ADVANCED HEALTH CORP, S-1, 1996-06-19

ADVANCED HEALTH CORP
S-1, 1996-06-19

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1996

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ADVANCED HEALTH CORPORATION
(Exact name of registrant as specified in charter)

<TABLE>
<S> <C> <C>
DELAWARE 8099 13-3893841
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

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560 WHITE PLAINS ROAD
TARRYTOWN, NEW YORK 10591
(914) 332-6688
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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JONATHAN EDELSON, M.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ADVANCED HEALTH CORPORATION
560 WHITE PLAINS ROAD
TARRYTOWN, NEW YORK 10591
(914) 332-6688
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)
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WITH COPIES TO:

<TABLE>
<S> <C>
JOHN J. SUYDAM, ESQ. MARK KESSEL, ESQ.
O'SULLIVAN GRAEV & KARABELL, LLP SHEARMAN & STERLING
30 ROCKEFELLER PLAZA 599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10112 NEW YORK, NEW YORK 10022
(212) 408-2400 (212) 848-4000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box. / / ___________________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / ___________________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
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PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
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Common Stock...................... 2,300,000 shares $14 $32,200,000 $11,104
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</TABLE>

(1) Includes 300,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the registration fee.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
ADVANCED HEALTH CORPORATION

CROSS REFERENCE SHEET PURSUANT TO REGULATION S-K, ITEM 501(B),
SHOWING LOCATION OF INFORMATION REQUIRED BY ITEMS ON FORM S-1

<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
- ------------------------------------------------------ ------------------------------------
<C> <S> <C>

1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................. Outside Front Cover Page

2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside Front and Outside Back Cover
Pages

3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges...................... Prospectus Summary; Risk Factors

4. Use of Proceeds................................. Use of Proceeds

5. Determination of Offering Price................. Outside Front Cover Page;
Underwriting

6. Dilution........................................ Prospectus Summary; Risk Factors;
Dilution

7. Selling Security Holders........................ Not Applicable

8. Plan of Distribution............................ Outside Front Cover Page;
Underwriting

9. Description of Securities to be Registered...... Description of Capital Stock

10. Interests of Named Experts and Counsel.......... Not Applicable

11. Information with Respect to the Registrant:

(a) Description of Business..................... Prospectus Summary; Risk Factors;
The Company; Management's Discussion
and Analysis of Financial Condition
and Results of Operations; Business

(b) Description of Property..................... Business

(d) Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters......................... Outside Front Cover Page; Prospectus
Summary; Risk Factors; Dividend
Policy; Capitalization; Description
of Capital Stock; Shares Eligible
for Future Sale

(e) Financial Statements........................ Prospectus Summary; Selected
Consolidated Financial Data;
Consolidated Financial Statements

(f) Selected Financial Data..................... Prospectus Summary; Selected
Consolidated Financial Data

(g) Supplementary Financial Information......... Not Applicable

(h) Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. Management's Discussion and Analysis
of Financial Condition and Results
of Operations

(i) Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure.................................. Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
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<C> <S> <C>
(j) Directors and Executive Officers............ Management

(k) Executive Compensation...................... Management

(l) Security Ownership of Certain Beneficial
Owners and Management....................... Principal Stockholders

(m) Certain Relationships and Related
Transactions................................ Management; Certain Transactions

12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... Not Applicable
</TABLE>
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)

DATED JUNE 19, 1996

2,000,000 SHARES

[LOGO]

ADVANCED HEALTH CORPORATION
COMMON STOCK
----------------------

All of the 2,000,000 shares of Common Stock offered hereby are being sold by
Advanced Health Corporation ("Advanced Health" or the "Company"). Prior to this
offering, there has been no public market for the Common Stock of the Company.
It is estimated that the initial public offering price will be between $12.00
and $14.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Company has
applied to have the Common Stock approved for quotation on the Nasdaq National
Market under the symbol "ADVH."

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THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 5 OF THIS PROSPECTUS.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
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Per Share................................ $ $ $
Total (3)................................ $ $ $
</TABLE>

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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses payable by the Company, estimated to be $750,000.

(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase an aggregate of up to 300,000
additional shares at the Price to Public less Underwriting Discounts and
Commissions to cover over-allotments, if any. If all such additional shares
are purchased, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."

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

The Common Stock is offered by the several Underwriters named herein when,
as and if received and accepted by them, subject to their right to reject orders
in whole or in part and subject to certain other conditions. It is expected that
delivery of certificates for the shares will be made at the offices of Cowen &
Company, New York, New York, on or about , 1996.

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

COWEN & COMPANY VOLPE, WELTY & COMPANY

, 1996
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

Med-E-PracticeTM, Smart ScriptsTM, Internet Script WriterTM, Med-E-VisitTM,
Practice Management IntegratorTM, Med-E-NetworkTM, Med-E-Net CentralTM,
Med-E-Net OfficeTM, Med-E-Net IntegratorTM and Med-E-Net CardiologyTM are
trademarks of the Company. Trade names and trademarks of other companies
appearing in this Prospectus are the property of their respective holders.

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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information in
this Prospectus (i) assumes no exercise of the Underwriters' over-allotment
option, (ii) reflects a 1.5-for-1 split of the Common Stock effected in April
1996 and a .59581-for-1 reverse split of the Common Stock to be effected prior
to the date of this Prospectus (the "Stock Splits") and (iii) reflects the
conversion of all outstanding Convertible Preferred Stock of the Company into
Common Stock upon the consummation of this offering (the "Preferred Stock
Conversion"). Unless the context otherwise requires, all references in this
Prospectus to the Company refer collectively to Advanced Health Corporation, its
predecessor and its subsidiaries.

THE COMPANY

Advanced Health Corporation provides a full range of integrated management
services and clinical information systems to physician group practices and
physician networks under long-term contracts. The management services provided
by the Company include physician practice and network development, marketing,
payor contracting, financial and administrative management, clinical information
management and human resource management. The Company developed its clinical
information systems to provide physicians at the point of care and on a
real-time basis with patient-specific clinical and payor information and the
ability to generate patient medical orders and to facilitate the implementation
of disease management programs. The Company focuses its management efforts on
high-cost, high-volume disease specialties, such as cardiology, oncology and
orthopedics. The Company currently manages two single-specialty physician group
practices and one multi-specialty physician group practice comprised of an
aggregate of over 50 physicians in the New York metropolitan area and six
physician networks with over 350 physicians in the greater New York and Atlanta
metropolitan areas.

Health care expenditures in the U.S. totalled approximately $1 trillion in
1994, with approximately 85% of such expenditures controlled by physician
decisions. Increasing concern over the rising cost of health care has led to the
development of managed care programs, which have shifted traditional fee-
for-service reimbursement for physicians to capitated and other fixed-fee
arrangements. As the financial risk of delivering health care shifts from payors
to providers, physicians are faced with increasing management responsibilities
and declining compensation. Because the majority of physicians practice
individually or in two-person groups, they tend to have limited financial and
administrative capacity. Consequently, physician practice management companies
have emerged in recent years to manage the financial and administrative
requirements of physician organizations. More importantly, the Company believes
there exists an even greater need among physicians for clinical management
services and information systems. The Company believes that assisting physicians
in managing the clinical aspects of their practices represents the greatest
opportunity to enhance the quality and reduce the cost of health care.

The Company believes that it is well positioned to attract, organize and
manage physician group practices and networks by offering a full range of
integrated management services and clinical information systems. The Company
believes that its clinical information systems will allow physicians, at the
point of care and on a real-time basis, (i) to access patient-specific clinical
and payor information, (ii) to generate patient instructions, prescriptions and
orders for tests, specialty referrals and specialty procedures and (iii) to
access databases containing managed care and disease management protocols,
diagnostic/treatment preferences and guidelines affecting medical orders. By
combining its group practice and network management services with its clinical
information systems, the Company believes it can provide physicians with
integrated solutions for managing the increased financial opportunities and
risks associated with managed care contracts while allowing physicians to
improve the quality of care.

3
<PAGE>
The Company's strategy includes (i) establishing long-term contractual
alliances with physician organizations, (ii) managing high-cost, high-volume
disease specialties such as cardiology, oncology and orthopedics, (iii)
providing physicians with clinical information at the point of care, (iv)
focusing on selected geographic markets that offer concentrations of physicians
seeking the Company's services and (v) continuing to develop relationships with
key industry participants. The Company has entered into a software license and
integration agreement with Merck Medco Managed Care, Inc. for the Company's
prescription writing software. In addition, the Company has entered into a
contract with an affiliate of PCS Health Systems, Inc., the managed care unit of
Eli Lilly & Company, to provide disease management information services and
software for the treatment of certain diseases.

THE OFFERING

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<S> <C>
Common Stock offered hereby.................... 2,000,000 shares
Common Stock to be outstanding after the 6,491,270 shares(1)
offering.......................................
Use of proceeds................................ To repay certain indebtedness and for
working capital and general corporate
purposes, which may include acquisitions.
See "Use of Proceeds."
Proposed Nasdaq National Market symbol......... ADVH
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED THREE MONTHS ENDED
INCEPTION DECEMBER 31, MARCH 31,
(AUGUST 27, 1993) TO ----------------- ---------------------------------
DECEMBER 31, 1993 1994 1995 1995 1996
-------------------- ------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue.......................... --$ $ 379 $ 1,053 $-- $ 3,692
Cost of sales.................... -- 12 340 -- 1,932
------ ------- ------- ------- -------
Gross profit..................... -- 367 713 -- 1,760
Operating expenses............... 66 1,318 3,255 322 1,925
Research and development
expenses........................ 455 1,583 3,157 718 1,017
------ ------- ------- ------- -------
Operating loss................... (521) (2,534) (5,699) (1,040) (1,182)
Other income (expense)........... -- (15) (8) 1 (19)
------ ------- ------- ------- -------
Net loss......................... $ (521) $(2,549) $(5,707) $(1,039) $(1,201)
------ ------- ------- ------- -------
------ ------- ------- ------- -------
Net loss per share............... (0.30) (1.29) (1.68) (0.45) (0.27)
------ ------- ------- ------- -------
------ ------- ------- ------- -------
Weighted average number of common
shares and common share
equivalents outstanding........ 1,725 1,978 3,389 2,315 4,482

MARCH 31, 1996
---------------------------------
ACTUAL AS ADJUSTED (3)
--------------- ---------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash....................................................................... $ 139 $22,069
Working capital (deficit).................................................. (1,963) 21,467
Total assets............................................................... 6,509 28,439
Total debt................................................................. 1,880 380
Total stockholders' equity................................................. 1,474 24,904
</TABLE>

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(1) Excludes 1,283,510 shares issuable upon the exercise of outstanding stock
options at a weighted average exercise price of $2.59 and 481,489 shares
issuable upon the exercise of outstanding warrants to purchase Common Stock
at a weighted average exercise price of $8.50. See "Management -- Stock
Plans" and Notes 3 and 10 of Notes to Consolidated Financial Statements.

(2) See Note 14 -- "Initial Public Offering" of Notes to Consolidated Financial
Statements.

(3) Adjusted to give effect to (i) the sale by the Company of 2,000,000 shares
of Common Stock offered hereby at an assumed initial public offering price
of $13.00 per share and after deducting underwriting discounts and
commissions and estimated offering expenses and (ii) the receipt and initial
application of the net proceeds therefrom. See "Use of Proceeds."

4
<PAGE>
RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. The following factors should be carefully considered in
evaluating the Company and its business before purchasing the shares of Common
Stock offered hereby. The discussion in this Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in this section and in the sections entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," as
well as those discussed elsewhere in this Prospectus.

LIMITED OPERATING HISTORY; HISTORY OF LOSSES; UNCERTAINTY OF FUTURE
PROFITABILITY

The Company was incorporated in August 1993, began providing physician
practice and network management services in December 1995 and has not yet
commercially installed its clinical information systems. Accordingly, the
Company has only a limited operating history upon which an evaluation of the
Company and its prospects can be based. As of March 31, 1996, the Company had an
accumulated deficit of approximately $10.0 million. The Company has never
achieved profitability and expects to continue to incur operating losses through
at least the end of 1996. Due to anticipated increases in operating expenses,
the Company's operating results will be adversely affected if sales of its
management services and clinical information systems do not increase. In
addition, the Company's prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stages of development, particularly companies in rapidly evolving markets. To
address these risks, the Company must, among other things, expand sales of its
physician practice and network management services, commercialize its clinical
information systems, respond to competitive developments and continue to attract
and retain qualified personnel. Accordingly, there can be no assurance that the
Company will be able to generate sufficient revenue to achieve profitability, to
maintain such profitability, if achieved, on a quarterly or annual basis or to
sustain or increase its revenue growth in future periods. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."

DEPENDENCE ON MANAGEMENT CONTRACTS WITH AFFILIATED PHYSICIAN GROUPS AND NETWORKS

The Company's revenue to date has been derived from a limited number of
long-term management agreements between the Company and certain physician groups
and networks. See "Risk Factors -- Concentration of Revenues." The termination
of any one or more of such management agreements would have a material adverse
effect on the Company's revenues and results of operations. The Company's future
growth and profitability is substantially dependent upon obtaining new contracts
for the provision of services to physician groups and physician networks on
satisfactory terms and conditions. The Company must accurately assess the costs
it will incur in providing services in order to negotiate contracts on terms
under which the Company can expect to realize adequate profit margins or
otherwise meet its objectives. The future growth and profitability of the
Company is also dependent on the Company's ability to effectively integrate the
practices of its affiliated physicians, to manage and control costs and to
realize economies of scale. The integration of new physician practice and
network management contracts, as well as the maintenance of existing contracts,
is made more difficult by reduced reimbursement rates of health care payors at a
time when the cost of providing medical services continues to increase. There
can be no assurance that the Company will obtain new physician practice and
network management contracts on satisfactory terms, or at all. Any failure of
the Company to obtain new contracts and price its services appropriately would
have a material adverse effect on the Company's business, financial condition
and results of operations and the price of the Common Stock. See "Business --
Physician Practice and Network Services."

5
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UNCERTAINTY OF SUCCESSFUL COMMERCIALIZATION OF CLINICAL INFORMATION SYSTEMS

Since its inception in August 1993, the Company has focused on developing
its clinical information systems. However, to date, the Company has not
commercially installed its clinical information systems. The Company's future
growth and profitability is substantially dependent upon the success of its
clinical information systems. The Company believes that market acceptance of
such systems will depend upon the continued growth of managed care in the
Company's markets, the continued increase in the administrative and clinical
complexity of ambulatory medicine, the clinical efficacy of the disease
management programs developed by its affiliated physicians and third parties,
the continued downward trend in the cost of computer hardware, particularly
handheld computing devices and wireless network infrastructures, and the
continued consolidation of physician group practices. No assurance can be given
that the Company's clinical information systems will be accepted or competitive
or that the Company will be successful in taking systems from their current
state of development to commercial introduction or commercial acceptance. If the
Company's clinical information systems do not achieve market acceptance or if
the Company does not develop and maintain sales, marketing and service
expertise, the Company's growth, revenues and results of operations will be
materially adversely affected. See "Business -- Clinical Information Systems."

MANAGEMENT OF GROWTH

The Company recently has experienced, and expects to continue to experience,
substantial growth and has significantly expanded, and expects to continue to
expand, its operations. This growth and expansion has placed, and will continue
to place, significant demands on the Company's management, technical, financial
and other resources. To manage growth effectively, the Company must maintain a
high level of operational quality and efficiency, and must continue to enhance
its operational, financial and management systems and to expand, train and
manage its employee base. To date, the Company has only limited experience in
providing physician practice and network management services and clinical
information systems. To execute its growth strategy, the Company plans to
significantly increase the number of physician practices and networks under
management, expand its clinical information systems customer base, develop
disease management services and develop a sales and marketing organization.
There can be no assurance that the Company will be able to manage growth
effectively, and any failure to do so could have a material adverse effect on
the Company's business, financial condition and results of operations and the
price of the Common Stock.

RISKS ASSOCIATED WITH CAPITATED FEE ARRANGEMENTS

As an increasing percentage of patients are coming under the control of
managed care entities, the Company believes that its success will, in part, be
dependent upon the Company's ability to negotiate and manage, on behalf of
physician practice groups and networks, agreements with health maintenance
organizations ("HMOs"), employer groups and other private third-party payors
pursuant to which professional services will be provided on a risk-sharing or
capitated basis by some or all of the physicians affiliated with the Company.
Under some of such agreements, the health care provider accepts a pre-determined
amount per patient per month in exchange for providing all necessary covered
services to the patients covered by the agreement. Such agreements pass the
economic risk of providing care from the payor to the provider. In the Company's
target markets, capitated fee arrangements are relatively new and the Company
has limited experience in negotiating or managing capitated fee agreements. The
proliferation of such agreements in markets served by the Company could result
in greater predictability of revenues, but not necessarily of profits, for
physicians affiliated with the Company. There can be no assurance that the
Company will be able to negotiate, on behalf of the physicians, satisfactory
arrangements on a risk-sharing or capitated basis or that the physician
organizations managed by the Company will be able to provide medical services at
a profit under such arrangements. To the extent affiliated physicians incur
medical costs that limit such affiliated physicians' profitability, there can be

6
<PAGE>
no assurance that the Company will be able to derive revenues from its
relationship with any such affiliated physicians.

In addition, the Company anticipates entering into managed care or capitated
arrangements, either directly through the formation of an IPA or indirectly
through the assignment of managed care contracts entered into between its
affiliated physicians and third-party payors. The Company has little experience
in managing capitated-risk arrangements. Revenues under managed care or
capitated arrangements entered into by the Company, whether directly through an
IPA or through the assignment of a capitated contract entered into by its
affiliated physicians, will generally be a fixed amount per enrollee. Under such
an arrangement, the Company would contract with affiliated physicians for the
provision of health care services and the Company would be responsible for the
provision of all or a portion of the health care requirements of such enrollees.
To the extent that such enrollees require more care than is anticipated by the
Company upon entering into such a contract, the Company's revenues under such
contracts may be insufficient to cover its costs. Although the Company expects
to enter into reinsurance agreements with third-party insurers in respect of
such risk, no assurances can be given that the Company will be able to obtain
such reinsurance on favorable terms, if at all. See "Business -- Contractual
Relationships with Affiliated Physicians -- Capitated and Other Fixed-Fee
Arrangements."

HIGHLY COMPETITIVE INDUSTRY

The physician practice and network management industry is highly
competitive. The industry is also subject to continuing changes in how services
and products are provided and how providers are selected and paid. As prepaid
medical care continues to grow, the Company may encounter increased competition.
Certain companies are expanding their presence in the physician management
market through the use of several approaches. A number of companies provide
broad management services to primary, multi-specialty and specialty physician
groups, while other companies provide claims processing, utilization review and
other more focused management services. In addition, certain of the Company's
competitors are dedicated to the management of single-specialty practices
focused on diseases such as cardiology, oncology and orthopedics. Certain of the
Company's competitors are significantly larger, have access to greater
resources, provide a wider variety of services and products, have greater
experience in providing health care management services and products and/or have
longer established relationships with customers for these services and products.
The Company believes that competition for services is based on cost and quality
of services. There can be no assurance that the Company's strategy will allow it
to compete favorably in contracting with payors or expanding or maintaining its
physician group practices or networks in existing or new markets. In addition,
many health care providers are consolidating to create larger health care
delivery enterprises with greater regional market power. Such consolidation
could erode the Company's customer base and reduce the size of the Company's
target market. In addition, the resulting enterprises could have greater
bargaining power, which could lead to price erosion affecting the Company's
services. The reduction in the size of the Company's target market or the
failure of the Company to maintain adequate price levels could have a material
adverse effect on the Company's business, financial condition and results of
operations and on the price of the Common Stock.

The market for health care information systems is highly competitive and
rapidly changing. The Company believes that the principal competitive factors
for clinical information systems are the usefulness of the data and reports
generated by the software, customer service and support, compatibility with the
customer's existing information systems, potential for product enhancement,
vendor reputation, price and the effectiveness of sales and marketing efforts.
Many of the Company's competitors and potential competitors have greater
financial, product development, technical and marketing resources than the
Company, and currently have, or may develop or acquire, substantial installed
customer bases in the health care industry. In addition, as the market for
clinical information systems develops, additional competitors may enter the
market and competition may intensify. While

7
<PAGE>
the Company believes that it has successfully differentiated itself from
competitors, for example, by offering clinical information systems that provide
patient-specific, point-of-care information, there can be no assurance that, in
the future, competition will not have a material adverse effect on the Company's
business, financial condition and results of operations and on the price of the
Common Stock. See "Business -- Competition."

CONCENTRATION OF REVENUES

In the year ended December 31, 1995, Madison Medical -- The Private Practice
Group of New York, L.L.P. ("Madison") accounted for approximately 36% of the
Company's revenues. In the three months ended March 31, 1996, Madison and the
Advanced Heart Physicians & Surgeons Network, P.C. ("AHP&S") accounted for
approximately 63% and 20% of revenues, respectively. The Company's management
services agreements generally have an initial term of five to 20 years and may
be terminated only for cause. The management services agreement with Madison,
however, gives Madison the right to terminate without cause following the first
year of the term and prior to the end of the tenth year of the term upon payment
of a penalty and thereafter without penalty. In addition, in the year ended
December 31, 1995, the Company's disease management software license and
integration agreement with an affiliate of PCS Health Systems, Inc., the managed
care unit of Eli Lilly & Company, accounted for approximately 32% of the
Company's revenues. Although such affiliate of PCS Health Systems has agreed to
sponsor two pilot programs involving the software applications developed by the
Company, it has no obligation thereafter to use or distribute the Company's
software. Although the Company seeks to build long-term customer relationships,
no assurance can be given that such relationships will continue. Any termination
or significant deterioration of the Company's relationships with its principal
customers could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, a deterioration in
the financial condition of any of its principal customers would materially
adversely affect the Company's financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

GOVERNMENT REGULATION

As a participant in the health care industry, the Company's operations and
relationships are subject to extensive and increasing regulation under numerous
laws administered by governmental entities at the federal, state and local
levels. These laws include the fraud and abuse provisions of the Medicare and
Medicaid statutes, which prohibit the solicitation, payment, receipt or offer of
any direct or indirect remuneration for the referral of Medicare or Medicaid
patients or for the order or provision of Medicare or Medicaid covered services,
items or equipment. These laws also impose restrictions on physicians' referrals
for designated health services to entities with which they have financial
relationships. Violations of these laws may result in substantial civil or
criminal penalties for individuals or entities, including large civil monetary
penalties and exclusion from participation in the Medicare and Medicaid
programs. Such exclusion, if applied to the physician groups or networks managed
by the Company, could result in significant loss of reimbursement. Several
states, including states in which the Company operates, have adopted similar
laws that cover patients in private programs as well as government programs. In
addition, the laws of many states prohibit physicians from splitting fees with
non-physicians and prohibit non-physician entities from practicing medicine.
These laws vary from state to state and are enforced by the courts and by
regulatory authorities. New York State, for example, prohibits percentage
payments from physicians or physician groups to management entities for services
other than billing and collecting. The Company believes its operations are in
material compliance with applicable laws in all jurisdictions in which it
operates. Nevertheless, because of the structure of its relationship with its
affiliated physician groups and networks, many aspects of the Company's business
operations have not been the subject of state or federal regulatory
interpretation and there can be no assurance that a review of the Company's or
its affiliated physicians' businesses by courts or regulatory

8
<PAGE>
authorities will not result in a determination that could adversely affect the
operations of the Company or its affiliated physicians (for example, by
rendering the Company's management services agreements with a physician
organization unenforceable) or that the health care regulatory environment will
not change so as to restrict the Company's or its affiliated physicians'
existing operations or expansion. In addition, recently released regulations
dealing with the use of physician incentives may restrict the extent to which
payors or the Company may impose financial risk upon physicians (or other
providers). Violation of such regulations could result in substantial penalties.
Such regulations may reduce the Company's ability to control its expenses.

The confidentiality of patient records and the circumstances under which
such records may be released are subject to substantial regulation by state and
federal laws and regulations, which govern both the disclosure and use of
confidential patient medical record information. The Company believes that it
complies with the laws and regulations regarding the collection and distribution
of patient data in all jurisdictions in which it operates, but regulations
governing patient confidentiality rights are evolving rapidly and are often
unclear and difficult to apply in the rapidly restructuring health care market.
Additional legislation governing the dissemination of medical record information
is continually being proposed at both the state and federal level. Such proposed
legislation could require patient consent before even coded or anonymous patient
information may be shared with third parties and that holders or users of such
information implement security measures. In addition, the American Medical
Association (the "AMA") has issued a Current Opinion to the effect that a
physician who does not obtain a patient's consent to disclosure of patient
information for commercial purposes, including anonymous disclosure, violates
the AMA's ethical standards with respect to patient confidentiality. While the
AMA's Current Opinions are not law, they may influence physicians' willingness
to obtain patient consents or agree to permit the Company to access clinical
data in their systems without such consents. Any such restrictions could have a
material adverse effect on the Company's ability to market its services and
systems. Although the Company intends to safeguard patient privacy when clinical
data is accessed and to enter patient medical information into or receive such
information from its database only with the consent of the patient, if a
patient's privacy is violated, the Company could be liable for damages incurred
by such patients. There can be no assurance that changes to state or federal
laws will not materially restrict the ability of the Company to obtain or
disseminate patient information.

Products, including software applications, intended for use in the diagnosis
of disease or other conditions, or in the cure, treatment, mitigation or
prevention of disease, are subject to regulation by the United States Food and
Drug Administration (the "FDA") as medical devices. The laws administered by the
FDA impose substantial regulatory controls over the manufacturing, labeling,
testing, distribution, sale, marketing and promotion of medical devices and
other related activities. These regulatory controls can include compliance with
the following requirements: manufacturer establishment registration and device
listing; current good manufacturing practices; FDA clearance of a premarket
notification submission or FDA approval of a premarket approval application;
medical device adverse event reporting; and general prohibitions on misbranding
and adulteration. Violations of the laws concerning medical devices can result
in, among other things, severe criminal and civil penalties, product seizure,
recall, repair or refund orders, withdrawal or denial of premarket notifications
or premarket approval applications, denial or suspension of government contracts
and injunctions against unlawful product manufacture, labeling, promotion and
distribution or other activities. In its 1989 Draft Policy for the Regulation of
Computer Products (the "1989 Draft Policy Statement"), the FDA stated that it
intended to exempt certain clinical decision support software products from a
number of regulatory controls, and that until those regulations were issued it
would not require manufacturers of such products to comply with requirements
other than the prohibitions on misbranding and adulteration. The Company
believes that its clinical information systems are not medical devices and,
thus, are not subject to the controls imposed on manufacturers of such products
and do not fall within the scope of the 1989 Draft Policy Statement. The Company
further believes that to the extent that its systems were determined to be
medical devices, the systems would fall within the exemptions for decision
support

9
<PAGE>
systems provided by the 1989 Draft Policy Statement. The Company has not taken
action to comply with the controls that would otherwise apply if the Company's
systems were determined to be non-exempt medical devices. The FDA has stated
that it intends to revise its 1989 Draft Policy Statement and that it may
eliminate some or all of the exemptions that it currently allows. Accordingly,
there can be no assurance that the FDA will not now or in the future make a
determination that the Company's current or future clinical information systems
are medical devices subject to FDA regulations and are ineligible for the
exemptions from those regulations. Furthermore, there can be no assurance that
the Company would be able to comply in a timely manner, if at all, with FDA
regulations if the agency made such determinations. Thus, such determinations by
the FDA could significantly delay, or even prevent, the Company's ability to
offer its systems and could otherwise have a material adverse effect on the
Company's business, financial condition and results of operations and on the
price of the Common Stock. See "Business -- Government Regulation."

UNCERTAINTY RELATED TO HEALTH CARE REFORM; COST CONTAINMENT AND REIMBURSEMENT
TRENDS; CONSOLIDATION

The Company anticipates that Congress and state legislatures will continue
to review and assess alternative health care delivery and payment systems.
Potential approaches that have been considered include mandated basic health
care benefits, controls on health care spending through limitations on the
growth of private health insurance premiums and Medicare and Medicaid spending,
the creation of large insurance purchasing groups and other fundamental changes
to the health care delivery system. Proposals have also been discussed which
would provide incentives for the provision of cost-effective, quality health
care through formation of regional delivery systems. Private sector providers
and payors have embraced certain elements of reform, resulting in increased
consolidation of medical groups and competition among managers of medical
practice groups as these providers and payors seek to form alliances in order to
provide quality, cost-effective care. Due to uncertainties regarding the
ultimate features of reform initiatives and their enactment and implementation,
the Company cannot predict which, if any, of such reform proposals will be
adopted, when they may be adopted or what impact they may have on the Company,
and there can be no assurance that the adoption of reform proposals will not
have a material adverse effect on the Company's business, operating results or
financial condition. In addition, the announcement of reform proposals and the
investment community's reaction to such proposals, as well as announcements by
competitors and third-party payors of their strategies to respond to such
initiatives, could produce volatility in the trading and market price of the
Common Stock.

The health care industry is experiencing a trend toward cost containment as
government and private third-party payors seek to impose lower reimbursement and
utilization rates and negotiate reduced payment schedules with service
providers. The federal government has implemented, through the Medicare program,
a resource-based relative value scale ("RBRVS") payment methodology for
physician services. This methodology went into effect in 1992 and is continuing
to be implemented in annual increments through December 31, 1996. RBRVS is a fee
schedule that, except for certain geographical and other adjustments, pays
similarly situated physicians the same amount for the same services. The RBRVS
is adjusted each year, and is subject to increases or decreases at the
discretion of Congress. To date, the implementation of RBRVS has reduced payment
rates for certain of the procedures historically provided by the physician
groups and networks managed by the Company. Management estimates that 35% of the
revenues of physician groups managed by the Company are derived from government
sponsored health care programs (principally, Medicare, Medicaid and state
reimbursed programs). RBRVS-type of payment systems have also been adopted by
certain private third-party payors and may become a predominant payment
methodology. Wider-spread implementation of such programs would reduce payments
by private third-party payors. Rates paid by many private third-party payors,
including those that provide Medicare supplemental insurance, are based on
established physician and hospital charges and are generally higher than
Medicare payment rates. A change in the patient mix of the practices under
Company management that results in a decrease in

10
<PAGE>
patients covered by private insurance could adversely affect the Company's
results of operations. The Company believes that cost containment trends will
continue to result in a reduction from historical levels in per-patient revenue
for medical practices. Further reductions in payments to physicians or other
changes in reimbursement for health care services could have an adverse effect
on the Company's operations, unless the Company is otherwise able to offset such
payment reductions. There can be no assurance that the effect of any or all of
these changes in third-party reimbursement could be offset by the Company
through cost reductions, increased volume, introduction of new services and
systems or otherwise. See "Business -- Government Regulation."

TECHNOLOGICAL CHANGE

The health care information industry is relatively new and is experiencing
rapid technological change, changing customer needs, frequent new product
introductions and evolving industry standards. In addition, as the computer and
software industries continue to experience rapid technological change, the
Company must be able to quickly and successfully adapt its clinical information
systems so that they continue to integrate well with the computer platforms and
other software employed by its customers. There can be no assurance that the
Company will not experience difficulties, including lack of necessary capital or
expertise, that could delay or prevent the successful development and
introduction of system enhancements or new systems in response to technological
changes. The Company's inability to respond to technological changes in a timely
and cost-effective manner could have a material adverse effect on the Company's
business, financial condition and results of operations and on the price of the
Common Stock. See "Business -- Clinical Information Systems."

DEPENDENCE ON PROPRIETARY ASSETS

The Company has made significant investments in its technology and relies on
a combination of patent, trade secret and copyright laws, nondisclosure and
other contractual provisions and technical measures to protect its proprietary
rights. The Company has no issued patents and one patent application. There can
be no assurance that any patent will be issued or, if issued, that such patent
or any other protections will be adequate or that the Company's competitors will
not independently develop technologies that are substantially equivalent or
superior to those of the Company. In addition, there can be no assurance that
the legal protections and precautions taken by the Company will be adequate to
prevent infringement or misappropriation of the Company's proprietary assets.

Although the Company believes that its clinical information systems do not
infringe upon the proprietary rights of third parties, there can be no assurance
that third parties will not assert infringement claims against the Company in
the future or that a license or similar agreement will be available on
reasonable terms in the event of an unfavorable outcome on any such claim. In
addition, any such claim may require the Company to incur substantial litigation
expenses or subject the Company to significant liabilities and could have a
material adverse effect on the Company's business, financial condition and
results of operations and the price of the Common Stock. See "Business --
Proprietary Rights."

MANAGEMENT SERVICES ORGANIZATIONS NOT WHOLLY-OWNED; PHYSICIAN PUT RIGHTS;
DILUTION

The Company typically establishes a management service organization (an
"MSO") for each physician practice group or network to which it provides
services, which MSO is majority-owned by the Company. The physician group or
network served typically has a minority interest in the MSO. Although the
Company has sufficient interests in the MSOs to exercise control over them, the
Company may owe a fiduciary duty to the holders of various minority interests in
such MSOs. Accordingly, the Company may not be able to exercise unfettered
control over such MSOs and may be required to deal

11
<PAGE>
with them on terms no less favorable to such MSOs than could be obtained from
unaffiliated third parties.

Under certain specified circumstances, the Company has the option to cause
certain MSOs to be merged with and into a wholly-owned subsidiary of the Company
in a transaction in which the physicians' interests in such MSOs would be
exchanged for Common Stock of the Company (the "Roll Up Transaction"). The
Company has reserved 548,224 shares of Common Stock for issuance upon
consummation of the Roll Up Transaction, all of which shares are required to be
issued if the Company effects the Roll Up Transaction. Accordingly, the Roll Up
Transaction, if effected, will be dilutive to investors. In addition, certain of
the physician groups and networks managed by the Company have rights to require
the Company to purchase all or part of such physicians' interest in their
respective MSOs in the event that the Company does not consummate the Roll Up
Transaction within one year after the satisfaction of specified conditions.
There can be no assurance that the Company will have the financial resources to
purchase such interests in accordance with its obligations at the time any such
rights are exercised, or that the Company would be able to obtain financing on
satisfactory terms or conditions, if at all, to purchase such interests. To the
extent that any future financing requirements with respect to such put rights
are satisfied through the issuance of equity securities, investors may
experience dilution. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Contractual Relationships
with Affiliated Physicians."

DEPENDENCE ON KEY PERSONNEL

The Company's ability to market and deliver its services and systems and to
achieve and maintain a competitive position is dependent in large part upon the
efforts of its senior management, particularly Jonathan Edelson, M.D., the
Company's Chairman of the Board and Chief Executive Officer, and Steven
Hochberg, the Company's President. Although the Company is the beneficiary of
$250,000 "key man" life insurance policies on the lives of each of Dr. Edelson
and Mr. Hochberg, the Company does not believe such amount would be adequate to
compensate for the loss of the services of either executive. In addition,
although the Company plans to enter into employment agreements with most of its
senior executives, including Dr. Edelson and Mr. Hochberg, such agreements will
not assure the services of such employees. The loss of the services of one or
more members of its senior management could have a material adverse effect on
the Company. The Company's future success also will depend upon its ability to
attract and retain qualified management, technical and marketing employees to
support its future growth. Competition for such personnel is intense, and there
can be no assurance that the Company will be successful in attracting or
retaining such personnel. The failure to attract and retain such persons could
materially adversely affect the Company. See "Management."

RISK OF LIABILITY CLAIMS

Customer reliance on the Company's services and systems could result in
exposure of the Company to liability claims if the Company's services and
systems fail to perform as intended or if patient care decisions based in part
on guidance from the Company's services and systems are challenged. Even
unsuccessful claims could result in the expenditure of funds in litigation,
diversion of management time and resources or damage to the Company's reputation
and the marketability of the Company's services and systems. While the Company
takes contractual steps to obtain indemnification for certain liabilities and
maintains general commercial liability insurance, there can be no assurance that
a successful claim could not be made against the Company, that the amount of
indemnification payments or insurance would be adequate to cover the costs of
defending against or paying such a claim or that the costs of defending against
such a claim or the payment of damages by the Company would not have a material
adverse effect on the Company's business, financial condition and results of
operations and on the price of the Common Stock.

12
<PAGE>
NO PRIOR PUBLIC MARKET; OFFERING PRICE DETERMINED BY AGREEMENT; VOLATILITY OF
STOCK PRICE

Prior to this offering, there has been no public market for the Common
Stock. Although the Company has applied to have the Common Stock approved for
quotation on the Nasdaq National Market, there can be no assurance that an
active trading market for the Common Stock will develop or continue after this
offering. The initial public offering price of the Common Stock will be
determined by negotiation between the Company and the Representatives of the
Underwriters, and may not be indicative of the market price for the Common Stock
after this offering. See "Underwriting." From time to time after this offering,
there may be significant volatility in the market price for the Common Stock.
Results of the Company's operations may fluctuate significantly from quarter to
quarter and will depend on numerous factors, primarily the timing of the
addition of new physician practice groups and networks under management and the
sale of clinical information systems and associated services. Such fluctuations
in quarterly operating results of the Company, changes in general conditions in
the economy, the financial markets or the health care industry or other
developments affecting the Company or its competitors could cause the market
price of the Common Stock to fluctuate substantially. In addition, in recent
years the stock market has experienced extreme price and volume fluctuations.
This volatility has had a significant effect on the market prices of securities
issued by many companies for reasons unrelated to their operating performance.

DILUTION

The purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the pro forma net tangible book value of
their shares of Common Stock in the amount of $9.45 per share, at an assumed
initial public offering price of $13.00 per share (after deducting underwriting
discounts and commissions and estimated offering expenses). Such investors will
experience additional dilution upon the exercise of outstanding options and
warrants. In addition, in the event the Company issues additional Common Stock
in the future, including shares that may be issued in connection with the Roll
Up Transaction or future acquisitions, investors may experience further
dilution. See "Dilution," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Contractual Relationships
with Affiliated Physicians."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of shares of Common Stock (including shares issued upon the exercise
of outstanding options) in the public market after this offering could adversely
affect the market price of the Common Stock. Such sales also might make it more
difficult for the Company to sell equity securities or equity-related securities
in the future at a time and price that the Company deems appropriate. Upon
completion of this offering, the Company will have approximately 6,491,270
shares of Common Stock outstanding. The 2,000,000 shares offered hereby will be
freely tradeable without restriction unless they are held by "affiliates" of the
Company as the term is used under the Securities Act of 1933 (the "Securities
Act") and the regulations promulgated thereunder. The remaining approximately
4,491,270 shares are restricted securities that may be sold only if registered
under the Securities Act or sold in accordance with an applicable exemption from
registration, such as Rule 144 promulgated under the Securities Act. As a result
of the contractual restrictions described below and the provisions of Rules 144,
144(k) and 701 under the Securities Act, additional shares will be available for
sale in the public market as follows: (i) no shares (other than those shares
sold hereby and not held by affiliates) will be available for immediate sale in
the public market on the date of this Prospectus, (ii) shares subject
to options exercisable within 90 days of the date of this Prospectus will be
freely tradeable by non-affiliates upon the effectiveness of a registration
statement relating to such stock options, (iii) shares and shares
subject to options exercisable within 90 days of the date of this Prospectus
will be eligible for sale 90 days after the date of this Prospectus, (iv)
shares and shares subject to options exercisable within 180 days of the
date of this Prospectus will be eligible for sale upon expiration of the lock-up
agreements 180 days after the date of this Prospectus and

13
<PAGE>
(v) shares and shares subject to options will be eligible for sale
upon expiration of their respective vesting and two-year holding periods. The
holders of 2,941,985 shares of Common Stock have the right in certain
circumstances to require the Company to register their shares under the
Securities Act for resale to the public. If such holders, by exercising their
demand registration rights, cause a large number of shares to be registered and
sold in the public market, such sales could have an adverse effect on the market
price for the Company's Common Stock. If the Company were required to include in
a Company-initiated registration shares held by such holders pursuant to the
exercise of their "piggyback" registration rights, such sales may have an
adverse effect on the Company's ability to raise needed capital. See "Shares
Eligible for Future Sale," "Description of Capital Stock" and "Underwriting."

UNSPECIFIED USE OF PROCEEDS

Following this offering, the Company will have approximately $18.3 million
($22.0 million if the Underwriters' over-allotment option is exercised in full)
of the net proceeds of this offering available for working capital and general
corporate purposes, which may include acquisitions. The Company's management,
subject to approval by the Board of Directors in certain circumstances, will
have broad discretion with respect to the application of such proceeds. See "Use
of Proceeds."

POTENTIAL ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BY-LAWS AND THE DGCL

The Company's Restated Certificate of Incorporation (the "Certificate of
Incorporation") and By-laws (the "By-laws") and the Delaware General Corporation
Law (the "DGCL") contain provisions which may have the effect of delaying,
deterring or preventing a future takeover or change in control of the Company
unless such takeover or change in control is approved by the Company's Board of
Directors. Such provisions may also render the removal of directors and
management more difficult. The Certificate of Incorporation and By-laws provide
for, among other things, a classified Board of Directors serving staggered terms
of three years, certain advance notice requirements for stockholder nominations
of candidates for election to the Board of Directors and certain other
stockholder proposals, restrictions on who may call a special meeting of
stockholders and a prohibition on stockholder action by written consent. In
addition, the Company's Board of Directors has the ability to authorize the
issuance of up to 5,000,000 shares of preferred stock in one or more series and
to fix the voting powers, designations, preferences and relative, participating,
optional and other special rights and qualifications, limitations or
restrictions thereof without stockholder approval. The DGCL also contains
provisions preventing certain stockholders from engaging in business
combinations with the Company, subject to certain exceptions. See "Description
of Capital Stock."

INVESTMENT COMPANY ACT CONSIDERATIONS

The Investment Company Act of 1940, as amended (the "1940 Act"), requires
the registration of, and imposes various substantive restrictions on, certain
companies that engage primarily, or propose to engage primarily, in the business
of investing, reinvesting or trading in securities, or that fail certain
statistical tests regarding the composition of assets and sources of income, and
are not primarily engaged in business other than investing, holding, owning or
trading securities. The Company believes that it is, and it intends to remain,
primarily engaged in business other than investing, holding, owning or trading
securities. The Company will seek to invest temporarily the proceeds of this
offering, pending their use as described under the caption "Use of Proceeds,"
and to utilize the proceeds of this offering in the manner described under "Use
of Proceeds," so as to avoid becoming subject to the registration requirements
of the 1940 Act. Such investment is likely to result in the Company obtaining
lower yields on the funds invested than might be available in the securities
markets generally. There can be no assurance, however, that such investments and
utilization can be made. If the Company were required to register as an
investment company under the 1940 Act, it would become subject to substantial
regulation with respect to its capital structure, management, operations,
transactions with affiliates, and other matters.

14
<PAGE>
THE COMPANY

The Company's predecessor, Med-E-Systems Corporation ("MES"), was
incorporated on August 27, 1993 as a clinical information systems development
company. Effective August 23, 1995, MES became a subsidiary of the Company
through a tax-free reorganization. The Company was subsequently merged with and
into Majean, Inc., a Delaware corporation, and the surviving corporation changed
its name to Advanced Health Corporation. The Company's executive offices are
located at 560 White Plains Road, Tarrytown, New York 10591, and its telephone
number at that address is (914) 332-6688.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common
offered hereby are estimated to be approximately $23.4 million ($27.1 million if
the Underwriters' over-allotment option is exercised in full), at an assumed
initial public offering price of $13.00 per share and after deducting
underwriting discounts and commissions and estimated offering expenses.

