers,
              directors, agents, employees and representatives,  successors  and
              assigns (collectively, "PHC Indemnified Parties") from and against
              any   and   all  claims,  actions,  suits,  proceedings,  demands,
              assessments,  judgments, losses, expenses,  liabilities,  damages,
              recoveries   and   deficiencies,  including   without   limitation
              interest,   penalties  and  reasonable  attorneys'  fees,   expert
              witness  fees,  costs  and other expenses (collectively, "Losses")
              borne  by  or  asserted  against  any of such indemnified  parties
              in  any  way  relating  to,  arising  out  of  or  resulting from:

             (i)  misrepresentation or breach of warranty made by Buyer in  this
                  Agreement, the Warrant Certificates; and

                                        30

<PAGE>32




               (ii) any breach by Buyer of any  covenant or  agreement contained
                    in this Agreement, or the Warrant Certificates.

         (b)   No  PHC  Indemnified  Party  shall have the right to recover from
               Buyer  based  on  claims  for indemnification  made under Section
               9.2(a) or for  breach of the  representations  or  warranties  of
               Buyer in Article III of this  Agreement if such claim is asserted
               with   respect   to   claims   under   Section   9.2(a)   or  the
               representations  and  warranties  of Buyer in Article III of this
               Agreement,  such  claim  is  asserted  prior  to  the  date  such
               representations and warranties terminate pursuant to Section 10.1
               below.

          9.3  Third  Party  Claims.
               --------------------   Notice  and  Opportunity  to  Settle.  The
following  provisions  shall be  applicable  in the event  that any Buyer or PHC
Indemnified  Party  asserts  indemnity  rights  pursuant  to this  Article  VIII
relating to any third party claim:

         (a)   Within  30  days  after  the  receipt  by  the party  entitled to
               indemnity  hereunder  (the  "Indemnified  Party") of any claim or
               demand (including but not limited to, notice of any action,  suit
               or proceeding)  by any third party against an  Indemnified  Party
               which  gives  rise  to  a  right  to  claim  of   indemnification
               hereunder,  the affected  Indemnified  Party shall give the other
               (collectively,  the "Indemnifying  Party") written notice of such
               claim or demand; provided, however, that the failure to give such
               notice   shall  not  relieve  the   Indemnifying   Party  of  its
               obligations  hereunder  except to the extent that such failure is
               materially prejudicial to the Indemnifying Party.

         (b)   The  Indemnifying  Party shall  have the right (without prejudice
               to  the  right  of  any   Indemnified  Party  to  participate  at
               its own expense through  counsel of its own choosing),  to defend
               against  such claim or demand at its expense and through  counsel
               of its own choosing  (the choice of such counsel to be subject to
               the reasonable consent of the affected  Indemnified  Parties) and
               to  control  such  defense  if it  gives  written  notice  of its
               intention  to do so within 15 days of the  receipt  of the notice
               referred to in Section 9.3(a) above.  If the  Indemnifying  Party
               shall  decline  or fail to assume  the  defense  of such claim or
               demand, the affected  Indemnified Parties shall have the right to
               assume control of such defense at the expense of the Indemnifying
               Party.  The  Indemnified  Parties  shall  cooperate  fully in the
               defense of such claim or demand and shall make  available  to the
               Indemnifying Party or its counsel all pertinent information under
               their control relating thereto.  The Indemnifying Party agrees to
               cooperate with the  Indemnified  Parties in order to enable their
               counsel  to  participate  in the  defense  and to  deliver to the
               Indemnified Parties copies of all pleadings and other information
               within  the   Indemnifying   Party's   knowledge  or   possession
               reasonably  requested by the Indemnified Parties that is relevant
               to the  defense  of any such claim or  demand.  The  Indemnifying
               Party and  the  Indemnified  Parties and their respective counsel


                                            31

<PAGE>33



               shall   maintain  confidentiality   with   respect  to  all  such
               information consistent with the conduct of  a  defense hereunder.

         (c)   The   Indemnifying  Party  shall  have  the  right  to  elect  to
               settle any such claim or demand for monetary  damages only at its
               sole   expense   and   provided   the   settlement   includes  an
               unconditional release of all Indemnified Parties,  subject to the
               consent of the affected  Indemnified  Parties;  provided further,
               that if the  affected  Indemnified  Parties  fail  to  give  such
               consent within 20 days of being  requested to do so, the affected
               Indemnified  Parties shall, at their expense,  assume the defense
               of such claim or demand  and  regardless  of the  outcome of such
               matter,  the Indemnifying  Party's  liability  hereunder shall be
               limited to the amount of any such proposed  settlement plus costs
               and expenses incident to the defense and settlement of such claim
               or demand.

         (d)   In  the  event  the Indemnifying Party assumes  the  defense of a
               claim  or  demand,  the Indemnified Parties shall have the  right
               thereafter  to  take  over  control  of  the defense of any claim
               or demand from the Indemnifying Party at any time and to elect to
               settle  such claim or  demand;  provided,  however,  that in such
               case,  unless  Otherwise  agreed by the  Indemnifying  Party, the
               Indemnifying Party shall have no indemnification obligations with
               respect to such claim,  demand or settlement except for the costs
               and expenses of such  Indemnifying  Party incurred in the defense
               of the claim or demand.

         (e)   With respect to claims or demands  arising under Section  9.1(a),
               9.1(b) or the  representations  and  warranties of PHC in Article
               II  above,  the  provisions  of  this  Section  9.3  are  subject
               to the $300,000  deductible  set forth in Section  9.1(d) hereof.
               Until such  deductible  has been  exhausted,  Buyer and PHC shall
               cooperate  with each other in the handling  and/or  settlement of
               any claim of  indemnification  covered by this  Section  9.3 such
               that Losses attributable to such claim will be properly allocated
               to PHC up to the amount of any unused portion of such deductible.


                                    ARTICLE X
                               GENERAL PROVISIONS

         10.1  Investigation  Will Not Affect  Representations  and  Warranties:
               ----------------------------------------------------------------
Survival.
--------   No investigation made by or for any party hereto prior to the Closing
shall affect or modify any  representations and warranties made to that party by
another  party.  All  representations  and warranties of the parties made herein
shall  survive  the Closing and shall  expire 18 months  after the Closing  Date
except that Sections 2.1, 2.2, 2.3, 2.4, 2.9, 2.25,  3.1, 3.2, 3.3, 3.8 and 3.21
(only to the extent  Sections  2.25 or 3.21 relate one or more such other listed
Sections) shall survive  indefinitely.  Except as otherwise  expressly  provided
herein, all covenants and obligations of the

                                         32

<PAGE>34



respective parties hereunder shall survive the Closing  indefinitely until fully
satisfied in accordance with this Agreement.

         10.2 Notices.
              -------   All notices and other communications hereunder shall  be
in  writing  and  shall  be  deemed  given  upon  personal  delivery,  facsimile
transmissions  (with  written or facsimile  confirmation  of receipt),  telex or
delivery by an overnight express courier service  (delivery,  postage or freight
charges  prepaid),  or on the fourth day following  deposit in the United States
mail (if  sent by  registered  or  certified  mail,  return  receipt  requested,
delivery  postage or freight charges  prepaid),  addressed to the parties at the
following  addresses (or at such other address for a party as shall be specified
by like notice):

         (a) if to Buyer, to:    Mr. S. Joseph Bruno
                                 United Payors & United Providers, Inc.
                                 2275 Research Boulevard, 6th Floor
                                 Rockville, Maryland 20850

         (b) if to PHC, to:      Billy B. Hill, Jr.
                                 Preferred Health Choice, Inc.
                                 1750 East Golf Road
                                 Schaumburg, IL  60173
                                 FAX: (847) 413-7194

             with a copy to:     A. Clark Waid III
                                 Pioneer Financial Services, Inc.
                                 1750 East Golf Road, Suite 1100
                                 Schaumburg, IL  60173
                                 FAX: (847) 413-7193



         10.3  Interpretation.
               --------------   When a reference is made in this Agreement to an
Article,  Section,  Exhibit or Schedule,  such reference shall be to an Article,
Section,  Exhibit or Schedule to this Agreement unless otherwise indicated.  All
Exhibits  referred to herein are hereby  incorporated by reference  herein.  The
words "include,"  "includes" and "including" when used herein shall be deemed in
each  case to be  followed  by the  words  "without  limitation."  The  table of
contents and headings  contained in this  Agreement are for  reference  purposes
only and  shall not  affect in any way the  meaning  or  interpretation  of this
Agreement.  Whenever  a  representation  or  warranty  herein  is  made  to  the
"knowledge,"  "best  knowledge" or awareness of a party, it shall refer to facts
within the actual  knowledge of such party and such party's  officers,  provided
that, in the case of each party,  such references shall be deemed to impose upon
such party a duty to conduct a reasonable investigation concerning the existence
of such facts, as well as an  investigation  of reasonably  available  corporate
records concerning such facts.