The Company will use approximately $5.1 million of the net proceeds of this
offering to repay an aggregate of $5.0 million principal amount of indebtedness,
plus interest. The Company issued two 8% promissory notes in the principal
amounts of $1,500,000 and $750,000 on February 28 and April 26, 1996,
respectively. The Company will issue two additional promissory notes in the
principal amounts of $750,000 and $2,000,000, respectively, bearing interest at
8% and 9%, respectively, prior to the date of this Prospectus. All of such notes
will mature on the earlier of the consummation of this offering and the one-year
anniversary of their issuance, in the case of the 8% notes, or July 31, 1997, in
the case of the 9% note. The proceeds of such notes were or will be used to
finance working capital.

The Company intends to use the balance of the net proceeds, approximately
$18.3 million, for working capital and general corporate purposes, which may
include acquisitions. From time to time in the ordinary course of its business,
the Company evaluates possible acquisitions of businesses, products and
technologies that are complementary to those of the Company. The Company
currently has no agreements or understandings, and is not engaged in active
negotiations, with respect to any such acquisition.

Pending the application of the net proceeds of this offering, the Company
intends to invest such proceeds in short-term, investment-grade,
interest-bearing instruments or money market funds.

DIVIDEND POLICY

The Company has not declared or paid any cash dividends on its capital stock
since inception and does not expect to pay dividends in the foreseeable future.
The Company presently intends to retain future earnings, if any, to finance the
expansion of its business. The payment of any cash dividends in the future will
depend on the Company's earnings, financial condition, results of operations,
capital needs, and other factors deemed pertinent by the Company's Board of
Directors, subject to laws and regulations then in effect.

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<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1996 (i) on a pro forma basis giving effect to the Stock Splits and the
Preferred Stock Conversion and (ii) as adjusted to reflect the receipt and
initial application of the estimated net proceeds from the sale by the Company
of 2,000,000 shares of Common Stock offered hereby, at an assumed initial public
offering price of $13.00 per share (after deducting underwriting discounts and
commissions and estimated offering expenses):

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
----------- -----------
<S> <C> <C>
Current portion of long-term debt................................ $ 1,754,721 $ 254,721
----------- -----------
----------- -----------
Long-term debt, less current portion............................. 125,254 125,254
----------- -----------
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares authorized
and no shares issued and outstanding......................... -- --
Common Stock, $.01 par value, 15,000,000 shares authorized,
4,491,270 shares issued and outstanding pro forma; and
6,491,270 shares issued and outstanding as adjusted(1)....... 44,913 64,913
Additional paid-in capital....................................... 11,481,478 34,891,478
Accumulated deficit.............................................. (9,977,647) (9,977,647)
Treasury stock, at cost (8,937 shares pro forma and as
adjusted)....................................................... (75,000) (75,000)
----------- -----------
Total stockholders' equity..................................... 1,473,744 24,903,744
----------- -----------
Total capitalization......................................... $ 1,598,998 $25,028,998
----------- -----------
----------- -----------
</TABLE>

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

(1) Excludes 1,283,510 shares issuable upon the exercise of outstanding stock
options at a weighted average exercise price of $2.59 and 481,489 shares
issuable upon the exercise of outstanding warrants to purchase Common Stock
at a weighted average exercise price of $8.50 per share. See
"Management -- Stock Plans" and Notes 3 and 10 of Notes to Consolidated
Financial Statements.

16
<PAGE>
DILUTION

The net tangible book value of the Company as of March 31, 1996 was
$(374,905), or $(0.08) per share of Common Stock on a pro forma basis, after
giving effect to the Stock Splits and the Preferred Stock Conversion. "Net
tangible book value per share" represents the amount of the Company's total
tangible assets less the Company's total liabilities, divided by the number of
shares of Common Stock outstanding. After giving effect to the sale of 2,000,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $13.00 per share (after deducting underwriting discounts and
commissions and estimated offering expenses), and the initial application of the
net proceeds therefrom, the pro forma net tangible book value of the Company at
March 31, 1996 would have been $23,055,095, or $3.55 per share of Common Stock.
This represents an immediate increase in pro forma net tangible book value of
$3.63 per share to existing stockholders and an immediate, substantial dilution
in pro forma net tangible book value per share of $9.45 per share to purchasers
of shares of Common Stock offered hereby, as illustrated in the following table:

Assumed initial public offering price per share........... $13.00
Pro forma net tangible book value per share at March 31,
1996................................................... $(0.08)
Increase per share attributable to new investors........ 3.63
------
Pro forma net tangible book value per share after this
offering................................................. 3.55
------
Dilution per share to new investors....................... $ 9.45
------
------

The following table sets forth, on a pro forma basis, after giving effect to
the Stock Splits and the Preferred Stock Conversion, as of March 31, 1996, the
number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by
existing stockholders and to be paid by purchasers of shares of Common Stock
offered hereby based upon assumed initial public offering price of $13.00 per
share (before deducting underwriting discounts and commissions and estimated
offering expenses).

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 4,491,270 69.2% $11,526,391 30.7% $ 2.57
New investors.......................... 2,000,000 30.8 26,000,000 69.3 13.00
--------- ------- ----------- -------
Total............................ 6,491,270 100.0% $37,526,391 100.0%
--------- ------- ----------- -------
--------- ------- ----------- -------
</TABLE>

The foregoing tables assume no exercise of stock options to purchase
1,283,510 shares of Common Stock outstanding at a weighted average exercise
price of $2.59 per share and 481,489 shares issuable upon the exercise of
outstanding warrants to purchase Common Stock at a weighted average exercise
price of $8.50 per share. To the extent that any of such options or warrants are
exercised, there will be further dilution to new investors in this offering. See
"Management -- Stock Plans" and Notes 3 and 10 of Notes to Consolidated
Financial Statements.

17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated statement of operations data for the period from
inception (August 27, 1993) to December 31, 1993 and for the years ended
December 31, 1994 and 1995, and the balance sheet data as of December 31, 1994
and 1995, are derived from the Consolidated Financial Statements of the Company
included elsewhere in this Prospectus, which have been audited by Arthur
Andersen LLP, independent public accountants. The selected consolidated balance
sheet data as of December 31, 1993 are derived from the consolidated financial
statements of the Company which have been audited by Arthur Andersen LLP,
independent public accountants, but which are not included in this Prospectus.
The selected consolidated statement of operations data for the three months
ended March 31, 1995 and 1996 and the selected consolidated balance sheet data
as of March 31, 1996 are derived from the Company's unaudited consolidated
financial statements, which include all adjustments, consisting of normal
recurring adjustments, which the Company considers necessary for a fair
presentation of the financial position and results of operations as of and for
the periods then ended. The results of operations for the three months ended
March 31, 1996 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1996 or any future period. The
selected consolidated financial data set forth below is qualified by reference
to, and should be read in conjunction with, the Company's Consolidated Financial
Statements and the Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
PERIOD FROM INCEPTION DECEMBER 31, MARCH 31,
(AUGUST 27, 1993) TO ----------------- -----------------
DECEMBER 31, 1993 1994 1995 1995 1996
--------------------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenue................................ -$- $ 379 $ 1,053 $ -- $ 3,692
Cost of sales.......................... -- 12 340 -- 1,932
------- ------- ------- ------- -------
Gross profit........................... -- 367 713 -- 1,760
Operating expenses..................... 66 1,318 3,255 322 1,925
Research and development expenses...... 455 1,583 3,157 718 1,017
------- ------- ------- ------- -------
Operating loss......................... (521) (2,534) (5,699) (1,040) (1,182)
Other income (expense)................. -- (15) (8) 1 (19)
------- ------- ------- ------- -------
Net loss............................... $ (521) $(2,549) $(5,707) $(1,039) $(1,201)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Net loss per share..................... (0.30) (1.29) (1.68) (0.45) (0.27)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Weighted average number of common
shares and common share equivalents
outstanding.......................... 1,725 1,978 3,389 2,315 4,482
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1993 1994 1995 1996
----- ------- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash.................................................. $ 7 $ 7 $1,464 $ 139
Working capital (deficit)............................. (435) (1,032) (741) (1,963)
Total assets.......................................... 27 913 6,462 6,509
Total debt............................................ -- 416 567 1,880
Total stockholders' equity (deficit).................. (416) (325) 2,675 1,474
</TABLE>

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

(1) See Note 14 -- "Initial Public Offering" of Notes to Consolidated Financial
Statements.

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Consolidated
Financial Statements and the notes thereto included elsewhere in this
Prospectus.

OVERVIEW

The Company provides a full range of integrated management services and
clinical information systems to physician group practices and physician
networks. The Company generates revenues from (i) fees for managing physician
group practices, (ii) fees for managing physician networks and (iii) fees for
use and support of its clinical information systems, including recurring
license, software installation, software integration, training and data
conversion fees. The Company contracts with its physician practice and network
management clients pursuant to long-term agreements with its MSOs, the results
of which MSOs are consolidated in the Consolidated Financial Statements. The
Company manages three medical practices in the greater New York metropolitan
area consisting of over 50 physicians. The Company also manages six physician
networks, and is developing additional networks, primarily in the fields of
cardiology, oncology and orthopedics.

Pursuant to the management services agreements that the Company enters into
with its physician practice clients, the physician practices outsource their
non-medical activities to the MSO. Fees are generated by the MSO through the
provision of these outsourced services, as well as certain additional management
and marketing services and clinical information systems. Fees are recognized by
the MSO as services are performed.

Pursuant to the management services agreements that the Company enters into
with physician networks, the MSOs recognize revenue from physician networks,
which contract with third-party payors for the delivery of health care services.
The payor contracts contain risk-sharing provisions whereby incentive revenue
can be earned or losses incurred, by the physician networks, based on the
utilization of physician and hospital services by assigned enrollees. There can
be no assurance that the Company will be able to negotiate, on behalf of the
physicians, satisfactory arrangements on a risk-sharing or capitated basis or
that the physician organizations managed by the Company will be able to provide
medical services at a profit under such arrangements. To the extent affiliated
physicians incur medical costs that limit their profitability, there can be no
assurance that the Company will be able to derive revenues from any such
affiliated relationship.

The Company anticipates entering into managed care or capitated
arrangements, either directly through the formation of an IPA or indirectly
through the assignment of managed care contracts entered into between its
affiliated physicians and third-party payors. The Company has little experience
in managing capitated-risk arrangements. Revenues under any such arrangements
entered into by the Company, whether directly through an IPA or through the
assignment of a capitated contract entered into by its affiliated physicians,
would generally be a fixed amount per enrollee. Under such an arrangement, the
Company would contract with affiliated physicians for the provision of health
care services and the Company would be responsible for the provision of all or a
portion of the health care requirements of such enrollees. To the extent that
enrollees require more care than is anticipated by the Company upon entering
into such a contract, the Company's revenues under such contracts may be
insufficient to cover its costs. The Company expects to enter into reinsurance
agreements with third-party insurers in respect of a portion of its risk under
such arrangements. See "Risk Factors -- Risks Associated with Capitated Fee
Arrangements" and "Business -- Contractual Relationships with Affiliated
Physicians -- Capitated and Other Fixed-Fee Arrangements."

The Company recognizes revenue from the sale and license of its clinical
information systems upon installation and acceptance, and from software
development and integration as services are provided. To

19
<PAGE>
date, the Company has not generated any significant revenues from the commercial
sale and installation of its clinical information systems. The Company has made
substantial investment in the development of its clinical information systems
and expects to continue such investment in the future.

To date, the Company has been dependent on a small number of contracts to
generate the majority of its revenues. In the year ended December 31, 1995,
approximately 68% of the Company's revenues were derived from its contracts with
Madison and an affiliate of PCS Health Systems, Inc., the managed care unit of
Eli Lilly & Company, while in the three months ended March 31, 1996,
approximately 83% of the Company's revenues were derived from its contracts with
Madison and AHP&S. The Company expects that the concentration of its revenues
will be reduced as the Company enters into additional contracts to provide
management services and clinical information systems to physician organizations.
See "Risk Factors -- Concentration of Revenues."

The Company believes that its historical results of operations from period
to period are not comparable and that such results are not necessarily
indicative of results for any future periods because the Company was a
development stage company investing in technology development and did not
provide physician practice and network management services prior to December 11,
1995.

ACQUISITIONS

On August 28, 1995, the Company acquired certain assets and assumed certain
liabilities of Peltz Ventimiglia, Inc. ("Peltz"), a physician practice
management consulting company with physician clients located throughout the East
Coast of the United States, for 75,996 shares of Common Stock and contingent
warrants to purchase 113,995 shares of Common Stock at $4.38 per share. The
warrants are only exercisable, as contingent consideration, based on the
achievement of targeted operating performance criteria. The audited financial
statements of Peltz are included elsewhere in this Prospectus.

On September 1, 1995, the Company acquired U.S. Health Connections, Inc.
("Health Connections"), a network management company servicing the Southeastern
United States and headquartered in Atlanta, Georgia, for $150,000 in cash,
30,193 shares of the Common Stock and $150,000 in notes payable. As of March 31,
1996, $75,000 of notes payable remained outstanding. The purchase price also
included an additional 56,611 shares of Common Stock issued into escrow at
closing. These escrowed shares represent contingent consideration that will be
released from escrow based on the achievement of targeted operating performance
criteria. The audited financial statements of Health Connections are included
elsewhere in this Prospectus.

On April 1, 1996, the Company acquired certain assets of Benenson &
Associates, Inc. ("Benenson"), a physician network development company with
approximately 10 network clients located throughout the East Coast of the United
States, for 8,937 shares of Common Stock and $45,000 to be paid in two
installments of $22,500 each on the closing date and the first anniversary
thereof.

RESULTS OF OPERATIONS

Three Months Ended March 31, 1996 and 1995

Net revenue for the three months ended March 31, 1996 was $3.7 million.
There was no revenue for the comparable period ended March 31, 1995. The
revenues for the three months ended March 31, 1996 primarily reflected the
Company's initiation of management services to Madison and AHP&S, as well as the
provision of consulting and network management services and the recognition of
license revenues under the Company's contract with Merck Medco Managed Care,
Inc.

Cost of sales for the three months ended March 31, 1996 was $1.9 million.
The Company incurred no cost of sales for the comparable period ended March 31,
1995. The cost of sales in the March 31, 1996 quarter related primarily to the
non-medical and system expenses outsourced to the Company from Madison and
AHP&S.

20
<PAGE>
Operating expenses for the three months ended March 31, 1996 increased to
$1.9 million from $1.3 million for the comparable period ended March 31, 1995.
The increase in operating expenses reflected expenses related to the provision
of management services in the March 31, 1996 quarter, whereas the Company was a
development stage company in the March 31, 1995 quarter.

Research and development expenses for the three months ended March 31, 1996
increased to $1.0 million from $778,401 for the comparable period ended March
31, 1995, due to an increase in the Company's development activities for its
clinical information systems.

Other income (expense) for the three months ended March 31, 1996 was $19,607
and related to interest on $1.5 million of indebtedness issued on February 28,
1996, bearing interest at 8% and interest on capital lease obligations. The
Company incurred no interest expense for the comparable period ended March 31,
1995.

The net loss for the three months ended March 31, 1996 was $1.2 million
compared to a loss of $1.0 million for the three months ended March 31, 1995.

Year Ended December 31, 1995 and 1994

Net revenue for the year ended December 31, 1995 increased to $1.1 million
from $378,878 for the year ended December 31, 1994. The increase in revenue
primarily reflected the provision of consulting and network management services,
as well as the initiation in September 1995 of the Company's contract with an
affiliate of PCS Health Systems, Inc., the managed care unit of Eli Lilly &
Company, and the initiation in December 1995 of the Company's management
services to Madison.

Operating expenses for the year ended December 31, 1995 increased to $3.3
million from $1.3 million for the year ended December 31, 1994. The increase in
operating expenses was due to the increases in staffing and general corporate
expenses required to fund the Company's transition from a development stage
company involved in the development of clinical information systems to a full
service physician practice and network management company.

Research and development expenses for the year ended December 31, 1995
increased to $3.2 million from $1.6 million, due to an increase in the Company's
development activities for its clinical information systems.

The net loss for the year ended December 31, 1995 was $5.7 million compared
to a loss of $2.5 million for the year ended December 31, 1994.

As of December 31, 1995, the Company had net operating loss carryforwards
("NOLs") available to offset future book and taxable income of approximately
$8.7 million and $6.2 million, respectively, which expire through 2010. The
difference between the book and tax NOLs relates principally to the differences
between book and tax accounting with respect to start-up costs, depreciation of
fixed assets, amortization of intangible assets and recognition of deferred
revenue. The book income tax benefits of $3.5 million and $1.3 million as of
December 31, 1995 and December 31, 1994, respectively, have been fully reserved
due to the uncertainty of their future realization.

Year Ended December 31, 1994 and Period from Inception (August 27, 1993) through
December 31, 1993

Net revenue for the year ended December 31, 1994 was $378,878, including
license revenues from a third party and development revenues from Physicians'
Online, Inc. See "Certain Transactions." The Company realized no revenue during
the period from inception through December 31, 1993. During both of such
periods, the Company was a development stage company primarily engaged in the
development of clinical information systems.

21
<PAGE>
Operating expenses for the year ended December 31, 1994 increased to $1.3
million, from $66,192 in the period from inception to December 31, 1993. The
increase in operating expenses was due, in part, to the inclusion of 12 months
of operating results in 1994 compared with approximately four months in 1993
and, in part, to the increase in staffing expenses and general corporate
expenses required to further develop the Company's clinical information systems.

Research and development expenses for the year ended December 31, 1994
increased to $1.6 million from $454,622 for the period from inception to
December 31, 1993. These expenses related to the Company's development
activities for its clinical information systems.

The net loss for the year ended December 31, 1994 was $2.5 million compared
to a loss of $520,814 for the period from inception through December 31, 1993.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its capital requirements through the
sale of equity and debt securities. The Company issued two 8% promissory notes
in the principal amounts of $1,500,000 and $750,000 on February 28 and April 26,
1996, respectively. The Company will issue two additional promissory notes in
the principal amounts of $750,000 and $2,000,000, respectively, bearing interest
at 8% and 9%, respectively, prior to the date of this Prospectus. All of such
notes will mature on the earlier of the consummation of this offering and the
one-year anniversary of their issuance, in the case of the 8% notes, or July 31,
1997, in the case of the 9% note. The proceeds of such notes were or will be
used to finance working capital. At March 31, 1996, the Company had cash and
cash equivalents of $139,490.

For the year ended December 31, 1995, the Company had a negative cash flow
from its operating activities of $4.3 million, compared with $2.4 million for
the three months ended March 31, 1996.

The Company believes that the net proceeds of this offering, cash on hand,
interest income and revenues from operations will be sufficient to fund planned
operations of the Company through at least the end of 1998. The Company has no
planned material capital expenditures or capital commitments.

From time to time in the ordinary course of its business, the Company
evaluates possible acquisitions of businesses, products and technologies that
are complementary to those of the Company. The Company currently has no
agreements or understandings, and is not engaged in active negotiations, with
respect to any such acquisition.

Under certain specified circumstances, the Company has the option to cause
the Roll Up Transaction to occur. The Company has reserved 548,224 shares of
Common Stock for issuance upon consummation of the Roll Up Transaction, all of
which will be issued if the Company effects the Roll Up Transaction.
Accordingly, the Roll Up Transaction, if effected, will be dilutive to
investors. In addition, certain of the physician groups and networks managed by
the Company have rights, to require the Company to purchase all or part of such
physicians' interest in their respective MSO in the event that the Company does
not consummate the Roll Up Transaction within one year after the satisfaction of
specified conditions. There can be no assurance that the Company will have the
financial resources to purchase such interests in accordance with its
obligations at the time any such rights are exercised, or that the Company would
be able to obtain financing on satisfactory terms or conditions, if at all, to
purchase such interests. See "Risk Factor--Management Service Organizations Not
Wholly-Owned; Physician Put Rights; Dilution" and "Business--Contractual
Relationships with Affiliated Physicians -- Capitated and Other Fixed-Fee
Arrangements."

22
<PAGE>
BUSINESS

OVERVIEW

Advanced Health Corporation provides a full range of integrated management
services and clinical information systems to physician group practices and
physician networks under long-term contracts. The management services provided
by the Company include physician practice and network development, marketing,
payor contracting, financial and administrative management, clinical information
management, human resource management and practice and network governance. The
Company has developed its clinical information systems to provide physicians at
the point of care and on a real-time basis with patient-specific clinical and
payor information and the ability to generate patient medical orders and to
facilitate the implementation of disease management programs. The Company
focuses its management efforts on high-cost, high-volume disease specialties,
such as cardiology, oncology and orthopedics. The Company currently manages two
single-specialty physician group practices and one multi-specialty physician
group practice comprised of an aggregate of over 50 physicians in the New York
metropolitan area and six physician networks with over 350 physicians in the
greater New York and Atlanta metropolitan areas. The Company believes its
management services and clinical information systems will enable physicians to
enhance the quality and reduce the cost of health care.

INDUSTRY

Health care expenditures in the United States have risen rapidly over the
past two decades and totalled approximately $1 trillion in 1994. One significant
factor affecting health care expenditures in the United States is the aging of
the population. Older Americans utilize more health care services. In 1992, the
number of Americans 65 years old or over represented 12% of the U.S. population,
but were responsible for approximately 23% of all health care expenditures. In
particular, older Americans spend more on certain medical specialties, such as
cardiology, oncology and orthopedics. In 1992, spending on cardiology, oncology
and orthopedics totalled approximately $200 billion and represented
approximately 17%, 5% and 5%, respectively, of total direct health care costs in
the United States.

Increasing concern over the rising cost of health care in the United States
has led to the development of managed care organizations and programs. Under
such programs, managed care payors typically govern the provision of health care
with the objective of ensuring delivery of quality care in a cost-effective
manner. The traditional fee-for-service method of compensating health care
providers offers few incentives for the efficient utilization of resources and
is generally believed to contribute to health care cost increases at rates
significantly higher than inflation. Consequently, fee-for-service reimbursement
is rapidly being replaced by alternative reimbursement models, including
capitated and other fixed-fee arrangements. The number of private insurance
beneficiaries who are enrolled in HMOs increased by approximately 40% from 1991
to 1994, with approximately 40 million beneficiaries enrolled in HMOs in 1991
and approximately 57 million beneficiaries enrolled in HMOs in 1994. In
addition, the number of Medicare beneficiaries enrolled in managed care programs
increased by approximately 52% from December 1994 to April 1996. The growth in
enrollment in these new reimbursement models is shifting the financial risk of
delivering health care from payors to providers.

As a result of this changing health care environment, health care cost
containment pressures have increased physician management responsibilities while
lowering reimbursement rates to physicians. Consequently, physician compensation
has declined; the average net income for physicians decreased by approximately
4% from 1993 to 1994. Because approximately 67% of all physicians currently
practice individually or in two-person groups, their ability to lower costs and
to negotiate with payors is limited. Individual physicians and small group
practices also tend to have limited administrative capacity, limited ties to
other health care providers (restricting their ability to coordinate care across
a variety of specialties), limited capital to invest in new clinical equipment
and technologies and limited purchasing power with vendors of medical supplies.
In addition, individual physicians and small group practices

23
<PAGE>
typically lack the information systems necessary to enter into and manage
risk-sharing contracts with payors and to implement efficiently disease
management programs.

In response to the foregoing factors, individual physicians and small group
practices are increasingly affiliating with larger group practices and physician
practice management companies ("PPMs"). From 1991 to 1995, the number of
physicians practicing in group practices increased by approximately 14% to a
total of 185,000 physicians, with approximately 5% of such physicians managed by
PPMs. By acquiring physician practices, PPMs are successfully providing
physicians with lower administrative costs, leverage with vendors and payors and
economies of scale necessary to attract capital resources. In addition,
management companies and consultants are organizing independent physician
practices, independent physician associations, physician hospital organizations
and other physician organizations for the purpose of enabling physicians to
contract with managed care payors.

The Company believes that significant opportunities exist, in the
consolidating health care industry, to assist physicians in managing the
administrative aspects of group practices and networks. More importantly, since
clinical decisions made by physicians impact 85% of overall health care
expenditures, the Company believes that even greater opportunities exist to
assist physicians in managing the clinical aspects of group practices and
networks. The Company believes its physician practice and network management
services and clinical information systems will enable physicians to more
effectively control both the quality and cost of health care.

STRATEGY

The objective of the Company is to become a leading provider of management
services and clinical information systems to physician organizations. By
enabling physicians to develop and efficiently manage group practices and
networks, the Company seeks to assist physicians in facilitating risk-based
managed care contracts, developing and implementing disease management programs
and monitoring and controlling health care outcomes and costs. The Company
intends to achieve its objective through the implementation of the following
strategy:

.Establishing Long-Term Alliances with Physician Organizations. The Company is
seeking to partner with physician group practices and networks through
long-term management contracts under which the Company provides a full range of
integrated management and information services. The Company believes that
contracting with physician organizations, rather than acquiring them, permits
physicians to remain independent while providing them with the proper
incentives and resources to improve their organizations. The Company typically
develops an alliance with each physician organization through the establishment
of an MSO. See "Business -- Contractual Relationships with Affiliated
Physicians."

. Managing High-Cost, High-Volume Disease Specialties. The Company believes that
the greatest opportunity for achieving clinical efficiencies is in high-cost,
high-volume disease specialties such as cardiology, oncology and orthopedics.
Total health care expenditures for these medical specialties are expected to
increase with the aging of the U.S. population. The Company seeks to integrate
physicians into comprehensive health care delivery systems to provide them
with greater access to managed care contracts and to implement disease
management programs. The Company believes that the evolution of disease
specialty treatment organizations will play a major role in managed care
contracting as payors recognize that the quality of care is improved and the
cost of care reduced when reimbursement and health care services target a
specific disease through coordinated networks of health care providers.

. Providing Physicians with Clinical Information at the Point of Care. The
Company has designed and developed point-of-care clinical information systems
that link physician users and their offices on a real-time basis to other
physicians, health care providers and third-party databases. By facilitating
the

24
<PAGE>
integration of clinical guidelines and efficient access to information, the
Company believes it can assist physicians in improving the quality and
lowering the cost of patient care.

. Focusing on Selected Geographic Markets. The Company seeks to provide its
services to physician group practices and networks located principally in
geographic markets where fee-for-service reimbursement is shifting to
capitated and other risk-based reimbursement and where there are significant
concentrations of physicians specializing in high-cost, high-volume disease
specialties. The Company's initial target markets include the greater New
York, Philadelphia and Atlanta metropolitan areas.

. Developing Strategic Industry Relationships. The Company believes that
developing strategic industry relationships will enhance its ability to
penetrate existing markets, gain access to new markets and develop new
products and services. The Company has entered into a software license and
integration agreement with Merck Medco Managed Care, Inc. for the Company's
prescription writing software. In addition, the Company has entered into a
contract with an affiliate of PCS Health Systems, Inc., the managed care unit
of Eli Lilly & Company, to provide disease management information services and
software for the treatment of certain diseases. The Company is continuing to
seek relationships for the development and distribution to third parties of
its clinical information systems.

PHYSICIAN PRACTICE AND NETWORK SERVICES

The Company provides physicians with a full range of integrated services to
develop group practices and networks, to manage group practice and network
operations and to manage medical risk. These integrated services include
clinical support and administrative and marketing services as well as
point-of-care information systems and support. The Company believes that its
point-of-care clinical information systems provide physicians with the
information needed to improve the quality and reduce the cost of health care.

The Company manages two single-specialty group practices and one
multi-specialty group practice located in the New York City metropolitan area.
The two single-specialty group practices are collectively comprised of more than
20 clinical cardiologists, interventional cardiologists and cardiothoracic
surgeons, including leading physicians in the areas of minimally invasive
coronary artery bypass grafts and angioplasties employing coronary stents. The
multi-specialty group practice is made up of over 30 physicians who have, with
the Company's assistance, aggregated their practices into a group practice. The
medical specialties represented by this group include adult primary care,
cardiology, oncology and orthopedics. The Company is currently negotiating with
additional physician group practices in the greater New York, Philadelphia and
Atlanta metropolitan areas.

The Company manages six physician networks covering approximately 738,000
lives, with a total of seven payor contracts among such networks. The Company
manages a network of approximately 110 cardiologists in New Jersey and is
developing additional cardiology networks in New York, Connecticut, Pennsylvania
and Delaware. The Company anticipates that these cardiovascular networks will
provide comprehensive cardiac care, including ancillary services. The Company
manages a community and medical center-based oncology network in Atlanta serving
approximately 150,000 lives that include both medical and radiation oncology.
The Company is currently developing an oncology network in New York. The Company
manages an orthopedic network in Atlanta, covering approximately 205,000 lives
and is developing orthopedic networks in New York, New Jersey, Pennsylvania and
Connecticut. In addition, the Company manages three additional networks in the
greater Atlanta area covering approximately 383,000 lives, including a
multi-specialty network, an obstetrics and gynecology network and a plastic
surgery network.

In addition to providing administrative management services to physician
organizations, the Company seeks to differentiate itself by assisting physicians
in managing the clinical aspects of their practices. The Company believes that
its management services and clinical information systems will enhance the
ability of physician group practices and networks to implement disease
management

25
<PAGE>
programs and to manage practices under risk-based contracts. The Company is
working to assist physicians in developing disease-specific clinical practice
guidelines and in practicing in accordance with applicable standards of care.
The Company has initially focused the implementation of its single-specialty
disease management strategy on the creation of an integrated comprehensive
cardiovascular care program, which includes physician group practices, networks
and medical support services. It is anticipated that this disease management
program will be delivered through linked practices and networks of
cardiovascular specialists under management and/or development by the Company
who will provide integrated, high-quality care for patients based on clinical
care guidelines developed by the physician network. The Company anticipates that
the physicians within these practices and networks will be linked together by
the Company's clinical information systems.

The Company has expanded its physician practice and network management
expertise through acquisitions. In August 1995, the Company acquired the assets
of Peltz, which provides consulting services to physicians seeking to form group
practices on the East Coast, including assistance in the legal, administrative,
technical, and logistical aspects of group formation and the subsequent
recruiting of new physicians. In September 1995, the Company acquired Health
Connections, an Atlanta-based physician network management company with over two
years of network management experience in disease-specific areas, including
oncology and orthopedics. In April 1996, the Company acquired certain assets of
Benenson, a physician network development company specializing in the formation
of state-wide and regional cardiology and orthopedic networks capable of
marketing and servicing risk-based contracts.

The Company markets its physician practice management and network management
services through (i) direct sales methods, (ii) consultative sales that include
providing advice on the development, consolidation and financing of group
practices and networks and (iii) cross-selling to customers of its clinical
information systems.

PHYSICIAN PRACTICE SERVICES

The Company offers a comprehensive set of physician practice management
services, including practice development and strategic planning, marketing,
payor contracting and management, financial and administrative management,
clinical information management, human resource management and practice
governance.

Practice Development and Strategic Planning. The Company assists physician
group practices in developing and expanding their practices through a
combination of physician recruitment, physician specialty mix analysis,
acquisition evaluation and integration, ancillary services evaluation, financial
consulting and strategic planning.

Marketing. The Company assists physician group practices in marketing their
medical services to HMOs, insurance companies, self-insured companies and the
patient community. Working closely with the physician group practice, the
Company develops public relations and community outreach programs designed to
educate managed care entities and the patient community about the medical
services provided by the physician group practice.

Payor Contracting and Management. The Company assists physician group
practices in negotiating and structuring managed care contracts with payors for
the provision of physician services. The Company works with physician group
practices to meet credentialling standards and specialty mix requirements of
payors. The Company administers payments to physician providers under payor
contracts.

Financial and Administrative Management. The Company offers a variety of
financial and administrative management services to physician group practices.
The Company's financial management services include accounting, payroll,
finance, payables management, financial reporting, financial

26
<PAGE>
controls, insurance negotiation and billing and collection. The Company's
administrative management services include lease negotiations, facilities
contracting and inventory management.

Clinical Information Management. The Company intends to provide each
physician group practice with its proprietary clinical information management
systems. The Med-E-Practice suite of applications is delivered as an integrated
system of computer hardware, software and clinical information intended to
provide a physician, at the point of care and on a real-time basis, with access
to databases containing clinical, diagnostic, disease management, patient
medical record and other medical information. The Company's clinical information
system provides a seamless interface with third-party administrative software.
See "Business -- Clinical Information Systems."

Human Resource Management. The Company, through its MSOs, employs and
manages all non-medical personnel that perform administrative, clerical and
secretarial support, billing and collection and records management for a
physician practice. The Company evaluates such employees, establishes personnel
policies and procedures and manages employee benefit programs. The Company also
provides payroll administration on behalf of the physician practice for the
medical personnel.

Practice Governance. The management services agreement that the Company
enters into with a physician practice provides for the establishment of a joint
management advisory board. Such board is responsible for developing management
and administrative policies for the overall operation of the physician group
practice and guidelines for the delivery of medical services. The joint
management advisory board is controlled by licensed physicians within the
physician group practice.

PHYSICIAN NETWORK SERVICES

The Company's physician network management services include network
development and strategic planning, disease management program development,
payor marketing and contracting, financial and administrative management,
clinical information management and network governance.

Network Development and Strategic Planning. The Company provides network
development services including feasibility studies, organizational services,
financial services, payor identification services, physician recruiting and
credentialling services and strategic planning services.

Disease Management Program Development. The Company provides physician
networks with disease management program development services, including
clinical guidelines development, implementation and management services, data
collection, outcomes measurement and clinical trials development.

Payor Marketing and Contracting. The Company assists physician networks in
marketing their medical services to health care payors, including HMOs,
insurance companies, self-insured companies and other managed care entities. The
Company works with each physician network to educate payors about the medical
services provided by such network. The Company structures and negotiates risk-
based contracts on behalf of its affiliated physician networks. The Company
works with physician networks to meet credentialling standards and specialty mix
requirements of payors.

Financial and Administrative Management. The Company offers a variety of
financial and administrative services to physician networks. The financial
services provided by the Company include risk management, capitation allocation
and distribution, claims processing and accounting services. The administrative
services provided by the Company include records maintenance, utilization
management and communications.

Clinical Information Management. The Company intends to provide clinical
information management services to physician networks. The Med-E-Network suite
of applications allows network physicians to process electronic referrals and
electronic claims. Med-E-Network also provides access to

27
<PAGE>
electronic payor and patient eligibility information, third-party databases and
patient-specific diagnostic and clinical information.

Network Governance. The Company assists network medical directors and
governance committees with a variety of governance issues.

CLINICAL INFORMATION SYSTEMS

The Company has developed clinical information systems that link physician
users at the point of care with patient data and clinical guidelines maintained
by the Company and third parties. The Company's clinical information systems
consist of proprietary software, third-party hardware, proprietary and
third-party databases and related support services. The Company's clinical
information systems are designed to allow physicians at the point of care and on
a real-time basis (i) to access patient-specific clinical and payor information,
(ii) to generate patient instructions, prescriptions and orders for tests,
specialty referrals and specialty procedures and (iii) to access databases
containing managed care and disease management guidelines, diagnostic/treatment
preferences and guidelines affecting medical orders.

The Company's clinical information systems are designed to complement
existing health care information systems and to function with third-party
applications. The clinical information system connects to physician users either
through the use of a hand-held computer equipped with a wireless modem or a
desktop computer using a standard wireline modem. It is anticipated that access
to the Company's clinical information systems will be delivered to physician
users and other health care professionals via both private and public networks,
including the Internet. The Company's product suites operate within a
client/server-based open architecture. The Company's products support HL-7
interfaces, incorporate TCP/IP protocols for real-time data transmission and run
on the Microsoft Windows operating system and standard hardware platforms. The
Company employs standard commercial security measures to ensure the privacy of
the data communication paths within its products.

While the Company has not yet sold or installed its clinical information
systems on a commercial basis, since October 1994 the Company has provided
systems support, including user support, data center operations and network
operations, to two pilot sites in Michigan, consisting of approximately 10
physicians, and since December 1995 to a multi-specialty group that the Company
manages in New York. The Company has a contract with a third-party to provide
training to its clients. The Company has developed training and installation
templates for its products and has experience using these templates in its two
pilot sites and in a New York-based physician group practice. In addition to
providing its clinical information systems to its affiliated physicians, the
Company intends to continue licensing its clinical information systems to
third-party health care organizations. The Company has one employee dedicated to
developing distribution channels for its clinical information systems. In
addition, the Company markets its clinical information systems to physician
group practices and networks together with its management services.

On September 27, 1995, the Company entered into a software license and
integration agreement with Merck Medco Managed Care, Inc. for the Company's
prescription writing software, which provides formulary management, drug
utilization and review ("DUR") edits and linkage to drug therapy protocols. On
August 1, 1995, the Company signed an agreement to provide disease management
information systems and software to an affiliate of PCS Health Systems, Inc.,
the managed care unit of Eli Lilly & Company. The Eli Lilly & Company affiliate
has agreed to sponsor two pilot programs involving the software applications
developed by the Company. The Company continues to pursue strategic
relationships with health care providers as well as health care information
systems companies for the purpose of further developing and marketing its
information systems.

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<PAGE>
SYSTEMS

The Company offers a broad range of clinical information systems for
physician users through two suites of applications, Med-E-Practice and
Med-E-Network. Med-E-Practice is designed to be used directly by physician group
practices in support of clinical decision making, clinical ordering and
administrative management. Med-E-Network is designed to support administrative
and clinical decision making for physician networks engaged in capitated and
other fixed-fee arrangements under managed care contracts. These systems have
only been developed by the Company recently, and the initial commercial
installation of the Med-E-Practice suite of applications is expected during June
1996. The Med-E-Network suite of applications is expected to be initially
installed in July 1996. See "Risk Factors -- Uncertainty of Successful
Commercialization of Clinical Information Systems."

The following table summarizes the two suites of applications offered and
being developed by the Company:

<TABLE>
<CAPTION>
PRODUCT NAME PRODUCT DESCRIPTION
- ------------------------------- ----------------------------------------------------------
<S> <C>

MED-E-PRACTICE

Smart Scripts................ A pharmaceutical prescription writing application
providing formulary management, DUR edits and diagnostic
coding linkage to drug therapy protocols.

Med-E-Visit.................. Patient encounter application generating a Superbill with
fully-qualified diagnostic coding linked to appropriate
billing codes required to support outcomes analysis.

Referral..................... Supports multiple referral networks by recording referral
information and providing both network-specific referral
rules and appropriate network specialists.

Conditions Editor............ Tracks and maintains an active conditions list by patient.

Allergies Editor............. Maintains active and inactive allergy conditions by
patient, supporting charting and DUR editing.

Practice Management
Integrator................. Allows Med-E-Practice applications to integrate with
third-party physician practice management systems using
industry-standard HL-7 records.

Clinical Note................ Allows physicians to complete clinical notes at the point
of care. Currently in development.

MED-E-NETWORK

Med-E-Net Central............ Provides centralized administrative functions necessary to
manage risk-taking specialty networks.

Med-E-Net Office............. Provides distributed functionality required to integrate
physicians in geographically dispersed networks.

Med-E-Net Integrator......... Provides integration and connectivity between the
applications in the Med-E-Network suite and third-party
databases.

Med-E-Net Cardiology......... Provides cardiology-specific extensions to Med-E-Network
for managing risk-taking cardiology networks.
</TABLE>

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<PAGE>
Med-E-Practice provides administrative and clinical support for physician
group practices. The Med-E-Practice suite is designed for use by physicians at
the point of care and is intended to allow better care decisions by providing
better information. All of the applications in the Med-E-Practice suite are
designed to be run on a pen-based, portable, wireless computer for use in a busy
ambulatory practice. The Med-E-Practice suite consists of the following
applications:

Smart Scripts. Smart Scripts is a prescription writing application that
provides the clinician: (i) patient-specific prescription history, (ii)
real-time formulary management, specific to each patient's insurance coverage,
(iii) clinical intervention screening, using third-party DUR modules, (iv)
default dosing, (v) generic substitution, (vi) condition/drug relationship
maintenance and (vii) support for individual customer lists. The Company also
markets Smart Scripts as a stand-alone product. The Company is also developing
an Internet/intranet version of Smart Scripts, "Internet Script Writer."
Internet Script Writer is designed to allow any physician with access to the
Internet to gain the advantages of on-line prescription management. The Internet
Script Writer will provide (i) patient-specific prescription history, (ii)
real-time formulary management, specific to each patient's insurance coverage,
(iii) clinical intervention screening, using third-party DUR modules and (iv)
legible, printed prescriptions. The Company expects that the Internet Script
Writer will be commercially available in the fourth quarter of 1996.

Med-E-Visit. Med-E-Visit is a patient encounter management application that
records procedures and conditions. Med-E-Visit allows for the selection of
laboratory, x-ray, immunization, visit and procedure codes, using standard
diagnostic and billing coding. Med-E-Visit links all procedures with conditions
for outcomes analysis and facilitates correct insurance billing. Med-E-Visit
records follow-up visit requirements and, in conjunction with the Practice
Management Integrator, submits a Superbill to a third-party practice management
system.

Referral. The Referral application simplifies patient referrals through
real-time access to each individual patient's appropriate physician network. The
Referral application records referral information, provides network-specific
referral rules and helps to select the appropriate referral physician by
specialty and location and allows a complete referral form to be created and
printed.

Conditions Editor. The Conditions Editor automatically tracks a patient's
medical condition information generated by the other applications in the
Med-E-Practice suite. It uses disease-specific algorithms to monitor and permit
a physician to record a patient encounter. The Conditions Editor also allows the
clinical user to directly edit and manage the current conditions list.

Allergies Editor. The Allergies Editor allows the clinical user to easily
maintain allergy information for use in the Med-E-Practice suite. Allergy
information is provided by the Conditions Editor to the Smart Scripts
application and other Med-E-Practice applications.

Practice Management Integrator. The Practice Management Integrator
integrates the Med-E-Practice suite with third-party practice management systems
through a Company-designed interface using the industry standard HL-7 interface.

Clinical Note. The Clinical Note is designed to be an "at a glance" utility
bringing the most appropriate information to the physician at the point of care.
The Clinical Note application is intended to enable the physician to review the
most current information regarding the patient's medical history, including
current medications, active and inactive conditions, office visits, past
referrals and pertinent test results. The Clinical Note also permits the
physician to update patient information during the patient encounter with new
clinical findings, new prescriptions, new referrals and new procedure orders.
The automated Clinical Note application structures the input of information and
orders in a focused and customizable format to allow rapid physician-driven data
entry and retrieval. The Clinical Note is expected to be commercially available
in 1997.

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<PAGE>
Med-E-Network is a suite of network management applications supporting
physician networks engaged in risk-based contracts with payors. Med-E-Network
automates network configuration, maintenance of network rules, referral
management, utilization review management, claims and encounter submissions and
financial and clinical reporting. Med-E-Network utilizes a relational database
engine which integrates various sources of information and provides a flexible
repository for developing administrative, financial and clinical reports. The
Med-E-Network suite consists of the following applications:

Med-E-Net Central. Med-E-Net Central is designed to centralize and support
the administrative functions of a risk-taking physician network by (i) providing
pre-certification, (ii) processing claims and encounters, (iii) generating,
managing and matching referrals, (iv) providing financial and clinical
utilization review reporting, (v) providing automated utilization review
approvals and denials and (vi) providing eligibility assistance.

Med-E-Net Office. Med-E-Net Office links physician offices to Med-E-Net
Central. Med-E-Net Office is a forms-based, scaleable, client/server application
supporting referral creation and receipt, claims and encounter submission and
the creation and submission of treatment plans.

Med-E-Net Integrator. The Med-E-Net Integrator provides connectivity between
the applications in the Med-E-Network suite and third-party databases.

Med-E-Net Cardiology. Med-E-Net Cardiology is designed to deliver
procedure-specific guidelines for the management of cardiac disease coupled with
an automated procedure approval and referral engine. Med-E-Net Cardiology is
expected to be commercially available in the third quarter of 1996.

CLINICAL INFORMATION SYSTEMS DEVELOPMENT

The Company believes that the timely development of new clinical information
applications and the enhancement of existing clinical information systems are
important to its competitive position. The Company's product development
strategy is directed toward creating new applications that (i) increase the
functionality of current products by providing enhanced interfaces to
third-party systems and data repositories, (ii) expand coverage along the
continuum of clinical care, (iii) increase coverage to additional disease and
procedure groups and (iv) provide customers with a range of decision support
systems at various price points. The Company has approximately 20 professionals
dedicated to systems development. See "Risk Factors -- Technological Change."

CONTRACTUAL RELATIONSHIPS WITH AFFILIATED PHYSICIANS

The Company typically establishes an MSO for each physician organization it
manages. The MSO is a joint venture between the physician organization and the
Company, with the Company owning at least 51% of the equity in the MSO. The MSO
enters into a long-term management services agreement with the physician
organization pursuant to which the MSO provides group practice management or
network management services that provide both administrative and clinical
support to members of the physician organization. The MSO concurrently enters
into a services agreement with the Company pursuant to which it gains access to
management services and clinical information systems from the Company. For each
MSO, a stockholders agreement is entered into among the MSO, the physician
organization and the Company. The stockholders agreement, among other things,
(i) restricts the transfer of MSO equity, (ii) provides the terms upon which the
MSO can, at the Company's option, be merged with and into a wholly-owned
subsidiary of the Company in a transaction in which the physician organization
will receive stock of the Company in exchange for shares in the MSO and (iii)
grants to the physician organization the right to put its equity in the MSO to
the Company if the Company does not exercise its option to merge the MSO into
the Company within one year after the Company's satisfaction of certain
specified targets. The Company has reserved 548,224 shares of Common Stock

31
<PAGE>
for issuance upon the merger of the MSOs into the Company. See "Risk Factors --
Management Service Organizations Not Wholly-Owned; Physician Put Rights;
Dilution."

Physician Practices. The management services agreements between the MSO and
a physician practice group generally have an initial term of five to 20 years
and are automatically renewable for additional terms. Such agreements typically
are subject to early termination for cause. The management services agreements
generally obligate an MSO to provide certain non-medical practice management
services to the physician practice group for a monthly fee. The fee paid to the
MSO is generally a combination of fixed fees for certain services and percentage
fees for certain services. For risk-based contracts that the physician practice
group enters into, the management services agreement will generally provide for
additional management fees based upon savings recognized by the physician
practice group because of any cost efficiencies resulting from the MSO's
performance. The fees are set to be competitive within the geographic area in
which the physician practice group is located. A provision restricting the
physician practice group from competing against the MSO or employing the MSO's
employees is generally included in the agreement.

Physician Networks. The management services agreements between the MSO and a
physician network generally have an initial term of at least five years and are
automatically renewable for additional terms. Such agreements typically are
subject to early termination for cause. The management services agreements
generally obligate an MSO to provide certain non-medical practice management
services to the physician network for a fee. The fee paid to the MSO for
risk-based or capitated contracts is generally a service fee equal to the actual
cost, not to exceed a specified percentage of capitated revenues, for providing
the non-medical management services plus an incentive based on savings generated
by the network. The fee paid to the MSO for fee-for-service contracts is
generally equal to the administrative fees included in the managed care contract
plus a management processing fee agreed upon by the MSO and the physician
network. The fees are set to be competitive within the geographic area in which
the physician network is located. In the agreement, the physician network agrees
that the MSO will be the exclusive provider of non-medical management services
to the physician network.

Capitated and Other Fixed-Fee Arrangements. The Company anticipates entering
into managed care or capitated arrangements, either directly through the
formation of an IPA or indirectly through the assignment of managed care
contracts entered into between its affiliated physicians and third-party payors.
The Company has little experience in managing capitated-risk arrangements.
Revenues under any managed care or capitated arrangements entered into by the
Company, whether directly through an IPA or through the assignment of a
capitated contract entered into by its affiliated physicians, will generally be
a fixed amount per enrollee. Under such an arrangement, the Company would
contract with affiliated physicians for the provision of health care services
and the Company would be responsible for the provision of all or a portion of
the health care requirements of such enrollees. To the extent that enrollees
require more care than is anticipated by the Company upon entering into such a
contract, the Company's revenues under such contracts may be insufficient to
cover its costs. The Company expects to enter into reinsurance agreements with
third-party insurers in respect of a portion of such risk. See "Risk
Factors -- Risks Associated with Capitated Fee Arrangements."

PROPRIETARY RIGHTS

The Company depends upon a combination of patent, trade secret and copyright
laws, nondisclosure and other contractual provisions and technical measures to
protect its proprietary rights. The Company has no issued patents and one patent
application. The patent application has been filed for the Company's Smart
Scripts prescription management application. No assurance can be provided that
such patent will be issued or will provide the Company with adequate protection.
The Company also seeks to protect the source code of its software, user
documentation and databases under copyright law. The copyright protection
accorded to databases, however, is fairly limited. While the arrangement and

32
<PAGE>
selection of data are predictable, the actual data are not, and others are free
to create databases that perform the same function. The Company distributes its
clinical information systems products under agreements that grant customers
non-exclusive licenses and generally contain terms and conditions restricting
the disclosure and use of the Company's systems. In addition, the Company
attempts to protect the secrecy of its proprietary databases and other trade
secrets and proprietary information through confidentiality agreements with
employees, consultants and third parties.

The Company believes that, aside from the various legal protections of its
proprietary information and technologies, factors such as the technological and
creative skills of its personnel and product maintenance and support are
integral to establishing and maintaining its position within the health care
industry. Although the Company believes that its products do not infringe upon
the proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against the Company in the future.
See "Risk Factors -- Dependence on Proprietary Assets."

COMPETITION

The provision of physician practice and network management services is a
highly competitive business in which the Company competes for contracts with
several national and many regional and local companies. The Company also
competes with traditional managers of health care services that directly recruit
and manage physicians. In addition, certain of the Company's competitors are
dedicated to or specialize in the management of single-specialty practices
focused on diseases such as cardiology, oncology and orthopedics, specialties on
which the Company intends to focus. Certain of the Company's competitors have
access to substantially greater financial resources than the Company. The
Company believes that competition in this industry is generally based on cost
and quality of services.

The market for health care information systems and services is highly
competitive and rapidly changing. The Company believes that the principal
competitive factors for clinical information systems are the proprietary nature
of methodologies, databases and technical resources, the usefulness of the data
and reports generated by the software, customer service and support,
compatibility with the customer's existing information systems, potential for
product enhancement, vendor reputation, price and the effectiveness of marketing
and sales efforts.

The Company's competitors include other providers of clinical information
systems and practice management systems. Many of the Company's competitors and
potential competitors have greater financial, product development, technical and
marketing resources than the Company, and currently have, or may develop or
acquire, substantial installed customer bases in the health care industry. In
addition, as the market for clinical information systems and practice management
systems develops, additional competitors may enter the market and competition
may intensify. While the Company believes that it will successfully
differentiate its clinical information systems from those of its competitors,
there can be no assurance that future competition will not have a material
adverse effect on the Company. See "Risk Factors -- Highly Competitive
Industry."

GOVERNMENT REGULATION

As a participant in the health care industry, the Company's operations and
relationships are subject to extensive and increasing regulation by a number of
governmental entities at the federal, state, and local levels. The Company
believes its operations are in material compliance with applicable laws.
Nevertheless, because of the nature of the Company's relationship with physician
organizations, many aspects of the Company's business operations have not been
the subject of state or federal regulatory interpretations and there can be no
assurance that a review by courts or regulatory authorities of the Company's
business or that of its affiliated physician organizations will not result in a
determination

33
<PAGE>
that could adversely affect the operations of the Company or that the health
care regulatory environment will not change so as to restrict the Company's or
the affiliated physicians' existing operations or their expansion.

During the first quarter of 1996, approximately 35% of the revenues of the
Company's affiliated physician group practices was derived from payments made by
government-sponsored health care programs (principally, Medicare, Medicaid and
state reimbursed programs). As a result, any change in reimbursement
regulations, policies, practices, interpretations or statutes could adversely
affect the operations of the Company. The federal Medicare program adopted a
system of reimbursement of physician services, RBRVS, which took effect in 1992
and is expected to be fully implemented by December 31, 1996. The Company
expects that the RBRVS fee schedule and other future changes in Medicare
reimbursement will result in some cases in a reduction and in some cases in an
increase from historical levels in the per-patient Medicare revenue received by
certain of the physician organizations with which the Company contracts.
Although the Company does not believe such reductions will have a material
adverse effect on the Company's operating results, the RBRVS fee schedule may be
adopted by other payors, which could have a material adverse effect on the
Company.

There are also state and federal civil and criminal statutes imposing
substantial penalties, including civil and criminal fines and imprisonment, on
health care providers that fraudulently or wrongfully bill governmental or other
third-party payors for health care services. The federal law prohibiting false
billings allows a private person to bring a civil action in the name of the U.S.
government for violations of its provisions. The Company believes it is in
material compliance with such laws, but there is no assurance that the Company's
activities will not be challenged or scrutinized by governmental authorities.
Moreover, technical Medicare and other reimbursement rules affect the structure
of physician billing arrangements. The Company believes it is in material
compliance with such regulations, but regulatory authorities may differ and in
such event the Company may have to modify its relationship with physician
organizations. Noncompliance with such regulations may adversely affect the
business, financial condition and results of operations of the Company and
subject it and affiliated physician groups to penalties and additional costs.

The laws of many states prohibit business corporations such as the Company
from practicing medicine and employing physicians to practice medicine. The
Company provides only non-medical services and clinical information systems to
physician organizations, does not represent to the public or its clients that it
offers medical services and does not exercise control over the practice of
medicine by the physician organizations with which it contracts. Accordingly,
the Company believes that it is not in violation of applicable state laws
relating to the practice of medicine. The laws in most states regarding the
corporate practice of medicine have been subjected to limited judicial and
regulatory interpretation and, therefore, no assurances can be given that the
Company's activities will be found to be in compliance, if challenged. There can
be no assurance that a review of the Company's or its affiliated physicians'
businesses by courts or regulatory authorities will not result in a
determination that could adversely affect the operations of the Company or its
affiliated physicians (for example, by rendering the Company's management
services agreements with a physician organization unenforceable). In addition to
prohibiting the practice of medicine, numerous states prohibit entities like the
Company from engaging in certain health care related activities such as
fee-splitting with physicians. New York State, for instance, prohibits
percentage-based payments from physicians or physician groups to management
companies for services other than billing and collection. Accordingly, expansion
of the operations of the Company to certain jurisdictions may require it to
comply with such jurisdictions' regulations which could lead to structural and
organizational modifications of the Company's form of relationships with
physician organizations. Such changes, if any, could have a material adverse
effect on the Company.

Certain provisions of the Social Security Act, commonly referred to as the
"Anti-kickback Statute," prohibit the offer, payment, solicitation or receipt of
any form of remuneration in return for the referral of Medicare or state health
program patients or patient care opportunities, or in return for

34
<PAGE>
the recommendation, arrangement, purchase, lease or order of items or services
that are covered by Medicare or state health programs. The Anti-kickback Statute
is broad in scope and has been broadly interpreted by courts in many
jurisdictions. Read literally, the statute places at risk many legitimate
business arrangements, potentially subjecting such arrangements to lengthy,
expensive investigations and prosecutions initiated by federal and state
governmental officials. Many states, including those in which the Company does
business, have adopted similar prohibitions against payments intended to induce
referrals of Medicaid and other third-party payor patients. The Company believes
that, although it is receiving remuneration under the management services
agreements for management services, it is not in a position to make or influence
the referral of patients or services reimbursed under government programs to the
physician groups and, therefore, believes it has not violated the Anti-kickback
Statute. The Company also is not a separate provider of Medicare or state health
program reimbursed services. To the extent the Company is deemed to be either a
referral source or a separate provider under its management services agreements
and to receive referrals from physicians, the financial arrangements under such
agreements could be subject to scrutiny and prosecution under the Anti-kickback
Statute. Violation of the Anti-kickback Statute is a felony, punishable by fines
up to $25,000 per violation and imprisonment for up to five years. In addition,
the Department of Health and Human Services may impose civil penalties excluding
violators from participation in Medicare or state health programs.

In July 1991, in part to address concerns regarding the Anti-kickback
Statute, the federal government published regulations that provide exceptions,
or "safe harbors," for transactions that will be deemed not to violate the
Anti-kickback Statute. Among the safe harbors included in the regulations were
provisions relating to the sale of practitioner practices, management and
personal services agreements and employee relationships. Additional safe harbors
were published in September 1993 offering new protections under the
Anti-kickback Statute to eight activities, including referrals within group
practices consisting of active investors. Proposed amendments to clarify these
safe harbors were published in July 1994 which, if adopted, would cause
substantive retroactive changes to the 1991 regulations. Although the Company
believes that it is not in violation of the Anti-kickback Statute, its
operations may not fit within any of the existing or proposed safe harbors.

Significant prohibitions against physician referrals were enacted by
Congress in the Omnibus Budget Reconciliation Act of 1993. These prohibitions,
commonly known as "Stark II," amended prior physician self-referral legislation
known as "Stark I" by dramatically enlarging the field of physician-owned or
physician-interested entities to which the referral prohibitions apply.
Effective January 1, 1995, Stark II prohibits, subject to certain exemptions, a
physician or a member of his immediate family from referring Medicare patients
to an entity providing "designated health services" in which the physician has
an ownership or investment interest, or with which the physician has entered
into a compensation arrangement including the physician's own group practice.
The designated health services include radiology and other diagnostic services,
radiation therapy services, physical and occupational therapy services, durable
medical equipment, parenteral and enteral nutrients, equipment and supplies,
prosthetics, orthotics, outpatient prescription drugs, home health services and
inpatient and outpatient hospital services. The penalties for violating Stark II
include a prohibition on payment by these government programs and civil
penalties of as much as $15,000 for each violative referral and $100,000 for
participation in a "circumvention scheme." The Company believes that its
activities are not in violation of Stark I or Stark II. However, the Stark
legislation is broad and ambiguous. Interpretative regulations clarifying the
provisions of Stark II have not been issued. While the Company believes it is in
compliance with the Stark legislation, future regulations could require the
Company to modify the form of its relationships with physician organizations.
Moreover, the violation of Stark I or II by the Company's affiliated physician
organizations could result in significant fines and loss or reimbursement which
could materially adversely affect the Company. Many states in which the Company
conducts business have enacted similar laws applicable to all services.

The Health Care Finance Administration ("HCFA") has issued final regulations
(the "PIP regulations") covering the use of physician incentive plans ("PIPs")
by HMOs and other managed care

35
<PAGE>
contractors and subcontractors ("Organizations"), potentially including the
Company. Any Organization that contracts with a physician group that places the
individual physician members of the group at substantial financial risk for the
provision of services (e.g., if a primary care group takes risk but subcontracts
with a specialty group to provide certain services) must satisfy certain
disclosure, survey and stop-loss requirements. Under the PIP regulations,
payments of any kind, direct or indirect, to induce providers to reduce or limit
covered or medically necessary services ("Prohibited Payments") are prohibited.
Further, where there are no Prohibited Payments but there is risk sharing among
participating providers related to utilization of services by their patients,
the regulations contain three groups of requirements: (i) requirements for
physician incentive plans that place physicians at "substantial financial risk;"
(ii) disclosure requirements for all Organizations with PIPs; and (iii)
requirements related to subcontracting arrangements. In the case of substantial
financial risk (defined in the regulations according to several methods, but
essentially risk in excess of 25% of the maximum payments anticipated under a
plan with less than 25,000 covered lives), Organizations must: (1) conduct
enrollee surveys; and (2) ensure that all providers have specified stop-loss
protection. The violation of the requirements of the PIP regulations may result
in a variety of sanctions, including suspension of enrollment of new Medicaid or
Medicare members, or a civil monetary penalty of $25,000 for each determination
of noncompliance. In addition, because of the increasing public concerns
regarding PIPs, the PIP regulations may become the model for the industry as a
whole. The new regulations could have an affect on the ability of the Company to
effectively reduce the costs of providing services, by limiting the amount of
risk that may be imposed upon physicians.

Because the affiliated physician organizations remain separate legal
entities, they may be deemed competitors subject to a range of antitrust laws
which prohibit anti-competitive conduct, including price fixing, concerted
refusals to deal and division of market. The Company intends to comply with such
state and federal laws as may affect its development of integrated health care
delivery networks, but there can be no assurance that a review of the Company's
business by courts or regulatory authorities will not result in a determination
that could adversely affect the operation of the Company and its affiliated
physician groups.

Laws in all states regulate the business of insurance and the operation of
HMOs. Many states also regulate the establishment and operation of networks of
health care providers. There can be no assurance that regulatory authorities of
the states in which the Company operates would not apply these laws to require
licensure of the Company's operations as an insurer, as an HMO or as a provider
network. The Company believes that it is in compliance with these laws in the
states in which it does business, but there can be no assurance that future
interpretations of insurance laws and health care network laws by the regulatory
authorities in these states or in the states into which the Company may expand
will not require licensure or a restructuring of some or all of the Company's
operations.

As a result of the continued escalation of health care costs and the
inability of many individuals to obtain health insurance, numerous proposals
have been or may be introduced in the U.S. Congress and state legislatures
relating to health care reform. There can be no assurance as to the ultimate
content, timing or effect of any health care reform legislation, nor is it
possible at this time to estimate the impact of potential legislation, which may
be material, on the Company.

The confidentiality of patient records and the circumstances under which
such records may be released is subject to substantial regulation under state
and federal laws and regulations. To protect patient confidentiality, data
entries to the Company's databases delete any patient identifiers, including
name, address, hospital and physician. The Company believes that its procedures
comply with the laws and regulations regarding the collection of patient data in
substantially all jurisdictions, but regulations governing patient
confidentiality rights are evolving rapidly and are often difficult to apply.
Additional legislation governing the dissemination of medical record information
has been proposed at both the state and federal level. This legislation may
require holders of such information to implement security measures that may be
of substantial cost to the Company. There can be no assurance that changes to

36
<PAGE>
state or federal laws would not materially restrict the ability of the Company
to obtain patient information originating from records.

The health care industry is subject to changing political, economic and
regulatory influences that may affect the procurement practices and operations
of health care industry participants. During the past several years, government
regulation of reimbursement rates in the United States health care industry has
increased. Lawmakers continue to propose programs to reform the United States
health care system, which may contain proposals to increase governmental
involvement in health care, lower reimbursement rates and otherwise change the
operating environment for the Company's customers. Health care industry
participants may react to these proposals by curtailing or deferring
investments, including investments in the Company's products. The Company cannot
predict what impact, if any, such factors may have on its business, financial
condition and results of operations or on the price of the Common Stock.

Certain products, including software applications, intended for use in the
diagnosis of disease or other conditions, or in the cure, treatment, mitigation
or prevention of disease, are subject to regulation by the FDA under the Federal
Food, Drug and Cosmetic Act of 1938, as amended (the "FDCA"). The FDCA imposes
substantial regulatory controls over the manufacturing, testing, labeling, sale,
distribution, marketing and promotion of medical devices and other related
activities. These regulatory controls can include, for example, compliance with
the following: manufacturer establishment registration and device listing;
current good manufacturing practices; FDA clearance of a premarket notification
submission or FDA approval of a premarket approval application; medical device
adverse event reporting; and general prohibitions on misbranding and
adulteration. Violations of the FDCA can result in severe criminal and civil
penalties, and other sanctions, including, but not limited to, product seizure,
recall, repair or refund orders, withdrawal or denial of premarket notifications
or premarket approval applications, denial or suspension of government
contracts, and injunctions against unlawful product manufacture, labeling,
promotion, and distribution or other activities.

In its 1989 Draft Policy Statement, the FDA stated that it intended to
exempt certain clinical decision support software products from a number of
regulatory controls. Under the 1989 Draft Policy Statement, the FDA stated that
it intended to exempt decision support software products that involve "competent
human intervention before any impact on human health occurs (e.g., where
clinical judgment and experience can be used to check and interpret a system
output)" from the following controls: manufacturer establishment registration
and device listing, premarket notification, and compliance with the medical
device reporting and current good manufacturing practice regulations. In the
1989 Draft Policy Statement, the FDA stated that until it formally exempted
decision support software products from these requirements, manufacturers of
eligible decision support software products would to be required to comply with
those controls.

Since issuing the 1989 Draft Policy Statement, the FDA has not issued a
final policy on this issue and has not formally exempted any products as
discussed in the 1989 Draft Policy Statement. The FDA has referred to the 1989
Draft Policy Statement in official presentations regarding software regulation
and in decisions and opinions regarding the regulatory status of various
products. Over the last few years, however, the FDA has stated that it intends
to issue a new policy concerning computer products. Under this new policy,
exemptions from regulatory controls, if any, would be based upon a product
specific "risk factor" analysis. For purposes of this analysis, the FDA has
considered, among other things, the following: (i) seriousness of the disease to
be diagnosed or treated; (ii) time frame for use of the information; (iii)
concordance with accepted medical practice; (iv) format of data and its
presentation; (v) individualized versus aggregate patient care recommendations;
and (vi) clarity of algorithms used in the software. Given the FDA's intent to
issue a new policy concerning the regulation of computer software, there can be
no assurance as to the effect of such a policy, if any, upon the regulatory
status of the Company's products.

37
<PAGE>
The Company believes that its clinical information systems are not medical
devices under the FDCA and, thus, are not subject to the controls imposed on
manufacturers of medical devices and do not fall within the scope of the 1989
Draft Policy Statement. The Company further believes that to the extent that its
products are determined to be medical devices, they fall within the exemptions
for decision support systems provided by the 1989 Draft Policy Statement. The
Company has not taken action to comply with the requirements that would
otherwise apply if the Company's products were determined to be non-exempt
medical devices.

There can be no assurance that the FDA will not make a request or take other
action to require the Company to comply with any or all current or future
controls applicable to medical devices under the FDCA. There can be no assurance
that, if such a request were made or other action were taken, the Company could
comply in a timely manner, if at all, or that any failure to comply would not
have a material adverse effect on the Company's business, financial condition or
results of operations, or that the Company would not be subjected to significant
penalties or other sanctions. There can be no assurance that the FDA will
continue to permit any or all of the exemptions provided in the 1989 Draft
Policy Statement, or in a new policy statement, if any, or that the FDA will
promulgate regulations formally implementing such exemptions. There can be no
assurance that the Company's current or future clinical information systems will
qualify for future exemptions, if any, nor can there be any assurance that any
future requirements will not have a material adverse effect on the Company's
business, financial condition or results of operations. See "Risk Factors --
Government Regulation."

LEGAL PROCEEDINGS

The Company is not a party to any litigation that would have a material
adverse effect on its business, results of operations or financial condition.

EMPLOYEES

As of March 31, 1996, the Company had a total of approximately 130
employees, approximately 35 of whom were employed in the Company's information
systems subsidiary. None of the Company's employees is subject to a collective
bargaining agreement. The Company has never experienced a work stoppage and
believes that its employee relations are satisfactory.

PROPERTIES

The Company currently occupies 11,009 square feet of leased office space in
Tarrytown, New York, 4,065 square feet of leased office space in Marietta,
Georgia, 1,180 square feet of leased office space in Wayne, Pennsylvania and
10,742 square feet of leased office and data center space in Chicago, Illinois.
The current lease (including 4,500 square feet of space subleased from
Physicians' Online, Inc. as more fully described under "Certain Transactions")
for the Tarrytown office expires in March 1997 and has an annual rental of
approximately $220,207. The Company intends to sublease an additional 5,500
square feet of space in Tarrytown, effective September 1 and expiring in March
1997, for a rental of approximately $70,583 during such period. The Company has
entered into a lease, effective April 1, 1997, for 25,000 square feet at the
Tarrytown office. Such lease will have an annual rental of approximately
$500,000 and will expire March 2002. See "Certain Transactions". The lease for
the Marietta office expires in January 2001 and has an annual rental of
approximately $50,000. The lease for the Wayne office expires in April 1997 and
has an annual rental of approximately $20,000. The lease for the Chicago office
expires in March 2001 and has an annual rental of $180,000 for the current year.
The Company believes that these facilities are adequate for the foreseeable
future.

38
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- ----------------------------------------
<S> <C> <C>
Jonathan Edelson, M.D................... 36 Chairman of the Board and Chief
Executive Officer
Steven Hochberg......................... 34 President and Director
Richard W. Kaplan....................... 50 Executive Vice President and Director
Alan B. Masarek......................... 35 Chief Operating Officer and Chief
Financial Officer
Robert Alger............................ 41 Vice President and Chief Information
Officer
Andrew C. Garling, M.D.................. 50 Vice President and Chief Medical Officer
Barry Kurokawa(1)(2).................... 40 Director
Jonathan Lieber(1)(2)................... 30 Director
</TABLE>

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

(1) Member of Audit Committee.

(2) Member of Compensation Committee.

JONATHAN EDELSON, M.D. has been the Chairman of the Board and Chief
Executive Officer of the Company since its inception. Dr. Edelson is a
board-certified internist. Prior to co-founding the Company, Dr. Edelson served
as the Chief Executive Officer of Physicians' Online, Inc. from August 1993 to
December 1994 and as a director from August 1993 to the present. Dr. Edelson was
a senior vice president with ValueRx, Inc., the prescription drug benefits
management unit of Value Health, Inc., from October 1990 to June 1993. As a
practicing physician prior to joining ValueRx, Inc., Dr. Edelson founded Medical
Decision Resources, Inc., a physician profiling and education business, in March
1989, and served as its President through September 1990. Dr. Edelson attended
Yale University, University of Chicago School of Medicine and the Harvard School
of Public Health.

STEVEN HOCHBERG has been President and a director of the Company since its
inception. He is a co-founder of the Company and a co-founder of Physicians'
Online, Inc. Mr. Hochberg served as the President of Physicians' Online, Inc.
from January 1993 to June 1994. Mr. Hochberg served as the President of Ascent
Group, Inc., a financial consulting business that he founded, from February 1992
to January 1993, and as a Vice President of Sigoloff & Associates, management
consultants, from September 1989 to February 1992. In addition, he worked with
Alex. Brown & Sons as a Corporate Finance Associate in 1985 and with Bain &
Company as a Strategy Consultant from 1986 to 1987. Mr. Hochberg, a CPA, holds
an MBA from Harvard Business School.

RICHARD W. KAPLAN has been Executive Vice President and a director of the
Company since April 1995. Prior to joining the Company, Mr. Kaplan was President
of Coastal Managed Health Care, Inc., a subsidiary of Coastal Physician Group,
from September 1993 to April 1995. Before joining Coastal, Mr. Kaplan held
senior management positions at a variety of companies in the managed care area,
including Towers Perrin from April 1992 to September 1993 and CIGNA Healthplans
from July 1985 to February 1992. Mr. Kaplan received his Masters in Public
Health from the University of North Carolina at Chapel Hill.

ALAN B. MASAREK has been Chief Operating Officer and Chief Financial Officer
of the Company since November 1995. Prior to joining the Company, from April
1995 to November 1995, Mr. Masarek was acting as an independent consultant. Mr.
Masarek was President and Chief Executive Officer of the Scovill Group, an
international manufacturer of fasteners and other component items with annual
revenues of approximately $125 million, from February 1994 to April 1995. Prior
to Scovill, Mr.

39
<PAGE>
Masarek was President of two divisions of the Bibb Company, a diversified
textile manufacturer, from December 1991 to February 1994. Prior to that, Mr.
Masarek worked for three years as a buyout specialist with the NTC Group and for
five years in the audit division of Arthur Andersen & Co. Mr. Masarek, a CPA,
holds an MBA from Harvard Business School.

ROBERT ALGER has been Vice President and Chief Information Officer of the
Company since February 1995. Prior to joining the Company, Mr. Alger was Chief
Information Officer and Vice President of Information Systems at Blue Shield of
California, from December 1991 to February 1995 and a partner at Scribner,
Jackson & Associates, a technology consulting group, from January 1986 to
December 1991. Mr. Alger received his B.S. from California State
University--Northridge.

ANDREW C. GARLING, M.D. has been Vice President and Chief Medical Officer of
the Company since November 1995. Dr. Garling's experience in medical information
systems includes serving as Vice President of Medical Affairs for TDS, Inc. from
August 1988 to December 1992 and as Chief Information Officer and Vice President
for the Prudential Health Care System's Southern Group Operations from December
1992 to November 1995. Dr. Garling completed his medical degree at Harvard
Medical School with initial specialty training in surgery. He later became board
certified in Emergency Medicine and practiced clinical medicine with the Kaiser
Permanente Medical Group of Northern California from July 1977 to August 1988.
At Kaiser, he also had administrative responsibilities, including serving as
staff president for the hospital system.

BARRY KUROKAWA has been a director of the Company since March 1996. Since
February 1996, Mr. Kurokawa has served as a Managing Director of ProMed Asset
Management, L.L.C. ("ProMed"), a private health care investment management and
services company, and as the President of Blackriver Capital Management, Ltd.,
the general partner of ProMed Partners, L.P. and a consultant to INVESCO Trust
Company, a mutual fund company. From May 1992 to January 1996, he was employed
by INVESCO Trust Company as Senior Vice President and portfolio manager of four
health care funds managed by the firm. From July 1992 to January 1996, Mr.
Kurokawa was also the Vice President of Global Health Services, a closed-end
mutual fund. Before he joined INVESCO, Mr. Kurokawa served as Vice President
Equity Research and health care analyst at Trust Company of the West, an
investment management company, from July 1987 to April 1992.

JONATHAN LIEBER has been a director of the Company since September 1995. Mr.
Lieber has served as an investment analyst focusing on special situation
investments, including the areas of healthcare, banking and other consumer
services, of GeoCapital Corp., since July 1992. Mr. Lieber has served since June
1992 as Vice President of Applewood Capital, where he specializes in consumer
services including healthcare, banking and finance. Additionally, Mr. Lieber has
served as a Vice President of Infomedia Management Co., Inc., the management
company for the general partner of the 21st Century investment partnerships
since February 1995. Prior to joining GeoCapital, Mr. Lieber was employed as a
research analyst at Gabelli & Co., an investment management and brokerage firm,
from 1990 to 1991.

Each of Barry Kurokawa and Jonathan Lieber were elected to the Board of
Directors pursuant to voting agreements which give the holders of the Series B
and C Preferred Stock of the Company the right to elect one director and the
holders of the Series D Preferred Stock of the Company the right to elect one
director. Such agreements will terminate upon the consummation of this offering.

The Board of Directors is divided into three classes, as nearly equal in
number as possible, having terms expiring at the annual meeting of the Company's
stockholders in 1997 (comprised of Mr. Kaplan), 1998 (comprised of Messrs.
Kurokawa and Lieber) and 1999 (comprised of Dr. Edelson and Mr. Hochberg). At
each annual meeting of stockholders, successors to the class of directors whose
term expires at such meeting will be elected to serve for three-year terms and
until their successors are elected and qualified.

40
<PAGE>
BOARD COMMITTEES

The Board of Directors has established two committees, the Audit Committee
and the Compensation Committee. The Audit Committee is comprised of Messrs.
Kurokawa and Lieber and oversees the activities of the Company's independent
auditors and the Company's internal controls. The Compensation Committee, which
is also comprised of Messrs. Kurokawa and Lieber, makes recommendations to the
Board of Directors with respect to general compensation and benefit levels,
determines the compensation and benefits for the Company's executive officers
and administers the Company's stock option plans and employee stock purchase
plan.

DIRECTOR COMPENSATION

Directors do not currently receive any cash compensation from the Company
for their service as members of the Board of Directors, although they are
reimbursed for certain expenses in connection with attendance at Board and
Committee meetings. Non-employee directors of the Company are eligible to
receive options under the Company's Stock Option Plan for Non-Employee
Directors. See "Management -- Stock Plans."

LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY

The Company's Certificate of Incorporation provides that directors of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director except for liability
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL or (iv) for any transaction
from which the director derived an improper personal benefit. The effect of
these provisions will be to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of fiduciary duty as a
director (including breaches resulting from grossly negligent behavior), except
in the situations described above. These provisions will not limit the liability
of directors under federal securities laws.

The Company's Certificate of Incorporation provides that the Company shall
indemnify its directors, officers, employees and agents to the fullest extent
permitted by law. The Company's Certificate of Incorporation also permits it to
secure insurance on behalf of any director, officer, employee or agent against
any expense, liability or loss arising out of his or her actions in such
capacity.

The Company intends to obtain directors' and officers' liability insurance
("D&O Insurance") prior to the date of this Prospectus, and expects to continue
to carry D&O Insurance following this offering. In addition, the Company has
entered into an indemnification agreement with each of its directors and
officers under which the Company has indemnified each of them against expenses
and losses incurred for claims brought against them by reason of a director or
officer of the Company.

The Company believes that the limitation of liability and indemnification
provisions in its Certificate of Incorporation, the D&O Insurance and the
indemnification agreements will enhance the Company's ability to continue to
attract and retain qualified individuals to serve as directors and officers.
There is no pending litigation or proceeding involving a director, officer or
employee of the Company to which the indemnification provisions would apply.

EXECUTIVE COMPENSATION

The following table sets forth a summary of the compensation earned by the
Company's Chief Executive Officer and the other executive officers of the
Company whose combined salary and bonus for the year ended December 31, 1995 was
in excess of $100,000 (collectively, the "Named Executive

41
<PAGE>
Officers") for services rendered in all capacities to the Company during the
Company's fiscal year ended December 31, 1995.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL SECURITIES
COMPENSATION UNDERLYING
------------ OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) (#) COMPENSATION
- ------------------------------------------------ ---- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Jonathan Edelson, M.D........................... 1995 $187,115(1) 101,286 $ 0
Chairman of the Board of Directors
and Chief Executive Officer
Steven Hochberg................................. 1995 187,115(1) 101,286 0
President and Director
Richard W. Kaplan............................... 1995 142,000(2) 193,637 14,800(3)
Executive Vice President and Director
Robert Alger.................................... 1995 123,937(4) 41,706 0
Vice President and Chief Information Officer
</TABLE>

- ------------
(1) Current annual salary is $220,000.

(2) Mr. Kaplan joined the Company in April 1995. Includes a $17,000 signing
bonus. Mr. Kaplan's current annual salary is $200,000.

(3) Includes living expenses as part of a relocation package for Mr. Kaplan.

(4) Mr. Alger joined the Company in February 1995. Mr. Alger's current annual
salary is $154,000.

The compensation of each of Alan B. Masarek, the Company's Chief Operating
Officer and Chief Financial Officer, and Andrew C. Garling, M.D., the Company's
Vice President and Chief Medical Officer, each of whom joined the Company in
November 1995, is currently in excess of $100,000 on an annual basis.

The following tables set forth, with respect to the Named Executive
Officers, the option grants made during the Company's fiscal year ended December
31, 1995 and the option values at the end of such fiscal year.

42
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------
NAME GRANTED (#)(2) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ------------------------------ -------------- ------------ -------- -------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Jonathan Edelson, M.D......... 53,622 4.25% $ 2.52 Mar. 31, 2005 $84,723 $215,560
47,664 3.78% 3.52 Dec. 31, 2005 105,337 267,395
Steven Hochberg............... 53,622 4.25% 2.52 Mar. 31, 2005 84,723 215,560
47,664 3.78% 3.52 Dec. 31, 2005 105,357 267,395
Richard W. Kaplan............. 178,742 14.17% 2.52 Apr. 30, 2005 282,416 718,543
14,895 1.18% 3.52 Dec. 31, 2005 32,918 83,561
Robert Alger.................. 35,748 2.83% 2.52 Feb. 28, 2005 56,482 143,707
5,958 0.47% 3.52 Dec. 31, 2005 13,167 33,424
</TABLE>

- ------------
(1) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Common Stock. The amounts
reflected in this table may not necessarily be achieved.

(2) All options were granted under the Company's 1995 Stock Option Plan. All
options granted had an exercise price equal to the fair market value on the
date of grant. All options may become fully exercisable on the occurrence of
a change in control as described in the Company's 1995 Stock Option Plan.
Options vest at the rate of one-third per year over a three-year period from
the date of grant.

The following table sets forth information with respect to options exercised
during the fiscal year ended December 31, 1995 by each of the Named Executive
Officers and certain information regarding options held at December 31, 1995 by
each of the Named Executive Officers.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
EXERCISE REALIZED --------------------------- ----------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(2)
- --------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan Edelson, M.D...... 239,515 $840,413 0 101,286 $ 0 $ 356,527
Steven Hochberg............ 268,114 $940,761 0 101,286 $ 0 $ 356,527
Richard W. Kaplan.......... -- -- 0 193,637 $ 0 $ 681,602
Robert Alger............... -- -- 0 41,706 $ 0 $ 146,805
</TABLE>

- ------------
(1) Value realized is based on a value of $3.52 per share of the Company's
Common Stock, the fair market value of the Company's Common Stock on
December 31, 1995, net of the exercise price paid.

(2) Value of unexercised in-the-money options is based on a value of $3.52 per
share of the Company's Common Stock, the fair market value of the Company's
Common Stock on December 31, 1995. Amounts reflected are based on the
assumed value minus the exercise price and multiplying the result by the
number of shares subject to the option.

43
<PAGE>
STOCK PLANS

1995 Stock Option Plan. The Company has adopted the 1995 Stock Option Plan
(the "1995 Plan"). The 1995 Plan permits the grant of (i) options to purchase
shares of Common Stock intended to qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
("Incentive Stock Options"), and (ii) options that do not so qualify
("Non-Qualified Options"). No award may be granted under the 1995 Plan after the
tenth anniversary of the Plan's adoption. The 1995 Plan is administered by the
Compensation Committee.

shares of Common Stock have been reserved for issuance under the 1995
Plan, subject to adjustment for stock splits, stock dividends,
recapitalizations, reclassifications and similar events. If an award expires
unexercised or is forfeited, surrendered or canceled, terminated or settled in
cash in lieu of Common Stock, the shares of Common Stock previously used for
such awards will be available for future awards under the 1995 Plan.

Options may be granted to persons who are, at the time of grant, employees,
officers or directors of, or consultants or advisors to, the Company, provided
that Incentive Stock Options may only be granted to individuals who are
employees of the Company (within the meaning of Section 3401(c) of the Code).
Members of the Compensation Committee are not eligible to receive options under
the 1995 Plan.

Options granted under the 1995 Plan must be exercised within ten years of
the grant date, except that an Incentive Stock Option granted to a person owning
more than 10% of the total combined voting power of all classes of stock of the
Company (a "Ten Percent Stockholder") must be exercised within five years of the
grant date. No options may be assigned or transferred by the optionee other than
by will or the laws of descent or distribution and, in the case of non-statutory
options, pursuant to a qualified domestic relations order (as defined in the
Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder). Each option may be exercised only by the optionee during his or her
lifetime.

The exercise price for each option granted from the date of this Prospectus
must be at least fair market value (the "Fair Value") per share of Common Stock
on the date such option is granted. For Incentive Stock Options granted to a Ten
Percent Stockholder, the exercise price shall not be less than 110% of the Fair
Value per share of Common Stock.

Options may be made exercisable in installments, and the exercisability of
Options may be accelerated by the Board of Directors of the Company. Options
granted under the 1995 Plan typically vest over a three-year period.

In the event of a consolidation or merger in which the Company is not the
surviving corporation, sale of all or substantially all of the assets of the
Company in which outstanding shares of Common Stock are exchanged for
securities, cash or other property of any other corporation or business entity
or a liquidation of the Company (a "Corporate Transaction"), the Compensation
Committee, or the board of directors of any corporation assuming the obligations
of the Company, may, in its discretion, take any one or more of the following
actions, as to outstanding options: (i) provide that such options shall be
assumed or equivalent options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), provided that any such option
substituted for incentive stock options shall meet the requirements of Section
424(a) of the Code; (ii) upon written notice to the optionee, provide that all
unexercised options will terminate immediately prior to the consummation of such
transaction unless exercised by the optionee within a specified period following
the date of such notice; (iii) in the event of a Corporate Transaction under the
terms of which holders of the Common Stock of the Company will receive upon
consummation thereof a cash payment for each share surrendered in the Corporate
Transaction (the "Transaction Price"), make or provide for a cash payment to the
optionees equal to the difference between (A) the Transaction Price times the
number of shares of Common Stock subject to such outstanding options (to the
extent then exercisable at prices not in excess of the Transaction Price)

44
<PAGE>
and (B) the aggregate exercise price of all such outstanding options in exchange
for the termination of such options, and (iv) provide that all or any
outstanding options shall become exercisable in full immediately prior to any
such event.

Stock Option Plan for Non-Employee Directors. The Company has adopted,
effective upon consummation of this offering, the Stock Option Plan for
Non-Employee Directors (the "Non-Employee Directors Plan"). The purpose of the
Non-Employee Directors Plan is to attract and retain the services of experienced
and knowledgeable independent directors of the Company for the benefit of the
Company and its stockholders and to provide additional incentive for such
directors to continue to work for the best interests of the Company and its
stockholders through continuing ownership of Common Stock. A total of 500,000
shares of Common Stock may be issued through the exercise of options granted
pursuant to the Non-Employee Directors Plan. No option may be granted under the
Non-Employee Directors Plan after 10 years following consummation of this
offering.

The Non-Employee Directors Plan will be administered by the Board of
Directors. Subject to the terms of the Non-Employee Directors Plan, the Board of
Directors has the sole authority to determine questions arising under, and to
adopt rules for the administration of, the Non-Employee Directors Plan. The
Non-Employee Directors Plan may be terminated at any time by the Board of
Directors, but such action will not affect options previously granted pursuant
thereto.

Directors of the Company who are not, and who have not been during the
immediately preceding 12-month period, employees of the Company or any
subsidiary of the Company (each, a "Non-Employee Director") are automatically
participants in the Non-Employee Directors Plan. There are currently two
directors, Messrs. Kurokawa and Lieber, who would be eligible to receive options
under the Non-Employee Directors Plan.

Each Non-Employee Director who is in office on the consummation of this
offering will, upon such consummation, automatically be granted an option to
acquire shares of Common Stock. Each Non-Employee Director who is in
office on November 15, 1996, but who is not in office upon the consummation of
this offering, will, on January 1, 1997, automatically be granted an option to
acquire shares of Common Stock. Each Non-Employee Director who is in
office on November 15 of any year (commencing with November 15, 1997) will, on
the immediately succeeding January 1, automatically be granted an option to
acquire shares of Common Stock. The price of shares that may be
purchased upon exercise of the option is the fair market value of the Common
Stock on the date of grant, as evidenced by the average of the high and low
sales prices of Common Stock on such date as reported on the Nasdaq National
Market. The price of shares that may be purchased upon exercise of an option
granted upon the consummation of this offering is the initial public offering
price. Options granted pursuant to the Non-Employee Directors Plan, except as
discussed below, are exercisable in installments of 25% upon each anniversary of
the date of grant. The term of each option, except as discussed below, is for a
period not exceeding 10 years from the date of grant. Options may not be
assigned or transferred except by will or by operation of the laws of descent
and distribution.

In the event of a Change in Control of the Company (as defined below), an
option granted to a Non-Employee Director will become fully exercisable if,
within one year of such Change in Control, such Non-Employee Director ceases for
any reason to be a member of the Board of Directors. A Change in Control will be
deemed to have occurred if (a) there is consummated (i) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock are converted into cash,
securities or other property, other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company; (b) the shareholders approve any plan or proposal
for the liquidation or dissolution of the Company; (c) any person (as such term
is used

45
<PAGE>
in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) becomes the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of 30% or more of the outstanding Common Stock; or
(d) during any period of two consecutive years, individuals who at the beginning
of such period constitute the entire Board of Directors cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period. Any exercise of an option permitted in
the event of a Change of Control must be made within 180 days of the relevant
Non-Employee Director's termination as a director of the Company.