                                        33

<PAGE>35

         10.4  Counterparts.
               ------------  This Agreement may be executed in two counterparts,
each of which shall be  considered  one and the same  document  and shall become
effective  when the  counterparts  have been  signed by each of the  parties and
delivered to the other party, it being  understood that each party need not sign
the same counterpart.

         10.5  Miscellaneous.
               -------------    This  Agreement  and  the  Exhibits,  Schedules,
documents,  instruments and other agreements specifically referred to herein (a)
constitute  the entire  agreement  among the parties with respect to the subject
matter  hereof and  supersede  all prior  agreements  and  understandings,  both
written and oral,  among the parties with respect to the subject  matter hereof;
(b) are not  intended  to confer  upon any other  person any rights or  remedies
hereunder (except  indemnification  rights conferred upon Indemnified Parties in
Article VIII of this  Agreement);  and (c) shall not be assigned by operation of
law or otherwise except as otherwise  specifically  set forth herein;  provided,
however, any party hereto may assign any of its rights and obligations hereunder
to any wholly-owned, direct or indirect subsidiary, but no such assignment shall
relieve such party of its obligations hereunder.  Each party hereby acknowledges
and  agrees  that it has not  replied  upon  any  statement,  representation  or
warranty  relating to the  matters  covered by this  Agreement  other than those
contained herein.

         10.6  Governing Law.
               -------------   This Agreement shall be governed in all respects,
including  validity,  interpretation  and  effect,  by the laws of the  State of
Illinois without giving effect to its conflict of law provisions.

         10.7  Severability.
               ------------   In case any provision in this  Agreement  shall be
found  by  a  court  of  competent  jurisdiction  to  be  invalid,   illegal  or
unenforceable,  such provision shall be construed and enforced as if it had been
narrowly  drawn  so as not to be  invalid,  illegal  or  unenforceable,  and the
validity,  legality  and  enforceability  of the  remaining  provisions  of this
Agreement shall not in any way be affected or impaired thereby.

         10.8  Successors and Assigns.
               ----------------------   This Agreement shall be binding upon the
parties hereto and their respective  successors and permitted  assigns and shall
inure to the  benefit  of the  parties  hereto  and their  respective  permitted
successors and assigns.

         10.9  Time of the Essence.
               -------------------   The   parties   agree   that   time  is  of
the essence of each provision of this Agreement.

         10.10 Attorneys' Fees.
               ---------------   In the event of any dispute with respect to the
subject matter of this Agreement, the prevailing party shall be entitled to such
party's  reasonable  attorneys'  fees and court costs  incurred in  resolving or
settling  the  dispute,  in addition to any and all other  damages to which such
party may be entitled.




                                         34

<PAGE>36


         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their  respective  officers  thereunto duly  authorized as of the date
first written above.



                                       PREFERRED HEALTH CHOICE, INC.

                                       By:      /s/ Billy B. Hill, Jr.
                                                ----------------------
                                       Its:     Authorized Signatory
                                                --------------------


                                       UNITED PAYORS AND UNITED PROVIDERS, INC.

                                       By:      /s/ S. Joseph Bruno
                                                --------------------------
                                       Its:     Vice President & Secretary
                                                --------------------------



                                         35

<PAGE>36

                                                                     EXHIBIT A-l

NEITHER THIS WARRANT NOR THE SECURITIES  ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED (THE "ACT"),  OR UNDER
ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR
LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. IN
PARTICULAR,  NO  SALE,  OFFER  TO  SELL OR  TRANSFER  OF  SUCH  WARRANTS  OR THE
SECURITIES  UNDERLYING  SUCH  WARRANTS  SHALL  BE  MADE  UNLESS  A  REGISTRATION
STATEMENT  UNDER THE ACT WITH RESPECT TO SUCH SECURITIES IS IN EFFECT OR, TO THE
COMPANY'S   REASONABLE   SATISFACTION,   AN  EXEMPTION  FROM  THE   REGISTRATION
REQUIREMENTS OF THE ACT IS THEN APPLICABLE TO SUCH SECURITIES.

                        WARRANT TO PURCHASE 150,000 SHARES
                                OF COMMON STOCK OF
                      UNITED PAYORS & UNITED PROVIDERS, INC.

                                   ISSUED TO
                         PREFERRED HEALTH CHOICE, INC.

                           DATED:  October 23, 1996

NO. 1

              (INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)

THIS IS TO CERTIFY THAT Preferred Health Choice,  Inc., an Illinois  corporation
("PHC"), (or its registered assigns,  herein referred to as the "Warrantholder")
is  entitled,  upon  the due  exercise  hereof  and  subject  to the  terms  and
conditions  hereof,  at any  time  commencing  on the  date of this  certificate
("Commencement  Date"),  and ending on the third anniversary of the Commencement
Date (the "Expiration Date"), to purchase from United Payors & United Providers,
Inc, a Delaware  corporation  (the  "Company"),  and the Company shall issue and
sell to the Warrantholder,  the number of shares of common stock, $.01 par value
per  share  (the  "Common  Stock"),  of the  Company  (said  number of shares as
adjusted as provided herein being  hereinafter  referred to as the "Shares") set
forth  above  upon  surrender  hereof,  with the form of  election  to  purchase
included herein completed and duly executed,  at the office of the Company,  and
upon  simultaneous  payment  therefor  at an  exercise  price per Share equal to
$16.00 (said  amount as adjusted  herein  being  hereinafter  referred to as the
"Purchase Price") in cash and/or check payable to the order of the Company.  The
number and Purchase  Price of the Shares are subject to  adjustment  as provided
herein.

         1.  The  Warrantholder  hereby  represents  to  the  Company  that  the
Warrantholder  is taking the  Warrants for  investment  and not with a view to a
distribution of the Warrants or the underlying Common Stock.  Nevertheless,  the
Company and the Warrantholder acknowledge and agree that Warrantholder may sell,
transfer, assign, hypothecate or otherwise dispose of this


<PAGE>37



Warrant after the Commencement Date, provided such sale,  transfer,  assignment,
hypothecation or other disposition is in accordance with applicable  federal and
state  securities  laws.  In  connection  therewith  the  Company may require an
opinion of counsel and/or other  documentation  as are  reasonably  necessary to
evidence compliance with such laws.

         2.  Subject to the  restrictions  set forth in  Section 3 hereof,  upon
surrender of this Warrant,  and payment of the Purchase Price as aforesaid,  the
Company shall issue and deliver with all reasonable  dispatch the certificate(s)
for the Shares to or upon the written order of the holder of this Warrant and in
such name or names as such  holder  may  designate.  Such  certificate(s)  shall
represent  the  number of Shares  issuable  upon the  exercise  of the  Warrants
embodied  herein,  together  with a cash amount (if the holder has so elected in
accordance  with the  provisions of Section 9 hereof) in respect of any fraction
of a Share otherwise issuable upon such surrender.

         Certificate(s)  representing  the  Shares  shall be deemed to have been
issued and the person so  designated to be named therein shall be deemed to have
become a holder of record of such Shares as of the date of the surrender of this
Warrant and payment of the Purchase Price as aforesaid;  provided,  however that
if, at the date of surrender of this Warrant and payment of such Purchase Price,
the transfer books for the Shares or other classes of stock purchasable upon the
exercise of this Warrant shall be closed,  the  certificate(s) for the Shares in
respect of which this Warrant is then exercised shall be issuable as of the date
on which such books shall next be opened,  and until such date the Company shall
be under no duty to deliver any  certificate(s)  for such  Shares.  This Warrant
shall be exercisable, at the election of the registered holder hereof, either as
an  entirety  or from time to time for part of the  number  of Shares  specified
herein,  but in no event  shall  fractional  Shares be issued with regard to the
exercise of this  Warrant.  In the event that this  Warrant is  exercised at any
time prior to the close of business on the Expiration  Date, a new Warrant shall
be issued to such holder for the remaining number of Shares purchasable pursuant
hereto.  The Company  shall  cancel this  Warrant  when it is  surrendered  upon
exercise.