Employee Stock Purchase Plan. The Company has adopted, effective upon the
date of this Prospectus, an employee stock purchase plan (the "Stock Purchase
Plan"). Under the Stock Purchase Plan, eligible employees will be granted
options (exercisable by electing to participate in the Plan) to purchase shares
of Common Stock through regular payroll deductions. The Stock Purchase Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Code. The total number of shares of Common Stock that are authorized for
issuance under the Stock Purchase Plan is 1,200,000. All full-time employees of
the Company who have completed at least one year of employment will be eligible
to participate in the Stock Purchase Plan, subject to certain limited
exceptions. Options will be granted every six months to eligible employees and,
if not exercised, will expire on the last day of the six-month period in which
granted. Employees electing to participate for any plan year will authorize
payroll deductions at a stated whole percentage ranging from 2% to 10% of
compensation, as determined by the participant. Options will be nontransferable
other than by will or by operation of the laws of descent and distribution. The
purchase price for shares offered under the Stock Purchase Plan each year will
be equal to a percentage designated by the Board of Directors (not less than
85%) of the lower of the fair market value of the Common Stock at the date of
grant or the semi-annual date of exercise as evidenced by the high and low sales
prices of the Common Stock on such date as reported on the Nasdaq National
Market. The Stock Purchase Plan will expire on the tenth anniversary of the date
of this Prospectus, unless sooner terminated by the Board of Directors. The
Board of Directors of the Company may amend, suspend or terminate the Stock
Purchase Plan at any time and from time to time, subject to certain limitations.
The Stock Purchase Plan will be administered by the Compensation Committee.

46
<PAGE>
CERTAIN TRANSACTIONS

In connection with the formation of the Company, Jonathan Edelson, M.D., the
Chairman of the Board and Chief Executive Officer of the Company, was issued
157,293 shares of Common Stock for an aggregate purchase price of $1,760. In
February 1994, the Company issued Dr. Edelson 893 shares of Common Stock in lieu
of interest on advances made to the Company. In May 1995, Dr. Edelson exercised
options to purchase 239,515 shares, for which he paid the Company $2,680. In
August 1995, Dr. Edelson purchased 48,260 shares for $576. In 1994, Dr. Edelson
loaned the Company an aggregate of $50,000 to fund working capital. Such loans
have been repaid in full.

In connection with the formation of the Company, Steven Hochberg, President
and a director of the Company, was issued 128,694 shares of Common Stock for an
aggregate purchase price of $1,440. In March 1995, Mr. Hochberg exercised
options to purchase 268,114 shares, for which he paid the Company $3,000. In
August 1995, Mr. Hochberg purchased 48,260 shares for $576. In 1995, Mr.
Hochberg loaned the Company an aggregate of $32,000 to fund working capital.
Such loans have been repaid in full.

In August 1995, the Company issued 2,978 shares of Common Stock to Richard
Kaplan, Executive Vice President and a director of the Company, for $25,000.

In August 1993, the Company issued 971,800 shares of Series A Convertible
Preferred Stock to affiliates of INVESCO Trust Company, a principal stockholder
of the Company, for $97,180. In March 1994, the Company issued 282,900 shares of
Series B Convertible Preferred Stock to affiliates of INVESCO Trust Company for
$2,000,103. In January, 1995 the Company issued 200,000 shares of Series C
Convertible Preferred Stock to affiliates of INVESCO Trust Company for
$1,500,000. In August 1995, the Company issued 666,360 shares of Series D
Convertible Preferred Stock to certain 21st Century partnerships, a principal
stockholder of the Company, for $4,997,700. Each share of Series A, B, C and D
Convertible Preferred Stock (collectively, the "Preferred Stock") is convertible
into 1.1189249 shares of Common Stock upon the consummation of this offering.

In connection with the formation of the Company in 1993, Christian Mayaud,
M.D., a principal stockholder of the Company, was issued 300,288 shares of
Common Stock for an aggregate purchase price of $3,360. In August 1994, Dr.
Mayaud was granted options to purchase 96,521 shares of Common Stock at an
exercise price of $.0112 per share. In March 1995, Dr. Mayaud was granted
options to purchase 11,171 shares of Common Stock at exercise prices of $2.52
per share. In March 1995, Dr. Mayaud exercised the 1994 options to purchase
96,521 shares of Common Stock for which he paid the Company $1,080. In August
1995, Dr. Mayaud purchased 32,174 shares of Common Stock for $360. In 1995, Mr.
Mayaud loaned the Company $25,000 to fund working capital. Such loan has been
repaid in full.

The Company currently subleases approximately 4,500 square feet of office
space in Tarrytown, New York from Physicians' Online, Inc. ("Physicians'
Online"), a Delaware corporation of which Dr. Edelson, Mr. Hochberg and Dr.
Mayaud own approximately 16% of the currently outstanding capital stock.
Physicians' Online was founded in January 1992 by Mr. Hochberg and Dr. Mayaud.
The yearly base rental on the Physicians' Online sublease equals $77,707, plus
escalations. During the period ended December 31, 1993, the years ended December
31, 1994 and 1995 and the three months ended March 31, 1996, Physicians' Online
incurred administrative expenses totalling $105,116, $135,825, $180,631 and
$25,500, respectively, on behalf of the Company for which the Company reimbursed
Physicians' Online. During 1993, Physicians' Online paid the Company a $175,000
fee for the development and implementation of a wireless application. During
1994, Physicians' Online loaned the Company $300,000, which loan bore interest
at the prime rate was repaid in full in 1995. During 1995, Physicians' Online
borrowed $500,000 from the Company. Such amount bore interest at the

47
<PAGE>
prime rate plus 1% and was repaid in full prior to December 31, 1995. See Note 4
of Notes to Consolidated Financial Statements.

The Company has granted options to purchase shares of Common Stock to its
directors and executive officers. See "Management -- Stock Plans" and Note 10 of
Notes to Consolidated Financial Statements.

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors and principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including a
majority of the independent and disinterested outside directors of the Board of
Directors.

48
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Common Stock of the Company as of the
date of this Prospectus and as adjusted to reflect the sale of the shares of
Common Stock offered hereby with respect to (i) each person known by the Company
to own beneficially more than 5% of the outstanding shares of Common Stock, (ii)
each of the Company's directors, (iii) each of the Named Executive Officers and
(iv) all directors and officers as a group. Unless otherwise indicated, the
address for each stockholder is c/o the Company, 560 White Plains Road,
Tarrytown, New York 10591.

<TABLE>
<CAPTION>
NUMBER PERCENTAGE
OF BENEFICIALLY OWNED(1)
SHARES -----------------------
BENEFICIALLY BEFORE THE AFTER THE
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- -------------------------------------------------------------- ------------ ---------- ---------
<S> <C> <C> <C>
INVESCO Trust Company(2)...................................... 1,300,086 28.9% 20.0%
7800 E. Union Avenue
Denver, CO 80237
21st Century Partnerships(3).................................. 595,535 13.3 9.2
767 Fifth Avenue
New York, NY 10153
Christian Mayaud, M.D.(4)..................................... 432,707 9.6 6.7
1235 Oenoke Ridge
New Canaan, CT 06840
Jonathan Edelson(5)........................................... 446,261 9.9 6.9
Steven Hochberg(5)............................................ 457,153 10.1 7.0
Richard W. Kaplan(6).......................................... 62,560 1.4 1.0
Robert Alger(7)............................................... 11,916 * *
Barry Kurokawa................................................ -- -- --
Jonathan Lieber............................................... -- -- --
All directors and executive officers as a group (8 984,984 21.4 14.9
persons)(8).................................................
</TABLE>

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

<TABLE>
<C> <S>
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the Securities and
Exchange Commission (the "Commission") and generally includes voting or investment
power with respect to securities and includes options exercisable within 60 days of the
date of this Prospectus. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table above have sole voting
and investment power with respect to all shares of Common Stock shown as beneficially
owned by them. Percentage of beneficial ownership is based on 4,491,270 shares of
Common Stock outstanding as of May 31, 1996 and 6,491,270 shares of Common Stock
outstanding upon the consummation of this offering.
(2) Includes 687,087 shares of Common Stock owned of record by INVESCO Strategic
Portfolios, Inc.--Health Sciences Portfolio ("ISP--HSP") and 618,999 shares of Common
Stock owned of record by The Global Health Sciences Fund ("GHS"). ISP--HSP and GHS are
mutual fund companies advised by INVESCO Funds Group, Inc., which is a subsidiary of
INVESCO PLC. INVESCO Trust Company is a subsidiary of INVESCO Funds Group, Inc.
(3) Includes shares owned by 21st Century Communications Partners, L.P., 21st Century
Communications T-E Partners, L.P. and 21st Century Foreign Partners, L.P.
(4) Includes options to purchase 3,723 shares of Common Stock that are exercisable within
60 days of the date of this Prospectus.
(5) Includes options to purchase 17,874 shares of Common Stock that are exercisable within
60 days of the date of this Prospectus.
(6) Includes options to purchase 59,581 shares of Common Stock that are exercisable within
60 days of the date of this Prospectus.
(7) Includes options to purchase 11,916 shares of Common Stock that are exercisable within
60 days of the date of this Prospectus.
(8) See notes (5), (6) and (7). Also includes options to purchase 7,092 shares of Common
Stock held by Alan B. Masarek that are exercisable within 60 days of the date of this
Prospectus.
</TABLE>

49
<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

Following the closing of the sale of the shares offered hereby, the
Company's authorized capital stock will consist of 15,000,000 shares of Common
Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock, par
value $.01 per share. The following summaries of certain provisions of the
Common Stock and Preferred Stock do not purport to be complete and are subject
to, and qualified by, the provisions of the Company's Restated Certificate of
Incorporation and By-laws, which are included as exhibits to the Registration
Statement of which this Prospectus is a part, and by applicable law.

COMMON STOCK

As of June 17, 1996, there were 4,491,270 shares of Common Stock outstanding
that were held of record by approximately 80 stockholders, after giving effect
to the Stock Splits and the Preferred Stock Conversion. The holders of Common
Stock are entitled to one vote for each share on all matters voted upon by
stockholders, including the election of directors. Subject to the rights of any
then outstanding Preferred Shares, the holders of the Common Stock are entitled
to such dividends as may be declared in the discretion of the Board of Directors
out of funds legally available therefor. Holders of the Common Stock are
entitled to share ratably in the net assets of the Company upon liquidation
after payment or provision for all liabilities and any preferential liquidation
rights of any Preferred Shares then outstanding. The holders of Common Stock
have no preemptive rights to purchase shares of stock of the Company. Shares of
Common Stock are not subject to any redemption provisions and are not
convertible into any other securities of the Company. All outstanding shares of
Common Stock are, and the shares of Common Stock to be issued pursuant to this
offering will be, upon payment of consideration therefor, fully paid and
nonassessable.

PREFERRED STOCK

Preferred Stock may be issued from time to time by the Board of Directors as
shares of one or more classes or series. Subject to the provisions of the
Company's Restated Certificate of Incorporation dated as of August 23, 1995, and
limitations prescribed by law, the Board of Directors is expressly authorized to
adopt resolutions to issue the shares, to fix the number of shares and to change
the number of shares constituting any series, and to provide for a change in the
voting power, designations, preferences and relative, participating, optional or
other special rights, qualifications, limitations or restrictions thereof,
including dividend rights (including whether dividends are cumulative), dividend
rates conversion rights and liquidation preferences of the shares constituting
any class or series of the Preferred Stock, in each case without any further
action or vote by the stockholders. Although the Company has no present plans to
issue any shares of Preferred Stock following the consummation of this offering,
the issuance of shares of Preferred Stock, or the issuance of rights to purchase
such shares, may have the effect of delaying, deferring or preventing a change
in control of the Company or an unsolicited acquisition proposal.

REGISTRATION RIGHTS

The holders of 2,941,985 shares of the Company's Common Stock are entitled
to certain rights with respect to the registration of shares of Common Stock
under the Securities Act. Under the terms of the agreements between the Company
and the holders of such registrable securities, if the Company proposes to
register any of its securities under the Securities Act, either for its own
account or for the account of other security holders exercising registration
rights, such holders are entitled to notice of such registration and are
entitled to include shares of such Common Stock therein. These registration
rights have been waived in connection with this Offering. The stockholders
benefiting from these rights

50
<PAGE>
may also require the Company to file a registration statement under the
Securities Act at its expense with respect to their shares of Common Stock, and
the Company is required to use its best efforts to effect such registration.
These registration rights will expire within three years from the consummation
of this Offering and have been waived by such holders in connection with this
Offering. In addition, these stockholders have the right to require the Company
to file up to two additional registration statements on Form S-3. This right
becomes available upon the eligibility of the Company to use such Form S-3 and
will expire within three years from the consummation of this Offering. All of
these rights are subject to certain conditions and limitations, including the
right of the underwriters of an offering to limit the number of shares included
in such registration.

In connection with the outstanding warrants, the holders of the Common Stock
issuable upon exercise of the warrants have certain rights to request the
Company to use its best efforts to effect the registration of the Common Stock
issuable upon the exercise of the warrants in connection with a registered
offering of Common Stock by the Company; provided that the Company will be
required to use its best efforts to include any such Common Stock issuable upon
the exercise of the warrants only after the registration of the Company's own
securities to the extent the underwriter for any such offering would not deem
any inclusion of such Common Stock issuable upon exercise of the warrants to
interfere with such offering. The warrant holders have waived these rights in
connection with this Offering. The rights to notice and inclusion in any
registration terminates with respect to each such share of Common Stock when
such shares issuable upon exercise of the warrants have been registered or sold.

CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS

As described below, the Certificate of Incorporation and By-laws contain
certain provisions that are intended to enhance the likelihood of continuity and
stability in the composition of the Company's Board of Directors and which may
have the effect of delaying, deterring or preventing a future takeover or change
in control of the Company unless such takeover or change in control is approved
by the Company's Board of Directors. Such provisions may also render the removal
of the directors and management more difficult.

Pursuant to the Certificate of Incorporation, the Board of Directors of the
Company is divided into three classes serving staggered three-year terms. The
By-laws establish an advance notice procedure with regard to the nomination,
other than by or at the direction of the Board of Directors, of candidates for
election as directors and with regard to certain matters to be brought before an
annual meeting of stockholders of the Company. In general, notice must be
received by the Company not less than 130 days prior to the meeting and must
contain certain specified information concerning the person to be nominated or
the matter to be brought before the meeting and concerning the stockholder
submitting the proposal. Special meetings of stockholders may be called only by
the Chairman of the Board, the President of the Company or the Board of
Directors. In addition, the Certificate of Incorporation provides that
stockholders may act only at an annual or special meeting and stockholders may
not act by written consent.

SECTION 203 OF THE DGCL

Section 203 of the DGCL ("Section 203") prevents an "interested stockholder"
(defined in Section 203, generally, as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with a publicly-held Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved either the business combination
or the transaction that resulted in the interested stockholder's becoming an
interested stockholder, the interested stockholder owns at least 85% of the
voting stock of the

51
<PAGE>
corporation outstanding at the time the transaction commenced (excluding stock
held by directors who are also officers of the corporation and by employee stock
plans that do not provide employees with the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer); or (iii) following the transaction in which such person became an
interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the shares of Common Stock of the
Company is .

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect the prevailing market price from time to time.
Furthermore, because only a limited number of shares will be available for sale
shortly after this offering because of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock in the public market after the restrictions lapse could adversely
affect the prevailing market price and the ability of the Company to raise
equity capital in the future. See "Risk Factors -- Shares Eligible for Future
Sale."

Upon completion of this offering, the Company will have outstanding
6,491,270 shares of Common Stock (assuming no exercise of the Underwriters'
over-allotment option or outstanding options). Of these shares, the 2,000,000
shares sold in this offering will be freely transferable without restriction or
further registration under the Securities Act unless purchased by "affiliates"
of the Company as that term is defined in Rule 144 of the Securities Act (an
"Affiliate"), which shares will be subject to the resale limitations of Rule 144
adopted under the Securities Act. The remaining 4,491,270 shares outstanding
upon completion of this offering and held by existing shareholders will be
"restricted securities" as that term is defined under Rule 144 (the "Restricted
Shares"). Restricted Shares generally may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rules
144, 144(k) or 701 promulgated under the Securities Act, which rules are
summarized below. As a result of the contractual restrictions described below
and the provisions of Rules 144, 144(k) and 701, additional shares will be
available for sale in the public market as follows: (i) no shares (other than
those shares sold hereby and not held by Affiliates) will be available for
immediate sale in the public market on the date of this Prospectus, (ii)
shares subject to options exercisable within 90 days of the date of this
Prospectus will be freely tradeable by non-Affiliates upon the effectiveness of
a registration statement relating to such stock options, (iii) shares and
shares subject to options exercisable within 90 days of the Effective Date
will be eligible for sale 90 days after the Effective Date, (iv) shares
and shares subject to options exercisable within 180 days of the Effective
Date will be eligible for sale upon expiration of the lock-up agreements 180
days after the Effective Date and (v) shares and shares subject to
options will be eligible for sale upon expiration of their respective vesting
and two-year holding periods.

The Company plans to file registration statements to register Common Shares
reserved for issuance under its stock option plans and employee stock purchase
plan. See "Management -- Stock Plans." Once registered, persons acquiring such
shares, whether or not they are Affiliates, will be permitted to resell their
shares in the public market without regard to the Rule 144 holding period.

Upon completion of this offering, the holders of 2,941,985 shares of Common
Stock, or their transferees, will be entitled to certain rights with respect to
the registration of such shares under the

52
<PAGE>
Securities Act. See "Description of Capital Stock -- Registration Rights."
Registration of such shares under the Securities Act would result in such shares
(except for shares purchased by Affiliates) becoming eligible for sale
immediately upon the effectiveness of such registration.

The Company has agreed not to sell or otherwise dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, or enter into any swap or similar agreement that transfers, in
whole or in part, the economic risk of ownership of the Common Stock, for a
period of 180 days after the Effective Date, without the prior written consent
of Cowen & Company, subject to certain limited exceptions. Additionally, all
directors and executive officers and certain other shareholders of the Company,
holding in the aggregate of the shares of Common Stock outstanding prior
to this offering, have agreed with the Underwriters not to sell or otherwise
dispose of any shares of Common Stock for a period of 180 days after the
Effective Date (the "Lockup Period") without the prior written consent of Cowen
& Company. See "Underwriting." The number of shares of Common Stock available
for sale in the public market is further limited by restrictions under the
Securities Act.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least two years, including
persons who may be deemed "affiliates" of the Company, would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of one percent of the number of shares of Common Stock then outstanding
or the average weekly trading volume of the Common Stock as reported through the
Nasdaq National Market during the four calendar weeks preceding the filing of a
Form 144 with respect to such sale. Sales under Rule 144 are also subject to
certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. In addition, a
person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned for at least
three years the Restricted Shares proposed to be sold, would be entitled to sell
such shares under Rule 144(k) without regard to the volume limitation, manner of
sale provisions, public information requirements or notice requirements. The
Commission has proposed certain amendments to Rule 144 and Rule 144(k) that
reduce the applicable requisite holding periods to one year and two years,
respectively.

Subject to certain limitations on the aggregate offering price of a
transaction and certain other conditions, Rule 701 permits resales of shares
issued prior to the date the issuer becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), pursuant to certain compensatory benefit plans and contracts commencing
90 days after the issuer becomes subject to the reporting requirements of the
Exchange Act, in reliance upon Rule 144 but without compliance with certain
restrictions, including the holding period requirements, contained in Rule 144.
In addition, the Commission has indicated that Rule 701 will apply to typical
stock options granted by an issuer before it becomes subject to the reporting
requirements of the Exchange Act, along with the shares acquired upon exercise
of such options (including exercises after the date of this Prospectus).
Securities issued in reliance on Rule 701 are restricted securities and, subject
to the contractual restrictions described above, beginning 90 days after the
date of this Prospectus, may be sold by persons other than Affiliates subject
only to the manner of sale provisions of Rule 144 and by Affiliates under Rule
144 without compliance with its two-year minimum holding period requirements.

53
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Cowen & Company and Volpe, Welty & Company, have severally agreed to purchase
from the Company the following respective number of shares at the initial public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus:

NUMBER
OF
UNDERWRITER SHARES
- --------------------------------------------------------------- ------------
Cowen & Company................................................
Volpe, Welty & Company.........................................

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

Total.................................................... 2,000,000
------------
------------

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.

The Underwriters propose to offer the shares of Common Stock directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow and such dealers may re-allow a
concession not in excess of $ per share to certain other dealers. The
Underwriters have informed the Company that they do not intend to confirm sales
to any accounts over which they exercise discretionary authority. After the
initial public offering of the shares, the offering price and other selling
terms may from time to time be varied by the Underwriters.

The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock at the initial public offering price, less the
underwriting discounts and commissions, set forth on the cover page of this
Prospectus, to cover over-allotments, if any. If the Underwriters exercise such
over-allotment option, the Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of shares of Common Stock to be purchased by each of them shown in
the foregoing table bears to the total number of shares of Common Stock offered
hereby. The Underwriters may exercise such option only to cover over-allotments
made in connection with the sale of shares of Common Stock offered hereby.

The Company's officers and directors and certain other shareholders of the
Company holding in the aggregate approximately shares of Common Stock have
agreed that they will not, without the

54
<PAGE>
prior written consent of Cowen & Company, offer, sell, contract or grant any
option to purchase or otherwise dispose of any shares of Common Stock, options,
rights or warrants to acquire shares of Common Stock, or securities exchangeable
for or convertible into shares of Common Stock owned by them during the 180-day
period commencing on the Effective Date. In addition, the Company has agreed
that it will not, without the prior written consent of Cowen & Company, offer,
sell, contract or grant any option to purchase or otherwise dispose of any
shares of Common Stock, options, rights or warrants to acquire shares of Common
Stock or securities exchangeable for or convertible into shares of Common Stock
during such 180-day period except in certain limited circumstances.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors
considered in determining the initial public offering price will be prevailing
market and economic conditions, market valuations of other companies engaged in
activities similar to the Company, estimates of the business potential and
prospects of the Company, the present state of the Company's business
operations, the Company's management and other factors, if any, deemed relevant.
The estimated initial public offering price range set forth on the cover of this
Prospectus is subject to change as a result of market conditions and other
factors.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by O'Sullivan Graev & Karabell, LLP, New York, New York and
for the Underwriters by Shearman & Sterling, New York, New York.

EXPERTS

The financial statements included in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.

ADDITIONAL INFORMATION

A Registration Statement on Form S-1 under the Securities Act, including
amendments thereto, relating to Common Stock offered hereby has been filed by
the Company with the Commission. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus concerning the
provisions or contents of any contract or other document referred to herein are
not necessarily complete. With respect to each such contract or document filed
as an exhibit to the Registration Statement, reference is made to such exhibit
for a more complete description, and each such statement is deemed to be
qualified in all respects by such reference. The Registration Statement and the
exhibits and schedules thereto filed with the Commission may be inspected,
without charge, at the public reference facilities maintained by the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices located at Seven World Trade Center,
Suite 1300, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.

55
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
ADVANCED HEALTH CORPORATION
(FORMERLY MED-E-SYSTEMS CORPORATION)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS....................................... F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of:
December 31, 1994 and December 31, 1995 and March 31, 1996 (unaudited)....... F-3
Consolidated Statements of Operations:
For the period from inception to December 31, 1993 and for the years ended
December 31, 1994 and 1995
For the three months ended March 31, 1995 and 1996 (unaudited)............... F-4
Consolidated Statement of Shareholders' Equity (Deficit):
From inception to December 31, 1995
For the three months ended March 31, 1996 (unaudited)........................ F-5
Consolidated Statements of Cash Flows:
For the period from inception to December 31, 1993 and for the years ended
December 31, 1994 and 1995
For the three months ended March 31, 1995 and 1996 (unaudited)............... F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..................................... F-7-F-18

PELTZ VENTIMIGLIA, INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS....................................... F-19
FINANCIAL STATEMENTS:
Balance Sheets as of December 31, 1994 and August 31, 1995................... F-20
Statements of Operations for the years ended December 31, 1993 and 1994 and
for the eight months ended August 31, 1995.................................. F-21
Statement of Shareholders' Equity for the years ended December 31, 1993 and
1994 and for the eight months ended August 31, 1995......................... F-22
Statements of Cash Flows for the years ended December 31, 1993 and 1994 and
for the eight months ended August 31, 1995.................................. F-23
NOTES TO FINANCIAL STATEMENTS.................................................. F-24

U.S. HEALTH CONNECTIONS, INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS....................................... F-25
FINANCIAL STATEMENTS:
Balance Sheets as of December 31, 1994 and August 31, 1995................... F-26
Statements of Operations for the year ended December 31, 1994 and
for the eight months ended August 31, 1995................................. F-27
Statement of Shareholders' Equity for the year ended December 31, 1994 and
for the eight months ended August 31, 1995................................. F-28
Statements of Cash Flows for the year ended December 31, 1994 and
for the eight months ended August 31, 1995................................. F-29
NOTES TO FINANCIAL STATEMENTS.................................................. F-30-F-31

PRO FORMA FINANCIAL INFORMATION
Pro Forma Statement of Operations of Advanced Health Corporation and
Subsidiaries for the year ended December 31, 1995.......................... F-32
</TABLE>

F-1
<PAGE>
After the conversion and reverse stock split transactions discussed in Note 14
to the consolidated financial statements of Advanced Health Corporation and
subsidiaries are effected, we expect to be in a position to render the following
audit report.

June 19, 1996

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Advanced Health Corporation:

We have audited the accompanying consolidated balance sheets of Advanced
Health Corporation (formerly Med-E-Systems Corporation) (a Delaware corporation)
and subsidiaries as of December 31, 1994 and 1995, and the related consolidated
statements of operations, shareholders' equity (deficit) and cash flows for the
period from inception (August 27, 1993) to December 31, 1993 and for the years
ended December 31, 1994 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Advanced Health Corporation
(formerly Med-E-Systems Corporation) and subsidiaries as of December 31, 1994
and 1995, and the results of their operations and their cash flows for the
period from inception to December 31, 1993 and for the years ended December 31,
1994 and 1995 in conformity with generally accepted accounting principles.

New York, New York
June 19, 1996 (except for the matters
described in Note 14, as to which the
date is )

F-2

<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1994 1995 1996
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................... $ 6,903 $ 1,464,427 $ 139,490
Accounts receivable.................................... -- 1,020,558 2,447,993
Note receivable........................................ -- 125,000 15,000
Prepaid expenses and deferred registration costs....... 7,134 278,305 344,684
---------- ----------- -----------
Total current assets............................... 14,037 2,888,290 2,947,167
PROPERTY AND EQUIPMENT, net............................. 773,333 1,538,898 1,555,933
DEFERRED INCOME TAXES, net of valuation allowance of
$1,290,849, $3,506,540 and $3,991,059, respectively.... -- -- --
INTANGIBLE ASSETS, net.................................. -- 1,875,611 1,848,649
OTHER ASSETS............................................ 125,711 159,112 156,897
---------- ----------- -----------
Total assets....................................... $ 913,081 $ 6,461,911 $ 6,508,646
---------- ----------- -----------
---------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable....................................... $ 319,126 $ 1,312,571 $ 1,141,690
Accrued expenses....................................... 126,845 407,241 788,237
Due to affiliate....................................... 375,825 -- --
Deferred revenue....................................... -- 1,500,000 1,225,000
Promissory notes....................................... -- -- 1,500,000
Loan payable related to acquisition.................... 50,000 150,000 81,000
Current portion of capital lease obligations........... 174,247 259,805 173,721
---------- ----------- -----------
Total current liabilities.......................... 1,046,043 3,629,617 4,909,648
---------- ----------- -----------
CAPITAL LEASE OBLIGATIONS............................... 191,799 157,254 125,254
---------- ----------- -----------
Total liabilities.................................. 1,237,842 3,786,871 5,034,902
---------- ----------- -----------
COMMITMENTS (Note 13)
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value, 5,000,000 shares
authorized; 0 shares issued and outstanding.......... -- -- --
Common stock, $.01 par value; 15,000,000 shares
authorized; 2,051,539, 4,491,270 and 4,491,270 shares
issued and outstanding, respectively................. 20,516 44,913 44,913
Additional paid-in capital............................. 2,727,587 11,481,478 11,481,478
Common stock subscriptions receivable.................. (3,120) -- --
Accumulated deficit.................................... (3,069,744) (8,776,351) (9,977,647)
Less: Treasury stock, at cost (0, 8,937 and 8,937
shares, respectively)................................ -- (75,000) (75,000)
---------- ----------- -----------
Total shareholders' equity (deficit)............... (324,761) 2,675,040 1,473,744
---------- ----------- -----------
Total liabilities and shareholders' equity
(deficit)......................................... $ 913,081 $ 6,461,911 $ 6,508,646
---------- ----------- -----------
---------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-3
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEARS FOR THE THREE
FROM INCEPTION ENDED DECEMBER 31, MONTHS ENDED MARCH 31,
(AUGUST 27, 1993) TO ------------------------- -------------------------
DECEMBER 31, 1993 1994 1995 1995 1996
-------------------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE..................... $-- $ 378,878 $ 1,053,949 $ -- $ 3,692,245
COST OF SALES............... -- 12,297 340,326 -- 1,931,502
----------- ----------- ----------- ----------- -----------
Gross profit.......... -- 366,581 713,623 -- 1,760,743
OPERATING EXPENSES.......... 66,192 1,318,145 3,254,978 322,354 1,925,415
RESEARCH AND DEVELOPMENT
EXPENSES................... 454,622 1,582,332 3,157,389 718,401 1,017,017
----------- ----------- ----------- ----------- -----------
Operating loss........ (520,814) (2,533,896) (5,698,744) (1,040,755) (1,181,689)
OTHER INCOME (EXPENSE)...... -- (15,034) (7,863) 1,341 (19,607)
----------- ----------- ----------- ----------- -----------
Net loss.............. $ (520,814) $(2,548,930) $(5,706,607) $(1,039,414) $(1,201,296)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
PER SHARE INFORMATION:
Net loss per share.......... $ (0.30) $ (1.29) $ (1.68) $ (0.45) $ (0.27)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average common
shares outstanding......... 1,724,659 1,977,736 3,388,767 2,315,244 4,482,333
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Supplementary net loss per
share (Note 14)(unaudited). $ (0.26)
-----------
-----------
Supplementary weighted
average common shares
outstanding............... 4,524,176
-----------
-----------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-4
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
COMMON STOCK
SUBSCRIPTIONS
COMMON STOCK ADDITIONAL RECEIVABLE TREASURY STOCK
--------------------- PAID-IN ----------------- ACCUMULATED -------------------
SHARES PAR VALUE CAPITAL SHARES AMOUNT DEFICIT SHARES AMOUNT TOTAL
--------- --------- ----------- -------- ------ ----------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT INCEPTION
(August 27,
1993).............. -- $ -- $ -- -- $-- $ -- -- $ -- $ --
Common stock
subscriptions...... 185,893 1,859 1,261 185,893 (3,120) -- -- -- --
Issuance of common
stock.............. 718,984 7,190 855 -- -- -- -- -- 8,045
Issuance of Series A
Convertible
Preferred
Stock--Converted to
Common Stock (Notes
8 and 14).......... 868,512 8,685 88,495 -- -- -- -- -- 97,180
Net loss............ -- -- -- -- -- (520,814 ) -- -- (520,814)
--------- --------- ----------- -------- ------ ----------- ------ ---------- ----------
BALANCE, December
31, 1993........... 1,773,389 17,734 90,611 185,893 (3,120) (520,814 ) -- -- (415,589)
Sale and issuance of
common stock (Note
7c)............... 25,319 253 639,402 -- -- -- -- -- 639,655
Issuance of Series B
Convertible
Preferred
Stock--Converted to
Common Stock (Notes
8 and 14).......... 252,831 2,529 1,997,574 -- -- -- -- -- 2,000,103
Net loss............ -- -- -- -- -- (2,548,930 ) -- -- (2,548,930)
--------- --------- ----------- -------- ------ ----------- ------ ---------- ----------
BALANCE, December
31, 1994........... 2,051,539 20,516 2,727,587 185,893 (3,120) (3,069,744 ) -- -- (324,761)
Issuance of Common
Stock (Note 7c).... 50,641 506 (506) -- -- -- -- -- --
Issuance of Series C
Convertible
Preferred
Stock--Converted to
Common Stock (Notes
8 and 14).......... 178,743 1,787 1,498,213 -- -- -- -- -- 1,500,000
Issuance of common
stock in private
placement........... 79,780 798 624,261 -- -- -- -- -- 625,059
Redemption of common
stock
subscriptions...... -- -- -- (185,893) 3,120 -- -- -- 3,120
Exercise of stock
options............ 885,279 8,853 10,864 -- -- -- -- -- 19,717
Common stock issued
for acquisitions... 649,753 6,498 1,629,314 -- -- -- -- -- 1,635,812
Issuance of Series D
Convertible
Preferred
Stock--Converted to
Common Stock (Notes
8 and 14).......... 595,535 5,955 4,991,745 -- -- -- -- -- 4,997,700
Purchase of treasury
stock.............. -- -- -- -- -- -- 8,937 (75,000) (75,000)
Net loss............ -- -- -- -- -- (5,706,607 ) -- -- (5,706,607)
--------- --------- ----------- -------- ------ ----------- ------ ---------- ----------
BALANCE, December
31, 1995........... 4,491,270 44,913 11,481,478 -- -- (8,776,351 ) 8,937 (75,000) 2,675,040
Net loss
(unaudited)......... -- -- -- -- -- (1,201,296 ) -- -- (1,201,296)
--------- --------- ----------- -------- ------ ----------- ------ ---------- ----------
BALANCE, March 31,
1996 (unaudited)... 4,491,270 $44,913 $11,481,478 -- $-- $(9,977,647) 8,937 $ (75,000) $1,473,744
--------- --------- ----------- -------- ------ ----------- ------ ---------- ----------
--------- --------- ----------- -------- ------ ----------- ------ ---------- ----------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-5
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES

(FORMERLY MED-E-SYSTEMS CORPORATION)

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>

FOR THE PERIOD FOR THE YEARS FOR THE THREE MONTHS
FROM INCEPTION ENDED DECEMBER 31, ENDED MARCH 31,
(AUGUST 27, 1993) TO -------------------------- --------------------------
DECEMBER 31, 1993 1994 1995 1995 1996
-------------------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>

CASH FLOWS FROM OPERATING
ACTIVITIES:

Net loss......................... $ (520,814) $(2,548,930) $(5,706,607) $(1,039,414) $(1,201,296)
Adjustments to reconcile net loss
to net cash used in operating
activities-
Depreciation and amortization... 1,552 146,681 456,819 86,080 216,417
Changes in operating assets and
liabilities-
Accounts receivable........... -- -- (1,020,558) -- (1,427,435)
Note receivable............... -- -- (125,000) -- 110,000
Prepaids and deferred
registration costs........... -- (7,134) (271,171) (952) (66,379)
Other assets.................. -- (125,711) (33,401) -- 2,215
Accounts payable.............. 118,413 200,713 993,445 6,226 (170,881)
Accrued expenses.............. 43,872 82,973 280,396 (119,998) 380,996
Due to affiliate.............. 105,116 270,709 (375,825) 47,719 --
Deferred revenue.............. 175,000 (175,000) 1,500,000 -- (275,000)
------- ----------- ----------- ----------- -----------
Net cash used in operating
activities.................. (76,861) (2,155,699) (4,301,902) (1,020,339) (2,431,363)
------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:

Issuance of note receivable from
affiliate....................... -- -- (500,000) -- --
Proceeds from repayment of note
receivable from affiliate....... -- -- 500,000 -- --
Net purchase price of
acquisitions.................... -- -- (150,000) -- --
Purchases of property and
equipment, net.................. (21,088) (505,997) (881,531) (39,793) (206,490)
------- ----------- ----------- ----------- -----------
Net cash used in investing
activities.................. (21,088) (505,997) (1,031,531) (39,793) (206,490)
------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:

(Repayment of) proceeds from loan
payable related to
acquisition..................... -- 50,000 (50,000) -- (69,000)
Net proceeds from sale and
issuance of common stock........ 8,045 639,655 628,179 -- --
Net proceeds from exercise of
stock options................... -- -- 19,717 -- --
Net proceeds from promissory
notes........................... -- -- -- -- 1,500,000
Purchase of treasury stock....... -- -- (75,000) -- --
Net proceeds from issuance of
Series A Convertible Preferred
Stock........................... 97,180 -- -- -- --
Net proceeds from issuance of
Series B Convertible Preferred
Stock........................... -- 2,000,103 -- -- --
Net proceeds from issuance of
Series C Convertible Preferred
Stock........................... -- -- 1,500,000 1,500,000 --
Net proceeds from issuance of
Series D Convertible Preferred
Stock........................... -- -- 4,997,700 -- --
Repayment of capital lease
obligations..................... -- (28,435) (229,639) (54,736) (118,084)
------- ----------- ----------- ----------- -----------
Net cash provided by
financing activities....... 105,225 2,661,323 6,790,957 1,445,264 1,312,916
------- ----------- ----------- ----------- -----------
Net change in cash........... 7,276 (373) 1,457,524 385,132 (1,324,937)
CASH, beginning of period........ -- 7,276 6,903 6,903 1,464,427
------- ----------- ----------- ----------- -----------
CASH, end of period.............. $ 7,276 $ 6,903 $ 1,464,427 $ 392,035 $ 139,490
------- ----------- ----------- ----------- -----------
------- ----------- ----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:

Cash paid during the period for:
Interest........................ $-- $ 3,267 $ 21,497 $ 4,557 $ 9,607
------- ----------- ----------- ----------- -----------
------- ----------- ----------- ----------- -----------
Income taxes..................... $-- $ 3,189 $ 14,854 $ -- $ 573
------- ----------- ----------- ----------- -----------
------- ----------- ----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF
NONCASH INVESTING ACTIVITIES:

Capital lease obligations
incurred........................ $-- $ 394,481 $ 280,652 $ 47,785 $ --
------- ----------- ----------- ----------- -----------
------- ----------- ----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-6
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995

1. ORGANIZATION AND BUSINESS

Advanced Health Corporation and subsidiaries (collectively, the "Company" or
"AHC"), provides physician groups and networks with practice and network
management services and clinical information systems and services. The Company's
wholly-owned subsidiary was incorporated on August 27, 1993 as Med-E-Systems
Corporation (formerly Med-E-Mail Corporation), and was engaged at inception to
design and develop clinical information systems for physician users. Effective
August 1995, Med-E-Systems Corporation became a wholly-owned subsidiary of AHC,
an entity incorporated in March 1995, through a stock-for-stock transfer in
which preferred and common shareholders of Med-E-Systems Corporation exchanged
their interests for the same amounts and classes of preferred and common stock
in AHC as those then outstanding in Med-E-Systems Corporation. The Company was
subsequently merged with and into Majean, Inc. (Note 3), a Delaware corporation,
and the surviving corporation changed its name to Advanced Health Corporation.
Concurrent with this transaction, the Company raised approximately $5 million in
a private placement of its securities for the principal purposes of funding the
ongoing development of the Company's clinical information systems and services
and the Company's forward integration into physician practice and network
management services. Management of the Company believes that this financing, as
well as the bridge financing described in Note 14, will be adequate to fund the
Company's operations at least through January 1997.

The Company operates in a highly-regulated environment in which its sources
of revenues are dependent on the Company's ability to successfully negotiate
with third parties for its various services. Currently, the Company depends on
revenue generated by a limited number of customers, including physician groups
and networks which are under long-term contracts.

For a discussion of risks associated with the Company and its business, see
"Risk Factors" in the accompanying initial public offering (Note 14)
registration statement of which these consolidated financial statements and
notes to consolidated financial statements are a part.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
AHC and its wholly-owned subsidiaries: Advanced Health Management Corporation
("AHM", formerly Advanced Clinical Networks Corporation), Med-E-Systems
Corporation ("MES") and Management Service Organization subsidiaries ("MSOs")
established to facilitate the provision of management services to physician
practice and network clients. These consolidated financial statements include
the results of operations of the Company from the inception of MES in August
1993, including other entities formed or acquired from their formation or
acquisition, through December 31, 1995. Intercompany accounts and transactions
have been eliminated in consolidation.

REVENUE RECOGNITION

Operating revenues are generated from three principal sources:

(a) Physician Practice Revenues: Through its majority or wholly-owned
consolidated MSOs, the Company enters into management services agreements
with its physician practice clients,

F-7
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
whereby physician practices outsource their non-medical and administrative
functions to the MSO. Fees are generated by the MSO through the provision of
these outsourced services as well as certain additional management,
marketing and information services. Fees are recognized as these services
are rendered.

(b) Physician Network Revenues: Through its majority-owned consolidated
MSOs, the Company enters into management services agreements with its
network clients whereby the MSOs recognizes capitation revenue from health
maintenance organizations ("HMOs") contracting with physician networks for
the delivery of health care. The HMO contracts typically contain shared-risk
provisions whereby additional incentive revenue can be earned or losses
incurred based on the utilization of physician and hospital services by
assigned HMO enrollees.

(c) Information Systems and Services Revenue: The Company recognizes
revenue from the sale of its information systems and services (upon
installation and acceptance), and from the licensing of its software to
third parties (upon delivery). Certain of these third parties provide
payment in advance for the development and installation of software,
databases and systems. The Company accounts for these advance payments as
deferred revenue when received, and recognizes revenue ratably over the
period of time during which the software is delivered and services are
performed. In December 1991, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 91-1, "Software Revenue
Recognition". The Company's revenue recognition policy is in compliance with
the provisions of this SOP.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade receivables from physician practice
revenues, physician network revenues and information systems and services
revenues.

PROPERTY AND EQUIPMENT

Property and equipment, consisting primarily of electronic data processing
equipment, are stated at cost and depreciated on a straight-line basis over the
useful lives of the assets (3 to 5 years). Equipment held under capital leases
is amortized utilizing the straight-line method over the lesser of the term of
the lease or the estimated useful life of the asset.

INTANGIBLE ASSETS

The Company is in the process of allocating the excess of purchase price
over tangible net assets acquired in the acquisitions described in Note 3 to
specific categories of intangible assets. The total of such excess purchase
price is included in intangible assets and is presently being amortized over
periods of 15 to 20 years.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred by the Company.

F-8
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

INCOME TAXES

At inception, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", which requires recognition of
deferred tax liabilities and assets for the estimated future tax effects of
events that have been recognized in the financial statements or income tax
returns. Under this method, deferred tax liabilities and assets are determined
based on (1) differences between the financial accounting and income tax bases
of assets and liabilities, and (2) carry-forwards, using enacted tax rates in
effect for the years in which the differences and carry-forwards are expected to
reverse and be utilized, respectively (Note 11).

NET LOSS PER COMMON SHARE

Net loss per common share was computed by dividing net loss by the weighted
average number of common shares outstanding during the respective years, which
includes, for all periods, the retroactive effect of (i) the conversion of Class
A, B, C and D Convertible Preferred Stock to common stock and (ii) the reverse
stock split, both described in Note 14, which will occur concurrent with the
consummation of the Company's initial public offering. Fully diluted net loss
per common share has not been presented since the inclusion of the impact of
stock options and warrants outstanding (Notes 3, 8, 10 and 14) would be
antidilutive.

RECENTLY ISSUED ACCOUNTING STANDARDS

During March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement establishes financial accounting and reporting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used, and for long-lived assets and
certain identifiable intangibles to be disposed of. This statement is effective
for financial statements for fiscal years beginning after December 15, 1995,
although earlier application is encouraged. The Company does not expect the
impact of the adoption of this pronouncement to be material.

During October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock Based Compensation." This statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans. SFAS No. 123 encourages entities to adopt a fair value based
method of accounting for stock compensation plans. However, SFAS No. 123 also
permits the Company to continue to measure compensation costs under pre-existing
accounting pronouncements. If the fair value based method of accounting is not
adopted, SFAS No. 123 requires

F-9
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
pro forma disclosures of net income (loss) and net income (loss) per common
share in the notes to consolidated financial statements. The accounting
requirements of SFAS No. 123 are effective for transactions entered into in
fiscal years that begin after December 15, 1995, though they may be adopted on
issuance. The disclosure requirements of SFAS No. 123 are effective for
financial statements for fiscal years beginning after December 15, 1995, or for
an earlier fiscal year for which SFAS No. 123 is initially adopted for
recognizing compensation cost. The Company has not yet quantified the expected
impact of the adoption of this pronouncement.

3. ACQUISITION OF BUSINESSES

ACQUISITIONS

The transaction with Majean, Inc. described in Note 1 was accounted for as a
purchase through the issuance of 543,564 shares of the Company's stock to the
shareholders of Majean, Inc. for an aggregate purchase price of $1,368,471.
Additionally, options to purchase 283,010 shares of common stock at $.0112 per
share were issued as part of this transaction. These options are only
exercisable, as contingent consideration, upon the achievement of certain
capitalization levels related to regulatory requirements. The entire purchase
price of this acquisition has been allocated to intangible assets in the
accompanying consolidated balance sheet, as will any contingent consideration
which arises due to the option described above, based on a twenty-year contract
with a MSO, which was contributed to Majean, Inc. by its shareholders upon its
formation prior to the transaction. Accordingly, this intangible asset is being
amortized over a period of twenty years.

Pursuant to an asset purchase agreement with Peltz Ventimiglia, Inc.
("Peltz") dated August 28, 1995, AHC acquired certain assets and assumed certain
liabilities of Peltz for 75,996 shares of common stock for an aggregate purchase
price of $191,327. Additionally, the former owners of Peltz received warrants to
purchase 113,995 shares of the Company's common stock at $4.38 per share, which
management believes to be in excess of the fair market value of such shares at
the date of grant. These warrants are only exercisable, as contingent
consideration, based on the achievement of targeted operating performance.

Pursuant to a purchase agreement with U.S. Health Connections, Inc. ("Health
Connections") dated September 1, 1995, the Company acquired, through its
subsidiary AHM, all of the outstanding stock of Health Connections for $150,000
in cash, a note for $150,000 due in two installments within one year of the
acquisition and 30,193 shares of common stock, for an aggregate purchase price
of $376,014. Furthermore, the Health Connections purchase agreement calls for
the issuance of an additional 56,611 shares of common stock, as contingent
consideration, based on the achievement of targeted operating performance by
this entity.

These acquisitions described above were valued based on management's
estimate of the fair value of common stock at the date of acquisition. Costs in
excess of net assets acquired were recorded as intangible assets and are being
amortized as described in Note 6.

F-10
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995

3. ACQUISITION OF BUSINESSES--(CONTINUED)
PRO FORMA RESULTS OF OPERATIONS

Summarized below are the unaudited pro forma results of operations of the
Company as though these acquisitions had occurred at the beginning of 1994.
Adjustments have been made for pro forma income taxes related to these
transactions.

FOR THE YEARS ENDED DECEMBER
31,
-----------------------------
1994 1995
----------- -----------
Pro Forma:
Revenues................................... $ 1,228,409 $ 1,619,621
Net loss................................... (2,467,198) (5,742,954)
Net loss per share......................... $ (1.18) $ (1.66)

These pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the acquisitions been
made at the beginning of 1994, or of results which may occur in the future.

4. RELATED PARTY TRANSACTIONS

The Company shares office space and administrative services with Physicians'
Online, Inc. ("POL"), a healthcare information services company which is partly
owned by several of the Company's shareholders, including certain officers and
directors.

During the period ended December 31, 1993 and the years ended December 31,
1994 and 1995, POL also incurred expenses totaling $105,116, $135,825 and
$180,631, respectively, and $47,719 and $25,500, respectively, for the three
months ended March 31, 1995 and 1996 (unaudited), on behalf of the Company for
which the Company has reimbursed POL. The amount due POL, as well as a loan from
POL in the amount of $300,000, which has been repaid, is reflected as due to
affiliate in the accompanying consolidated balance sheet at December 31, 1994.
In addition, during 1995, POL borrowed $500,000 from the Company. POL repaid
this amount in full prior to December 31, 1995.

Management of the Company believes that these related party transactions
were effected on terms which approximate fair market value.

F-11
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995

5. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- 1996
1994 1995 (UNAUDITED)
-------- ---------- ------------
<S> <C> <C> <C>
Computer equipment and software.......................... $486,155 $1,152,077 $ 1,367,146
Equipment under capital leases........................... 394,481 681,988 681,988
Leasehold improvements................................... 37,930 60,236 27,049
Furniture and fixtures................................... 3,000 189,448 214,056
-------- ---------- ------------
921,566 2,083,749 2,290,239
Less: Accumulated depreciation and amortization.......... 148,233 544,851 734,306
-------- ---------- ------------
Property and equipment, net.............................. $773,333 $1,538,898 $ 1,555,933
-------- ---------- ------------
-------- ---------- ------------
</TABLE>

Depreciation and amortization aggregated $1,552, $146,681 and $396,618,
respectively, for the period ended December 31, 1993 and for the years ended
December 31, 1994 and 1995, and $86,080 and $189,455, respectively, for the
three months ended March 31, 1995 and 1996 (unaudited).

6. INTANGIBLE ASSETS

Intangible assets consist of the following:

<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, 1996
1995 (UNAUDITED)
------------ -----------
<S> <C> <C>
Excess of purchase price over net assets acquired.................. $1,917,261 $ 1,917,261
Less: Accumulated amortization..................................... 41,650 68,612
------------ -----------
Intangible assets, net......................................... $1,875,611 $ 1,848,649
------------ -----------
------------ -----------
</TABLE>

Amortization aggregated $41,650 for the year ended December 31, 1995 and
$26,962 for the three months ended March 31, 1996 (unaudited). There were no
intangible assets or related amortization prior to 1995.

7. COMMON STOCK

In connection with the formation of the Company, the Company entered into
two common stock agreements as follows:

(a) On August 30, 1993, the Company entered into agreements for the
subscription of 185,893 shares of common stock for $3,120.

(b) On December 27, 1993, the Company sold 718,984 shares of common
stock for $8,045 pursuant to a private placement agreement dated November 8,
1993. The shares were offered only to the holders of POL stock on a
one-for-one basis pro rata to their shareholdings in POL as of the close of
business on August 30, 1993. In accordance with this agreement, the holders
of these

F-12
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995

7. COMMON STOCK--(CONTINUED)
shares have the right, on two occasions, to participate on a "piggy-back"
basis in a registration by the Company under the Securities Act of 1933, as
amended, subject to certain restrictions, for a period ending on December
27, 1998, and commencing twelve months from the closing of an initial public
offering of the securities of the Company.

(c) In November 1994, the Company sold 75,960 shares of common stock
pursuant to a private placement agreement dated August 22, 1994 for an
aggregate of $639,655. Of these shares sold, all of which were paid for in
1994, 25,319 were issued prior to December 31, 1994 and 50,641 were issued
in January 1995. In accordance with this agreement, the holders of these
shares have the right, on two occasions, to participate on a "piggy-back"
basis in a registration by the Company under the Securities Act of 1933, as
amended, subject to certain restrictions, for a period ending on October 31,
1999, and commencing twelve months from the closing of an initial public
offering of the securities of the Company.

(d) In 1995, the Company sold 79,780 shares of common stock pursuant to
a private placement agreement dated April 21, 1995 for an aggregate of
$625,059. In accordance with this agreement, the holders of these shares
have the right, on two occasions, to participate on a "piggy-back" basis in
a registration by the Company under the Securities Act of 1933, as amended,
subject to certain restrictions, for a period ending on September 30, 2000,
and commencing twelve months from the closing of an initial public offering
of the securities of the Company.

8. CONVERTIBLE PREFERRED STOCK

During 1993, the Company's shareholders authorized 2,000,000 shares of
Preferred Stock with a par value of $.01 per share, of which 971,800 shares were
designated Series A Convertible Preferred Stock. On August 31, 1993, the Company
sold 971,800 shares of Series A Convertible Preferred Stock for $97,180. In
March 1994, the Company authorized and sold 282,900 shares of Series B
Convertible Preferred Stock for $2,000,103 pursuant to a Private Placement
Agreement. In January 1995, the Company authorized and sold 200,000 shares of
Series C Convertible Preferred Stock for $1,500,000 pursuant to a Private
Placement Agreement. In August 1995, the Company authorized and sold 666,360
shares of Series D Convertible Preferred Stock for $4,997,700 pursuant to a
Private Placement Agreement. All of the above shares are not redeemable.

Each individual share of Series A, B, C and D Convertible Preferred Stock
was convertible into 1.5 common shares (see Note 14) at the holder's option,
subject to adjustment for antidilution. The holders of Series A, B, C and D
Convertible Preferred Stock were entitled to receive dividends as and if
declared by the Board of Directors. In the event of liquidation, dissolution or
winding up of the Company, the holders of Series A, B, C and D Convertible
Preferred Stock were entitled to receive all accrued dividends, if applicable,
plus the liquidation price per share of $.07, $4.71, $5.00 and $5.00,
respectively.

As described in Note 14, all information contained in the accompanying
consolidated financial statements has been retroactively restated to give effect
to both the conversion of Class A, B, C and D Convertible Preferred Stock to
common stock and the reverse stock split, both of which transactions will be
effected concurrent with the consummation of the pending initial public
offering. Accordingly, the sale of Series A, B, C and D Convertible Preferred
Stock is reflected as the sale of 868,512, 252,831,

F-13
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995

8. CONVERTIBLE PREFERRED STOCK--(CONTINUED)
178,743 and 595,535 shares of common stock, respectively, in the accompanying
consolidated financial statements.

Subject to certain provisions, prior to the conversion to common stock,
registration rights, as defined in the agreement, were to be exercisable after
the earlier of (1) August 23, 1999, or (2) the
effective date of the first registration statement for a public offering of
securities of the Company. Holders of Series B, C and D Convertible Preferred
Stock have voting rights. Furthermore, holders of Series D Convertible Preferred
Stock have the right to purchase 446,858 shares of common stock at $8.39 per
share.

9. STOCK SPLITS

In January 1995, the Company authorized a 100 for 1 stock split on its
Series A and B Preferred Stock and a 100 for 1 stock split on the common stock
sold in 1993 (Note 7 a). In March 1996, the Company authorized a 1.5 for 1 stock
split on its common stock. All information in the accompanying consolidated
financial statements and footnotes has been retroactively restated to give
effect to these stock splits.

10. STOCK OPTIONS AND WARRANTS

STOCK OPTIONS

During 1994, the Company issued options to employees to purchase 970,860
shares of common stock at prices ranging from $.0112 to $2.52 per share. During
1995, the Company issued options to employees to purchase 851,380 shares of
common stock at prices ranging from $2.52 to $3.52 per share. During the three
months ended March 31, 1996, the Company issued options to employees, directors
and advisors to purchase 105,244 shares of common stock at $5.04 per share. In
the opinion of management, these option prices represented the fair market value
of such shares at the dates of grant.

Transactions involving the Stock Option Plan for the years ended December
31, 1994 and 1995 and for the three months ended March 31, 1996 are summarized
as follows:

<TABLE>
<CAPTION>
THREE MONTHS
FOR THE YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
--------------------------- 1996
1994 1995 (UNAUDITED)
------------ ----------- ------------
<S> <C> <C> <C>
Outstanding at beginning of period.................. -- 970,860 888,924
Granted........................................... 970,860 851,380 105,244
Exercised......................................... -- (885,279) --
Canceled.......................................... -- (48,037) (17,427)
------------ ----------- ------------
Outstanding at end of period........................ 970,860 888,924 976,741
------------ ----------- ------------
------------ ----------- ------------
Range of exercise prices............................ $.0112-$2.52 $2.52-$3.52 $ 2.52-$5.04
------------ ----------- ------------
------------ ----------- ------------
</TABLE>

F-14
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995

10. STOCK OPTIONS AND WARRANTS--(CONTINUED)
STOCK WARRANTS

In October 1995, the Company issued warrants to a financial advisor to
purchase 17,874 shares of common stock at $3.52 per share. In the opinion of
management, the exercise price of $3.52 per share represents the fair value of
such shares at the date the warrants were issued. Accordingly, management has
determined that the intrinsic value of these warrants is not material to the
Company's consolidated financial statements.

11. INCOME TAXES

There is no provision for income taxes in the accompanying consolidated
financial statements because the Company has incurred net operating losses from
inception. As of December 31, 1995, the Company had net operating loss carry
forwards ("NOLs") available to offset future book and taxable income of
approximately $8.7 million and $6.2 million, respectively, which expire through
2010. The difference between the book and tax NOLs relates principally to the
differences between book and tax accounting related to start-up costs,
depreciation of fixed assets, amortization of intangible assets and recognition
of deferred revenue. The future book income tax benefits of $1.3 million and
$3.5 million as of December 31, 1994 and December 31, 1995, respectively, have
been fully reserved due to the uncertainty of their future realization.

12. CAPITAL LEASE OBLIGATIONS

The Company is the lessee of certain equipment under capital leases expiring
through 1998. The assets and liabilities are recorded at the lower of the
present value of minimum lease payments or the fair market value of the asset.
The interest rates on the capital leases vary from 2.63% to 17.00%.

Future minimum payments under these lease agreements for the next three
years are as follows:

YEAR ENDING
DECEMBER 31,
- ----------------------------------------------------------------
1996............................................................ $277,842
1997............................................................ 126,767
1998............................................................ 39,994
--------
Total minimum lease payments.................................... 444,603

Less: Amount representing interest.............................. 27,544
--------
Present value of net minimum lease payments..................... $417,059
--------
--------

13. COMMITMENTS

The Company leases certain office space for its operations. Leases for this
space expire through 2002 and call for annual rent with immaterial escalations
through the end of the leases.

The Company has also entered into several operating leases for office
equipment.

F-15
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995

13. COMMITMENTS--(CONTINUED)
Future minimum payments for operating leases at December 31, 1995 are as
follows:

YEAR ENDING
DECEMBER 31,
- ---------------------------------------------------------------
1996........................................................... $ 247,447
1997........................................................... 673,317
1998........................................................... 784,772
1999........................................................... 781,844
2000 and thereafter............................................ 1,539,750

Rent expense for the period ended December 31, 1993 and for the years ended
December 31, 1994 and 1995 was $20,000, $69,774 and $125,881, respectively, and
$27,996 and $67,651 for the three months ended March 31, 1995 and 1996
(unaudited).

14. SUBSEQUENT EVENTS

ACQUISITION

On April 1, 1996, the Company acquired certain assets and assumed certain
liabilities of a network development company in exchange for 8,937 shares of the
Company's common stock and $45,000, to be paid in two installments of $22,500 on
the closing date and the first anniversary thereof. The pro forma effects of
this transaction have not been presented, as the results are immaterial to the
Company's consolidated financial statements taken as a whole.

FORMATION OF MSOS

In June 1996, the Company obtained a 51% interest in Cardiology First
Management Company ("CFMC"), a newly formed MSO. The Company acquired this
interest as part of the formation of CFMC and concurrent with the signing of a
long-term management services agreement between CFMC and Cardiology First of New
Jersey, P.A., which is a network of cardiologists based in the State of New
Jersey.

In June 1996, the Company obtained a 51% interest in Diamond Physician
Management, Inc. ("Diamond"), a newly formed MSO. The Company acquired this
interest as part of the formation of Diamond and concurrent with the signing of
a long-term management services agreement between Diamond and Long Island
Interventional Cardiology, which is a private cardiovascular physician practice
based in Long Island, New York.

In forming these MSOs, the Company conveyed 49% interests to the physician
practice or network in exchange for the execution of the long-term management
services agreements described above. The Company will record the fair value of
this arrangement, which is, in the opinion of management, more readily
determinable than the 49% MSO interest conveyed. These intangible assets, which
the Company does not expect to be material, will be amortized over the life of
the related contracts.

F-16
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995

14. SUBSEQUENT EVENTS--(CONTINUED)
The stockholders agreements for these MSOs, among other things, (i) restrict
the transfer of MSO equity, (ii) provide the terms upon which the MSO can, at
the Company's option, be merged with and into a wholly-owned subsidiary of the
Company in a transaction in which the physician practice or network will receive
stock of the Company in exchange for shares in the MSO, and (iii) grant to the
physician practice or network the right to put its equity share in the MSO to
the Company within one year of the Company's satisfaction of certain specified
targeted operating results.

INITIAL PUBLIC OFFERING

The Company is pursuing an initial public offering of its securities. The
proposed offering presently contemplates the sale of 2,000,000 shares of common
stock at $13 per share. The Company plans to use a portion of the proceeds of
the proposed offering to repay the Bridge Financing described below, of which
$1,500,000 was outstanding at March 31, 1996. Supplementary net loss per share
for the three months ended March 31, 1996 (unaudited) gives supplemental effect
to the issuance of 115,385 shares of common stock for the entire period during
which the related Bridge Financing was outstanding, which is the number of
shares to be issued in the proposed initial public offering, the proceeds of
which would be used to repay the $1,500,000 outstanding at March 31, 1996, as
well as to the effect of the reduction of related interest expense in that
period. These shares are presumed outstanding for supplementary purposes only,
and were neither issued nor outstanding for any purpose during the three months
ended March 31, 1996.

CONVERSION OF CONVERTIBLE PREFERRED STOCK

Pursuant to the terms of the Series A, B, C and D Convertible Preferred
Stock (Note 8), these securities will be converted, on a 1.5 to 1 share basis,
to common stock concurrent with the consummation of the pending public offering
described above. All information contained in the accompanying consolidated
financial statements and footnotes has been retroactively restated to give
effect to this conversion.

REVERSE STOCK SPLIT AND RECAPITALIZATION

In connection with the pending initial public offering described above, the
Company will effect a recapitalization whereby the presently outstanding common
stock (including converted Series A, B, C and D Convertible Preferred Stock)
will be converted to shares of common stock on a .59581 to 1 share basis. After
this reverse split is effected, the Company will have 5,000,000 shares of
preferred stock authorized and 15,000,000 shares of common stock authorized. All
information contained in the accompanying financial statements and footnotes has
been retroactively restated to give effect to this transaction.

BRIDGE FINANCING

On February 28, 1996, the Company entered into an agreement to issue three
8% promissory notes to an investor for an aggregate amount of $3,000,000. The
Company issued one promissory note and received $1,500,000 upon the closing,
issued a second promissory note and received $750,000 at the second closing
date, April 26,1996, and it is to receive the remaining $750,000 on the third
closing date,

F-17
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995

14. SUBSEQUENT EVENTS--(CONTINUED)
June 28, 1996. Each note is due on the earlier of the initial public offering of
the Company's securities or one year from the respective closing dates. Interest
is due quarterly on each of the notes.

In addition, the investor received warrants to purchase 16,757 shares of
common stock of the Company at $16.78 per share which expire on June 28, 2001.
The exercise price of $16.78 per share is, in the opinion of management, greater
than the fair market value of such shares at the date the warrants were issued.
The investor also received 8,937 contingent warrants to purchase the Company's
stock at $8.39 per share. These contingent warrants may be exercised during the
period of January 1, 1997 through June 28, 2001 if payment has not been made on
the notes by the agreed upon payment dates described above or if an initial
public offering is not consummated prior to January 1, 1997; however, if
payments on the notes are made by the specified dates, these contingent warrants
will be canceled.

The Company is presently in the process of negotiating an agreement with the
owners of the Company's Series D Convertible Preferred Stock and related
warrants for additional bridge financing in the amount of approximately
$2,000,000. This financing is expected to be subordinated to the initial bridge
financing described above, to bear interest at 9% and to expire on the earlier
of the consummation of an initial public offering or July 31, 1997.

15. UNAUDITED INTERIM CONSOLIDATED FINANCIAL INFORMATION

The unaudited consolidated financial information for the three months ended
March 31, 1995 and 1996 has been prepared in accordance with generally accepted
accounting principles for interim financial information. In the opinion of the
Company, these unaudited consolidated financial statements reflect all
adjustments necessary, consisting of normal recurring adjustments, for a fair
presentation of such data on a basis consistent with that of the audited data
presented herein. The consolidated results of operations for interim periods are
not necessarily indicative of the results to be expected for a full year.

F-18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Advanced Health Corporation:

We have audited the accompanying balance sheets of Peltz Ventimiglia, Inc.
(a New York corporation) as of December 31, 1994 and August 31, 1995, and the
related statements of operations, shareholders' equity and cash flows for the
years ended December 31, 1993 and 1994 and for the eight months ended August 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Peltz Ventimiglia, Inc. as
of December 31, 1994 and August 31, 1995, and the results of its operations and
its cash flows for the years ended December 31, 1993 and 1994 and for the eight
months ended August 31, 1995 in conformity with generally accepted accounting
principles.

New York, New York
June 4, 1996

F-19
<PAGE>
PELTZ VENTIMIGLIA, INC.
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
1994 1995
------------ ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................... $ 3,179 $ 4,344
Accounts receivable................................................ 45,173 41,552
------------ ----------
Total current assets........................................... 48,352 45,896
OTHER ASSETS......................................................... 7,108 7,817
------------ ----------
Total assets................................................... $ 55,460 $ 53,713
------------ ----------
------------ ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................... $ 17,297 $ 30,394
Accrued expenses................................................... 7,337 3,385
------------ ----------
Total liabilities.............................................. 24,634 33,779
------------ ----------
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; 1,000 shares authorized; 1,000
shares issued and outstanding, respectively...................... 1 1
Additional paid-in capital......................................... 3,085 3,085
Retained earnings.................................................. 27,740 16,848
------------ ----------
Total shareholders' equity..................................... 30,826 19,934
------------ ----------
Total liabilities and shareholders' equity..................... $ 55,460 $ 53,713
------------ ----------
------------ ----------
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-20
<PAGE>
PELTZ VENTIMIGLIA, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS ENDED EIGHT MONTHS
DECEMBER 31, ENDED
-------------------- AUGUST 31,
1993 1994 1995
-------- -------- ------------
<S> <C> <C> <C>
REVENUE................................................... $377,032 $499,543 $351,066
OPERATING EXPENSES........................................ 182,205 408,925 363,047
-------- -------- ------------
(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR STATE AND
LOCAL INCOME TAXES....................................... 194,827 90,618 (11,981)
(BENEFIT) PROVISION FOR STATE AND LOCAL INCOME TAXES...... 17,712 8,238 (1,089)
-------- -------- ------------
Net (loss) income................................... $177,115 $ 82,380 $(10,892)
-------- -------- ------------
-------- -------- ------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-21
<PAGE>
PELTZ VENTIMIGLIA, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
AND FOR THE EIGHT MONTHS ENDED AUGUST 31, 1995

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN RETAINED
SHARES PAR VALUE CAPITAL EARNINGS TOTAL
------ --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1993.................... 1,000 $ 1 $3,085 $ 3,960 $ 7,046
Distributions to shareholders............. -- -- -- (164,139) (164,139)
Net income................................ -- -- -- 177,115 177,115
--
------ ---------- -------- --------
BALANCE, December 31, 1993.................. 1,000 1 3,085 16,936 20,022
Distributions to shareholders............. -- -- -- (71,576) (71,576)
Net income................................ -- -- -- 82,380 82,380
--
------ ---------- -------- --------
BALANCE, December 31, 1994.................. 1,000 1 3,085 27,740 30,826
Net (loss)................................ -- -- -- (10,892) (10,892)
--
------ ---------- -------- --------
BALANCE, August 31, 1995.................... 1,000 $ 1 $3,085 $ 16,848 $ 19,934
--
--
------ ---------- -------- --------
------ ---------- -------- --------
</TABLE>

The accompanying notes are an integral part of these statements.

F-22
<PAGE>
PELTZ VENTIMIGLIA, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS ENDED EIGHT MONTHS
DECEMBER 31, ENDED
------------------- AUGUST 31,
1993 1994 1995
-------- ------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income........................................ $177,115 $82,380 $(10,892)
Adjustments to reconcile net (loss) income to net cash
provided by operating activities-
Changes in operating assets and liabilities-
Accounts receivable.................................... (34,369) (10,804) 3,621
Other assets........................................... 5,171 (7,108) (709)
Accounts payable....................................... 24,143 (7,171) 13,097
Accrued expenses....................................... -- 7,337 (3,952)
-------- ------- ------------
Net cash provided by operating activities............ 172,060 64,634 1,165
-------- ------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders............................ (164,139) (71,576) --
-------- ------- ------------
Net cash used in financing activities................ (164,139) (71,576) --
-------- ------- ------------
Net change in cash................................... 7,921 (6,942) 1,165
CASH, beginning of period.................................. 2,200 10,121 3,179
-------- ------- ------------
CASH, end of period........................................ $ 10,121 $ 3,179 $ 4,344
-------- ------- ------------
-------- ------- ------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-23
<PAGE>
PELTZ VENTIMIGLIA, INC.
NOTES TO FINANCIAL STATEMENTSE
DECEMBER 31, 1994 AND AUGUST 31, 1995

1. ORGANIZATION AND BUSINESS

Peltz Ventimiglia, Inc. (the "Company") provides physician practice
management consulting services for physicians in the Eastern United States.

On August 28, 1995, the Company entered into a purchase agreement with
Advanced Health Management Corporation ("AHM", formerly Advanced Clinical
Networks Corporation), a wholly-owned subsidiary of Advanced Health Corporation
("AHC"), whereby the Company sold its net assets to AHM for 75,996 shares of AHC
common stock for an aggregate sale price of $191,327.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

Fees for physician practice management consulting services are recognized as
services are rendered.

USE OF ESTIMATES

INCOME TAXES

The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", which requires
recognition of deferred tax liabilities and assets for the estimated future tax
effects of events that have been recognized in the financial statements or
income tax returns. Under this method, deferred tax liabilities and assets are
determined based on (1) differences between the financial accounting and income
tax bases of assets and liabilities, and (2) carry-forwards, using enacted tax
rates in effect for the years in which the differences and carry-forwards are
expected to reverse and be utilized, respectively.

The Company operates under Subchapter S of the Internal Revenue Code and,
consequently, is not subject to Federal and certain state income taxes. The
stockholders include their pro rata share of the Company's income in their
personal income tax returns. It is the Company's policy to reimburse its
stockholders for any tax liability resulting from their inclusion of the
Company's income in their respective tax returns.

F-24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Advanced Health Corporation:

We have audited the accompanying balance sheets of U.S. Health Connections,
Inc. (a Georgia corporation) as of December 31, 1994 and August 31, 1995, and
the related statements of operations, shareholders' equity and cash flows for
the year ended December 31, 1994 and for the eight months ended August 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of U.S. Health Connections,
Inc. as of December 31, 1994 and August 31, 1995, and the results of its
operations and its cash flows for the year ended December 31, 1994 and for the
eight months ended August 31, 1995 in conformity with generally accepted
accounting principles.

New York, New York
June 5, 1996

F-25
<PAGE>
U.S. HEALTH CONNECTIONS, INC.
BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................... $ 24,834 $ 10,436
Accrued expenses................................................... 27,414 15,953
Current portion of long-term debt.................................. 2,838 8,309
Loan payable to shareholder........................................ -- 6,000
Deferred revenue................................................... 10,002 --
------------ ----------
Total current liabilities...................................... 65,088 40,698
LONG-TERM DEBT, net of current portion............................... 8,513 --
------------ ----------
Total liabilities.............................................. 73,601 40,698
------------ ----------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value; 10,000 shares authorized; 100 shares
issued and outstanding............................................ 1 1
Additional paid-in capital......................................... 99 99
Retained earnings.................................................. 25,247 25,365
------------ ----------
Total shareholders' equity..................................... 25,347 25,465
------------ ----------
Total liabilities and shareholders' equity..................... $ 98,948 $ 66,163
------------ ----------
------------ ----------
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-26
<PAGE>
U.S. HEALTH CONNECTIONS, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE
FOR THE EIGHT MONTHS
YEAR ENDED ENDED
DECEMBER 31, AUGUST 31,
1994 1995
------------ ------------
<S> <C> <C>
REVENUE............................................................ $349,988 $214,606
OPERATING EXPENSES................................................. 318,506 212,002
------------ ------------
Operating income............................................. 31,482 2,604
INTEREST EXPENSE, net.............................................. 948 690
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES........................... 30,534 1,914
PROVISION FOR INCOME TAXES......................................... 5,287 1,796
------------ ------------
Net income................................................... $ 25,247 $ 118
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-27
<PAGE>
U.S. HEALTH CONNECTIONS, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1994
AND FOR THE EIGHT MONTHS ENDED AUGUST 31, 1995

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN RETAINED
SHARES PAR VALUE CAPITAL EARNINGS TOTAL
------ --------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994............................. -- $ -- $ -- $ -- $ --
Issuance of common stock............................. 100 1 99 -- 100
Net income........................................... -- -- -- 25,247 25,247
------ --- --- -------- -------
BALANCE, December 31, 1994........................... 100 1 99 25,247 25,347
Net income........................................... -- -- -- 118 118
------ --- --- -------- -------
BALANCE, August 31, 1995............................. 100 $ 1 $ 99 $ 25,365 $25,465
------ --- --- -------- -------
------ --- --- -------- -------
</TABLE>

The accompanying notes are an integral part of this statement.

F-28
<PAGE>
U.S. HEALTH CONNECTIONS, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE
FOR THE EIGHT MONTHS
YEAR ENDED ENDED
DECEMBER 31, AUGUST 31,
1994 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 25,247 $ 118
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation................................................... 5,200 5,200
Changes in operating assets and liabilities-
Accounts receivable.......................................... (72,596) 31,821
Other assets................................................. (1,592) (60)
Accounts payable............................................. 24,834 (14,398)
Accrued expenses............................................. 27,414 (11,461)
Deferred revenue............................................. 10,002 (10,002)
------------ ------------
Net cash provided by operating activities.................. 18,509 1,218
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net......................... (25,252) (8,884)
------------ ------------
Net cash used in investing activities...................... (25,252) (8,884)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from long-term debt................................. 11,351 (3,042)
Proceeds from loan payable from related party.................... -- 6,000
Proceeds from sale and issuance of common stock.................. 100 --
------------ ------------
Net cash provided by financing activities.................. 11,451 2,958
------------ ------------
Net change in cash......................................... 4,708 (4,708)
CASH, beginning of period.......................................... -- 4,708
------------ ------------
CASH, end of period................................................ $ 4,708 $ --
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-29
<PAGE>
U.S. HEALTH CONNECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND AUGUST 31, 1995

1. ORGANIZATION AND BUSINESS

U.S. Health Connections, Inc. (the "Company") commenced operations on
January 1, 1994. The Company provides physician network management services for
physician groups in the Southeastern United States.

On September 1, 1995, the Company entered into a purchase agreement with
Advanced Health Management Corporation ("AHM", formerly Advanced Clinical
Networks Corporation), a wholly-owned subsidiary of Advanced Health Corporation
("AHC"), whereby the Company's shareholders sold all of their outstanding stock
to AHM for $150,000 in cash, a $150,000 note receivable and 30,193 shares of AHC
common stock, for an aggregate sale price of $376,014.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

The Company enters into management services agreements with its network
clients whereby the Company recognizes administrative fees for managing
capitated contracts between health maintenance organizations ("HMOs") and
physician networks for the delivery of health care.

PROPERTY AND EQUIPMENT

Property and equipment, consisting primarily of electronic data processing
equipment, are stated at cost and depreciated on a straight-line basis over the
useful lives of the assets (5 years).

USE OF ESTIMATES

INCOME TAXES

F-30
<PAGE>
U.S. HEALTH CONNECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND AUGUST 31, 1995

3. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

DECEMBER 31, AUGUST 31,
1994 1995
------------ ----------
Vehicle.......................................... $ 14,888 $ 14,888
Computer equipment and software.................. 7,618 12,499
Furniture and fixtures........................... 2,746 6,749
------------ ----------
25,252 34,136

Less: Accumulated depreciation................... 5,200 10,400
------------ ----------
Property and equipment, net...................... $ 20,052 $ 23,736
------------ ----------
------------ ----------

Depreciation aggregated $5,200 for each of the year ended December 31, 1994
and the eight months ended August 31, 1995, respectively.

4. LONG-TERM DEBT

The Company had a loan payable with a bank related to the acquisition of a
vehicle. This loan was payable, with interest at 7.5%, in equal installments
through December 1997 and was repaid in full subsequent to the sale of the
Company to AHC. Accordingly, all long-term debt is reflected as a current
liability in the accompanying balance sheet as of August 31, 1995.

5. RELATED PARTY TRANSACTION

In 1995, the Company borrowed $6,000 from a related party of the majority
shareholder. The loan is due on demand and interest is payable, and is accrued
by the Company at August 31, 1995, at the payment date at a rate equal to the
Company's average borrowing rate.

F-31
<PAGE>
ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)

The following pro forma statement of operations for the year ended December
31, 1995 includes the results of operations of Advanced Health Corporation,
Peltz Ventimiglia, Inc. and U.S. Health Connections, Inc. as if the acquisitions
of Peltz Ventimiglia, Inc. and U.S. Health Connections, Inc. by Advanced Health
Corporation were made on January 1, 1995. The Company believes that this pro
forma statement of operations includes all necessary pro forma adjustments to
give pro forma effect to these transactions as if they had occurred on January
1, 1995.

The pro forma financial information presented below does not purport to be
indicative of the operating results which would have been achieved had the
acquisitions taken place on January 1, 1995 and should not be construed as
representative of the Company's results of operations for any future period.

<TABLE>
<CAPTION>
ADVANCED PELTZ U.S. HEALTH
HEALTH VENTIMIGLIA, CONNECTIONS, PRO FORMA PRO FORMA
CORPORATION(1) INC.(2) INC.(2) SUBTOTAL ADJUSTMENTS(3) OPERATIONS
-------------- ------------ ------------ ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE................... $ 1,053,949 $351,066 $214,606 $ 1,619,621 $-- $ 1,619,621
COST OF SALES............. 340,326 -- -- 340,326 -- 340,326
-------------- ------------ ------------ ----------- -------------- -----------
Gross Profit.......... 713,623 351,066 214,606 1,279,295 -- 1,279,295
OPERATING EXPENSES........ 6,412,367 363,047 212,002 6,987,416 26,280 7,013,696
-------------- ------------ ------------ ----------- -------------- -----------
Operating income
(loss).................... (5,698,744) (11,981) 2,604 (5,708,121) (26,280) (5,734,401)
OTHER INCOME (EXPENSE).... (7,863) -- (690) (8,553) -- (8,553)
-------------- ------------ ------------ ----------- -------------- -----------
Income (loss) before
income taxes............ (5,706,607) (11,981) 1,914 (5,716,674) (26,280) (5,742,954)
PROVISION (BENEFIT) FOR
INCOME TAXES............. -- (1,089) 1,796 707 (707) --
-------------- ------------ ------------ ----------- -------------- -----------
Net loss.............. $ (5,706,607) $(10,892) $ 118 $(5,717,381) $(25,573) $(5,742,954)
-------------- ------------ ------------ ----------- -------------- -----------
-------------- ------------ ------------ ----------- -------------- -----------
Pro forma net loss per
share.................... $ (1.66)
-----------
-----------
Pro forma weighted average
common shares
outstanding(4).......... 3,458,838
-----------
-----------
</TABLE>

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

(1) Includes the results of operations of Advanced Health Corporation for the
full year, and the results of operations of Peltz Ventimiglia, Inc. and U.S.
Health Connections, Inc. from September 1, 1995 through December 31, 1995.

(2) Includes the results of operations of Peltz Ventimiglia, Inc. and U.S.
Health Connections, Inc. from January 1, 1995 through August 31, 1995.

(3) Pro forma adjustments give effect to amortization of intangible assets
related to the acquisitions of Peltz Ventimiglia, Inc. and U.S. Health
Connections, Inc., as well as to the tax provision (benefit) which would
have resulted from the combined results of operations, had the acquisitions
been made at the beginning of the year.

(4) Includes the pro forma effect of shares of common stock issued in connection
with the acquisitions of Peltz Ventimiglia, Inc. and U.S. Health
Connections, Inc. as if those shares were issued and outstanding for the
period from January 1, 1995 to December 31, 1995.

F-32
<PAGE>
========================================== ==================================
- ------------------------------------------ ----------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OF THE UNDERWRITERS OR BY ANY
OTHER PERSON. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION 2,000,000 SHARES
OF AN OFFER TO BUY A SECURITY OTHER THAN THE
SHARES OF COMMON STOCK OFFERED HEREBY, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY, TO ANY PERSON IN [LOGO]
ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION TO SUCH ADVANCED HEALTH
PERSON. NEITHER THE DELIVERY OF THIS CORPORATION
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.

-------------------
TABLE OF CONTENTS

PAGE
----
Prospectus Summary..................... 3
Risk Factors........................... 5 -------------------
The Company............................ 15 PROSPECTUS
Use of Proceeds........................ 15 -------------------
Dividend Policy........................ 15
Capitalization......................... 16
Dilution............................... 17
Selected Consolidated Financial Data... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 19
Business............................... 23
Management............................. 39
Certain Transactions................... 47 COWEN & COMPANY
Principal Stockholders................. 49
Description of Capital Stock........... 50
Shares Eligible for Future Sale........ 52 VOLPE, WELTY & COMPANY
Underwriting........................... 54
Legal Matters.......................... 55
Experts................................ 55
Additional Information................. 55
Index to Consolidated Financial
Statements........................... F-1

-------------------
, 1996
UNTIL , 1996 (25 DAYS
AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
========================================== ==================================
- ------------------------------------------ ----------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee, the NASD filing
fee and the Nasdaq National Market listing fee.

SEC registration fee........................................... $ 11,104
NASD filing fee................................................ 3,520
Nasdaq National Market listing fee............................. *
Blue sky fees and expenses..................................... 25,000
Printing and engraving expenses................................ *
Legal fees and expenses........................................ ]*
Accounting fees and expenses................................... *
Transfer agent and registrar fees.............................. *
Miscellaneous.................................................. *
----------
Total...................................................... $ *
----------
----------
- ------------
* To be provided by amendment.

The Company will bear all of the foregoing fees and expenses.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the DGCL authorizes a court to award or a corporation's Board
of Directors to grant indemnification to directors and officers in terms
sufficiently broad to permit such indemnification under certain circumstances
for liabilities (including reimbursement for expenses incurred) arising under
the Act. Articles Nine and Ten of the Registrant's Certificate of Incorporation
provide for indemnification of its directors and officers and permissible
indemnification of employees and other agents to the maximum extent permitted by
the DGCL. Reference is also made to the Underwriting Agreement to be filed as
Exhibit 1.1 hereto, which sets forth certain indemnification provisions. In
addition, the Registrant maintains liability insurance for its officers and
directors.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The Registrant has sold and issued the following securities during the past
three years:

On August 30, 1993, the Company sold 185,893 common shares to the Chairman
and an employee of the Company, for an aggregate of $3,120 and 300,288 shares to
one individual for $3,360.

On December 27, 1993, the Company sold 718,984 common shares for $8,045
pursuant to a rights offering. The shares were offered only to the holders of
Physicians' On-Line, Inc. stock on a one-for-one basis pro rata to their
shareholdings in Physicians' On-Line, Inc.

In November 1994, the Company sold 75,965 common shares for an aggregate of
$639,655. Of these shares sold, all of which were paid for in 1994, 25,319 were
issued prior to December 31, 1994 and 50,641 were issued in January 1995.

In August 1995, the Company issued 2,978 shares of Common Stock to a
director of the Company for $25,000.

II-1
<PAGE>
In August 1995, the Company issued 543,564 shares of common stock to
purchase Majean, Inc. and 75,996 shares of common stock to purchase Peltz
Ventimiglia, Inc. and in September 1995, 30,193 shares of common stock to
purchase U.S. Health Connections, Inc., as more fully described in Note 3 to the
accompanying Consolidated Financial Statements.

In 1995, the Company sold 76,802 common shares to investors for an aggregate
of $625,059.

During 1995, the Chairman, the President, the principal stockholder and
certain employees exercised stock options for 287,775, 316,174, 128,695 and
152,635 shares, respectively, for $19,717.

The above securities were offered and sold by the Registrant in reliance
upon an exemption from registration under either (i) Section 4(2) of the
Securities Act as transactions not involving any public offering or (ii) Rule
701 under the Securities Act. No underwriters were involved in connection with
the sales of securities referred to in this Item 15.

All transactions described above were effected in reliance upon the
exemption from the registration requirements of the Securities Act contained in
Section 4(2) of the Securities Act and Rule 701 promulgated under the Securities
Act on the basis that such transactions did not involve a public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<C> <S>

*1.1 Form of Underwriting Agreement

*2.1 Agreement and Plan of Merger dated as of August 2, 1995, among Med-E-Systems
Corporation, Med-E-Systems Acquisition Corporation and the Registrant

*2.2 Agreement and Plan of Merger dated as of August 7, 1995, between the Registrant
and Majean, Inc.

2.3 Asset Purchase Agreement dated as of August 28, 1995, among Advanced Clinical
Networks Corporation, Peltz Ventimiglia, Inc., Richard Ventimiglia and Steven
Peltz

2.4 Agreement and Plan of Merger dated as of September 1, 1995, among U.S. Health
Connections, Inc., the Registrant and Advanced Clinical Networks Corporation

*3.1 Restated Certificate of Incorporation of the Registrant

*3.2 By-laws of the Registrant

*4.1 Advanced Health Corporation 1995 Stock Option Plan, as amended

*4.2 Employee Stock Purchase Plan

*4.3 Non-Employee Director Stock Option Plan

*5 Opinion of O'Sullivan Graev & Karabell, LLP (including the consent of such firm)

*10.1 Development and Marketing Agreement dated as of August 11, 1995, between Med-E-
Systems Corporation and Integrated Disease Management, Inc.

*10.2 Software License Agreement dated as of September 27, 1995, between Med-E-Systems
Corporation and Medco Containment Services Inc.

*10.3 System Implementation Agreement dated August 22, 1995, between IDX Systems
Corporation and the Registrant

10.4 Investors' Rights Agreement dated as of August 31, 1993, among Med-E-Mail
Corporation, Financial Strategic Portfolios, Inc.--Health Sciences Portfolio and
The Global Health Sciences Fund
</TABLE>

II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<C> <S>
10.5 Amended and Restated Investors' Rights Agreement dated as of March 16, 1994,
among Med-E-Mail Corporation, Financial Strategic Portfolios, Inc.--Health
Sciences Portfolio and The Global Health Sciences Fund

10.6 Amended and Restated Investors' Rights Agreement dated as of January 27, 1995,
among Med-E-Systems Corporation, Invesco Strategic Portfolios, Inc.--Health
Sciences Portfolio and The Global Health Sciences Fund

10.7 Investors' Rights Agreement dated as of August 23, 1995, among the Registrant,
21st Century Communucations Partners, L.P., 21st Century Communications T-E
Partners, L.P. and 21st Century Communications Foreign Partners, L.P.