         Prior to due presentment for  registration of transfer of this Warrant,
the Company  shall deem and treat the  Warrantholder  in whose name this Warrant
shall be issued  as the  absolute  owner of this  Warrant  (notwithstanding  any
notation of ownership or other writing on this Warrant made by anyone other than
the Company) for the purpose of any exercise hereof,  of any distribution to the
holder hereof, and for all other purposes, and the Company shall not be affected
by any notice to the contrary.

         3.  The  Company  shall  pay  all  documentary  stamp  taxes,  if  any,
attributable to the initial issuance of the Shares issuable upon the exercise of
this Warrant,  provided,  however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue or  delivery of any  certificates  for Shares in a name other than that of
the  Warrantholder  upon the  exercise  of this  Warrant,  and in such  case the
Company  shall not be required to issue or deliver any  certificates  for Shares
until or unless the person or persons

                                      2

<PAGE>38



requesting  the issuance have paid to the Company the amount of such tax or have
established to the Company's satisfaction that such tax has been paid.

         4. In case this Warrant shall be mutilated,  lost, stolen or destroyed,
the Company shall issue and deliver,  in exchange and  substitution for and upon
cancellation of the mutilated  Warrant,  or in lieu of and  substitution for the
Warrant lost, stolen or destroyed,  a new Warrant of like tenor and representing
an equivalent number of Shares purchasable upon exercise,  but only upon receipt
of  evidence  reasonably  satisfactory  to the  Company of such  loss,  theft or
destruction of such Warrant and reasonable indemnity or bond, if requested, also
reasonably  satisfactory to the Company.  Applicants for such substitute Warrant
shall also  comply  with such  other  reasonable  conditions  and pay such other
reasonable charges as the Company may prescribe.

         5. (a) For the  purpose of enabling  it to satisfy  any  obligation  to
issue Shares upon the exercise of this  Warrant,  the Company shall at all times
through the Expiration  Date,  reserve and keep available,  free from preemptive
rights and out of its aggregate  authorized but unissued shares of Common Stock,
the number of Shares deliverable upon the exercise of this Warrant.

         (b) Before taking any action which would cause an  adjustment  pursuant
to the terms  set forth  herein  reducing  the  portion  of the  Purchase  Price
attributable to the Shares below the then par value (if any) of such Shares, the
Company shall take any corporate action which may, in the opinion of its counsel
(which may be counsel regularly  engaged by the Company),  be necessary in order
that the Company may  validly  and  legally  issue fully paid and  nonassessable
Shares at the Purchase Price as so adjusted.

         (c) The Company  covenants  that all Shares issued upon exercise of the
Warrants shall, upon issuance in accordance with the terms hereof, be fully paid
and nonassessable and free from all preemptive rights and taxes, liens,  charges
and security  interests  created by the Company with respect to the issuance and
holding thereof.

         (d) After  the  Expiration  Date,   no   Shares  shall  be  subject  to
reservation in respect to this Warrant.

         6.  Unless  this  Warrant is  surrendered  and  payment  made as herein
provided  before the Expiration  Date,  this Warrant will become wholly void and
all rights evidenced hereby will terminate.

         7.  Subject to the  provisions of Section 2 above,  this Warrant may be
exchanged  for a number of  Warrants  of the same tenor as this  Warrant for the
purchase  in the  aggregate  of the same  number of Shares of the Company as are
purchasable  upon exercise of this Warrant,  upon surrender hereof at the office
of the Company with written instructions as to the denominations of the Warrants
to be issued in exchange.

         8.  (a) In case the Company  shall at any time  after  the date of this
Agreement  (i) declare a dividend on the Common Stock of the Company  payable in
shares of the Company's
                                                         3

<PAGE>39



Common Stock,  (ii) subdivide the  outstanding,  Common Stock,  or (iii) reverse
split the outstanding Common Stock into a smaller number of shares, the Purchase
Price in  effect  at the time of the  record  date for such  dividend  or of the
effective date of such subdivision,  reverse split or  reclassification,  and/or
the number and kind of shares of capital stock  issuable on such date,  shall be
proportionately  adjusted so that the holder of any Warrant exercised after such
time shall be entitled to receive the  aggregate  number and kind of  securities
which, if such Warrant had been exercised  immediately  prior to such date, such
holder  would have  owned upon such  exercise  and been  entitled  to receive by
virtue of such dividend,  subdivision,  reverse split or reclassification.  Such
adjustments  shall be made  successively  whenever  any event listed above shall
occur.

         (b) If at any time the Company  shall  declare a dividend or  otherwise
make a distribution to the holders of its Common Stock in the form of: (i) cash;
(ii) any evidences of its  indebtedness,  any shares of its capital stock or any
other securities or property of any nature whatsoever (including securities of a
subsidiary,  but excluding  common stock or securities  convertible  into common
stock);  or (iii) any warrants or other rights to subscribe  for or purchase any
evidences of its  indebtedness,  any shares of its capital  stock,  or any other
securities  or  property of any nature  whatsoever  (including  securities  of a
subsidiary, but excluding securities convertible into common stock or additional
shares of Common Stock), (to the extent that an appropriate  adjustment for such
distribution is not covered by another  paragraph Section 8) the adjustments set
forth in subparagraphs  (i) and (ii) below shall be made to the number of shares
of Common Stock for which this Warrant is  exercisable  and the Purchase  Price,
respectively:

                  (i) The  number  of shares  of  Common  Stock  for which  this
         Warrant is  exercisable  shall be adjusted to equal:  (i) the number of
         shares  of  common  Stock  for  which  this   Warrant  is   exercisable
         immediately prior to such event, (ii) multiplied by a fraction, (A) the
         numerator  of which  shall be the  current  market  price  per share of
         Common Stock on the record date for the dividend or  distribution,  and
         (B) the  denominator  of which  shall be the current  market  price per
         share  of  Common  Stock  on  the  record  date  for  the  dividend  or
         distribution minus the amount allocable to one share of Common Stock of
         any such cash so distributed  and the fair value (as determined in good
         faith by the Board of  Directors  of the  Company and  supported  by an
         opinion from an investment banking firm of recognized national standing
         acceptable to the holders of the Warrant) of any and all such evidences
         of indebtedness, shares of capital stock, other securities or property,
         or warrants or other subscription or purchase rights so distributed.

                  (ii) The  Purchase  Price shall be adjusted to equal:  (i) the
         Purchase Price in effect  immediately before the occurrence of any such
         event, (ii) multiplied by a fraction, (A) the numerator of which is the
         number of shares of Common Stock for which this Warrant is  exercisable
         immediately before the adjustment,  and (B) the denominator of which is
         the number of shares for which this Warrant is exercisable  immediately
         after the adjustment.


                                      4

<PAGE>40



         Such adjustment shall be made successively  whenever such a record date
is fixed;  and in the event that such  distribution is not so made, the Purchase
Price shall again be  adjusted to be the  Purchase  Price which would then be in
effect if such record date had not been fixed.

         (c) For the purpose of any computation  under Section 8(b) hereof,  the
current  market  price per share of  Common  Stock on any date  shall be (i) the
average of the last  reported  sale prices for the past thirty  trading  days as
reported  on a  national  securities  exchange  or (ii) the  average of the last
reported bid and asked prices for the past thirty  trading days if the Company's
common stock is reported on the NASDAQ or (iii) if the Company's common stock is
not reported on the NASDAQ,  the average of the last reported sale price for the
past thirty  trading  days as reported  in the "pink  sheets" (or an  equivalent
quotation system) for over-the-counter stocks.

         (d) No adjustment in the Purchase  Price shall be required  unless such
adjustment  would  require a decrease of at lest one cent ($0.01) in such price;
provided, however, that any adjustment which (by reason of this Section 8(d)) is
not require to be made shall be carried  forward  and taken into  account in any
subsequent  adjustment.  All calculations  under this Section 8 shall be made to
the nearest cent or to the nearest hundredth of a Share, as the case may be, but
in no event  shall  the  Company  be  obligated  to issue  fractional  Shares or
fractional portions of any securities upon the exercise of any Warrant.

         (e) In the event that at any time,  as a result of an  adjustment  made
pursuant to Section 8(a) hereof, the holder of any Warrant thereafter  exercised
shall  become  entitled  to receive  any shares of capital  stock or warrants or
other securities of the Company other than the Shares,  thereafter the number of
such other shares of capital stock or warrants or other securities so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Shares  contained in this Section 8, and the  provisions  of this
Warrant with respect to the Shares shall  apply,  to the extent  applicable,  on
like  terms to any such  other  shares of  capital  stock or  warrants  or other
securities.