10.8 Registration Rights Agreement dated February 28, 1996, among the Registrant, Park
Avenue Capital, L.P. and Access Industries, LLC

*10.9 Management Services Agreement dated as of December 11, 1995, between Madison
Medical--The Private Practice Group of New York, L.L.P. and Uptown Management,
Inc.

*10.10 Stockholders' Agreement dated as of December 11, 1995, among Uptown Physician
Management, Inc. and certain stockholders

*10.11 Management Services Agreement dated as of August 7, 1995, among Advanced Heart
Institute of New York, P.C., Valavanur A. Subramanian, M.D., Jeffrey Moses, M.D.
and Majean Sub 2, Inc.

*10.12 Management Services Agreement between Cardiology Physician Management, Inc. and
Cardiology First of New Jersey, P.A.

*10.13 Stockholders' Agreement between Cardiology Physician Management, Inc. and
Cardiology First of New Jersey, P.A.

*10.14 Management Services Agreement between Diamond Physician Management, Inc. and Long
Island Interventional Cardiology

*10.15 Stockholders' Agreement between Diamond Physician Management, Inc. and Long
Island Interventional Cardiology

*10.16 Administrative Services Base Agreement dated June 30, 1994, between U.S. Health
Connections, Inc. and The Emory Clinic, Inc.

10.17 Tarrytown, New York Office Lease Agreement dated November 30, 1995, between
Tarrytown Corporate Center IV, L.P. and the Registrant

10.18 Tarrytown, New York Office Sublease Agreement dated October 31, 1995, between
American Software, USA, Inc. and the Registrant

10.19 Chicago Office Lease Agreement dated December 8, 1995, between Adams Family,
L.L.C. and the Registrant

11.1 Supplemental Net Loss Per Common Share Computation

21 List of Subsidiaries

*23.1 Consent of O'Sullivan Graev & Karabell, LLP (to be included as part of its
opinion to be filed as Exhibit 5 hereto)

23.2 Consent of Arthur Andersen LLP

24 Powers of Attorney (included on page II-5)

27 Financial Data Schedule
</TABLE>

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

* To be filed by amendment.

II-3
<PAGE>
(b) Financial Statement Schedules

All schedules are omitted because they are inapplicable or the requested
information is shown in the consolidated financial statements or related notes.

ITEM 17. UNDERTAKINGS.

The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the DGCL, the Certificate of Incorporation and By-laws,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in such Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in such
Securities Act and will be governed by the final adjudication of such issue.

The Registrant hereby undertakes that:

1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

2. For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tarrytown, State of New
York, on the 19th day of June, 1996.

ADVANCED HEALTH CORPORATION

By: /s/ JONATHAN EDELSON, M.D.
..................................
Jonathan Edelson, M.D.
Chairman of the Board and
Chief Executive Officer

POWER OF ATTORNEY

We, the undersigned directors and officers of ADVANCED HEALTH CORPORATION,
do hereby constitute and appoint Jonathan Edelson, M.D., Steven Hochberg and
Alan B. Masarek, and each of them acting alone, our true and lawful attorneys
and agents, with full power of substitution, to do any and all acts and things
in our name and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, and each of them acting alone,
may deem necessary or advisable to enable said corporation to comply with the
Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below and
to file with the Securities and Exchange Commission, any and all amendments
(including post-effective amendments) hereto, including exhibits thereto and
other documents in connection herewith, including, without limitation, any
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933; and we do hereby
ratify and confirm all that said attorneys and agents, or any of them, shall do
or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 19th day of June, 1996, by the
following persons in the capacities indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ JONATHAN EDELSON, M.D. Chairman of the Board, Chief Executive
............................................. Officer and Director (Principal Executive
Jonathan Edelson, M.D Officer)

/s/ STEVEN HOCHBERG President and Director
.............................................
Steven Hochberg

/s/ RICHARD W. KAPLAN Executive Vice President and Director
.............................................
Richard W. Kaplan

/s/ ALAN B. MASAREK Chief Operating Officer and Chief Financial
............................................. Officer (Principal Financial and Accounting
Alan B. Masarek Officer)

/s/ JONATHAN LIEBER Director
.............................................
Jonathan Lieber

/s/ BARRY KUROKAWA Director
.............................................
Barry Kurokawa
</TABLE>

II-5

<PAGE>

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

EXHIBITS

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

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

ADVANCED HEALTH CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

INDEX TO EXHIBITS
-----------------

<TABLE><CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER
- ----------- ---------------
<C> <S> <C>

*1.1 Form of Underwriting Agreement

*2.1 Agreement and Plan of Merger dated as of August 2, 1995, among Med-E-Systems
Corporation, Med-E-Systems Acquisition Corporation and the Registrant

*2.2 Agreement and Plan of Merger dated as of August 7, 1995, between the Registrant
and Majean, Inc.

2.3 Asset Purchase Agreement dated as of August 28, 1995, among Advanced Clinical
Networks Corporation, Peltz Ventimiglia, Inc., Richard Ventimiglia and Steven
Peltz

2.4 Agreement and Plan of Merger dated as of September 1, 1995, among U.S. Health
Connections, Inc., the Registrant and Advanced Clinical Networks Corporation

*3.1 Restated Certificate of Incorporation of the Registrant

*3.2 By-laws of the Registrant

*4.1 Advanced Health Corporation 1995 Stock Option Plan, as amended

*4.2 Employee Stock Purchase Plan

*4.3 Non-Employee Director Stock Option Plan

*5 Opinion of O'Sullivan Graev & Karabell, LLP (including the consent of such firm)

*10.1 Development and Marketing Agreement dated as of August 11, 1995, between Med-E-
Systems Corporation and Integrated Disease Management, Inc.

*10.2 Software License Agreement dated as of September 27, 1995, between Med-E-Systems
Corporation and Medco Containment Services Inc.

*10.3 System Implementation Agreement dated August 22, 1995, between IDX Systems
Corporation and the Registrant

10.4 Investors' Rights Agreement dated as of August 31, 1993, among Med-E-Mail
Corporation, Financial Strategic Portfolios, Inc.--Health Sciences Portfolio and
The Global Health Sciences Fund

10.5 Amended and Restated Investors' Rights Agreement dated as of March 16, 1994,
among Med-E-Mail Corporation, Financial Strategic Portfolios, Inc.--Health
Sciences Portfolio and The Global Health Sciences Fund

10.8 Registration Rights Agreement dated February 28, 1996, among the Registrant, Park
Avenue Capital, L.P. and Access Industries, LLC

*10.9 Management Services Agreement dated as of December 11, 1995, between Madison
Medical--The Private Practice Group of New York, L.L.P. and Uptown Management,
Inc.

*10.10 Stockholders' Agreement dated as of December 11, 1995, among Uptown Physician
Management, Inc. and certain stockholders

*10.11 Management Services Agreement dated as of August 7, 1995, among Advanced Heart
Institute of New York, P.C., Valavanur A. Subramanian, M.D., Jeffrey Moses, M.D.
and Majean Sub 2, Inc.

*10.12 Management Services Agreement between Cardiology Physician Management, Inc. and
Cardiology First of New Jersey, P.A.

*10.13 Stockholders' Agreement between Cardiology Physician Management, Inc. and
Cardiology First of New Jersey, P.A.

*10.14 Management Services Agreement between Diamond Physician Management, Inc. and Long
Island Interventional Cardiology
</TABLE>

<PAGE>

INDEX TO EXHIBITS
-----------------

<TABLE><CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER
- ----------- ---------------
<C> <S> <C>

*10.15 Stockholders' Agreement between Diamond Physician Management, Inc. and Long
Island Interventional Cardiology

*10.16 Administrative Services Base Agreement dated June 30, 1994, between U.S. Health
Connections, Inc. and The Emory Clinic, Inc.

10.17 Tarrytown, New York Office Lease Agreement dated November 30, 1995, between
Tarrytown Corporate Center IV, L.P. and the Registrant

10.18 Tarrytown, New York Office Sublease Agreement dated October 31, 1995, between
American Software, USA, Inc. and the Registrant

10.19 Chicago Office Lease Agreement dated December 8, 1995, between Adams Family,
L.L.C. and the Registrant

11.1 Supplemental Net Loss Per Common Share Computation

21 List of Subsidiaries

*23.1 Consent of O'Sullivan Graev & Karabell, LLP (to be included as part of its
opinion to be filed as Exhibit 5 hereto)

23.2 Consent of Arthur Andersen LLP

24 Powers of Attorney (included on page II-5)

27 Financial Data Schedule
</TABLE>

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

* To be filed by amendment.

Exhibit 2.3

[EXECUTION COPY]

ASSET PURCHASE AGREEMENT

DATED AS OF AUGUST 28, 1995,

AMONG

ADVANCED CLINICAL NETWORKS CORPORATION,

PELTZ VENTIMIGLIA, INC.

AND THE FOUNDERS

<PAGE>

TABLE OF CONTENTS
-----------------

Article Page
- ------- ----

ARTICLE I TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF
LIABILITIES AND RELATED MATTERS . . . 1
1.1. Transfer of Assets . . . . . . . . . . . . . 1
1.2. Assets Not Being Transferred . . . . . . . . 3
1.3. Liabilities Being Assumed . . . . . . . . . . 4
1.4. Liabilities Not Being Assumed . . . . . . . . 4
1.5. Instruments of Conveyance and Transfer, Etc. . 6
1.6. Right of Endorsement, Etc . . . . . . . . . . 6
1.7. Further Assurances, Etc . . . . . . . . . . . 6
1.8. Assignment of Contracts, Rights, Etc . . . . 7

ARTICLE II PURCHASE PRICE; ALLOCATION . . . . . . . . . . 7
2.1. Purchase Price; Payment . . . . . . . . . . . 7
2.2. Allocation of Purchase Price . . . . . . . . . 8

ARTICLE III REPRESENTATIONS AND WARRANTIES . . . . . . . 8
3.1. Representations and Warranties of the Seller
and the Founders . . . . . . . . . . . . . 8
(a) Organization; Good Standing; Qualification
and Power . . . . . . . . . . . . . . . . 8
(b) Equity Investments . . . . . . . . . . . . . 9
(c) Authority . . . . . . . . . . . . . . . . . . 9
(d) Financial Information . . . . . . . . . . . . 9
(e) Absence of Undisclosed Liabilities . . . . . 10
(f} Absence of Changes . . . . . . . . . . . . . 10
(g) Title to Assets, Properties, Interests in
Properties and Rights and Related
Matters . . . . . . . . . . . . . . . . . 12
(h) Tax Matters . . . . . . . . . . . . . . . . . 13
(i) Real Property . . . . . . . . . . . . . . . . 14
(j) Environmental Matters . . . . . . . . . . . . 14
(k) Intellectual Property Rights . . . . . . . . 15
(1) Agreements, Etc . . . . . . . . . . . . . . . 15
(m) Litigation, Etc. . .' . . . . . . . . . . . . 17
(n) Compliance; Governmental Authorizations . . . 17
(o) Accounts and Notes Receivable; Accounts
Payable . . . . . . . . . . . . . . . . . 18
(p) Labor Relations; Employees . . . . . . . . . 18
(q) Employee Benefit Plans . . . . . . . . . . . 19
(r) Insurance . . . . . . . . . . . . . . . . . . 20
(s) Burdensome Restrictions . . . . . . . . . . . 20
(t) Brokers . . . . . . . . . . . . . . . . . . . 20
(u) Disclosure . . . . . . . . . . . . . . . . . 20
(v) Insider Contracts . . . . . . . . . . . . . . 21
(w) Definition of Best Knowledge . . . . . . . . 21
(x) Investment Representations . . . . . . . . . 21
3.2. Representations and Warranties of the Buyer. . 22
(a) Organization, Good Standing and Power . . . . 22
(b) Authority . . . . . . . . . . . . . . . . . . 22

-i-

<PAGE>

Article Page
- ------- ----

(c) Capitalization . . . . . . . . . . . . . . . . 23
(d) Brokers . . . . . . . . . . . . . . . . . . . . 23
(e) . . . . . . . . . . . . . . . . . . . . . . . . 23
(f) Litigation . . . . . . . . . . . . . . . . . . 23
(g) No Defaults . . . . . . . . . . . . . . . . . . 23

ARTICLE IV CONDITIONS OF CLOSING . . . . . . . . . . . . . . . 23
4.1. Conditions of Each Party's Obligations . . . . . . 23
(a) Approvals . . . . . . . . . . . . . . . . . . 23
(b) Legal Action . . . . . . . . . . . . . . . . . 23
(c) Legislation . . . . . . . . . . . . . . . . . 24
4.2. Conditions of Obligations of the Buyer . . . . 24
(a) Representations and Warranties . . . . . . . . 24
(b) Performance of Obligations of the Seller and
the Founders . . . . . . . . . . . . . . 24
(c) Authorization . . . . . . . . . . . . . . . . 24
(d) Absence of Changes . . . . . . . . . . . . . . 24
(e) Instruments of Transfer, Conveyance and
Assignment . . . . . . . . . . . . . . . 24
(f) Opinion of Counsel to the Seller . . . . . . . 24
(g) Acceptance by Counsel to the Buyer . . . . . . 24
(h) Consents and Approvals . . . . . . . . . . . . 25
(i) Government Consents, Authorizations, Etc . . . 25
(j) . . . . . . . . . . . . . . . . . . . . . . . . 25
(k) Payments . . . . . . . . . . . . . . . . . . . 25
(1) Employment Agreements . . . . . . . . . . . . 25
4.3. Conditions of Obligations of the Seller . . . 25
(a) Representations and Warranties . . . . . . . . 25
(b) Performance of Obligations . . . . . . . . . . 25
(c) Authorization . . . . . . . . . . . . . . . . 25
(d) Acceptance by Counsel to the Seller . . . . . 25
(e) Government Consents, Authorizations, Etc. . . . 26
(f) Opinion of Counsel to the Buyer . . . . . . . 26

ARTICLE V CLOSING . . . . . . . . . . . . . . . . . . . 26

ARTICLE VI INDEMNIFICATION . . . . . . . . . . . . . . . 26
6.1. Definitions . . . . . . . . . . . . . . . . . 26
(a) "Affiliate" . . . . . . . . . . . . . . . . . . 26
(b) "Buyer Indemnification Event". . . . . . . . . . 26
(c) "Buyer Indemnified Persons" . . . . . . . . . . 27
(d) "Indemnified Persons" . . . . . . . . . . . . . 27
(e) "Indemnifying Person" . . . . . . . . . . . . . 27
(f) "Losses" . . . . . . . . . . . . . . . . . . . . 27
(G) "Seller Indemnification Event" . . . . . . . . 27
(h) "Seller Indemnified Persons" . . . . . . . . . 28
6.2. Indemnification Generally, Etc . . . . . . . . 28
(a) Buyer Indemnification . . . . . . . . . . . . . 28
(b) Seller Indemnification . . . . . . . . . . . . 28
6.3. Assertion of Claims . . . . . . . . . . . . . 28
6.4. Notice and Defense of Third Party Claims . . . 28

-ii-

<PAGE>

Article Page
- ------- ----

6.5. Survival of Representations, Warranties and
Covenants . . . . . . . . . . . . . . . . 29
6.6. Limitations on Indemnification . . . . . . . 29
6.7. Exclusivity of Remedies . . . . . . . . . . . 30
6.8. Payment . . . . . . . . . . . . . . . . . . . 30

ARTICLE VII ADDITIONAL POST-CLOSING AGREEMENTS . . . . . . 30
7.1. Disclosure of Information; Non-Competition . . 30
7.2. Access . . . . . . . . . . . . . . . . . . . . 32
7.3. Employees and Employee Benefits . . . . . . . 32
7.4. Transfer of Securities . . . . . . . . . . . . 33
7.5. Accounts Receivable . . . . . . . . . . . . . 33

ARTICLE VIII AMENDMENT, MODIFICATION AND WAIVER . . . . . . . 34
8.1. Amendment, Modification and Waiver . . . . . . . 34
34
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . 34
9.1. Expenses; Transfer Taxes, Etc . . . . . . . . 34
9.2. Entire Agreement . . . . . . . . . . . . . . . 34
9.3. Descriptive Headings . . . . . . . . . . . . . 35
9.4. Notices . . . . . . . . . . . . . . . . . . . 35
9.5. Counterparts . . . . . . . . . . . . . . . . . 36
9.6. Governing Law . . . . . . . . . . . . . . . . 36
9.7. Benefits of Agreement . . . . . . . . . . . . 36
9.8. Pronouns . . . . . . . . . . . . . . . . . . . 36

-iii-

<PAGE>

Attachments
-----------

EXHIBITS
- --------

Exhibit A - Form of Bill of Sale and Assumption Agreement

Exhibit B - Form of Warrant Issuance Agreement

Exhibit C - Form of Opinion of Counsel to the Seller

Exhibit D - Form of Employment Agreement

Exhibit E - Form of Opinion of Counsel to the Buyer

SCHEDULES
- ---------

1.1 (c) - Assigned Contracts
1.1 (d) - Real Property Leases
1.1 (e) - Accounts Receivable
1.1 (k) - Excluded Claims
1.1 (m) - Additional Assets
1.2 (9) Certain Excluded Assets
1.3 (a) - Accounts Payable
3.1 (a) - Jurisdictions of Qualification
3.1 (d) - Financial Statements
3.1 (e) - Liabilities
3.1 (f) (iii) - Changes
3.1 (1) - Agreements
3.1 (m) - Litigation
3.1 (0) - Receivables and Payables
3.1 (p) - Employees
3.1 (q) - Employee Benefit Plans
3.1 (r) - Insurance
4.2 (h) - Consents and Approvals
4.2 (k) - Customers to be Notified of Payments
7.3 (a) - Employees Hired

-iv-

<PAGE>

Definitions
-----------

The following terms which may appear in more than one Section of this
Agreement are defined in the following Sections:

Term Section
---- -------

Affiliate . . . . . . . . . . . . . . . . . . . . . . . 6.1(a)
AHC . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
Assigned Contracts . . . . . . . . . . . . . . . . . . . 1.1(c)
Associate . . . . . . . . . . . . . . . . . . . . . 3.1(1) (xv)
Assumed Obligations . . . . . . . . . . . . . . . . . . 1.3(b)
Best Knowledge . . . . . . . . . . . . . . . . . . . . . 3.1(w)
Bill of Sale and Assumption Agreement . . . . . . . . . . . . 1.5
Business Day . . . . . . . . . . . . . . . . . . . . . . . . 9.4
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . Caption
Buyer Indemnification Event . . . . . . . . . . . . . . 6.1(b)
Buyer Indemnified Persons . . . . . . . . . . . . . . . 6.1(c)
Claims . . . . . . . . . . . . . . . . . . . . . . . 3.1(g) (i)
Closing . . . . . . . . . . . . . . . . . . . . . . . Artic1e V
Closing Date . . . . . . . . . . . . . . . . . . . . . Artic1e V
Common Stock . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
Competitive Business . . . . . . . . . . . . . . . . . . 7.1(b)
Confidential Information . . . . . . . . . . . . . . . . 7.1(a)
disqualified individual . . . . . . . . . . . . . 3.1(1) (xii)
employee benefit plan . . . . . . . . . . . . . . . 3.1(q) (i)
Employee Plans . . . . . . . . . . . . . . . . . . . 3.1(q) (i)
Employees . . . . . . . . . . . . . . . . . . . . . . . 3.1(p)
Environmental Laws . . . . . . . . . . . . . . . . . . . 3.1(j)
ERISA . . . . . . . . . . . . . . . . . . . . . . . 3.1(q) (i)
ERISA Affiliate . . . . . . . . . . . . . . . . . . 3.1(q) (iv)
excess parachute payment . . . . . . . . . . . . . 3.1(1) (xii)
Excluded Assets . . . . . . . . . . . . . . . . . . . . 1.2(g)
Excluded Obligations . . . . . . . . . . . . . . . . . . 1.4(h)
Financial Statements . . . . . . . . . . . . . . . . . . 3.1(d)
Former Employees . . . . . . . . . . . . . . . . . . . . 7.3(b)
Founders . . . . . . . . . . . . . . . . . . . . . . . . Caption
handling . . . . . . . . . . . . . . . . . . . . . . . . 3.1(j)
Hazardous Substance . . . . . . . . . . . . . . . . . . 3.1(j)
Historical Financial Statements . . . . . . . . . . . . 3.1(d)
Indemnified Persons . . . . . . . . . . . . . . . . . . 6.1(d)
Indemnifying Person . . . . . . . . . . . . . . . . . . 6.1(e)
Losses . . . . . . . . . . . . . . . . . . . . . . . . . 6.1(f)
Litigation . . . . . . . . . . . . . . . . . . . . . . . 3.1(m)
P&L Report Date . . . . . . . . . . . . . . . . . . . . 3.1(d)
P&L Report . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
Pension Plan . . . . . . . . . . . . . . . . . . . 3.1(q) (iii)
Permitted Liens . . . . . . . . . . . . . . . . . . 3.1(g) (iv)
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 2.1
Purchased Assets . . . . . . . . . . . . . . . . . . . . 1.1(m)
Real Property . . . . . . . . . . . . . . . . . . . . . 3.1(j)
Restrictive Covenant . . . . . . . . . . . . . . . . . . . . 2.1
Returns . . . . . . . . . . . . . . . . . . . . . . 3.1(h) (i)

-v-

<PAGE>

Term Section
---- -------

Schedule of Assumed Liabilities . . . . . . . . . . . . 1.3(a)
Securities Act . . . . . . . . . . . . . . . . . . 3.1 (l) (xv)
Seller . . . . . . . . . . . . . . . . . . . . . . . . . Caption
Seller Indemnification Event . . . . . . . . . . . . . . 6.1(g)
Seller Indemnified Persons . . . . . . . . . . . . . . . 6.1(h)
Statement of Allocation . . . . . . . . . . . . . . . . . . 2.2
Subject Business . . . . . . . . . . . . . . . . . . . Preamble
Tax . . . . . . . . . . . . . . . . . . . . . . . . 3.1 (h) (v)
Taxes . . . . . . . . . . . . . . . . . . . . . . . 3.1 (h) (v)
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4
transferee . . . . . . . . . . . . . . . . . . . . . 3.1 (h) (v)

-vi-

<PAGE>

ASSET PURCHASE AGREEMENT dated as of
August 28, 1995, among ADVANCED CLINICAL
NETWORKS CORPORATION, a Delaware corporation
(the "Buyer"), PELTZ VENTIMIGLIA, INC., a New
York corporation (the "Seller"), and each of
RICHARD VENTIMIGLIA and STEVEN PELTZ
(collectively, the "Founders").

The Seller is engaged in the business (the "Subject Business") of
providing consulting services to physicians. The parties hereto desire that
the Seller sell, transfer, convey and assign to the Buyer all of the
assets, properties, interests in properties and rights of the Seller used
in the Subject Business (other than the Excluded Assets), subject to
certain payments by the Buyer and the assumption by the Buyer of certain
liabilities and obligations of the Seller described herein, upon the terms
and subject to the conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set
forth, the parties hereby agree as follows:

ARTICLE I

TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF
LIABILITIES AND RELATED MATTERS

1.1. Transfer of Assets . On the terms and subject to the conditions
-------------------
of this Agreement, at the Closing, the Seller shall sell, transfer, convey
and assign to the Buyer, and the Buyer shall purchase and acquire from the
Seller, all of the assets, properties, interests in properties and rights
of the Seller of every kind and description, wherever located (other than
the Excluded Assets), as the same shall exist immediately prior to the
Closing, free and clear of all Claims (except Permitted Liens), including,
without limitation, the following:

(a) Except as set forth on Schedule 1.2(g), all of the furniture,
---------------
leasehold improvements, office equipment, office supplies and other
items of tangible personal property, if any, owned or leased by the
Seller that relate in any manner to, or are used or held for use in
connection with, the Subject Business;

(b) all of the inventories, supplies, stationary, forms, labels,
shipping materials, marketing materials and other materials, if any,
owned by the Seller that relate in any manner to, or are used or held
for use in connection with, the Subject Business;

<PAGE>

(c) all of the Seller's rights in, to and under the contracts, leases,
commitments and other agreements identified on Schedule 1.1(c) (the
---------------
"Assigned Contracts");

(d) all rights and incidents of interest of the Seller in and to the
real property leases, written, oral or otherwise (the "Real Property
Leases"), listed on Schedule 1.1(d), if any, together with all of the
---------------
Seller's right, title and interest in the removable structures, fixtures
and improvements (including, without limitation, removable leasehold
improvements) located on the real property covered by the Real Property
Leases;

(e) all accounts receivable listed on Schedule 1.1(e), all notes
---------------
receivable and prepaid expenses, advances and deposits that relate in any
manner to, or are used or held for use in connection with, the Subject
Business;

(f) all records and files of the Seller (whether in hard copy or
machine readable form), including, without limitation, property records,
mailing lists, client lists, prospective client lists, personnel and
payroll records, accounting records and computer programs, records, files
and related software and documentation that relate in any manner to, or are
used or held for use in connection with, the Subject Business;

(g) all rights in and to insurance and indemnity claims relating to the
Purchased Assets and the Assumed Liabilities in respect of events occurring
prior to the Closing;

(h) all interests in and to post office boxes, telephone, telecopier
and telex numbers and all listings in all telephone books and directors;

(i) to the extent transferable, all federal, state, local and foreign
governmental licenses, permits, authorizations, approvals and utility
deposits;

(j) all transferable rights (including experience ratings) with respect
to unemployment, workers' and workmen's compensation, and other similar
insurance reserves relating to employees of the Seller who become employees
of the Buyer;

(k) except for the claims listed on Schedule 1.1(k), all rights, choses
---------------
in action, and claims (known or unknown, matured or unmatured, accrued or
contingent) against third parties relating to, arising

-2-

<PAGE>

out of or based upon the business or the Purchased Assets;

(1) all computer hardware and software, and related systems,
whether owned or leased by the Seller that relate in any manner to, or
are used or held for use in connection with, the Business; and

(m) those additional assets, properties and rights, if any, set
forth on Schedule 1.1(m).
---------------

For convenience of reference, the assets, properties, interests in
properties and rights that are to be sold, transferred, conveyed and
assigned to the Buyer by the Seller pursuant to Section 1.1 are hereinafter
collectively referred to as the "Purchased Assets".

1.2. ASSETS NOT BEING TRANSFERRED. Anything contained in Section
----------------------------
1.1 or elsewhere herein to the contrary notwithstanding, there are
expressly excluded from the assets, properties, interests in properties and
rights of the Seller to be sold, transferred, conveyed and assigned to the
Buyer the following:

(a) the consideration delivered to the Seller pursuant to this
Agreement;

(b) the minute books, ownership record books, seals, blank share
certificates and tax returns of the Seller;

(c) all assets associated with or owned by any Employee Plan (as
defined below) sponsored or maintained by the Seller, including,
without limitation, any defined benefit plan (as defined in Section
3(35) of ERISA), defined contribution plan (as defined in Section
3(34) of ERISA), deferred compensation plan, health, life insurance,
welfare benefit or cafeteria plan;

(d) all rights of the Seller in and to insurance and indemnity
claims against third parties, other than those rights related to the
Purchased Assets;

(e) all rights and choses in action of the Seller against third
parties, other than those rights and choses in action related to the
Purchased Assets;

(f) all indebtedness owed to the Seller from the Founders
reflected on the Balance Sheet; and

(g) the assets described on Schedule 1.2(g) attached hereto.
----------------

For convenience of reference, the assets, properties, interests in
properties and rights of the Seller that are not to be sold,

-3-

<PAGE>

transferred, conveyed and assigned to the Buyer are hereinafter
collectively referred to as the "Excluded Assets".

1.3. Liabilities Being Assumed. Except as otherwise provided herein and
-------------------------
subject to the terms and conditions of this Agreement, simultaneously with
the sale, transfer, conveyance and assignment to the Buyer of the Purchased
Assets, the Buyer shall assume, and hereby agrees to pay when due, the
following liabilities and obligations of the Seller:

(a) the liabilities and obligations of the Seller set forth on
Schedule 1.3(a), but only to the extent remaining unpaid as of the
---------------
Closing, and only to the extent the accounts receivable listed on
Schedule 1.1(e) are collected by the Buyer; and
---------------

(b) all ordinary course liabilities and obligations arising or to
be performed after the Closing in accordance with the terms of all
contracts, licenses, leases, commitments, purchase orders, sales
orders and other agreements effectively assigned and transferred to
the Buyer pursuant to the provisions hereof.

For convenience of reference, the foregoing liabilities and obligations of
the Seller being assumed by the Buyer are collectively referred to as the
"Assumed Obligations".

1.4. Liabilities Not Being Assumed. The Buyer is not assuming any
-----------------------------
liabilities or obligations of the Seller (fixed or contingent, known or
unknown, matured or unmatured) other than the Assumed Obligations, and,
without limiting the generality of the foregoing, the Buyer is not assuming
any of the following liabilities and obligations of the Seller:

(a) all liabilities and obligations for Taxes arising out of or
relating to the operation of the Subject Business prior to the
Closing;

(b) all liabilities and obligations under any contract, license,
lease, commitment, purchase order, sales order or other agreement
effectively assigned and transferred to the Buyer hereunder (other
than ordinary course obligations required to be performed after the
Closing in accordance with the terms of any of the same) arising prior
to the Closing or arising out of, relating to or based upon any action
or omission of the Seller prior to the Closing, notwithstanding that
such liability or obligation shall arise, be asserted or come due
after the Closing;

(c) all liabilities and obligations relating to or arising out of
suits, actions, proceedings or claims (including, without limitation,
any of the same in respect of personal injury, property damage,

-4-

<PAGE>

workers' or workmen's compensation, grievances, the violation of any law
(including, without limitation, any environmental law)) which were filed,
brought, commenced or asserted prior to the Closing, or which are based on
(but only to the extent based on) events occurring prior to the Closing, or
which are based on or related to (but only to the extent based on or
related to) products sold or services performed by the Seller prior to the
Closing, notwithstanding that the date on which such suit, action,
proceeding or claim is filed, brought, commenced or asserted is after the
Closing;

(d) all liabilities and obligations for severance or similar payments
or other payments pursuant to any written or oral agreement, arrangement or
understanding to be made to any officer, director, employee, stockholder or
agent of the Seller in connection with the sale of the Subject Business;

(e) all liabilities and obligations of the Seller relating to the
Excluded Assets and all liabilities and obligations of the Seller under or
arising out of this Agreement or with respect to the transactions
contemplated hereby, including, without limitation, legal and accounting
fees, expenses and Taxes incurred by the Seller or any stockholder of the
Seller;

(f) all liabilities and obligations under any employment agreement or
similar agreement, arrangement or understanding relating to the terms of
employment of any employee of the Seller;

(g) all liabilities and obligations associated with or required under
any employee plan sponsored or maintained by the Seller, including, without
limitation, any defined benefit plan (as defined in Section 3(35) of
ERISA), defined contribution plan (as defined by Section 3(34) of ERISA),
deferred compensation plan, health, life insurance, welfare benefit, post-
retirement health or life benefits or cafeteria plan;

(h) all liabilities and obligations of the Seller relating to or
arising out of the failure of the Seller, knowingly or unknowingly, to
qualify to do business in the Commonwealth of Massachusetts or the States
of North Carolina, Rhode Island, New Jersey or Connecticut; and

(i) all liabilities and obligations of the Seller relating to or
arising out of the operation, liquidation, dissolution or winding-up of its
business after the Closing.

-5-

<PAGE>

For convenience of reference, the foregoing liabilities and obligations of
the Seller not being assumed by the Buyer are collectively referred to as
the "Excluded Obligations".

1.5. Instruments of Conveyance and Transfer, Etc. At the Closing, the
-------------------------------------------
Seller shall deliver (or cause to be delivered) to the Buyer such deeds,
bills of sale, endorsements, assignments and other good and sufficient
instruments of sale, transfer, conveyance and assignment as shall be
necessary to sell, transfer, convey and assign to the Buyer, in accordance
with the terms hereof, title to the Purchased Assets, free and clear of all
Claims (except Permitted Liens), including, without limitation, the
delivery of a Bill of Sale and Assumption Agreement (the "Bill of Sale and
Assumption Agreement"), substantially in the form of Exhibit A.
---------
Simultaneously therewith, the Seller shall take all steps as may be
reasonably required to put the Buyer in possession and operating control of
the Purchased Assets. At the Closing, the Buyer shall execute and deliver
to the Seller the Bill of Sale and Assumption Agreement.

1.6. Right of Endorsement, Etc. Effective upon the Closing, the Seller
-------------------------
hereby constitutes and appoints the Buyer, its successors and assigns, the
true and lawful attorney of the Seller with full power of substitution, in
the name of the Buyer, or the name of the Seller, on behalf of and for the
benefit of the Buyer, to collect all accounts and notes receivable and
other items being sold, transferred, conveyed and assigned to the Buyer as
provided herein, to endorse, without recourse, checks, notes and other
instruments constituting or relating to the Purchased Assets in the name of
the Seller, to institute and prosecute, in the name of the Seller or
otherwise, all proceedings which the Buyer may deem proper in order to
collect, assert or enforce any claim, right or title of any kind in or to
the Purchased Assets, to defend and compromise any and all actions, suits
or proceedings in respect of any of the Purchased Assets and to do all such
acts and things in relation thereto as the Buyer may deem advisable. The
foregoing powers are coupled with an interest and shall be irrevocable by
the Seller, directly or indirectly, whether by the dissolution of the
Seller or in any manner or for any reason.

1.7. Further Assurances, Etc. The Seller or the Founders shall pay or
-----------------------
cause to be paid to the Buyer promptly any amounts which shall be received
by the Seller or the Founders after the Closing which constitute Purchased
Assets. The Seller and the Founders shall, at any time and from time to
time after the Closing, upon the reasonable request of the Buyer and at the
expense of the Seller or the Founders, as the case may be, for out-of-
pocket costs do, execute, acknowledge, deliver and file, or shall cause to
be done, executed, acknowledged, delivered or filed, all such further acts,
transfers, conveyances, assignments or assurances as may reasonably be
required for better selling, transferring, conveying, assigning and
assuring to the Buyer, or for aiding and assisting in the collection of or
reducing to

-6-

<PAGE>

possession by the Buyer, any of the assets, properties, interests in
properties or rights being purchased by the Buyer hereunder. The Buyer,
shall, at any time and from time to time after the Closing, upon the
reasonable request of the Seller and the Founders and at the expense of the
Seller and the Founders do, execute, acknowledge, deliver and file, or
shall cause to be done, executed, acknowledged, delivered or filed, all
such further acts or assurances as may reasonably be required to confirm
and effect the agreements and obligations undertaken by the Buyer
hereunder.

1.8. ASSIGNMENT OF CONTRACTS, RIGHTS, ETC. Anything contained in this
------------------------------------
Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement or attempted agreement to transfer, sublease or
assign any contract, license, lease, sales order, purchase order or other
agreement or any claim of or right to any benefit arising thereunder or
resulting therefrom or any permit or operating authority if an attempted
transfer, sublease or assignment thereof, without the consent of any other
party thereto, would constitute a breach thereof or in any way affect the
rights of the Buyer or the Seller and the Founders thereunder; provided,
--------
however, that the Buyer will fulfill and otherwise perform the obligations
- -------
of the Seller under any such contract, license, lease, sales order,
purchase order or other agreement in the name of the Seller, and the Seller
accordingly assigns to the Buyer all rights to benefits thereunder. The
Seller and the Founders shall use reasonable commercial efforts, and the
Buyer shall cooperate with the Seller and the Founders, to obtain the
consent of any such third party to any of the foregoing to the assignment
or transfer thereof to the Buyer in all cases in which such consent is
required for assignment or transfer. If such consent is not obtained, the
Seller and the Founders shall cooperate with the Buyer in any arrangements
reasonably necessary or desirable to provide for the Buyer the benefits
(together with the obligation to perform) thereunder, including, without
limitation, enforcement for the benefit of the Buyer of any and all rights
of the Seller and the Founders thereunder against the other party thereto
arising out of the cancellation thereof by such other party or otherwise.

ARTICLE II

PURCHASE PRICE; ALLOCATION

2.1. Purchase Price; Payment. The purchase price (the "Purchase Price")
-----------------------
to be paid for the Purchased Assets and the covenant of the Seller and the
Founders not to compete with the Subject Business set forth in Section 7.1
(the "Restrictive Covenant") shall consist of $1,000,000 payable at the
Closing to the Seller in 85,034 shares of common stock (the "Common Stock")
of Advanced Health Corporation ("AHC").

-7-

<PAGE>

2.2. Allocation of Purchase Price. The Purchase Price and the Assumed
----------------------------
Obligations shall be allocated among the Purchased Assets and the
Restrictive Covenant in a statement (the "Statement of Allocation")
prepared by the Buyer's Accountants and the Buyer's Accountants shall
deliver the Statement of Allocation to the Founders within 90 days of the
Closing. If the Seller and the Founders believe the Statement of Allocation
is unreasonable and are unable promptly to reach agreement with the Buyer
on such allocation, the parties will select an independent public
accounting firm selected by lot to resolve the dispute and the allocation
determined by such firm shall be binding on the parties for the purposes
hereof. The Seller and the Founders shall complete and execute a Form 8594
Asset Acquisition Statement Under Section 1060 of the Code consistent with
the Statement of Allocation (or the allocation determined by an independent
public accounting firm, if necessary), deliver a copy of such form to the
Buyer and file a copy of such form with the Seller's tax returns for the
period which includes the Closing.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE FOUNDERS. The
-------------------------------------------------------------
Seller and the Founders, jointly and severally, hereby represent and
warrant to the Buyer as follows:

(a) Organization; Good Standing; Qualification and Power. The Seller is
----------------------------------------------------
a corporation duly organized, validly existing and in good standing under
the laws of the State of New York and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted and as proposed to be conducted, to enter
into this Agreement and the Bill of Sale and Assumption Agreement, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The Seller is duly qualified
and in good standing to do business in all jurisdictions in which the
failure to be so qualified and in good standing to do business would have a
material adverse effect on the business, assets, operations, results of
operations or affairs of the Subject Business. Schedule 3.1(a) sets forth a
---------------
true and complete list of all jurisdictions in which the Seller is
qualified and in good standing to do business and all jurisdictions in
which the Seller is conducting business. The Seller has delivered to the
Buyer true and correct copies of its Certificate of Incorporation and By-
laws, each as in effect on the date hereof.

(b) Equity Investments. The Seller currently has no subsidiaries, nor
------------------
has the Seller owned, nor does the Seller currently own, any capital stock
or other proprietary interest, directly or indirectly, in any corporation,
association, trust, partnership, joint venture or other entity.

-8-

<PAGE>

(c) Authority. The execution, delivery and performance of this
---------
Agreement and the Bill of Sale and Assumption Agreement and the
consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action on the part
of the Seller. This Agreement has been duly and validly executed and
delivered by the Seller and the Founders and this Agreement is, and the
Bill of Sale and Assumption Agreement, when validly executed and delivered
by the Seller, will be, legal, valid and binding obligations of the Seller
and/or the Founders, as the case may be, enforceable in accordance with
their respective terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally. Neither the execution,
delivery or performance of this Agreement or the Bill of Sale and
Assumption Agreement by the Seller or the Founders, as the case may be, nor
the consummation by the Seller or the Founders, as the case may be, of the
transactions contemplated hereby or thereby, nor compliance by the Seller
or the Founders, as the case may be, with any provision hereof or thereof
will (i) conflict with or result in a breach of any provision of the
Certificate of Incorporation or By-laws of the Seller, (ii) cause a default
(with due notice, lapse of time or both), or give rise to any right of
termination, cancellation or acceleration, under any of the terms,
conditions or provisions of any note, bond, lease, mortgage, indenture,
license or other instrument, obligation or agreement to which the Seller or
the Founders is a party or by which they or any of their respective
properties or assets may be bound (with respect to which defaults or other
rights all requisite waivers or consents shall have been obtained at or
prior to the Closing) or (iii) violate any law, statute, rule or regulation
or order, writ, judgment, injunction or decree of any court, administrative
agency or governmental body applicable to the Seller, either Founder or any
of their respective properties or assets. No permit, authorization, consent
or approval of or by, or any notification of or filing with, any person
(governmental or private) is required in connection with the execution,
delivery or performance by the Seller or the Founders of this Agreement to
which it is a party or the consummation of the transactions contemplated
hereby or thereby.

(d) Financial Information. Schedule 3.1(d) contains (i) U.S. Income
---------------------- ----------------
Tax Return for an S Corporation for the Seller for 1992, (ii) U.S. Income
Tax Return for an S Corporation for the Seller for 1993, (iii) U.S. Income
Tax Return for an S Corporation for the Seller for 1994 and in each case
the related schedules and attachments to such income tax returns
(collectively, the "Historical Financial Statements"), and (iv) the
unaudited profit and loss report of the Seller at June 30, 1995 (the "P&L
Report"; and the date thereof being referred to as the "P&L Report Date")
(the Historical Financial Statements and the P&L Report being collectively
referred to as the "Financial Statements"). The Financial Statements (A)
were prepared on the cash basis of accounting, a comprehensive basis

-9-

<PAGE>

of accounting other than GAAP, consistently applied, (B) were prepared in
accordance with the books and records of the Seller and (C) fairly present
the financial position of the Seller as of the dates thereof on the cash
basis of accounting.

(e) Absence of Undisclosed Liabilities. Except as set forth on
----------------------------------
Schedule 3.1(e), as of the P&L Report Date, (i) the Seller did not have any
- ---------------
material liability of any nature (matured or unmatured, fixed or
contingent, known or unknown) which was not provided for or disclosed on
the Financial Statements, (ii) all liability reserves established by the
Seller on the Financial Statements were adequate and (iii) there were no
loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards
Board in March 1975) which were not adequately provided for or disclosed on
the Financial Statements.

(f) Absence of Changes. Since the P&L Report Date, the Seller and
------------------
the Subject Business have been operated in the ordinary course and
consistent with past practice and there has not been:

(i) any material adverse change in the condition (financial or
otherwise), assets (including, without limitation, levels of working
capital and the components thereof), liabilities, operations, results of
operations, earnings, business or prospects of the Seller;

(ii) any damage, destruction or loss (whether or not covered by
insurance) in an aggregate amount exceeding $10,000 affecting any
asset or property of the Seller or any Subsidiary;

(iii) Except as set forth on Schedule 3.1(f)(iii), any obligation
--------------------
or liability (whether absolute, accrued, contingent or otherwise and
whether due or to become due) created or incurred, or any transaction,
contract or commitment entered into, by the Seller or any Subsidiary
other than such items created or incurred in the ordinary course of
the Subject Business and consistent with past practice;

(iv) any payment, discharge or satisfaction of any claim, lien,
encumbrance, liability or obligation by the Seller outside the
ordinary course of the Subject Business (whether absolute, accrued,
contingent or otherwise and whether due or to become due);

(v) any labor trouble, problem or grievance materially adversely
affecting the Seller;

(vi) any license, sale, transfer, pledge, mortgage or other
disposition of any tangible or intangible

-10-

<PAGE>

asset of the Seller except in the ordinary course of the Subject Business
and consistent with past practice;

(vii) any write-off as uncollectible of any accounts receivable or
notes receivable of the Seller or any portion thereof in excess of $5,000
in the aggregate;

(viii) any agreement or contract entered into by or on behalf of the
Seller which requires the delivery by the Seller of a performance bond in
connection therewith;

(ix) Except as set forth on Schedule 1.1(e) any account receivable of
---------------
the Seller in an amount greater than $10,000 which (A) has become
delinquent in its payment by more than 90 days, (B) has had asserted
against it any claim, refusal to pay or right of set-off, (C) an account
debtor has refused to pay for any reason or with respect to which, to the
Best Knowledge of the Seller and the Founders, such account debtor has
become insolvent or bankrupt or (D) has been pledged to any third party;

(x) any cancellation of any debts or claims of, or any amendment,
termination or waiver of any rights of material value to, the Seller;

(xi) any general uniform increase in the compensation of employees of
the Seller (including, without limitation, any increase pursuant to any
bonus, pension, profit-sharing, deferred compensation arrangement or other
plan or commitment) or any increase in compensation payable to any officer,
employee, consultant or agent thereof, or the entering into of any
employment contract with any officer or employee, or the making of any loan
to, or the engagement in any transaction with, any officer of the Seller;

(xii) any change in the accounting methods or practices followed by the
Seller or any change in depreciation or amortization policies or rates
theretofore adopted;

(xiii) any termination of employment of any key employee of the Seller
or any expression of intention by any key employee of the Seller to
terminate such employment with the Seller;

(xiv) any capital expenditures or commitments therefor by the Seller in
excess of $5,000 in the aggregate for additions to property, plant or
equipment of the Seller;

(xv) any agreement or commitment relating to the sale by the Seller of
any material fixed assets of the Seller;

-11-

<PAGE>

(xvi) any other transaction relating to the Seller other than in
the ordinary course of the Subject Business and consistent with past
practice; or

(xvii) any agreement or understanding, whether in writing or
otherwise, for the Seller to take any of the actions specified in
items (i) through (xvi) above.

(g) Title to Assets, Properties, Interests in Properties and
--------------------------------------------------------
Rights and Related Matters. (i) The Seller has good and valid title to all
- --------------------------
of the Purchased Assets, free and clear of all security interests,
judgments, liens, pledges, claims, charges, escrows, encumbrances,
easements, options, rights of first refusal, rights of first offer,
mortgages, indentures, security agreements or other agreements, arrange-
ments, contracts, commitments, understandings or obligations, whether
written or oral and whether or not relating in any way to credit or the
borrowing of money (collectively, "Claims"), of any kind or character,
except for Permitted Liens.

(ii) There does not exist any condition which materially interferes
with the economic value or use (consistent with the Seller's past practice)
of any tangible personal property included in the Purchased Assets and such
property is in good operating condition and repair, reasonable wear and
tear excepted. The Purchased Assets include all assets, properties (real,
personal and mixed, tangible and intangible), interests in properties and
rights necessary for the conduct of, and otherwise used in, the Subject
Business as presently conducted by the Seller.

(iii) The Seller has the complete and unrestricted power and the
unqualified right to sell, transfer, convey and assign the Purchased
Assets, and this Agreement and the Bill of Sale and Assumption Agreement
are sufficient to sell, transfer, convey and assign to the Buyer all right,
title and interest of the Seller in and to the Purchased Assets, free and
clear of all Claims (other than Permitted Liens) and to vest in the Buyer
good and valid title thereto sufficient to conduct the Subject Business as
presently conducted by the Seller.

(iv) As used in this Agreement, "Permitted Liens" shall mean (i) any
lien for current Taxes not yet due and payable, (ii) liens of carriers,
warehousemen, mechanics and materialmen created in the ordinary course of
the Subject Business for amounts not yet due and payable which do not
materially detract from the value or impair the use of any property or
assets and (iii) in the case of Purchased Assets, liens incurred in the
ordinary course of the Subject Business (including, without limitation,
surety bonds and appeal bonds) in connection with workers' compensation,
unemployment insurance and other types of social security benefits.

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<PAGE>

(h) Tax Matters. (i) (A) The Seller has paid all Taxes required to be
-----------
paid through the date hereof and has filed and will, prior to the Closing,
file all returns, declarations of estimated Tax, Tax reports, information
returns and statements required to be filed by it prior to the Closing
(other than those for which extensions shall have been granted prior to
Closing) relating to any Taxes with respect to any income, properties or
operations of the Seller prior to the Closing (collectively, "Returns");
(B) as of the time of filing, the Returns correctly reflected in all
material respects (and, as to any Returns not filed as of the date hereof,
will correctly reflect in all material respects) the facts regarding the
income, business, assets, operations, activities and status of the Seller
and any other information required to be shown therein; (C) the Seller has
timely paid or made provisions on its books and records for all Taxes
relating to the operations of the Subject Business that have been shown as
due and payable on the Returns that have been filed; (D) the Seller (x) has
made provision on the Financial Statements for all Taxes payable for any
periods that end on or before the P&L Report Date for which no Returns have
yet been filed and for any periods that begin on or before the P&L Report
Date and end after the P&L Report Date to the extent such Taxes are
attributable to the portion of any such period ending on the P&L Report
Date, except that no provision has been made with respect to Taxes relating
to the operation of the Subject Business for 1995 and (y) has made
provision for all Taxes payable for any periods that end on or before the
date of the Closing for which no Returns have then been filed and for any
periods that begin on or before the date of the Closing and end after such
date to the extent such Taxes are attributable to the portion of any such
period ending on such date; (E) no tax liens have been filed with respect
to any of the Purchased Assets, and there are no pending tax audits of any
Returns of the Seller relating to the Subject Business; and (F) no
deficiency or addition to Taxes, interest or penalties for any Taxes
relating to the operations of the Subject Business has been proposed,
asserted or assessed in writing against the Seller or the Founders (or any
member of any affiliated or combined group of which the Seller or any
former subsidiary of the Seller is or was a member for which the Seller
could be liable).

(ii) At all times since February 10, 1992, the Seller has had in effect
a valid election to be treated as an S Corporation under the Code. Such
election has not been revoked or terminated and is in full force and effect
at the date of this Agreement and such election will not be terminated
prior to the Closing Date. The Seller will not be subject to the payment of
any Tax pursuant to Section 1374 of the Code as a result of the
transaction's contemplated by this Agreement. The Seller has not been
subject to the Tax imposed by Section 1375 of the Code for any prior Tax
year and will not be subject to such Tax for the current tax year. The
Corporation has made all elections under state and local Tax laws which are
similar to S Corporation

-13-

<PAGE>

elections under the Code and such elections remain in full force and
effect.

(iii) The Seller is not a foreign person within the meaning of Sec.1.1445-
2(b) of the Regulations under Section 1445 of the Code.

(iv) The Seller has provided the Buyer with true and complete copies
of all Federal, state and foreign Returns of the Seller.

(v) For purposes of this Agreement, "Tax" means any of the Taxes and
"Taxes" means, with respect to any person or entity, (A) all Federal,
state, local and foreign income taxes (including any tax on or based upon
net income, or gross income, or income as specially defined, or earnings,
or profits, or selected items of income, earnings or profits) and all
Federal, state, local and foreign gross receipts, sales, use, ad valorem,
transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties or other Federal,
state, local and foreign taxes, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any taxing authority (domestic or foreign)
on such person or entity and (B) any liability for the payment of any
amount of the type described in the immediately preceding clause (A) as a
result of being a "transferee" (within the meaning of Section 6901 of the
Code or any other applicable law) of another person or entity or a member
of an affiliated or combined group.

(i) Real Property. The Seller does not own any real property or have
-------------
any ownership interest in real property. The Seller does not lease any
property except pursuant to the Real Property Leases. All Real Property
Leases are in full force and effect and create a valid leasehold interest
in favor of the Seller in the real property demised thereunder, in each
case, free and clear of all mortgages, liens, easements, covenants, rights
of way and other encumbrances other than encumbrances which do not impair
the use of the premises covered thereby by the Seller. The Seller is not in
default in any material respect under any Real Property Lease. To the Best
Knowledge of the Seller and the Founders no other party to a Real Property
Lease is in material default thereunder.

(j) Environmental Matters. (i) Neither the Seller nor the Founders has
---------------------
engaged, or authorized or permitted any other person to engage, in any
activity on the real property covered by the Real Property Leases (the
"Real Property") involving the handling, storage, generation,
transportation, release, or disposal (whether legal or illegal, accidental
or intentional) (collectively, "handling") of any hazardous substance, as
defined in 42 U.S.C.A. Section 9601(14), or any

-14-

<PAGE>

petroleum or petroleum products (each, a "Hazardous Substance"), nor are
any Hazardous Substances present on the Real Property, (ii) the Seller has,
in all material respects, conducted the Subject Business in compliance with
all Federal, state and local laws, rules and regulations relating to
protection of the environment ("Environmental Laws") and (iii) neither the
Seller nor the Founders has received any notice or other communication
alleging a violation of any Environmental Law as a result of the operation
of the Subject Business or relating to the Real Property.

(k) Intellectual Property Rights. The Seller does not own, and does not
----------------------------
assert any proprietary rights in, any copyrights, trademarks, service
marks, tradenames or patents.

(1) Agreements, Etc. Schedule 3.1(1) sets forth a true and complete
---------------- ----------------
list and brief description of all written or oral contracts, agreements and
other instruments not made in the ordinary course of the Subject Business
or made or performed in the ordinary course of the Subject Business and
referred to in clauses (i) through (xvii) of this Section 3.1(1). Except as
set forth on Schedule 3.1(1), the Seller is not a party to any written or
---------------
oral, formal or informal, contract, agreement or other instrument of the
type specified in the following clauses (i) through (xvii):

(i) distributorship, dealer, sales, advertising, agency,
manufacturer's representative, franchise or similar contract or any
other contract relating to the payment of a commission;

(ii) collective bargaining agreement or contract with or
commitment to any labor union;

(iii) continuing contract for the future purchase, lease or sale
of products, materials, supplies, equipment or services which calls
for the expenditure of $10,000 or more and which is not immediately
terminable without cost or other liability at or at any time within 30
days after the Closing;

(iv) contract for the future sale or lease of products which
creates a current or future liability in excess of $10,000 and which
is not immediately terminable without cost or other liability at or at
any time within 30 days after the Closing;

(v) contract or commitment for the employment of any officer,
employee or consultant or any other type of contract or understanding
with any officer, employee or consultant which is not immediately
terminable without cost or other liability at or at any time after the
Closing;

-15-

<PAGE>

(vi) profit-sharing, bonus, stock option, deferred compensation,
pension, retirement, disability, stock purchase, hospitalization, insurance
or similar plan or agreement, formal or informal, providing benefits to any
current or former officer, employee or consultant;

(vii) indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money, for a
line of credit or for a leasing transaction of a type required to be
capitalized in accordance with Statement of Financial Accounting Standards
No. 13 of the Financial Accounting Standards Board;

(viii) lease or other agreement under which the Seller is lessee
of or holds or operates any items of tangible personal property owned by
any third party and under which payments to such third party exceed $5,000
per annum;

(ix) agreement to make cumulative capital expenditures or
commitments therefor in excess of $5,000;

(x) agreement or arrangement for the sale of any assets,
properties, interests in properties or rights requiring the consent of any
party to the transfer and assignment of such assets, properties, interests
in properties and rights;

(xi) agreement which restricts the Seller or such Subsidiary from
engaging in any business anywhere in the world or otherwise limits the
business in which they may engage;

(xii) agreement or contract with a "disqualified individual" (as
defined in Section 280G(c) of the Code) which would result in a
disallowance of any deduction for any "excess parachute payment" (as
defined under Section 280G(b)(i) of the Code);

(xiii) option or other agreement to purchase or acquire, or to
sell or dispose of, any interest in real property or other assets or
properties of the Seller or such Subsidiary;

(xiv) agreement under which the Seller has agreed to indemnify any
third party with respect to any Tax liability of any third party;

(xv) agreement with any Affiliate or "Associate" (as such term is
defined in Rule 405 promulgated under the

-16-

<PAGE>

Securities Act of 1933, as amended (the "Securities Act")), of the
Seller;

(xvi) agreement to do any of the foregoing; or

(xvii) agreement, contract or arrangement not described above
in (i)-(xvi) that is material to the Subject Business.

The Seller does not own or operate any vehicles, boats, aircraft,
apartments or other facilities for executive, administrative or sales
purposes and the Seller does not own or pay for any social club
memberships. The Seller has in all material respects performed all the
obligations required to be performed by them to date, and are not in
default (or alleged to be in default) in any material respect, under any
agreement with a customer or supplier or any other material agreement,
lease, contract, commitment, instrument or obligation, and there exists no
event, condition or occurrence which, after notice or lapse of time, or
both, would constitute such a default by them of any of the foregoing. The
Seller has furnished to the Buyer true and correct copies of all documents
set forth on Schedule 3.1(1).
---------------

(m) Litigation, Etc. Except as set forth on Schedule 3.1(m), there
--------------- ---------------
are no (i) actions, suits, claims, investigations or legal or
administrative or arbitration proceedings pending or threatened against the
Seller, the Purchased Assets or the Subject Business, whether at law or in
equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality
(collectively, "Litigation") or (ii) judgments, decrees, injunctions or
orders of any court, governmental department, commission, agency,
instrumentality or arbitrator against the Seller or affecting the Purchased
Assets or the Subject Business. The Seller has delivered to the Buyer all
documents and correspondence relating to matters referred to in said
Schedule 3.1(M).
- ---------------

(n) Compliance; Governmental Authorizations. The Seller has complied in
---------------------------------------
all material respects with all applicable Federal, state, local or foreign
laws, ordinances, regulations and orders. The Seller has all Federal,
state, local and foreign governmental licenses and permits necessary in the
conduct of the Subject Business the lack of which would have a material
adverse effect on the Buyer's ability to operate the Subject Business after
the Closing on substantially the same basis as presently operated. Such
licenses and permits are in full force and effect, no violations are or
have been recorded in respect of any thereof and no proceeding is pending
or threatened to revoke or limit any thereof.

(o) Accounts and Notes Receivable; Accounts Payable. (i) Except as set
-----------------------------------------------
forth on Schedule 3.1(o), all of the accounts receivable and notes
---------------
receivable owing to the Seller as

-17-

<PAGE>

of the date hereof constitute, and as of the Closing will constitute, valid
and enforceable claims arising from bona fide transactions in the ordinary
---------
course of the Subject Business, the amounts of which are actually due and
owing, and as of the date hereof, there are no claims, refusals to pay or
other rights of set-off against any thereof. Except as set forth on
Schedule 3.1(o), as of the date hereof, there is (A) no account debtor or
- ---------------
note debtor of the Seller delinquent in its payment by more than 60 days,
(B) no account debtor or note debtor of the Subject Business who has
refused to pay its obligations for any reason or is the subject of a
bankruptcy proceeding and (C) no account receivable or note receivable of
the Seller pledged to any third party.

(ii) All accounts payable and notes payable by the Seller to third
parties arose in the ordinary course of business and, except as set forth
in Schedule 3.1(o), there is no account payable or note payable past due or
---------------
delinquent in its payment.

(p) Labor Relations; Employees. Schedule 3.1(p) contains a true and
-------------------------- ---------------
complete list of the persons other than the Founders employed by the Seller
and its Subsidiaries as of the date hereof (the "Employees"), including (i)
each Employee's current salary level, (ii) the aggregate vacation allotted
to such employee for the 1995 calendar year (not including any vacation
days carried over from prior years), (iii) the number of vacation days
remaining for such Employee in the 1995 calendar year (not including any
vacation days carried over from prior years) and (iv) the aggregate number
of compensation days accrued for all employees through the date hereof and
the cost thereof. Except as set forth on Schedule 3.1(p), (i) the Seller is
---------------
not delinquent in payments to any of the Employees for any wages, salaries,
commissions, bonuses or other direct or indirect compensation for any
services performed by them to the date hereof or amounts required to be
reimbursed to the Employees; (ii) upon termination of the employment of any
of the Employees, neither the Seller nor the Buyer will by reason of
anything done prior to the Closing, or by reason of the consummation of the
transactions contemplated hereby, be liable for any excise taxes pursuant
to Section 4980B of the Code or to any of the Employees for severance pay
or any other payments; (iii) there is no unfair labor practice complaint
against the Seller pending before the National Labor Relations Board or any
comparable state, local or foreign agency; (iv) there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened against or
involving the Seller; (v) there is no collective bargaining agreement
covering any of the Employees; and (vi) no Employee or consultant is in
violation of any (A) employment agreement, arrangement or policy between
such person and any previous employer (private or governmental) or (B)
agreement restricting or prohibiting the use of any information or
materials used or being used by such person in connection with such
person's employment by or association with the Seller.

-18-

<PAGE>

(q) Employee Benefit Plans. (i) Schedule 3.1(q) identifies each
---------------------- ---------------
"employee benefit plan", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and all other
written or oral plans, programs, policies or agreements involving direct or
indirect compensation (including any employment agreements entered into
between the Seller and any Employee or former employee of the Seller, but
excluding workers' compensation, unemployment compensation and other
government-mandated programs) currently or previously maintained or entered
into by the Seller or the Founders for the benefit of any Employee or
former employee of the Seller under which the Seller or any Affiliate
thereof has any present or future obligation or liability (the "Employee
Plans"). The Seller has provided the Buyer with true and complete age,
salary, service and related data for Employees of the Seller.

(ii) Schedule 3.1(g) lists each employment, severance or other
---------------
similar contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including any self-
insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits currently maintained by the Seller.

(iii) All of the Employee Plans, other than "multiemployer plans"
within the meaning of Section 3 (37) or 4001(a) (3) of ERISA, to the extent
subject to ERISA, are in substantial compliance with ERISA. Each Employee
Plan which is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA ("Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service, and it is not aware
of any circumstances likely to result in revocation of any such favorable
determination letter. There is no Litigation relating to the Employee
Plans. The Seller has not engaged in a transaction with respect to any
Employee Plan that, assuming the taxable period of such transaction expired
as of the date hereof, could subject it to a tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA in an amount
which would be material.

(iv) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by the Seller with respect to any
ongoing, frozen or terminated "single-employer plan" within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by it, or
the single-employer plan of any entity which is considered one employer
with it under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). The Seller has not incurred and does not expect to incur any
withdrawal liability with respect to a multiemployer plan under Subtitle E
of Title IV of ERISA

-19-

<PAGE>

(regardless of whether based on contributions of an ERISA Affiliate). No
notice of a "reportable event", within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived, has been
required to be filed for any Pension Plan or by any ERISA Affiliate within
the 12-month period ending on the date hereof.

(v) All contributions required to be made by the Seller under
the terms of any Employee Plan have been timely made or have been reflected
in the Financial Statements. Neither any Pension Plan nor any single-
employer plan of an ERISA Affiliate has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA. The Seller has not provided, nor is it required to
provide, security to any Pension Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Code.

(r) Insurance. Schedule 3.1(r) contains a list of all policies of
--------- ---------------
liability, theft, fidelity, fire, product liability, errors and omissions,
health and other property and casualty forms of insurance held by the
Seller covering the assets, properties or operations of the Subject
Business (specifying the insurer, amount of coverage, type of insurance,
policy number and any pending claims thereunder). All such policies of
insurance are valid and enforceable policies and are outstanding and duly
in force and all premiums with respect thereto are currently paid. Neither
the Seller nor the Founders has, during the last five fiscal years, been
denied or had revoked or rescinded any policy of insurance relating to the
assets, properties or operations of the Subject Business.

(s) Burdensome Restrictions. The Seller is not bound by any oral or
-----------------------
written agreement or contract which by its terms prohibits it from
conducting the Subject Business (or any part thereof).

(t) Brokers. The Seller has not, nor have any of its officers,
-------
directors, stockholders or employees, employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby.

(u) Disclosure. Neither this Agreement (including the Exhibits and
----------
Schedules attached hereto) nor any other document, certificate or written
statement furnished to the Buyer by or on behalf of the Seller or the
Founders in connection with the transactions contemplated hereby contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein not
misleading. There have been no events or transactions, or information which
has come to the attention of the Seller or the Founders, which, as they
relate directly to the Seller, the Subject Business or the Purchased
Assets, could reasonably be

-20-

<PAGE>

expected to have a material adverse effect on the business, operations,
affairs, prospects or condition of the Seller, the Subject Business and the
Purchased Assets, taken as a whole. Notwithstanding the foregoing, neither
the Seller nor any Founder makes any representation or warranty regarding
the accuracy of any financial projections, forecasts or budgets disclosed
to or discussed with the Buyer; provided, however, that the Seller and the
-------- -------
Founders represent and warrant that the assumptions underlying any such
projections, forecasts and budgets were based on the good faith estimates
of the Seller and the Founders when made.

(v) Insider Contracts. No contracts, licenses, agreements or
-----------------
arrangements, verbal or written, exist pursuant to which any stockholder,
officer or director of the Seller sells, licenses or leases, directly or
indirectly, any product, service or facility to the Seller or otherwise
provides property or rights to the Seller. No material items are located at
the Seller's facilities that are the personal property of any stockholder,
officer or director of the Seller.

(w) Definition of Best Knowledge. As used in this Agreement,
----------------------------
the term "Best Knowledge" of any person or entity shall mean and include
(i) actual knowledge or (ii) that knowledge which a prudent business person
could have reasonably been expected to obtain in the management of his or
her business affairs after exercising reasonable diligence with respect to
a particular matter.

(x) Investment Representations. (i) The Seller is acquiring
--------------------------
the shares of Common Stock (as defined below) hereunder for its own
account, for investment and not with a view to the distribution thereof
within the meaning of the Securities Act.

(ii) The Seller understands that (1) the shares of Common
Stock have not been registered under the Securities Act and applicable
state securities laws, by reason of their issuance by the Buyer in a
transaction exempt from the registration requirements of the Securities Act
and applicable state securities laws and (2) the shares of Common Stock
must be held by the Seller indefinitely unless a subsequent disposition
thereof is registered under the Securities Act and applicable state
securities laws or is exempt from registration.

(iii) The Seller further understands that the exemption from
registration afforded by Rule 144 promulgated under the Securities Act
depends on the satisfaction of various conditions, and that, if applicable,
Rule 144 may only afford the basis for sales only in limited amounts.

3.2. Representations and Warranties of the Buyer. The Buyer
-------------------------------------------
represents and warrants to the Seller and the Founders as follows:

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<PAGE>

(a) Organization, Good Standing and Power. The Buyer (i) is a
-------------------------------------
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, (ii) has all requisite corporate power and
authority to own, lease and operate its properties, to carry on its
business as now being conducted, to execute and deliver this Agreement and
the Bill of Sale and Assumption Agreement to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby and (iii) is duly qualified and in good standing to do
business in all such jurisdictions in which the failure to be so qualified
and in good standing to do business could reasonably be expected to have a
material adverse effect on the business, assets, operations, results of
operations or affairs of the Buyer.

(b) Authority. The execution, delivery and performance of
---------
this Agreement and the Bill of Sale and Assumption Agreement, and the
consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action on the part
of the Buyer. This Agreement has been duly and validly executed and
delivered by the Buyer, and this Agreement is, and the Bill of Sale and
Assumption Agreement when validly executed and delivered by the Buyer will
be, valid and binding obligations of the Buyer, enforceable in accordance
with their respective terms except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally. Neither the execution,
delivery or performance of this Agreement or the Bill of Sale and
Assumption Agreement, nor the consummation by the Buyer of the transactions
contemplated hereby or thereby, nor compliance by the Buyer with any
provision hereof or thereof, will (i) conflict with or result in a breach
of any provisions of the Certificate of Incorporation or By-laws of the
Buyer, (ii) cause a default (with due notice, lapse of time or both), or
give rise to any right of termination, cancellation or acceleration, under
any of the terms, conditions or provisions of any material note, bond,
lease, mortgage, indenture, license or other instrument, obligation or
agreement to which the Buyer is a party or by which it or any of its
properties Or assets is or may be bound or (iii) violate any law, statute,
rule or regulation or order, writ, judgment, injunction or decree of any
court, administrative agency or governmental body applicable to the Buyer
or any of its properties or assets. No permit, authorization, consent or
approval of or by, or any notification of or filing with, any person
(governmental or private) is required in connection with the execution,
delivery or performance by the Buyer of this Agreement or the consummation
by the Buyer of the transactions contemplated hereby.

(c) Capitalization. The authorized capital stock of the Buyer
--------------
consists of 1,000 shares of common stock, par value $.001 per share, of
which 1,000 shares are issued and outstanding as of the date hereof.

-22-

<PAGE>

(d) Brokers. Neither the Buyer nor any of its officers,
-------
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.

(e) [INTENTIONALLY LEFT BLANK]

(f) Litigation. There are no legal, administrative,
----------
arbitration or other proceedings or governmental investigations pending or,
to the Best Knowledge of the Buyer, threatened against the Buyer that would
give any third party the right to enjoin, revoke or condition the
transactions contemplated hereunder.

(g) No Defaults. The Buyer is not in default in any respect
-----------
under any contract, agreement, instrument or other obligation which default
could give rise to remedies thereunder that would materially and adversely
affect the business, properties, financial condition or assets of the
Buyer, taken as a whole, and, to the Best Knowledge of the Buyer, no event,
condition or occurrence currently exists which, with due notice, lapse of
time or both, would constitute such a default.

ARTICLE IV

CONDITIONS OF CLOSING

4.1. Conditions of Each Party's Obligations. The obligations of
--------------------------------------
the Seller to sell the Purchased Assets, and of the Buyer to purchase the
Purchased Assets, are subject to the satisfaction of the following
conditions unless waived (to the extent such conditions can be waived) by
the Seller and the Buyer:

(a) Approvals. All authorizations, consents, orders or
---------
approvals of, or declarations or filings with, or expiration of waiting
periods imposed by, any governmental agency or authority necessary for the
consummation of the transactions contemplated hereby 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 transactions contemplated hereby shall have been issued
by any Federal or state court and remain in effect. Each party agrees to
use its best efforts to have any such injunction or order lifted.

(c) Legislation. No Federal, state, local or foreign
-----------
statute, rule or regulation shall have been enacted which prohibits,
restricts or delays the consummation of the transac-

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<PAGE>

tions contemplated by Articles I and II or any of the conditions to the
consummation of such transactions.

4.2. Conditions of Obligations of the Buyer. The obligation of the
--------------------------------------
Buyer to purchase the Purchased Assets is subject to the satisfaction of
the following conditions unless waived (to the extent such conditions can
be waived) by the Buyer:

(a) Representations and Warranties. The representations and
------------------------------
warranties of the Seller and the Founders set forth in Section 3.1 shall in
each case be true and correct in all material respects as of the date of
this Agreement and as of the Closing as though made at and as of the
Closing.

(b) Performance of Obligations of the Seller and the
------------------------------------------------
Founders. The Seller and the Founders shall have performed all obligations
- --------
required to be performed by them under this Agreement prior to and at the
Closing.

(c) Authorization. All action necessary to authorize the
-------------
execution, delivery and performance of this Agreement and each of the
Ancillary Agreements by the Seller and the Founders, as applicable, and the
consummation of the transactions contemplated hereby and thereby shall have
been duly and validly taken by the Seller and the Founders and the Seller
and the Founders shall have full power and right to consummate the trans-
actions contemplated hereby and thereby.

(d) Absence of Changes. Except as set forth on Schedule
------------------ --------
3.1(f)(iii), since the P&L Report Date, there shall not have occurred any
- ----------
material adverse change in the business, operations, financial condition,
results of operations, assets, liabilities or prospects of the Seller or
the Subject Business.

(e) Instruments of Transfer, Conveyance and Assignment. The
--------------------------------------------------
Buyer shall have received duly executed instruments of sale, transfer,
conveyance and assignment, including the Bill of Sale and Assumption
Agreement and appropriate copyright assignments, as contemplated by Section
1.3.

(f) Opinion of Counsel to the Seller. The Buyer shall have
--------------------------------
received an opinion dated the date of the Closing of Speno, Goldberg,
Steingart & Penn, P.C., counsel to the Seller and the Founders,
substantially in the form of Exhibit C.
---------

(g) Acceptance by Counsel to the Buyer. The sufficiency of
----------------------------------
all papers delivered hereunder and all related proceedings shall be
reasonably acceptable to O'Sullivan Graev & Karabell, LLP, counsel to the
Buyer.

(h) Consents and Approvals. The Buyer shall have received
----------------------
duly executed copies of (i) consents to the assignment of the contracts
listed on Schedule 4.2(h) and (ii) all other
---------------

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<PAGE>

approvals, if any, required by this Agreement or the Schedules, in each
case in form and substance satisfactory to the Buyer and counsel to the
Buyer.

(i) Government Consents, Authorizations, Etc. All consents,
----------------------------------------
authorizations, orders or approvals of, and filings or registrations with,
any Federal, state, local or foreign governmental commission, board or
other regulatory body which are required for or in connection with the
execution and delivery by the Seller and the Founders of this Agreement and
the consummation by the Seller and the Founders of the transactions
contemplated hereby shall have been obtained or made.

(j) [INTENTIONALLY LEFT BLANK]

(k) Payments. The Seller shall have directed all customers
--------
identified on Schedule 4.2(k) to make payments to an account designated by
---------------
the Seller.

(1) Employment Agreements. The Founders shall each have
---------------------
entered into an Employment Agreement with the Buyer substantially in the
form of Exhibit D.
---------

4.3. Conditions of Obligations of the Seller. The obligation of
---------------------------------------
the Seller to sell the Purchased Assets to the Buyer is subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by the Seller:

(a) Representations and Warranties. The representations and
------------------------------
warranties of the Buyer set forth in Section 3.2 shall be true and correct
in all material respects as of the date of this Agreement and as of the
Closing Date as though made at and as of the Closing, and the Seller and
the Founders shall have received a certificate signed by an authorized
officer of the Buyer to that effect.

(b) Performance of Obligations. The Buyer shall have
--------------------------
performed all obligations required to be performed by it under this
Agreement prior to and at the Closing, and the Seller and the Founders
shall have received a certificate signed by an authorized officer of the
Buyer to that effect.

(c) Authorization. All action necessary to authorize the
-------------
execution, delivery and performance of this Agreement by the Buyer and the
consummation of the transactions contemplated hereby shall have been duly
and validly taken by the Buyer.

(d) Acceptance by Counsel to the Seller. The sufficiency of
-----------------------------------
all papers delivered hereunder and all related proceedings shall be
reasonably acceptable to Speno, Goldberg, Steingart & Penn, P.C., counsel
to the Seller and the Founders.

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<PAGE>

(e) Government Consents, Authorizations, Etc. All consents,
----------------------------------------
authorizations, orders or approvals of, and filings or registrations with,
any Federal, state, local or foreign governmental commission, board or
other regulatory body which are required for or in connection with the
execution and delivery by the Buyer of this Agreement and the consummation
by the Buyer of the transactions contemplated hereby shall have been
obtained or made.

(f) Opinion of Counsel to the Buyer. The Seller shall have
-------------------------------
received an opinion dated the date of the Closing of O'Sullivan Graev &
Karabell, LLP, counsel to the Buyer, substantially in the form of Exhibit
-------
E.
- --

ARTICLE V

CLOSING

The closing (the "Closing") for the consummation of the
transactions contemplated by this Agreement, unless another date or place
is agreed to in writing by the parties, shall take place at the offices of
O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York
10112 on the date hereof (the "Closing Date").

ARTICLE VI

INDEMNIFICATION

6.1. Definitions. As used in this Agreement, the following
-----------
terms shall have the following meanings:

(a) "Affiliate", as to any person, means any other person
-----------
that, directly or indirectly, through one or more intermediaries, controls,
is controlled by or is under common control with such person.

(b) "Buyer Indemnification Event" shall mean the
-----------------------------
following:

(i) (A) the untruth, inaccuracy or breach of any
representation or warranty of the Seller and the Founders contained in
Section 3.1, any Schedule or Exhibit attached hereto or any certificate
delivered by the Seller or the Founders in connection herewith (or any
facts or circumstances constituting any such untruth, inaccuracy or breach)
or (B) the breach of any agreement or covenant of the Seller or the
Founders contained in this Agreement;

(ii) the assertion against or the payment by
the Buyer or any Buyer Indemnified Person of any

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<PAGE>

liability or obligation (accrued, contingent or otherwise and whether
contractual, Tax or any other type of liability or obligation) not
expressly assumed by the Buyer hereunder in accordance with Section
1.3; and

(iii) the failure to use best efforts to obtain any consent
or to provide any benefit under any contract, license, lease, sales order,
purchase order or other agreement, claim, right, permit or operating
authority contemplated by Section 1.8.

(c) "Buyer Indemnified Persons" shall mean and include the
---------------------------
Buyer and its Affiliates, successors and assigns, and their respective
officers and directors.

(d) "Indemnified Persons" shall mean the Buyer Indemnified
---------------------
Persons or the Seller Indemnified Persons, as the case may be.

(e) "Indemnifying Person" shall mean the Buyer or the Seller
---------------------
and the Founders, as the case may be.

(f) "Losses" shall mean any and all losses, claims,
--------
shortages, damages, liabilities, expenses (including reasonable attorneys'
and accountants' fees), assessments, Tax deficiencies and Taxes (including
interest or penalties thereon) sustained, suffered or incurred by any
Indemnified Person arising from any matter which is the subject of
indemnification under Section 6.2.

(g) "Seller Indemnification Event" shall mean the
------------------------------
following:

(i)(A) the untruth, inaccuracy or breach of any
representation or warranty of the Buyer contained in Section 3.2, any
Exhibit attached hereto or any certificate delivered by the Buyer in
connection herewith at or before the Closing (or any facts or
circumstances constituting any such untruth, inaccuracy or breach) or
(B) the breach of any agreement or covenant of the Buyer contained in
this Agreement; and

(ii) the assertion against or payment by the Seller or the
Founders of any liability or obligation (accrued, contingent or
otherwise and whether contractual, tax or any other type of
liability or obligation) expressly assumed by the Buyer hereunder
in accordance with Section 1.3 or the Bill of Sale and Assumption
Agreement, or of any obligation or liability related to the
Subject Business which arises as a result of conduct by the Buyer
of the Subject Business after the Closing.

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<PAGE>

(h) "Seller Indemnified Persons" shall mean and include the
----------------------------
Seller and the Founders and their respective Affiliates, successors and
assigns, and their respective officers and directors.

6.2. Indemnification Generally, Etc. (a) Buyer Indemnification.
------------------------------- ---------------------
Subject to the limitations contained in Section 6.6(a), the Seller and the
Founders shall, jointly and severally, indemnify, defend and hold harmless
the Buyer Indemnified Persons, and each of them, from and against any and
all Losses resulting from Buyer Indemnification Events.

(b) Seller Indemnification. Subject to the limitations
----------------------
contained in Section 6.6(b), the Buyer shall indemnify, defend and hold
harmless the Seller Indemnified Persons, and each of them, from and against
any and all Losses resulting from Seller Indemnification Events.

6.3. Assertion of Claims. No claim, demand, suit or cause of
-------------------
action shall be brought under Section 6.2 unless the Indemnified Persons,
or any of them, give the Indemnifying Person written notice of the
existence of any such claim, demand, suit or cause of action, stating with
particularity the nature and basis of said claim, and the amount thereof,
to the extent known, and providing to the extent reasonably available all
written documentation relating thereto. Such written notice shall be
delivered to the Indemnifying Person as soon as practicable upon receipt of
actual knowledge of such claim, demand, suit or cause of action; provided,
---------
however, that the failure to provide such written notice shall not affect
- ---------
the Indemnified Persons' right to indemnification hereunder if failure to
provide such written notice does not materially adversely affect the
Indemnifying Person. Upon the giving of such written notice as aforesaid,
the Indemnified Persons, or any of them, shall have the right to commence
legal proceedings for the enforcement of their rights under Section 6.2.

6.4. Notice and Defense of Third Party Claims. (a) In the event
----------------------------------------
any action, suit or proceeding is brought by a third party against an
Indemnified Person, with respect to which an Indemnifying Person may have
liability under Section 6.2, the action, suit or proceeding shall, upon the
written agreement of the Indemnifying Person that it is obligated with
respect to such action, suit or proceeding, be defended (including all
proceedings on appeal or for review which counsel for the defendant shall
deem appropriate) and, unless otherwise provided below, controlled by such
Indemnifying Person. The Indemnified Persons shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Persons, unless
(i) the employment of such counsel shall have been authorized in writing by
the Indemnifying Person in connection with the defense of such action, suit
or proceeding, (ii) the Indemnifying Person shall fail actively and
diligently to defend such action, suit or

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<PAGE>

proceeding, (iii) the Indemnified Persons shall have reasonably concluded
that such action, suit or proceeding involves to a significant extent
matters beyond the scope of the indemnity agreement contained in Section
6.2 or (iv) the Indemnified Persons shall have reasonably concluded that
there may be one or more legal or equitable defenses available to the
Indemnified Persons which are different from or additional to those
available to the Indemnifying Person, in any of which events the
Indemnifying Person shall not have the right to direct the defense of such
action, suit or proceeding on behalf of the Indemnified Persons and that
portion of any fees and expenses of counsel related to matters covered by
the indemnity agreement and contained in Section 6.2 shall be borne by the
Indemnifying Person. The Indemnified persons shall be kept fully informed
of such action, suit or proceeding at all stages thereof whether or not
they are so represented. The Indemnifying Person shall make available to
the Indemnified Persons and their attorneys and accountants all books and
records of the Indemnifying Person relating to such action, suit or
proceeding and the parties hereto agree to render to each other such
assistance as they may reasonably require of each other in order to ensure
the proper and adequate defense of any such action, suit or proceeding.

(b) The Indemnifying Person shall not make any settlement of
any action, suit or proceeding without the written consent of the
Indemnified Persons, which consent shall not be unreasonably withheld;
provided, however, that in the event the Indemnified Persons refuse to
- -------- -------
consent to a settlement acceptable to the Indemnifying Person which is
capable of settlement by the payment of money only and the Indemnifying
Persons shall demonstrate to the reasonable satisfaction of the Indemnified
Persons their ability to pay such amount, the Indemnifying Person may pay
the amount of the proposed settlement to the Indemnified Persons and shall
thereupon be released from any further liability with respect to such
action, suit or proceeding.

6.5. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------------------
Subject to the further provisions of this Section 6.5 and to Article VII,
the representations and warranties of the Seller and the Founders contained
in Section 3.1 and the representations and warranties of the Buyer
contained in Section 3.2 shall survive the Closing and shall terminate on
the first anniversary of the Closing Date; provided, however, that the
-------- --------
representations and warranties of the Seller and the Founders set forth in
Sections 3.1(a), 3.1(c), 3.1(g) and 3.1(k) shall survive the Closing and
remain in full force and effect until the expiration of the statute of
limitations, if any, applicable to the matters set forth therein (and
indefinitely if none).

6.6. LIMITATIONS ON INDEMNIFICATION. (a) Anything contained
------------------------------
herein to the contrary notwithstanding, neither the Seller nor the Founders
shall have any obligation to indemnify any Buyer Indemnified Person
pursuant to Section 6.2(a) for any Losses in respect of Buyer
Indemnification Events (other than

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<PAGE>

Buyer Indemnification Events described in Section 6.1(b)(ii)) unless, and
only to the extent that, the aggregate of all Losses arising from or in
connection with such Buyer Indemnification Events exceeds $50,000. The
aggregate obligation of the Seller and the Founders in respect of the
indemnity agreement contained in Section 6.2(a) (other than with respect to
Buyer Indemnification Events described in Section 6.1(b)(ii)) shall not
exceed the Purchase Price plus any Excluded Liabilities.

(b) Anything contained herein to the contrary
notwithstanding, the Buyer shall have no obligation to indemnify any Seller
Indemnified Person pursuant to Section 6.2(b) for any Losses in respect of
Seller Indemnification Events (other than Seller Indemnification Events
described in Section 6.1(g)(ii)) unless, and only to the extent that, the
aggregate of all such Losses exceeds $50,000. The aggregate obligation of
the Buyer in respect of the indemnity agreement set forth in Section 6.2(b)
(other than with respect to Seller Indemnification Events described in
Section 6.1(g)(ii)) shall not exceed the Purchase Price plus any Assumed
Obligations.

6.7. Exclusivity of Remedies. The rights of the Indemnified
-----------------------
Persons to indemnification under this Article VI shall be the sole and
exclusive contractual right or remedy in connection with any Losses arising
from or in connection with this Agreement.

6.8. Payment. At the sole option of the Buyer, the Seller or the
-------
Founders, as the case may be, shall reimburse any Buyer Indemnified Person
suffering a Loss resulting from a Buyer Indemnification Event in cash or in
shares of Common Stock valued at the then-fair market value of such shares.

ARTICLE VII

ADDITIONAL POST-CLOSING AGREEMENTS

7.1. Disclosure of Information; Non-Competition. (a) From and
------------------------------------------
after the Closing, neither the Seller nor the Founders shall use or
disclose to any person, firm, corporation or other business entity, except
as required by law or judicial process, any Confidential Information, for
any reason or purpose whatsoever, nor shall they make use of any of the
Confidential Information for their own purposes or for the benefit of any
person, firm, corporation or other business entity except the Buyer or any
Affiliate thereof. For purposes of this Agreement, "Confidential
Information" shall mean all information of a proprietary nature relating to
the Seller, the Subject Business or the Purchased Assets (other than
information which is in the public domain at the time of receipt thereof by
the Seller or the Founders or at the time of its use or disclosure by the
Seller or the Founders other than as a result of the breach by the Seller
or the Founders of their agreement hereunder).

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<PAGE>

(b) Each of the Seller and the Founders acknowledge that the
Subject Business has been conducted by the Seller, and further acknowledge
and recognize the highly competitive nature of the industry in which the
Subject Business is involved. Accordingly, in consideration of the premises
contained herein, the consideration to be received hereunder and in
consideration of and as an inducement to the Buyer to consummate the
transactions contemplated hereby, the Seller and the Founders shall not
from and after the Closing Date until the first anniversary of the Closing
(i) directly or indirectly engage in, whether such engagement shall be as a
partner, stockholder (other than ownership of up to one percent of the
outstanding securities of any public company with a market capitalization
in excess of $500 million or investments in mutual funds), affiliate or
other participant in any Competitive Business, or represent in any way, any
Competitive Business, whether such engagement or representation shall be
for profit or not, (ii) interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between the Buyer and any third
party, including, without limitation, any customer, supplier or employee of
the Buyer, or (iii) affirmatively assist or induce others to engage in any
Competitive Business in any manner described in the foregoing clauses (i)
and (ii). As used herein, "Competitive Business" shall mean any business in
any city or county in any State of the United States if such business is
competitive, directly or indirectly, with (A) the Subject Business or (B)
any business being developed or conducted or proposed to be developed or
conducted by the Buyer.

(c) The Seller and the Founders have carefully considered
the nature and extent of the restrictions set forth herein and acknowledge
that the same are reasonable with respect to scope, duration and territory.
It is the desire and intent of the parties that the provisions of this
Section 7.1 be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular provision of this Section 7.1 shall
be adjudicated to be invalid or unenforceable, such provision without any
action by any party shall be deemed amended to delete therefrom or to
modify the provisions thereof so as to restrict (including, without
limitation, a reduction in duration, geographical area or prohibited
business activity) the portion adjudicated to be invalid or unenforceable,
such deletion or modification to apply only with respect to the operation
of such provision in the particular jurisdiction in which such adjudication
is made, and such deletion or modification to be made only to the extent
necessary to cause the provision as amended to be valid and enforceable.

(d) The parties hereto recognize and acknowledge that a
breach by the Seller and the Founders of this Section 7.1 will cause
irreparable and material loss and damage to the Buyer as to which it will
not have an adequate remedy at law or in damages. Accordingly, each party
acknowledges and agrees that

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<PAGE>

the issuance of an injunction or other equitable remedy is an appropriate
remedy for any such breach.