         (f) In any  case  in  which  this  Section  8  shall  require  that  an
adjustment  in the  Purchase  Price be made  effective as of a record date for a
specified  event,  the Company may elect to defer until the  occurrence  of such
event the issuing to the holder of any Warrants exercised after such record date
Shares and such other shares of capital stock or warrants or other securities of
the Company,  if any,  issuable upon such exercise over and above the Shares, on
the basis of the Purchase  Price in effect prior to such  adjustment;  provided,
however,  that  the  Company  shall  deliver  to the  holder a due bill or other
appropriate  instrument evidencing such holder's right to receive such shares of
capital stock; or warrants or other  securities upon the occurrence of the event
requiring such adjustment.

         (g) In  case  of any  capital  reorganization  of the  Company,  or any
reclassification  of the Common Stock (other than a change in par value, or from
par to no par  value,  or from no par  value to par  value,  or as a  result  of
subdivision or combination), or in case of the consolidation

                                   5

<PAGE>41



of the  Company  with or the merger of the  Company  into any other  corporation
(other than a  consolidation  or merger in which the  Company is the  continuing
corporation)  or of the sale of the  properties and assets of the Company as, or
substantially as, an entirety to any other corporation, each Warrant shall after
such  reorganization,   reclassification,   consolidation,  merger  or  sale  be
exercisable, upon the terms and conditions,  specified herein, for the number of
shares of Common Stock or other capital stock or warrants or other securities or
property to which a holder of the number of Shares  purchasable  (at the time of
such  reorganization,  reclassification,  consolidation,  merger  or sale)  upon
exercise of such  Warrant  would have been  entitled  upon such  reorganization,
reclassification,  consolidation,  merger  or  sale;  and in any such  case,  if
necessary,  the  provisions  set forth in this  Section 8(g) with respect to the
rights and  interests  thereafter  of the  registered  holders  of all  Warrants
purchasable  upon  the  exercise  of  any  portion  of  this  Warrant  shall  be
approximately  adjusted so as to be applicable,  as nearly as may reasonably be,
to any  shares of  Common  Stock or other  capital  stock or  warrants  or other
securities or property  thereafter  deliverable on the exercise of the Warrants.
The  subdivision,  reverse split or combination of shares of Common Stock at any
time  outstanding  into a greater or lesser number of shares shall not be deemed
to be a  reclassification  of the Common  Stock for the purposes of this Section
8(g).

         (h) Except as provided in subparagraph  (iv) hereunder,  if the Company
shall,  prior  to the  Expiration  Date,  issue  or sell  (whether  in a  single
transaction or a series of transactions,  whether or not related) any additional
shares of Common Stock in exchange for consideration in an amount per additional
share of Common Stock which are in each  instance,  less than the Purchase Price
at the time the  additional  shares of Common  Stock  are  issued,  then (to the
extent that an  appropriate  adjustment  is not covered by another  paragraph of
Section 8), the Purchase Price and the number of shares for which the Warrant is
exercisable shall be adjusted as follows:

                  (i) The  Purchase  Price  shall be  adjusted  to equal (i) the
         Purchase  Price for which  this  Warrant  is  exercisable  prior to the
         adjustment;  (ii) multiplied by a fraction,  (A) the numerator of which
         is the  sum  of the  number  of  shares  of  Common  Stock  outstanding
         immediately prior to the issue or sale multiplied by the Purchase Price
         then in effect,  plus the  number of shares of Common  Stock that could
         have been  acquired at the current  market price  immediately  prior to
         such issue or sale  using the  aggregate  consideration  payable in the
         issue or sale and (B) the  denominator of which is the number of shares
         of Common Stock outstanding immediately prior to the issue or sale plus
         the number of additional shares of Common Stock issued or sold.

                  (ii) The  number  of shares  of  Common  Stock for which  this
         Warrant is exercisable  shall be adjusted to equal the number of shares
         of Common Stock for which this Warrant is exercisable immediately prior
         to such issue or sale,  multiplied by a fraction,  (A) the numerator of
         which is the Purchase Price after giving effect to the adjustment,  and
         (B)  the   denominator  of  which  is  the  Purchase  Price  in  effect
         immediately prior to the issue or sale.


                                           6

<PAGE>42



                  (iii) No  adjustment  of the number of shares of Common  Stock
         for which this Warrant shall be exercisable or the Purchase Price shall
         be made  under  paragraph  (i) or (ii) of this  Section  8(h)  upon the
         issuance  of any  additional  shares of Common  Stock  which are issued
         pursuant to the  exercise  of any  warrants  or other  subscription  or
         purchase  rights or  pursuant  to the  exercise  of any  conversion  or
         exchange rights in any securities convertible into common stock, if any
         such  adjustment  shall  previously have been made upon the issuance of
         such  warrants or other rights or upon the issuance of such  securities
         convertible  into common  stock (or upon the issuance of any warrant or
         other rights therefor) pursuant to this Section 8.

                  (iv) Notwithstanding any other provision of this Section 8(h),
         no  adjustment  to the exercise  price of the Warrants or the number of
         shares  issuable  upon  exercise  of the  Warrants  shall be made  with
         respect to the issuance  (to persons or entities  other than persons or
         entities  who or  which,  acting  alone or  together,  own of record or
         beneficially,  at least  (x) 10% of the  outstanding  shares  of Common
         Stock, including securities convertible into, or otherwise representing
         the  right to  acquire,  shares  of  Common  Stock,  or (y)  securities
         representing at least 10% of the voting power or equity interest in the
         Company,   including   securities   convertible   into   or   otherwise
         representing  the  right  to  acquire  such  securities)  of  up  to an
         aggregate of 4,500,000 additional shares of Common Stock (including but
         not limited to the issuance of shares of Common Stock upon the exercise
         of conversion of the options, warrants, convertible securities or other
         securities evidencing the right to purchase shares of Common Stock).

         9. Upon exercise the Company  shall not be required to issue  fractions
of Shares.  In lieu of such  fractional  Shares,  the holders of Warrants  shall
receive an amount in cash equal to the same fraction of the current market value
of one whole Share.  For purposes of this Section 9, the current market value of
one whole  Share  shall be  determined  pursuant  to Section  8(c)  hereof.  All
calculations under this section 9 shall be made to the nearest cent.

         10. The holder of a Warrant  shall not be  entitled  to any rights of a
shareholder  of the  Company  with  respect to any Shares  purchasable  upon the
exercise thereof,  including voting,  dividend or dissolution rights, until such
Shares  have  been  paid  for in full  and  issued  to such  holder.  As soon as
practicable  after such  exercise,  the Company shall  deliver a certificate  or
certificates for the securities issuable upon such exercise,  all of which shall
be fully paid and  nonassessable,  to the person or persons  entitled to receive
the same; provided,  however, that such certificate or certificates delivered to
the holder of the surrendered warrant shall bear a legend reading  substantially
as follows:

         No  sale,  offer  to  sell  or  transfer  of  such  securities  or this
         certificate or of any shares or other securities issued in exchange for
         or in respect of such  securities  shall be made unless a  registration
         statement  under the Securities Act of 1933,  (the "Act"),  as amended,
         with  respect to such  securities,  is in effect  or, to the  Company's
         reasonable   satisfaction,   an   exemption   from   the   registration
         requirements of the Act is then applicable to such securities.

                                       7

<PAGE>43




         11.      (a) Upon  any  adjustment of  the Purchase  Price  pursuant to
Section 8 hereof,  the  Company  within  ninety  (90)  calendar days  thereafter
shall  have  on  file  for inspection by the holder hereof  a certificate of the
Board of Directors  of the  Company  setting   forth  the  Purchase  Price after
such  adjustment  and   setting   forth  in  reasonable  detail  the  method  of
calculation and the facts upon which such  calculations  are based  and  setting
forth  the  number of Shares purchasable  upon  exercise of a Warrant after such
adjustment  in  the  Purchase Price,  which  certificate shall,  absent manifest
error,  be  conclusive  evidence  of  the  correctness  of the matters set forth
 therein.

         (b)      In case:

                  (1) the Company shall authorize the issuance to all holders of
         Common  Stock of  rights,  options  or  warrants  to  subscribe  for or
         purchase  capital  stock of the  Company  or of any other  subscription
         rights, options or warrants; or

                  (2)  the  Company  shall  authorize  the  distribution  to all
         holders of Common  Stock of  evidences  of its  indebtedness  or assets
         (other  than  cash  dividends  or  cash  distributions  payable  out of
         earnings  (or  consolidated  earnings if the Company  shall have one or
         more  subsidiaries)  or earned  surplus or dividends  payable in Common
         Stock or distributions of scrip); or

                  (3) of any  consolidation  or merger to which the Company is a
         party and for which  approval  of any  stockholders  of the  Company is
         required, or of the conveyance or transfer of the properties and assets
         of  the  Company  substantially  as  an  entirety,  or of  any  capital
         reorganization of any  reclassification of the Common Stock (other than
         a change in par value,  or from par value to no par  value,  or from no
         par  value  to  par  value,   or  as  a  result  of  a  subdivision  or
         combination); or

                  (4) of the voluntary  or involuntary dissolution,  liquidation
         or winding up of the Company; or

                  (5) the Company proposes to take any other  action which would
         require  an  adjustment of  the  Purchase  Price  pursuant to Section 8
         hereof;

then the  Company  shall give to the  holder of a Warrant at his or its  address
appearing  below at least ten (10) calendar days prior to the applicable  record
date hereinafter  specified in (i) or (ii) below, by first-class  mail,  postage
prepaid, a written notice stating (i) the date as of which the holders of record
of shares of Common  Stock to be entitled to receive any such  rights,  options,
warrants or distribution are to be determined or (ii) the date on which any such
consolidation,  merger, conveyance, transfer, reorganization,  reclassification,
dissolution,  liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange such shares for securities or other  property,  if
any,  deliverable  upon  such  consolidation,   merger,  conveyance,   transfer,
reorganization,  reclassification,  dissolution,  liquidation or winding up. The
failure to give the

                                    8

<PAGE>44



notice required by this Section 11 (b) or any defect herein shall not affect the
legality or validity of any distribution right, option, warrant,  consolidation,
merger, conveyance,  transfer,  reorganization,  reclassification,  dissolution,
liquidation or winding up or the vote upon any action.

         (c) Nothing  contained herein shall be construed as conferring upon the
holder of a Warrant  with  respect to the Shares the right to vote or to consent
or to receive notice as a stockholder in respect of the meetings of stockholders
or the election of directors of the Company or any other  matter,  or any rights
whatsoever as a stockholder of the Company.

         12. Any notice,  request, demand or other communication pursuant to the
terms of this  Warrant  shall be in writing and shall be  sufficiently  given or
made when  delivered  or  mailed  by first  class or  registered  mail,  postage
prepaid, if to the Company addressed to:

                  United Payors or United Providers, Inc.
                  2275 Research Boulevard
                  6th Floor
                  Rockville, Maryland 20850
                  Attention:  Secretary

or to such other address as the Company may  designate by written  notice to the
holder of a Warrant,  and if to the holder of a Warrant at his or its registered
address on the records of the Company.

         13. All the  covenants and  provisions  herein by or for the benefit of
the  Company  hereof  shall  bind and  inure to the  benefit  of its  respective
successors  and  assigns  to  the  extent  permitted  hereunder  and  all of the
covenants and provisions herein by or for the benefit of the holder hereof shall
inure to the benefit of such holder's successors,  legal representatives,  heirs
or assigns as permitted herein.

         14. This Warrant  shall be deemed to be a contract  made under the laws
of the State of Delaware for all  purposes and shall be construed in  accordance
with the internal laws of such State.

         15. Nothing in the Warrant shall be construed to give to  any person or
corporation  other than the Company and the holder of this  Warrant any legal or
equitable right,  remedy or claim under this Warrant;  but this Warrant shall be
for the sole  and  exclusive  benefit  of the  Company  and the  holder  of this
Warrant.



                                       9

<PAGE>45



IN WITNESS  WHEREOF,  an  authorized  officer  of the  Company  has signed  this
Warrant.


                                          UNITED PAYORS & UNITED PROVIDERS, INC.





                                          By: /s/ Thomas L. Blair
                                                  ---------------
                                                  President


                                   10

<PAGE>46



                                ELECTION TO PURCHASE
                                --------------------

         (To be executed  by the holder only if it desires to exercise  Warrants
evidenced by the within Warrant)

TO:      UNITED PAYORS & UNITED PROVIDERS, INC.
         2275 Research Boulevard
         6th Floor
         Rockville, Maryland 20850
         Attention: Secretary

         The undersigned hereby (1) irrevocably elects to exercise _____________
Warrants,  evidenced  by the within  Warrant  for,  and to  purchase  thereunder
________________  Shares  issuable  upon  exercise of said  Warrants,  (2) makes
payment  in  full of the  Purchase  Price  of such  Shares,  (3)  requests  that
certificates for the Shares be issued in the name of:

Please print Social Security or Tax Identification Number ______________________

________________________________________________________________________________
                        (Please print name and address)

________________________________________________________________________________

________________________________________________________________________________

and (4) if said number of Warrants  shall not be all the  Warrants  evidenced by
the within  Warrant,  requests  that a new Warrant  evidencing  Warrants  not so
exercised be issued in the name of and delivered to:


________________________________________________________________________________
                        (Please print name and address)





In lieu of receipt of a fractional  Share the  undersigned  hereby elects (check
the appropriate line):                                                     -----
--------------------

_______       (i)  to receive a cash payment, and the check representing payment
                   thereof should be made payable to ___________________________

                   _____________________________________________________________
                         (Please print name and address)


                                11

<PAGE>47



                   and should be delivered to

                   _____________________________________________________________

                   ________________________________________________________;  or



                                                                               

_______       (ii) to  credit  the  amount  of such payment against the Purchase
                   Price payable  for the Shares  issuable upon  the exercise of
                   said Warrants.


DATED:         __________________________, 199__

                                         Signature: ____________________________

                                        NOTICE:   The   above   signature   must
                                                  correspond  with  the name  as
                                                  written  upon  the face of the
                                                  within   Warrant   in    every
                                                  particular, without alteration
                                                  or  enlargement or any  change
                                                  whatsoever, or  if  signed  by
                                                  any other  person  the Form of
                                                  Assignment  herein   must   be
                                                  duly executed.


                                        12

<PAGE>48



                                                                     EXHIBIT A-2

NEITHER THIS WARRANT NOR THE SECURITIES  ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED (THE "ACT"),  OR UNDER
ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR
LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. IN
PARTICULAR,  NO  SALE,  OFFER  TO  SELL OR  TRANSFER  OF  SUCH  WARRANTS  OR THE
SECURITIES  UNDERLYING  SUCH  WARRANTS  SHALL  BE  MADE  UNLESS  A  REGISTRATION
STATEMENT  UNDER THE ACT WITH RESPECT TO SUCH SECURITIES IS IN EFFECT OR, TO THE
COMPANY'S   REASONABLE   SATISFACTION,   AN  EXEMPTION  FROM  THE   REGISTRATION
REQUIREMENTS OF THE ACT IS THEN APPLICABLE TO SUCH SECURITIES.

                         WARRANT TO PURCHASE 168,000 SHARES
                                 OF COMMON STOCK OF
                        UNITED PAYORS & UNITED PROVIDERS, INC.

                                    ISSUED TO
                           PREFERRED HEALTH CHOICE, INC.
                              DATED:  October 29, 1996

NO. 2

             (INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)

         THIS IS TO CERTIFY THAT  Preferred  Health  Choice,  Inc.,  an Illinois
corporation  ("PHC"),  (or its  registered  assigns,  herein  referred to as the
"Warrantholder")  is entitled,  upon the due exercise  hereof and subject to the
terms and conditions  hereof, at any time commencing on the first anniversary of
this certificate  ("Commencement  Date"), and ending on the third anniversary of
the Commencement Date (the "Expiration  Date"), to purchase from United Payors &
United Providers,  Inc, a Delaware corporation (the "Company"),  and the Company
shall issue and sell to the Warrantholder, the number of shares of common stock,
$.01 par value per share (the "Common  Stock"),  of the Company  (said number of
shares as adjusted  as  provided  herein  being  hereinafter  referred to as the
"Shares") set forth above upon  surrender  hereof,  with the form of election to
purchase  included  herein  completed  and duly  executed,  at the office of the
Company,  and upon simultaneous  payment therefor at an exercise price per Share
equal to $16.00 (said amount as adjusted herein being hereinafter referred to as
the "Purchase  Price") in cash and/or check payable to the order of the Company.
The  number and  Purchase  Price of the Shares  are  subject  to  adjustment  as
provided herein.

         1.  The  Warrantholder  hereby  represents  to  the  Company  that  the
Warrantholder  is taking the  Warrants for  investment  and not with a view to a
distribution of the Warrants or the underlying Common Stock.  Nevertheless,  the
Company and the Warrantholder acknowledge and agree that Warrantholder may sell,
transfer,  assign,  hypothecate  or otherwise  dispose of this Warrant after the
Commencement Date, provided such sale, transfer, assignment, hypothecation


<PAGE>49



or  other  disposition  is in  accordance  with  applicable  federal  and  state
securities  laws. In connection  therewith the Company may require an opinion of
counsel  and/or  other  documentation  as are  reasonably  necessary to evidence
compliance with such laws.

         2.  Subject to the  restrictions  set forth in  Section 3 hereof,  upon
surrender of this Warrant,  and payment of the Purchase Price as aforesaid,  the
Company shall issue and deliver with all reasonable  dispatch the certificate(s)
for the Shares to or upon the written order of the holder of this Warrant and in
such name or names as such  holder  may  designate.  Such  certificate(s)  shall
represent  the  number of Shares  issuable  upon the  exercise  of the  Warrants
embodied  herein,  together  with a cash amount (if the holder has so elected in
accordance  with the  provisions of Section 9 hereof) in respect of any fraction
of a Share otherwise issuable upon such surrender.

         Certificate(s)  representing  the  Shares  shall be deemed to have been
issued and the person so  designated to be named therein shall be deemed to have
become a holder of record of such Shares as of the date of the surrender of this
Warrant and payment of the Purchase Price as aforesaid;  provided,  however that
if, at the date of surrender of this Warrant and payment of such Purchase Price,
the transfer books for the Shares or other classes of stock purchasable upon the
exercise of this Warrant shall be closed,  the  certificate(s) for the Shares in
respect of which this Warrant is then exercised shall be issuable as of the date
on which such books shall next be opened,  and until such date the Company shall
be under no duty to deliver any  certificate(s)  for such  Shares.  This Warrant
shall be exercisable, at the election of the registered holder hereof, either as
an  entirety  or from time to time for part of the  number  of Shares  specified
herein,  but in no event  shall  fractional  Shares be issued with regard to the
exercise of this  Warrant.  In the event that this  Warrant is  exercised at any
time prior to the close of business on the Expiration  Date, a new Warrant shall
be issued to such holder for the remaining number of Shares purchasable pursuant
hereto.  The Company  shall  cancel this  Warrant  when it is  surrendered  upon
exercise.

         Prior to due presentment for  registration of transfer of this Warrant,
the Company  shall deem and treat the  Warrantholder  in whose name this Warrant
shall be issued  as the  absolute  owner of this  Warrant  (notwithstanding  any
notation of ownership or other writing on this Warrant made by anyone other than
the Company) for the purpose of any exercise hereof,  of any distribution to the
holder hereof, and for all other purposes, and the Company shall not be affected
by any notice to the contrary.

         3.  The  Company  shall  pay  all  documentary  stamp  taxes,  if  any,
attributable to the initial issuance of the Shares issuable upon the exercise of
this Warrant,  provided,  however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue or  delivery of any  certificates  for Shares in a name other than that of
the  Warrantholder  upon the  exercise  of this  Warrant,  and in such  case the
Company  shall not be required to issue or deliver any  certificates  for Shares
until or unless the person or persons  requesting  the issuance have paid to the
Company the amount of such tax or have established to the Company's satisfaction
that such tax has been paid.

                                        2

<PAGE>50




         4.  In case this Warrant shall be mutilated, lost, stolen or destroyed,
the Company shall issue and deliver,  in exchange and  substitution for and upon
cancellation of the mutilated  Warrant,  or in lieu of and  substitution for the
Warrant lost, stolen or destroyed,  a new Warrant of like tenor and representing
an equivalent number of Shares purchasable upon exercise,  but only upon receipt
of  evidence  reasonably  satisfactory  to the  Company of such  loss,  theft or
destruction of such Warrant and reasonable indemnity or bond, if requested, also
reasonably  satisfactory to the Company.  Applicants for such substitute Warrant
shall also  comply  with such  other  reasonable  conditions  and pay such other
reasonable charges as the Company may prescribe.

         5.  (a) For the  purpose of enabling  it to satisfy any  obligation  to
issue Shares upon the exercise of this  Warrant,  the Company shall at all times
through the Expiration  Date,  reserve and keep available,  free from preemptive
rights and out of its aggregate  authorized but unissued shares of Common Stock,
the number of Shares deliverable upon the exercise of this Warrant.

         (b) Before taking any action which would cause an  adjustment  pursuant
to the terms  set forth  herein  reducing  the  portion  of the  Purchase  Price
attributable to the Shares below the then par value (if any) of such Shares, the
Company shall take any corporate action which may, in the opinion of its counsel
(which may be counsel regularly  engaged by the Company),  be necessary in order
that the Company may  validly  and  legally  issue fully paid and  nonassessable
Shares at the Purchase Price as so adjusted.

         (c) The Company  covenants  that all Shares issued upon exercise of the
Warrants shall, upon issuance in accordance with the terms hereof, be fully paid
and nonassessable and free from all preemptive rights and taxes, liens,  charges
and security  interests  created by the Company with respect to the issuance and
holding thereof.

         (d) After  the  Expiration  Date,   no   Shares  shall  be  subject  to
reservation in respect to this Warrant.

         6.  Unless  this  Warrant is  surrendered  and  payment  made as herein
provided  before the Expiration  Date,  this Warrant will become wholly void and
all rights evidenced hereby will terminate.

         7.  Subject to the  provisions of Section 2 above,  this Warrant may be
exchanged  for a number of  Warrants  of the same tenor as this  Warrant for the
purchase  in the  aggregate  of the same  number of Shares of the Company as are
purchasable  upon exercise of this Warrant,  upon surrender hereof at the office
of the Company with written instructions as to the denominations of the Warrants
to be issued in exchange.

         8.  (a) In case the Company  shall at any time  after  the date of this
Agreement  (i) declare a dividend on the Common Stock of the Company  payable in
shares of the Company's  Common Stock,  (ii)  subdivide the  outstanding  Common
Stock, or (iii) reverse split the outstanding Common Stock into a smaller number
of shares,  the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, reverse split

                                     3

<PAGE>51



or  reclassification,  and/or the  number  and kind of shares of  capital  stock
issuable on such date, shall be  proportionately  adjusted so that the holder of
any Warrant exercised after such time shall be entitled to receive the aggregate
number  and  kind of  securities  which,  if such  Warrant  had  been  exercised
immediately  prior to such date, such holder would have owned upon such exercise
and been entitled to receive by virtue of such  dividend,  subdivision,  reverse
split or reclassification.  Such adjustments shall be made successively whenever
any event listed above shall occur.

         (b)  If at any time the Company shall  declare a dividend or  otherwise
make a distribution to the holders of its Common Stock in the form of: (i) cash;
(ii) any evidences of its  indebtedness,  any shares of its capital stock or any
other securities or property of any nature whatsoever (including securities of a
subsidiary,  but excluding  common stock or securities  convertible  into common
stock);  or (iii) any warrants or other rights to subscribe  for or purchase any
evidences of its  indebtedness,  any shares of its capital  stock,  or any other
securities  or  property of any nature  whatsoever  (including  securities  of a
subsidiary, but excluding securities convertible into common stock or additional
shares of Common Stock), (to the extent that an appropriate  adjustment for such
distribution is not covered by another  paragraph Section 8) the adjustments set
forth in subparagraphs  (i) and (ii) below shall be made to the number of shares
of Common Stock for which this Warrant is  exercisable  and the Purchase  Price,
respectively:

              (i)   The  number  of  shares  of  Common  Stock  for  which  this
         Warrant is  exercisable  shall be adjusted to equal:  (i) the number of
         shares  of  common  Stock  for  which  this   Warrant  is   exercisable
         immediately prior to such event, (ii) multiplied by a fraction, (A) the
         numerator  of which  shall be the  current  market  price  per share of
         Common Stock on the record date for the dividend or  distribution,  and
         (B) the  denominator  of which  shall be the current  market  price per
         share  of  Common  Stock  on  the  record  date  for  the  dividend  or
         distribution minus the amount allocable to one share of Common Stock of
         any such cash so distributed  and the fair value (as determined in good
         faith by the Board of  Directors  of the  Company and  supported  by an
         opinion from an investment banking firm of recognized national standing
         acceptable to the holders of the Warrant) of any and all such evidences
         of indebtedness, shares of capital stock, other securities or property,
         or warrants or other subscription or purchase rights so distributed.

              (ii)  The   Purchase  Price  shall  be adjusted to equal:  (i) the
         Purchase Price in effect  immediately before the occurrence of any such
         event, (ii) multiplied by a fraction, (A) the numerator of which is the
         number of shares of Common Stock for which this Warrant is  exercisable
         immediately before the adjustment,  and (B) the denominator of which is
         the number of shares for which this Warrant is exercisable  immediately
         after the adjustment.

         Such adjustment shall be made successively  whenever such a record date
is fixed;  and in the event that such  distribution is not so made, the Purchase
Price shall again be  adjusted to be the  Purchase  Price which would then be in
effect if such record date had not been fixed.


                                           4

<PAGE>52



         (c) For the purpose of any computation  under Section 8(b) hereof,  the
current  market  price per share of  Common  Stock on any date  shall be (i) the
average of the last  reported  sale prices for the past thirty  trading  days as
reported  on a  national  securities  exchange  or (ii) the  average of the last
reported bid and asked prices for the past thirty  trading days if the Company's
common stock is reported on the NASDAQ or (iii) if the Company's common stock is
not reported on the NASDAQ,  the average of the last reported sale price for the
past thirty  trading  days as reported  in the "pink  sheets" (or an  equivalent
quotation system) for over-the-counter stocks.

         (d) No adjustment in the Purchase  Price shall be required  unless such
adjustment  would  require a decrease of at lest one cent ($0.01) in such price;
provided, however, that any adjustment which (by reason of this Section 8(d)) is
not require to be made shall be carried  forward  and taken into  account in any
subsequent  adjustment.  All calculations  under this Section 8 shall be made to
the nearest cent or to the nearest hundredth of a Share, as the case may be, but
in no event  shall  the  Company  be  obligated  to issue  fractional  Shares or
fractional portions of any securities upon the exercise of any Warrant.

         (e) In the event that at any time,  as a result of an  adjustment  made
pursuant to Section 8(a) hereof, the holder of any Warrant thereafter  exercised
shall  become  entitled  to receive  any shares of capital  stock or warrants or
other securities of the Company other than the Shares,  thereafter the number of
such other shares of capital stock or warrants or other securities so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Shares  contained in this Section 8, and the  provisions  of this
Warrant with respect to the Shares shall  apply,  to the extent  applicable,  on
like  terms to any such  other  shares of  capital  stock or  warrants  or other
securities.

         (f) In any  case  in  which  this  Section  8  shall  require  that  an
adjustment  in the  Purchase  Price be made  effective as of a record date for a
specified  event,  the Company may elect to defer until the  occurrence  of such
event the issuing to the holder of any Warrants exercised after such record date
Shares and such other shares of capital stock or warrants or other securities of
the Company,  if any,  issuable upon such exercise over and above the Shares, on
the basis of the Purchase  Price in effect prior to such  adjustment;  provided,
however,  that  the  Company  shall  deliver  to the  holder a due bill or other
appropriate  instrument evidencing such holder's right to receive such shares of
capital stock or warrants or other  securities  upon the occurrence of the event
requiring such adjustment.

         (g) In  case  of any  capital  reorganization  of the  Company,  or any
reclassification  of the Common Stock (other than a change in par value, or from
par to no par  value,  or from no par  value to par  value,  or as a  result  of
subdivision or combination), or in case of the consolidation of the Company with
or  the  merger  of  the  Company  into  any  other  corporation  (other  than a
consolidation  or merger in which the Company is the continuing  corporation) or
of the sale of the properties and assets of the Company as, or substantially as,
an  entirety  to  any  other   corporation,   each  Warrant   shall  after  such
reorganization, reclassification, consolidation, merger

                                      5

<PAGE>53



or sale be exercisable, upon the terms and conditions, specified herein, for the
number of shares of Common  Stock or other  capital  stock or  warrants or other
securities or property to which a holder of the number of Shares purchasable (at
the time of such  reorganization,  reclassification,  consolidation,  merger  or
sale)  upon  exercise  of such  Warrant  would  have  been  entitled  upon  such
reorganization, reclassification, consolidation, merger or sale; and in any such
case, if necessary,  the  provisions set forth in this Section 8(g) with respect
to the rights and interests thereafter of the registered holders of all Warrants
purchasable  upon  the  exercise  of  any  portion  of  this  Warrant  shall  be
approximately  adjusted so as to be applicable,  as nearly as may reasonably be,
to any  shares of  Common  Stock or other  capital  stock or  warrants  or other
securities or property  thereafter  deliverable on the exercise of the Warrants.
The  subdivision,  reverse split or combination of shares of Common Stock at any
time  outstanding  into a greater or lesser number of shares shall not be deemed
to be a  reclassification  of the Common  Stock for the purposes of this Section
8(g).

         (h)  Except as provided in subparagraph  (iv) hereunder, if the Company
shall,  prior  to the  Expiration  Date,  issue  or sell  (whether  in a  single
transaction or a series of transactions,  whether or not related) any additional
shares of Common Stock in exchange for consideration in an amount per additional
share of Common Stock which are in each  instance,  less than the Purchase Price
at the time the  additional  shares of Common  Stock  are  issued,  then (to the
extent that an  appropriate  adjustment  is not covered by another  paragraph of
Section 8), the Purchase Price and the number of shares for which the Warrant is
exercisable shall be adjusted as follows:

              (i)   The  Purchase  Price  shall  be  adjusted  to  equal (i) the
         Purchase  Price for which  this  Warrant  is  exercisable  prior to the
         adjustment;  (ii) multiplied by a fraction,  (A) the numerator of which
         is the  sum  of the  number  of  shares  of  Common  Stock  outstanding
         immediately prior to the issue or sale multiplied by the Purchase Price
         then in effect,  plus the  number of shares of Common  Stock that could
         have been  acquired at the current  market price  immediately  prior to
         such issue or sale  using the  aggregate  consideration  payable in the
         issue or sale and (B) the  denominator of which is the number of shares
         of Common Stock outstanding immediately prior to the issue or sale plus
         the number of additional shares of Common Stock issued or sold.

              (ii)  The  number  of  shares  of  Common  Stock  for  which  this
         Warrant is exercisable  shall be adjusted to equal the number of shares
         of Common Stock for which this Warrant is exercisable immediately prior
         to such issue or sale,  multiplied by a fraction,  (A) the numerator of
         which is the Purchase  Price are giving effect to the  adjustment,  and
         (B)  the   denominator  of  which  is  the  Purchase  Price  in  effect
         immediately prior to the issue or sale.

              (iii) No  adjustment  of  the  number  of shares of  Common  Stock
         for which this Warrant shall be exercisable or the Purchase Price shall
         be made  under  paragraph  (i) or (ii) of this  Section  8(h)  upon the
         issuance  of any  additional  shares of Common  Stock  which are issued
         pursuant to the  exercise  of any  warrants  or other  subscription  or
         purchase  rights or  pursuant  to the  exercise  of any  conversion  or
         exchange rights in any

                                          6

<PAGE>54



         securities  convertible into common stock, if any such adjustment shall
         previously  have been made upon the issuance of such  warrants or other
         rights or upon the issuance of such securities  convertible into common
         stock (or upon the  issuance of any warrant or other  rights  therefor)
         pursuant to this Section 8.

              (iv)  Notwithstanding  any  other  provision of this Section 8(h),
         no  adjustment  to the exercise  price of the Warrants or the number of
         shares  issuable  upon  exercise  of the  Warrants  shall be made  with
         respect to the issuance  (to persons or entities  other than persons or
         entities  who or  which,  acting  alone or  together,  own of record or
         beneficially,  at least  (x) 10% of the  outstanding  shares  of Common
         Stock, including securities convertible into, or otherwise representing
         the  right to  acquire,  shares  of  Common  Stock,  or (y)  securities
         representing at least 10% of the voting power or equity interest in the
         Company,   including   securities   convertible   into   or   otherwise
         representing  the  right  to  acquire  such  securities)  of  up  to an
         aggregate of 4,500,000 additional shares of Common Stock (including but
         not limited to the issuance of shares of Common Stock upon the exercise
         of conversion of the options, warrants, convertible securities or other
         securities evidencing the right to purchase shares of Common Stock).

         9.  Upon exercise the Company  shall not be required to issue fractions
of Shares.  In lieu of such  fractional  Shares,  the holders of Warrants  shall
receive an amount in cash equal to the same fraction of the current market value
of one whole Share.  For purposes of this Section 9, the current market value of
one whole  Share  shall be  determined  pursuant  to Section  8(c)  hereof.  All
calculations under this section 9 shall be made to the nearest cent.

         10. The holder of a Warrant  shall not be  entitled  to any rights of a
shareholder  of the  Company  with  respect to any Shares  purchasable  upon the
exercise thereof,  including voting,  dividend or dissolution rights, until such
Shares  have  been  paid  for in full  and  issued  to such  holder.  As soon as
practicable  after such  exercise,  the Company shall  deliver a certificate  or
certificates for the securities issuable upon such exercise,  all of which shall
be fully paid and  nonassessable,  to the person or persons  entitled to receive
the same; provided,  however, that such certificate or certificates delivered to
the holder of the surrendered Warrant shall bear a legend reading  substantially
as follows:

         No  sale,  offer  to  sell  or  transfer  of  such  securities  or this
         certificate or of any shares or other securities issued in exchange for
         or in respect of such  securities  shall be made unless a  registration
         statement  under the  Securities  Act of 1933 (the "Act"),  as amended,
         with  respect to such  securities,  is in effect  or, to the  Company's
         reasonable   satisfaction,   an   exemption   from   the   registration
         requirements of the Act is then applicable to such securities.

         11. (a) Upon any adjustment of the Purchase Price pursuant to Section 8
hereof,  the Company within ninety (90) calendar days  thereafter  shall have on
file for inspection by the holder hereof a certificate of the Board of Directors
of the  Company  setting  forth the  Purchase  Price after such  adjustment  and
setting forth in reasonable detail the method of calculation and

                                       7

<PAGE>55



the facts upon which such calculations are based and setting forth the number of
Shares  purchasable  upon  exercise of a Warrant  after such  adjustment  in the
Purchase Price,  which certificate  shall,  absent manifest error, be conclusive
evidence of the correctness of the matters set forth therein.

         (b)      In case:

                  (1) the Company shall authorize the issuance to all holders of
         Common  Stock of  rights,  options  or  warrants  to  subscribe  for or
         purchase  capital  stock of the  Company  or of any other  subscription
         rights, options or warrants; or

                  (2) the  Company  shall  authorize  the  distribution  to all
         holders of Common  Stock of  evidences  of its  indebtedness  or assets
         (other  than  cash  dividends  or  cash  distributions  payable  out of
         earnings  (or  consolidated  earnings if the Company  shall have one or
         more  subsidiaries)  or earned  surplus or dividends  payable in Common
         Stock or distributions of scrip); or

                  (3) of any  consolidation  or merger to which the Company is a
         party and for which  approval  of any  stockholders  of the  Company is
         required, or of the conveyance or transfer of the properties and assets
         of  the  Company  substantially  as  an  entirety,  or of  any  capital
         reorganization of any  reclassification of the Common Stock (other than
         a change in par value,  or from par value to no par  value,  or from no
         par  value  to  par  value,   or  as  a  result  of  a  subdivision  or
         combination); or

                  (4) of the voluntary  or involuntary dissolution,  liquidation
         or winding up of the Company; or

                  (5) the Company proposes to  take any other action which would
         require an  adjustment  of  the  Purchase  Price  pursuant to Section 8
         hereof;

then the  Company  shall give to the  holder of a Warrant at his or its  address
appearing  below at least ten (10) calendar days prior to the applicable  record
date hereinafter  specified in (i) or (ii) below, by first-class  mail,  postage
prepaid, a written notice stating (i) the date as of which the holders of record
of shares of Common  Stock to be entitled to receive any such  rights,  options,
warrants or distribution are to be determined or (ii) the date on which any such
consolidation,  merger, conveyance, transfer, reorganization,  reclassification,
dissolution,  liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange such shares for securities or other  property,  if
any,  deliverable  upon  such  consolidation,   merger,  conveyance,   transfer,
reorganization,  reclassification,  dissolution,  liquidation or winding up. The
failure to give the notice  required by this Section 11 (b) or any defect herein
shall not affect the  legality or validity of any  distribution  right,  option,
warrant,   consolidation,    merger,   conveyance,   transfer,   reorganization,
reclassification,  dissolution,  liquidation  or winding up or the vote upon any
action.


                                     8

<PAGE>56



         (c) Nothing  contained herein shall be construed as conferring upon the
holder of a Warrant  with  respect to the Shares the right to vote or to consent
or to receive notice as a stockholder in respect of the meetings of stockholders
or the election of directors of the Company or any other  matter,  or any rights
whatsoever as a stockholder of the Company.

         12. Any notice,  request, demand or other communication pursuant to the
terms of this  Warrant  shall be in writing and shall be  sufficiently  given or
made when  delivered  or  mailed  by first  class or  registered  mail,  postage
prepaid, if to the Company addressed to:

             United Payors or United Providers, Inc.
             2275 Research Boulevard
             6th Floor
             Rockville, Maryland 20850
             Attention:  Secretary

or to such other address as the Company may  designate by written  notice to the
holder of a Warrant,  and if to the holder of a Warrant at his or its registered
address on the records of the Company.

         13. All the  covenants and  provisions  herein by or for the benefit of
the  Company  hereof  shall  bind and  inure to the  benefit  of its  respective
successors  and  assigns  to  the  extent  permitted  hereunder  and  all of the
covenants and provisions herein by or for the benefit of the holder hereof shall
inure to the benefit of such holder's successors,  legal representatives,  heirs
or assigns as permitted herein.

         14. This Warrant  shall be deemed to be a contract  made under the laws
of the State of Delaware for all  purposes and shall be construed in  accordance
with the internal laws of such State.

         15. Nothing in the Warrant shall be  construed to give to any person or
corporation  other than the Company and the holder of this  Warrant any legal or
equitable right,  remedy or claim under this Warrant;  but this Warrant shall be
for the sole  and  exclusive  benefit  of the  Company  and the  holder  of this
Warrant.

IN WITNESS  WHEREOF,  an  authorized  officer  of the  Company  has signed  this
Warrant.

                                          UNITED PAYORS & UNITED PROVIDERS, INC.





                                           By: /s/ Thomas L. Blair
                                                   ---------------
                                                   President

                                        9

<PAGE>57





                                ELECTION TO PURCHASE
                                --------------------

         (To be executed  by the holder only if it desires to exercise  Warrants
evidenced by the within Warrant)

TO:      UNITED PAYORS & UNITED PROVIDERS, INC.
         2275 Research Boulevard
         6th Floor
         Rockville, Maryland 20850
         Attention: Secretary

         The undersigned hereby (1) irrevocably elects to exercise _____________
Warrants,  evidenced  by the within  Warrant  for,  and to  purchase  thereunder
________________  Shares  issuable  upon  exercise of said  Warrants,  (2) makes
payment  in  full of the  Purchase  Price  of such  Shares,  (3)  requests  that
certificates for the Shares be issued in the name of:

Please print Social Security or Tax Identification Number ______________________

________________________________________________________________________________
                        (Please print name and address)

________________________________________________________________________________

________________________________________________________________________________

and (4) if said number of Warrants  shall not be all the  Warrants  evidenced by
the within  Warrant,  requests  that a new Warrant  evidencing  Warrants  not so
exercised be issued in the name of and delivered to:


________________________________________________________________________________
                        (Please print name and address)





In lieu of receipt of a fractional  Share the  undersigned  hereby elects (check
the appropriate line):                                                     -----
--------------------

_______       (i)  to receive a cash payment, and the check representing payment
                   thereof should be made payable to ___________________________

                   _____________________________________________________________
                         (Please print name and address)


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                   and should be delivered to

                   _____________________________________________________________

                   ________________________________________________________;  or



                                                                               

_______       (ii) to  credit  the  amount  of such payment against the Purchase
                   Price payable  for the Shares  issuable upon  the exercise of
                   said Warrants.


DATED:         __________________________, 199__

                                         Signature: ____________________________

                                        NOTICE:   The   above   signature   must
                                                  correspond  with  the name  as
                                                  written  upon  the face of the
                                                  within   Warrant   in    every
                                                  particular, without alteration
                                                  or  enlargement or any  change
                                                  whatsoever, or  if  signed  by
                                                  any other  person  the Form of
                                                  Assignment  herein   must   be
                                                  duly executed.


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