7.2. Access. In connection with any financial audit of the Seller
------
or the Founders or any Tax audit or other governmental investigation of the
Seller or the Founders for any matter relating to any period prior to the
Closing, or for any other reasonable and lawful purpose, the Buyer shall,
upon request, permit the Seller and the Founders and their representatives
to have access, at reasonable times during normal business hours and in a
manner which is not disruptive to the operations of the Buyer, to the work
papers, books and records of the Buyer relating to the Seller which shall
have been in the possession of the Buyer as of the Closing and which remain
in the possession of the Buyer. The Buyer shall not dispose of such work
papers, books and records during the five-year period beginning with the
Closing without the Seller's consent, which consent shall not be
unreasonably withheld. Following the expiration of such five-year period,
the Buyer may dispose of such work papers, books and records at any time
upon giving 60 days' prior written notice to the Seller, unless the Seller
agrees to take possession of such work papers, books and records within
such 60 days at no expense to the Buyer. If the Buyer permits access to, or
surrenders possession of, work papers, books and records as provided in
this Section 7.2, then the provisions of Section 7.1(a) shall apply as if
the Seller were the Buyer.

7.3. EMPLOYEES AND EMPLOYEE BENEFITS. (a) The Buyer shall offer
-------------------------------
employment effective as of the Closing to each of the Employees listed on
Schedule 7.3(a). Such offer shall not guarantee employment to any Employee
- ---------------
nor shall any such offer abrogate the Buyer's right to terminate any such
Employee employed by the Buyer at will. The Buyer shall offer to all
Employees who accept employment with the Buyer those employee benefits
generally offered to the Buyer's employees, provided that, with respect to
Employees currently covered by the group health plan of the Seller, such
Employees will be subject to the pre-existing condition limitation or
exclusion, if any, under any group health plan maintained by the Buyer only
to the extent such Employees were subject to such a limitation or exclusion
under the Seller's group health plan.

(b) The Seller and the Founders shall be responsible for,
and shall indemnify and hold the Buyer harmless from and against, all
claims of the Employees and former employees of the Seller and the
Subsidiaries (the "Former Employees") for worker's compensation,
unemployment compensation and other government-mandated benefits, and for
weekly indemnity, life, hospital/medical/surgical, disability, major
medical, dental and any other benefits under any Employee Plan or Benefit
Arrangement maintained by the Seller, the Subsidiaries or the Founders
(including, without limitation, any severance or other amounts payable, if
any, to Employees as a result of the sale of the Subject Business pursuant
to this Agreement}, which arise or

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<PAGE>

relate to any period prior to the Closing (or arise as a result of the
Closing) and are payable under the terms and conditions of any Employee
Plan or Benefit Arrangement maintained by the Seller, the Subsidiaries or
the Founders for the Employees or Former Employees, provided, however, that
-------- -------
the indemnity under this sentence will not exceed that provided with
respect to Section 7.1(b)(ii) of this Agreement. The Buyer shall be
responsible for, and shall indemnify and hold the Seller and the Founders
harmless from and against, all claims by Employees or Former Employees for
benefits which arise after and relate to periods after the Closing which
are payable under the terms and conditions of any benefit program adopted
or maintained by the Buyer for its employees. Anything contained in this
Section 7.3(b) to the contrary notwithstanding, any amount payable in
respect of any claim which is determined by a final decision of a court of
competent jurisdiction or of a duly constituted arbitral tribunal to be
wholly or partly the joint responsibility of the Buyer and the Seller shall
be paid by the Buyer and the Seller on the basis determined by such court
or tribunal.

(c) The Seller shall be responsible for payroll for its
employees through and including the Closing Date. The Seller shall include
in its final payroll payment in full for all vacation days accrued prior to
the Closing Date (which payment shall not be reimbursed by the Buyer).

7.4. Transfer of Securities. Neither the Seller, nor the Founders
----------------------
shall sell, or in any other way directly or indirectly transfer, assign,
pledge, distribute, encumber or otherwise dispose of, either voluntarily or
involuntarily, with or without consideration (a "Transfer") any shares of
Common Stock other than in compliance with applicable Federal and state
securities laws. At the request of the Buyer, the Seller or a selling
Founder shall deliver on opinion of counsel to the Buyer, in form and
substance satisfactory to the Buyer, to the effect that any proposed
Transfer of share of Common Stock shall not violate the Securities Act.

7.5. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE. (a) The Founders
-------------------------------------
jointly and severally guarantee to the Buyer the full and punctual payment
of all accounts receivable of the Seller listed on Schedule 1(e) up to a
-------------
total amount equal to the accounts payable listed on Schedule 1.3(a).
---------------
(b) The Buyer shall pay to the Founders all accounts
receivable listed on Schedule 1.1(e), if and when collected, that exceed
---------------
the total amount of accounts payable listed on Schedule 1.3(a).
---------------
(c) Until such time as all accounts payable listed on
Schedule 1.3(a) have been paid and all accounts receivable listed on
- ----------------
Schedule 1.1(e) have been collected, the Buyer shall provide to the
- ---------------
Founders on a monthly basis an accounting of all accounts

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<PAGE>

payable of the Seller paid by the Buyer and all accounts receivable of the
Seller collected by the Buyer.

ARTICLE VIII

AMENDMENT, MODIFICATION AND WAIVER

8.1. Amendment, Modification and Waiver. This Agreement shall not
----------------------------------
be altered or otherwise amended except pursuant to an instrument in writing
signed by each of the parties. The waiver by one party of the performance
of any covenant, condition or promise shall not invalidate this Agreement,
nor shall it be considered as a waiver by such party of any other covenant,
condition or promise. The delay in pursuing any remedy or in insisting upon
full performance for any breach or failure of any covenant, condition or
promise shall not prevent a party from later pursuing any remedies or
insisting upon full performance for the same or any similar breach or
failure.

ARTICLE IX

MISCELLANEOUS

9.1. Expenses; Transfer Taxes, Etc. All fees, costs and expenses
-----------------------------
incurred by Buyer in connection with, relating to or arising out of the
execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, including, without limitation,
attorneys', accountants' and other professional fees and expenses, shall be
borne by the Buyer. All fees, costs and expenses incurred by the Seller and
the Founders in connection with, relating to or arising out of the
execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, including, without limitation,
attorneys', accountants' and other professional fees and expenses, shall be
borne by the Founders or the Seller. The Founders shall pay all sales, use
and excise taxes and all registration, recording or transfer taxes which
may be payable in connection with the transactions contemplated by this
Agreement.

9.2. Entire Agreement. This Agreement (including the recitals
----------------
hereof and the Schedules and the Exhibits attached hereto), the Letter
Agreement dated the date hereof between the parties regarding consents, the
Letter Agreement dated the date hereof between the parties regarding
allocation of the Purchase Price for tax purposes and the Letter Agreement
dated the date hereof between AHC and the Seller regarding certain
representations contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby and supersedes all prior
agreements, representations, warranties and understandings, either oral or
written, between the parties with respect thereto.

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<PAGE>

9.3. Descriptive Headings. Descriptive headings are for
--------------------
convenience only and shall not control or affect the meaning or
construction of any provisions of this Agreement.

9.4. Notices. All notices or other communications which are
-------
required or permitted hereunder shall be in writing and sufficient if (a)
delivered personally or sent by telecopier (if an addressee has set forth a
telecopy number below), (b) sent by nationally-recognized overnight courier
or (c) sent by certified mail, postage prepaid, return receipt requested,
addressed as follows:

if to the Buyer, to:

Advanced Clinical Networks Corporation
560 White Plains Road, Second Floor
Tarrytown, New York 10591
Attention: Richard Kaplan
Telecopier: (914) 332-1186

with a copy to:

O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: John J. Suydam, Esq.
Telecopier: (212) 408-2420; and

if to the Seller or the Founders, as the case may be, to:

Peltz Ventimiglia, Inc.
c/o Speno, Goldberg, Steingart & Penn, P.C.
300 Old Country Road
Mineola, NY 11501
Attention: Vinson Friedman, Esq.
Telecopier: (516) 746-2768

Richard Ventimiglia
454 Garden Boulevard
Garden City, NY 11530

Steven Peltz
Box 301
Lincolndale, NY 10540

in each case, with a copy to:

Speno, Goldberg, Steingart & Penn, P.C.
300 Old Country Road
Mineola, NY 11501
Attention: Vinson Friedman, Esq.
Telecopier: (516) 746-2768

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<PAGE>

or to such other address as the party to whom notice is to be given may
have furnished to each other party in writing in accordance herewith. Any
such communication shall be deemed to have been given (i) when delivered if
personally delivered or sent by telecopier, (ii) on the Business Day after
dispatch if sent by nationally-recognized, overnight courier and (iii) on
the fifth Business Day after dispatch, if sent by mail. As used herein,
"Business Day" means a day that is not a Saturday, Sunday or a day on which
banking institutions in New York, New York are not required to be open.

9.5. Counterparts. This Agreement may be executed in any number
------------
of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute
but one agreement.

9.6. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York applicable
to contracts made and performed wholly therein.

9.7. Benefits of Agreement. The terms and provisions of this
---------------------
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Anything contained
herein to the contrary notwithstanding, this Agreement shall not be
assignable by any party without the consent of the other parties hereto and
any purported assignment without such consent shall be null and void.

9.8. Pronouns. As used herein, all pronouns shall include the
--------
masculine, feminine, neuter, singular and plural thereof whenever the
context and facts require such construction.

* * *

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<PAGE>

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the day and year first above
written.

ADVANCED CLINICAL NETWORKS
CORPORATION

By:/s/ Richard Kaplan
------------------------------------
Name: Richard Kaplan
Title:President

PELTZ VENTIMIGLIA, INC.

By:/s/ Richard Ventimiglia
-----------------------
Name:Richard Ventimiglia
Title:President

/s/Richard Ventimiglia
--------------------------
Richard Ventimiglia

/s/Steven Peltz
--------------------------
Steven Peltz

-37-

Exhibit 2.4

[EXECUTION COPY]

================================================================================

AGREEMENT AND PLAN OF MERGER

DATED AS OF SEPTEMBER 1, 1995

among

US HEALTH CONNECTIONS, INC.,

ADVANCED HEALTH CORPORATION

and

ADVANCED CLINICAL NETWORKS CORPORATION

================================================================================

<PAGE>

TABLE OF CONTENTS

Page

ARTICLE 1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Effective Time of the Merger . . . . . . . . . . . . . . 1
1.03. Effect of Merger . . . . . . . . . . . . . . . . . . . . 1
1.04. Supplementary Action . . . . . . . . . . . . . . . . . . 2

ARTICLE 2 THE SURVIVING CORPORATION . . . . . . . . . . . . . . . 2
2.01. Name . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.02. Certificate of Incorporation . . . . . . . . . . . . . . 2
2.03. By-laws . . . . . . . . . . . . . . . . . . . . . . . . 2
2.04. Directors . . . . . . . . . . . . . . . . . . . . . . . 2
2.05. Officers . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE 3 CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . 3
3.01. Conversion of Shares . . . . . . . . . . . . . . . . . . 3
3.02. No Further Transfers . . . . . . . . . . . . . . . . . . 4

ARTICLE 4 PAYMENT AND PURCHASE PRICE . . . . . . . . . . . . . . . 4
4.01. Surrender and Payment . . . . . . . . . . . . . . . . . 4
4.02. Exchange Procedure . . . . . . . . . . . . . . . . . . . 4

ARTICLE 5 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 5
5.01. Time and Place . . . . . . . . . . . . . . . . . . . . . 5
5.02. Deliveries at Closing . . . . . . . . . . . . . . . . . 5

ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . 5
6.01. Capitalization. . . . . . . . . . . . . . . . . . . . . 5
6.02. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 6
6.03. Organization . . . . . . . . . . . . . . . . . . . . . . 6
6.04. Annual and Quarterly Reports . . . . . . . . . . . . . . 6
6.06. Absence of Certain Changes or Events . . . . . . . . . . 6
6.07. Title to Assets. . . . . . . . . . . . . . . . . . . . . 7
6.08. Intellectual Property . . . . . . . . . . . . . . . . . 7
6.09. Commitments . . . . . . . . . . . . . . . . . . . . . . 7
6.10. Litigation . . . . . . . . . . . . . . . . . . . . . . . 8
6.11. Compliance With Laws . . . . . . . . . . . . . . . . . . 8
6.12. Corporate Power and Authority; No Violations . . . . . . 8
6.13. Employee Benefit Plans . . . . . . . . . . . . . . . . . 9
6.14. Consents . . . . . . . . . . . . . . . . . . . . . . . . 10
6.15. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . 11
6.17. No Undisclosed Liabilities . . . . . . . . . . . . . . . 12

-i-
<PAGE>

ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND
ACQUISITION . . . . . . . . . . . . . . . . . . . . 12
7.01. Organization; Capitalization . . . . . . . . . . . . . . 12
7.02. Corporate Power and Authority; Effect of Agreement . . . 12
7.03. Consents . . . . . . . . . . . . . . . . . . . . . . . . 13
7.04. Litigation . . . . . . . . . . . . . . . . . . . . . . . 13

ARTICLE 8 COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . 13
8.01. Best Efforts . . . . . . . . . . . . . . . . . . . . . . 13
8.02. [Intentionally Omitted] . . . . . . . . . . . . . . . . 13
8.03. Access . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.04. No Solicitation . . . . . . . . . . . . . . . . . . . . 16
8.05. Indemnification . . . . . . . . . . . . . . . . . . . . 16

ARTICLE 9 CONDITIONS TO PURCHASER'S AND ACQUISITION'S
OBLIGATIONS . . . . . . . . . . . . . . . . . . . . 18
9.01. Representations, Warranties and Covenants of the
Company . . . . . . . . . . . . . . . . . . . . . . 18
9.02. No Prohibition . . . . . . . . . . . . . . . . . . . . . 18
9.03. Third Party Consents . . . . . . . . . . . . . . . . . . 18
9.04. Governmental Consents . . . . . . . . . . . . . . . . . 18
9.05. Stockholders' Consent, Etc. . . . . . . . . . . . . . . 19
9.06. Company Counsel Opinion . . . . . . . . . . . . . . . . 19

ARTICLE 10 CONDITIONS TO THE COMPANY'S OBLIGATIONS . . . . . . . . 19
10.01. Representations, Warranties and Covenants of Purchaser
and Acquisition . . . . . . . . . . . . . . . . . . 19
10.02. No Prohibition . . . . . . . . . . . . . . . . . . . . . 19
10.03. Governmental Consents . . . . . . . . . . . . . . . . . 19
10.04. Buyer Group Counsel Opinion . . . . . . . . . . . . . . 20

ARTICLE 11 [Intentionally Omitted] . . . . . . . . . . . . . . . . 20

ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 21
12.01. Survival of Representations and Warranties . . . . . . . 21
12.02. Entire Agreement . . . . . . . . . . . . . . . . . . . . 21
12.03. Successors and Assigns . . . . . . . . . . . . . . . . . 21
12.04. Headings . . . . . . . . . . . . . . . . . . . . . . . . 21
12.05. Modification and Waiver . . . . . . . . . . . . . . . . 21
12.06. Broker's Fees . . . . . . . . . . . . . . . . . . . . . 21
12.07. Expenses . . . . . . . . . . . . . . . . . . . . . . . . 21
12.08. Notices . . . . . . . . . . . . . . . . . . . . . . . . 22
12.09. Governing Law . . . . . . . . . . . . . . . . . . . . . 22
12.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . 23

-ii-
<PAGE>

LIST OF DEFINED TERMS

Term Place of Definition
- ---- -------------------

"Acquisition" . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.06
"Benefit Plans" . . . . . . . . . . . . . . . . . . . . . . Section 6.14(a)
"Buyer Group" . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Certificate of Merger" . . . . . . . . . . . . . . . . . . . Section 1.02
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . Section 5.01
"Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.01
"Commitments" . . . . . . . . . . . . . . . . . . . . . . . . Section 6.09
"Company Common Stock" . . . . . . . . . . . . . . . . . . Section 3.01(a)
"Company Gross Revenues" . . . . . . . . . . . . . . . . . Section 3.01(b)
"Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Corporation Law" . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Disclosure Schedule" . . . . . . . . . . . . . . . . . . . . . . Article 6
"Earn-out Period" . . . . . . . . . . . . . . . . . . . . . Section 3.01(b)
"Effective Time" . . . . . . . . . . . . . . . . . . . . . . Section 1.02
"Employee Benefit Plan" . . . . . . . . . . . . . . . . . . Section 6.14(a)
"Encumbrances" . . . . . . . . . . . . . . . . . . . . . . . Section 6.02
"Escrow Shares" . . . . . . . . . . . . . . . . . . . Section 3.01(a)
"Financial Statements . . . . . . . . . . . . . . . . . . . . Section 6.04
"Government Entity" . . . . . . . . . . . . . . . . . . . . Section 6.10
"Indemnified Party" . . . . . . . . . . . . . . . . . . . Section 8.06(b)
"Liabilities" . . . . . . . . . . . . . . . . . . . . . . . Section 8.06(a)
"Litigation" . . . . . . . . . . . . . . . . . . . . . . . . Section 6.10
"Losses" . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.06(a)
"Material Adverse Effect" . . . . . . . . . . . . . . . . . . Section 6.03
"Merger" . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Merger Consideration" . . . . . . . . . . . . . . . . . . . Section 3.01
"Permitted Encumbrances" . . . . . . . . . . . . . . . . . . Section 6.07
"Permits" . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.11
"Person" . . . . . . . . . . . . . . . . . . . . . . . . . . Section 12.02
"Purchaser" . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Purchaser's Certificate" . . . . . . . . . . . . . . . . Section 10.01(c)
"Returns" . . . . . . . . . . . . . . . . . . . . . . . . Section 6.16(a)
"Seller's Certificate" . . . . . . . . . . . . . . . . . . Section 9.01(c)
"Stockholders" . . . . . . . . . . . . . . . . . . . . . . Section 5.02(a)
"Surviving Corporation" . . . . . . . . . . . . . . . . . . . . . Preamble
"Surviving Corporation Gross Revenues" . . . . . . . . . . Section 3.01(b)
"Taxes" . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.16(e)

-iii-

<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------

This AGREEMENT AND PLAN OF MERGER, dated as of September 1, 1995,
is made among US HEALTH CONNECTIONS, INC., a Georgia corporation (the
"Company"), ADVANCED HEALTH CORPORATION, a Delaware corporation (the
"Purchaser"), and ADVANCED CLINICAL NETWORKS CORPORATION, a Delaware
corporation and a wholly owned subsidiary of the Purchaser ("Acquisition"
and together with the Purchaser, the "Buyer Group").

The Boards of Directors and stockholders of the Company and
Acquisition deem it advisable and in the best interests of each such
corporation and its respective stockholders to cause the merger of the
Company with and into Acquisition (the "Merger") upon the terms and
conditions set forth herein and in accordance with the General Corporation
Law of the State of Delaware (the "Corporation Law"). (Acquisition and the
Company being hereinafter sometimes referred to as the "Constituent
Corporations" and Acquisition, following the effectiveness of the Merger,
as the "Surviving Corporation".)

THEREFORE, in consideration of the mutual representations,
warranties, covenants and conditions contained herein, and in order to set
forth the terms and conditions of the Merger and the mode of carrying the
same into effect, the parties hereby agree as follows:

ARTICLE 1

THE MERGER
----------

1.01. The Merger. Upon the terms and subject to the conditions
----------
hereof as promptly as practicable following the satisfaction or waiver of
the conditions set forth in Articles 9 and 10 hereof, the Company shall be
merged with and into Acquisition and the separate existence of the Company
shall thereupon cease, and Acquisition, as the Surviving Corporation, shall
continue to exist under and be governed by the Corporation Law.

1.02. Effective Time of the Merger. The Merger shall become
----------------------------
effective when a properly executed Certificate of Merger in substantially
the form of Exhibit 1.02 attached hereto (the "Certificate of Merger") is
filed with the Secretary of State of Delaware as provided in the
Corporation Law. When used in this Agreement, the term "Effective Time"
shall mean the date and time at which the Certificate of Merger is so
filed.

1.03. Effect of Merger. The Merger shall have the effects set
----------------
forth in the Corporation Law.
<PAGE>

1.04. Supplementary Action. If, at any time after the Effective
--------------------
Time, the Surviving Corporation shall consider or be advised that any
further assignments or assurances are necessary or desirable to vest or to
perfect or confirm of record in the Surviving Corporation the title to any
property or rights of either of the Constituent Corporations, or otherwise
to carry out the provisions of this Agreement, the officers and directors
of the Surviving Corporation are hereby authorized and empowered on behalf
of the respective Constituent Corporations, in the name of and on behalf of
the appropriate Constituent Corporation, to execute and deliver any and all
things reasonably necessary or proper to vest or to perfect or confirm
title to such property or rights in the Surviving Corporation, and
otherwise to carry out the purposes and provisions of this Agreement.

ARTICLE 2

THE SURVIVING CORPORATION
-------------------------

2.01. Name. The name of the Surviving Corporation will be
----
Advanced Clinical Networks Corporation.

2.02. Certificate of Incorporation. The Certificate of
----------------------------
Incorporation of Acquisition, as amended by the Certificate of Merger,
shall be the certificate of incorporation of the Surviving Corporation.
The Certificate of Incorporation of the Surviving Corporation thereafter
may be amended in accordance with its terms and as provided by law.

2.03. By-laws. The By-laws of Acquisition immediately prior to
-------
the Effective Time shall be the By-laws of the Surviving Corporation.

2.04. Directors. The directors of Acquisition immediately prior
---------
to the Effective Time shall be the directors of the Surviving Corporation
until their respective successors are duly elected and qualified in the
manner provided in the Certificate of Incorporation and By-laws of the
Surviving Corporation, or until their earlier resignation or removal, or as
otherwise provided by law.

2.05. Officers. The officers of Acquisition immediately prior
--------
to the Effective Time shall be the officers of the Surviving Corporation
until their successors are duly elected and qualified in the manner
provided in the Certificate of Incorporation and By-laws of the Surviving
Corporation, or until their earlier resignation or removal, or as otherwise
provided by law.

-2-

<PAGE>

ARTICLE 3

CONVERSION OF SHARES
--------------------

3.01. Conversion of Shares. As of the Effective Time, by virtue
--------------------
of the Merger and without any action on the part of any holder:

(a) Each of the issued and outstanding shares of the
Company's Common Stock, par value $.01 per share ("Company Common Stock"),
excluding any such shares held in the Company's treasury, shall be
converted into the right of the holder of such Company Common Stock in the
aggregate to receive:

(i) 33,784 fully paid and nonassessable shares of the
Purchaser's Common Stock, par value $.01, valued
by the parties at $11.84 per share;

(ii) an amount of cash at Closing equal to $150,000;

(iii) an amount of cash on the six month and 12 month
anniversaries of the Closing Date each equal to
$75,000; and

(iv) subject to Section 3.01(b), up to 63,344 fully
paid and nonassessable shares of Purchaser's
Common Stock (the "Escrow Shares").

Each share of the Company Common Stock held in the treasury of the Company
shall be cancelled and no payment shall be made in respect thereof.

(b) On the Closing Date, the Surviving Corporation shall
deposit the Escrow Shares in an escrow account pursuant to an escrow
agreement substantially in the form of Exhibit 3.01(b). Escrow Shares
---------------
shall be released to the Stockholders on the following basis:

(i) One-third of the Escrow Shares shall be released
when and if gross revenues, as calculated by the
Surviving Corporation on an accrual basis, from
the operation of the business of the Company as a
division of the Surviving Corporation ("Surviving
Corporation Gross Revenues") have increased by 30%
during the Earn-out Period (as defined below) over
an amount equal to two times the Company's gross
revenues, as calculated by the Surviving
Corporation on an accrual basis, for the period
from January 1, 1995 to June 30,

-3-

<PAGE>

1995 ("Company Gross Revenues"); provided,
--------
however, that Surviving Corporation Gross Revenues
-------
shall not include any existing revenues from any
business acquired by any member of the Buyer Group
subsequent to the date hereof.

(ii) One-third of the Escrow Shares shall be released
when and if Surviving Corporation Gross Revenues
have increased by 60% during the Earn-out Period
over Company Gross Revenues.

(iii) One-third of the Escrow Shares shall be released
when and if Surviving Corporation Gross Revenues
have increased by 90% during the Earn-out Period
over Company Gross Revenues.

(c) The term "Earn-out Period" means the two year period
beginning on the Closing Date and ending on the two year anniversary of
such date.

(e) In the event that Purchaser has not consummated a
public offering of equity securities within 36 months of the date hereof,
the Stockholders may deliver a written notice to Purchaser requiring
Purchaser within 120 days of such notice to purchase up to one-half of the
shares of Purchaser's Common Stock acquired by the Stockholders hereunder
then held by the Stockholders at a purchase price equal to 70% of the then-
fair market value of such shares of Purchaser's Common Stock, which value
shall be the value assigned to such shares of Purchaser's Common Stock (i)
by an appraisal by a nationally recognized investment bank conducted at the
cost of Purchaser or (ii) at the sole discretion of the Company, by an
average of two appraisals by two nationally recognized investment banks,
one at the cost of the Company and one at the cost of Purchaser.

3.02. No Further Transfers. At the Effective Time, the stock
--------------------
transfer books of the Company shall be closed and no transfer of Company
Common Stock shall thereafter be made.

ARTICLE 4

PAYMENT AND PURCHASE PRICE

4.01. Surrender and Payment. After the Effective Time, each
---------------------
holder of a certificate which immediately prior to the Effective Date
represented issued and outstanding shares of Company Common Stock (other
than shares held in the treasury) shall be entitled, upon surrender
thereof, to receive payment therefor equal to the Merger Consideration.
Until so surrendered, each

-4-

<PAGE>

certificate which immediately prior to the Effective Time represented
issued and outstanding shares of Company Common Stock (other than shares
held in the treasury) shall upon and after the Effective Time be deemed for
all purposes to represent and evidence only the right to receive the Merger
Consideration as aforesaid.

4.02. Exchange Procedure. Upon surrender of a certificate
------------------
representing the Company Common Stock for cancellation to the Company, the
holder of such certificate shall be entitled to receive in exchange
therefor the Merger Consideration to which the holder of the Company Common
Stock is entitled pursuant to Section 3.01 hereof, and the certificates so
surrendered shall forthwith be cancelled. Until surrendered as
contemplated by this Section 4.02, each certificate representing Company
Common Stock shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger
Consideration provided by Section 3.01 and the Corporation Law.

ARTICLE 5

CLOSING
-------

5.01. Time and Place. The closing of the transactions
--------------
contemplated hereby (the "Closing") shall take place at a time (the
"Closing Date") and place within the United States to be determined by
mutual agreement among the parties as soon as practicable after
satisfaction or waiver of the conditions set forth in Articles 9 and 10
hereof (other than those conditions which by their terms are intended to be
satisfied on the Closing Date), but in no event later than five days after
such conditions are satisfied or waived, which time also shall be the
Effective Time.

5.02. Deliveries at Closing. At the Closing:
---------------------

(a) There shall be delivered to Purchaser, Acquisition, the
Company and the stockholders of the Company (the "Stockholders") the
certificates, opinions and other documents and instruments provided to be
delivered under Articles 9 and 10 hereof.

(b) Purchaser, Acquisition and the Company shall cause the
Certificate of Merger to be filed in accordance with the Corporation Law,
and shall take any and all other lawful actions, and do any other lawful
things necessary to effect the Merger and to enable the Merger to become
effective.

(c) The Stockholders shall deliver to the Company for
cancellation all the certificates representing the Company Common Stock
(other than shares held in the treasury of the Company).

(d) Purchaser and Acquisition shall pay to the Stockholders
the cash payments to which they are entitled pursuant to Section 3.01 by
wire transfer of immediately available funds.

-5-

<PAGE>
ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------

Except as otherwise set forth in the section of the disclosure
schedule delivered by the Company to the Purchaser in connection herewith
(the "Disclosure Schedule") corresponding to the applicable section in this
Article 6, the Company represents and warrants to the Purchaser and
Acquisition as follows:

6.01. Capitalization. The authorized capital stock of the
--------------
Company consists of 10,000 shares of Common Stock, par value $.01 per
share, of which 100 shares are outstanding; all of such 100 shares of
Company Common Stock are owned of record by the Stockholders as set forth
in Section 6.01 of the Disclosure Schedule. All of such shares are validly
issued, fully paid and non-assessable. There are no securities presently
outstanding, and at the Effective Time there will not be any outstanding
securities which are, convertible into, exchangeable for, or carrying the
right to acquire, equity securities of the Company, or subscriptions,
warrants, options, calls, convertible securities, registration or other
rights or other arrangements or commitments obligating the Company to
issue, transfer or dispose of any of its equity securities or any ownership
interest therein. There are no voting trusts or other agreements or
understandings to which the Company is bound with respect to the voting of
the Company Common Stock.

6.02. Subsidiaries. The Company does not own, directly or
------------
indirectly, any capital stock or any other equity interest in any person.

6.03. Organization. The Company is a corporation duly
------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry
on its business as it is now being conducted. The Company is duly
qualified to do business and in good standing as a foreign corporation in
the jurisdictions set forth in Section 6.03 of the Disclosure Schedule
which are all of the jurisdictions where the nature of the property owned
or leased by it, or the nature of the business conducted by it, makes such
qualification necessary and the absence of such qualification would be
reasonably likely to have a material adverse effect on the assets,
business, operations or condition (financial or otherwise) of the Company
(a "Material Adverse Effect"). True and complete copies of the certificate
of incorporation and by-laws (or substantially equivalent documents) of the
Company have been delivered to the Purchaser.

6.04. Financial Statements. The Company has previously
--------------------
furnished to the Purchaser its unaudited balance sheet and an unaudited
income statement as at June 30, 1995 (the "Financial

-6-

<PAGE>

Statements"). The Financial Statements (i) were prepared on the cash basis
of accounting, a comprehensive basis of accounting other than generally
accepted accounting principles, consistently applied, (ii) were prepared in
accordance with the books and records of the Company and (iii) fairly
present the financial position of the Company as of the date thereof on the
cash basis of accounting.

6.06. Absence of Certain Changes or Events. Except as permitted
------------------------------------
or contemplated by this Agreement and except as set forth on Sections 6.06,
6.09 or 6.10 of the Disclosure Schedule, since the date of the Financial
Statements, (a) the Company has not (i) suffered any damage, destruction or
casualty loss to any of its assets which, individually or in the aggregate,
has or would reasonably be likely to have a Material Adverse Effect,
(ii) incurred or discharged any material obligation or liability, or
entered into any other material transaction, except in the ordinary course
of business or (iii) suffered any Material Adverse Effect and (b) to the
best knowledge of the Company, no event has occurred which is reasonably
likely to have a Material Adverse Effect.

6.07. Title to Assets. The Company has good (and, in the case
---------------
of real property, marketable) title (or leasehold interest with respect to
capital leases) to all of the assets and properties which it purports to
own (including those reflected on the Financial Statements), except for
assets and properties sold, consumed or otherwise disposed of in the
ordinary course of business since the date of the Financial Statements,
free and clear of any imperfections to title, liens, claims, security
interests, pledges, charges or other encumbrances ("Encumbrances"), except
(a) lack of title and other Encumbrances as set forth in Section 6.07 of
the Disclosure Schedule and (b) liens for taxes not yet due and payable or
being contested in good faith by appropriate proceedings (the matters set
forth in the foregoing clauses (a) and (b) being referred to herein as the
"Permitted Encumbrances").

6.08. Intellectual Property. (a) Schedule 6.08 sets forth each
--------------------- -------------
copyright, trademark, service mark, tradename or patent owned by the
Company or in which the Company asserts proprietary rights, and each
Federal, state or foreign registration thereof or application relating to
the registration thereof.

(b) Except as set forth in Schedule 6.08, the Company
-------------
is the exclusive owner of and has the exclusive right to use, sell and
license and bring actions for the infringement of all Intellectual Property
Rights (as defined below) used in the conduct of its business as presently
conducted (collectively, the "Requisite Rights").

(c) Except as set forth on Schedule 6.08, no
-------------
royalties, honorariums, fees or other amounts (including, without
limitation, amounts based on basis point allocations) are payable

-7-

<PAGE>

by the Company to other persons by reason of the ownership, sale, lease,
license or use of the Requisite Rights.

(d) No Requisite Right infringes or, to the best
knowledge of the Company, will infringe any Intellectual Property Rights of
another and the Company has not received any notice or other communication
to the effect that any of the Requisite Rights will conflict with the
asserted rights of others (nor, to the best knowledge of the Company does
there exist any basis for any such assertion).

(e) To the best knowledge of the Company, no third
party is infringing or has infringed on any of the Requisite Rights.

(f) As used herein, the term "Intellectual Property
Rights" means all industrial and intellectual property rights, including,
without limitation, patents, patent applications, patent rights, trade-
marks, trademark applications, trade names, service marks, service mark
applications, copyrights, know-how, certificates of public convenience and
necessity, franchises, licenses, trade secrets, proprietary processes and
formulae, all source and object code, algorithms, architecture, structure,
display screens, layouts, processes, inventions, development tools and all
documentation and media constituting, describing or relating to the above,
including, without limitation, manuals, memoranda and records.

6.09. Commitments. (a) Section 6.09(a) of the Disclosure
-----------
Schedule sets forth an accurate and complete list of each contract or
agreement, whether written or oral (including any and all amendments
thereto) to which the Company is a party or by which the Company is bound
(collectively, the "Commitments"). The Company previously has furnished to
Purchaser true and correct copies of all Commitments. All of the
Commitments are enforceable by the Company which is a party thereto in
accordance with their terms except to the extent that such enforceability
(a) may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights generally, and (b) is
subject to general principles of equity and public policy. Except as set
forth in Section 6.09(a) of the Disclosure Schedule, the Company is not in
breach or default under (and no event has occurred which with notice or the
passage of time or both would constitute a breach or default under) any
agreements listed or required to be listed in Section 6.09(a) of the
Disclosure Schedule nor, to the knowledge of the Company, is any other
party to any of the agreements listed or required to be listed in Section
6.09(a) of the Disclosure Schedule in default thereunder (and no event has
occurred which with notice or the passage of time or both would constitute
a breach or default thereunder).

(b) Except as set forth in Section 6.09(b) of the
Disclosure Schedule, the consummation of the transactions contemplated
hereby will not (either alone or upon the passage of

-8-

<PAGE>

time and/or occurrence of any additional acts or events) result in any
payment (severance pay or otherwise) becoming due from the Company to any
person or accelerate the time of payment or vesting, or increase the amount
of compensation due, any person; excluding, however, any such payments,
accelerations or increases which could have occurred upon the passage of
time and/or occurrence of any additional acts or events even if the "change
of control" or "potential change of control" occurring upon the execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein did not occur.

6.10. Litigation. There is no action, suit, investigation or
----------
proceeding ("Litigation") pending or, to the Company's knowledge,
threatened, involving the Company before any court or before any public
body or authority, domestic or foreign (a "Government Entity"). The
Company is not subject to any outstanding orders, rulings, judgments or
decrees by any Government Entity.

6.11. Compliance With Laws. The Company is in compliance with
--------------------
all applicable laws, rules, regulations, ordinances, decrees or orders of
any Government Entity currently in effect. The Company has all
governmental permits, licenses and authorizations necessary for the conduct
of its business as presently conducted ("Permits") and is in compliance
with the terms of the Permits.

6.12. Corporate Power and Authority; No Violations. The Company
--------------------------------------------
has full corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by the Company of this Agreement and
the consummation by the Company of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
the Company, including due and valid authorization by the Board of
Directors and the Stockholders of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company
and constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that such enforceability (i) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally, and (ii) is subject to general principles of
equity. Except as set forth in Section 6.12 of the Disclosure Schedule,
neither the execution, delivery or performance by the Company of this
Agreement nor the consummation by the Company of the transactions
contemplated hereby will, with or without the giving of notice or the
passage of time, or both, (x) violate any provision of law, rule,
regulation, order, judgment, writ, injunction or decree applicable to the
Company or any of its properties or assets, (y) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to
-9-

<PAGE>

accelerate, terminate, modify, or cancel, or require any notice under any
note, bond, mortgage, indenture, license, contract or agreement to which
the Company is a party or by which the Company or any of their assets is
bound or result in the imposition of any Encumbrance (other than Permitted
Encumbrances) upon any of the assets of the Company or (z) conflict with or
violate any provision of the certificate of incorporation or the by-laws
(or substantially equivalent documents) of the Company.

6.13. Employee Benefit Plans.
----------------------

(a) Section 6.13 of the Disclosure Schedule sets forth an
accurate and complete list of each employee benefit plan (including,
without limitation, any "employee benefit plan," as defined in Section 3(3)
of ERISA), and any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, severance, disability, death benefit,
hospitalization, insurance or other plan, arrangement or understanding,
other than a non-material fringe benefit plan (all the foregoing, other
than any "multiemployer plan" as defined in Section 3(37) of ERISA (the
"Multiemployer Plans") being herein called the "Benefit Plans"),
maintained, contributed to or required to be contributed to by the Company
for the benefit of any employee or former employee of the Company or under
which the Company has any liability. With respect to each Benefit Plan,
the Company previously has furnished to Purchaser a true and correct copy
of, where applicable, (i) the most recent annual report (Form 5500) filed
with the IRS, (ii) the plan document, (iii) each trust agreement and group
annuity contract, if any, relating to such Benefit Plan, (iv) the most
recent actuarial report or valuation relating to such Benefit Plan (in the
event such Benefit Plan is subject to Title IV of ERISA), (v) the most
recent Summary Plan Description and (vi) the most recent determination
letter issued by the IRS.

(b) Except as set forth in Section 6.13 of the Disclosure
Schedule, no Benefit Plan is or was subject to Title IV of ERISA. With
respect to the Benefit Plans, in the aggregate, no event has occurred, and
there exists no condition or set of circumstances nor is any condition or
set of circumstances reasonably likely to occur, in connection with which
the Company would be subject to any liability (except liability for
benefits claims and funding obligations payable in the ordinary course)
under ERISA, the Code or any other applicable law that would be reasonably
likely to have a Material Adverse Effect.

(c) Except as set forth in Section 6.13 of the Disclosure
Schedule, with respect to the Benefit Plans, in the aggregate, there are no
funded benefit obligations for which contributions have not been made or
properly accrued and there are no unfunded benefit obligations which have
not been accounted for by reserves, or otherwise properly footnoted in
accordance with generally accepted accounting principles, in the Financial
Statements of the Company. No Benefit Plan has incurred any

-10-

<PAGE>

"accumulated funding deficiency" (as defined in Section 412 of the Code),
whether or not waived. All required contributions to date by the Company
to all Multiemployer Plans have been made or properly accrued. The Company
has no knowledge that any Multiemployer Plan with respect to which the
Company has any actual or potential liability is in reorganization or has
been terminated within the meaning of Title IV of ERISA. The Company has
not incurred and does not reasonably anticipate incurring any withdrawal
liability under Subtitle E of Title IV of ERISA with respect to any such
Multiemployer Plan.

(d) Each of the Benefit Plans has been administered in
accordance with its terms in all material respects and is in compliance in
all material respects with applicable laws and regulations.

(e) Except as set forth in Section 6.13 of the Disclosure
Schedule, each of the Benefit Plans which is intended to be a qualified
plan within the meaning of Section 401(a) of the Code has been determined
by the IRS to be so qualified and nothing has occurred to cause the loss of
such qualified status.

(f) Except as set forth in Section 6.13 of the Disclosure
Schedule, no Benefit Plan provides health, medical or life insurance
benefits with respect to current or former employees of the Company beyond
their retirement or other termination of service other than (i) coverage
mandated by applicable law, or (ii) benefits the full cost of which are
borne by the current or former employee (or his or her beneficiary).

6.14. Consents. Except as set forth in Section 6.14 of the
--------
Disclosure Schedule, no consent, approval or authorization of, or exemption
by, or filing with, any governmental authority is required in connection
with the execution, delivery and performance by the Company of this
Agreement or the taking of any other action contemplated hereby, excluding,
however, consents, approvals, authorizations, exemptions and filings, if
any, which Purchaser or Acquisition is required to obtain or make.

6.15. Taxes. Except in each case as set forth in Section 6.15
-----
of the Disclosure Schedule:

(a) The Company has (i) timely filed and in all material
respects correctly prepared all returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be filed or sent
on or before the Closing Date by or with respect to them in respect of any
Taxes (as hereinafter defined); (ii) properly paid all Taxes that are shown
due and payable on such Returns and all late filing penalties, if any;
(iii) established on their books and records and in the consolidated
financial statements of the Company reserves for the payment of all Taxes
not yet due and payable; and (iv) complied in all material respects with
all applicable laws, rules and

-11-

<PAGE>

regulations relating to the payment and withholding of Taxes from employees
and other persons.

(b) There are no liens for Taxes upon the assets of the
Company, except liens for Taxes not yet due and other immaterial liens.

(c) Except as set forth on Schedule 6.15, no claim or
deficiency for any Taxes has been proposed, asserted or assessed against
the Company which have not been resolved and paid in full. Except as
disclosed in Section 6.16 of the Disclosure Schedule, there are no
outstanding waivers or comparable consents given by the Company regarding
the application of the statute of limitations with respect to any Taxes or
Returns. Except as set forth on Schedule 6.16, no federal, state, local or
foreign audits or other proceedings before any Government Entity are
presently pending or threatened, with regard to any Taxes or Returns and
the Company has not received any notices of any such audits or proceedings.

(d) "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including without limitation all net income, gross
income, gross receipts, real or personal property, tollgate, capital, net
worth, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, social security, unemployment, excise,
estimated, severance, stamp occupation, property or other taxes, customs
duties, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority, domestic or foreign, upon the Company.

6.16. Insurance. Section 6.16 of the Disclosure Schedule
---------
contains an accurate and complete list and a brief description of all
insurance policies (either currently in effect or expired) which are, or
were since ________ __, ____ owned or held by the Company, insuring the
properties, assets, business and operations of the Company and their
potential liabilities to third parties. Section 6.16 of the Disclosure
Schedule identifies such policies as claims-made or occurrence based and
identifies all risks which the Company has identified as being self-insured
or subject to the payment of retrospective premiums or deductible amounts.
All such insurance policies, except for those that have expired, are in
full force and effect, all premiums including retrospective premiums
thereto covering all periods have been paid and no notice of cancellation
or termination has been received by the Company with respect to any such
policy. The Company has not received any notice from any insurance carrier
requiring the Company to implement changes in its present operations as a
condition of maintaining insurance.

6.17. No Undisclosed Liabilities. Except as set forth in the
--------------------------
Financial Statements or on Section 6.17 of the Disclosure Schedule, the
Company did not have, at the date thereof, any liabilities or obligations
(absolute, accrued, fixed, contingent,

-12-

<PAGE>

liquidated, unliquidated or otherwise) required under the cash basis of
accounting (including materiality standards thereunder) to be reflected on
a balance sheet of the Company.

ARTICLE 7

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND ACQUISITION
---------------------------------------------------------------

The Buyer Group hereby jointly and severally represent and
warrant to the Company as follows:

7.01. Organization; Capitalization. (a) Each member of the
----------------------------
Buyer Group is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted, and
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby.

(b) (i) The authorized capital of the Purchaser consists of:

(A) Preferred Stock. 3,000,000 shares of Preferred
---------------
Stock, par value $.01 per share (the "Preferred Stock"), of which (w)
971,800 shares have been designated Series A Preferred Stock (the "Series A
Preferred Stock") and are issued and outstanding as of the date hereof, (x)
282,900 shares have been designated Series B Preferred Stock (the "Series B
Preferred Stock") and are issued and outstanding as of the date hereof, (y)
200,000 shares have been designated Series C Preferred Stock (the "Series C
Preferred Stock") and are issued and outstanding as of the date hereof and
(z) 666,360 shares have been designated Series D Preferred Stock (the
"Series D Preferred Stock") and are issued and outstanding as of the date
hereof. The rights, privileges and preferences of the Series A Preferred
Stock, the Series B Preferred Stock, Series C Preferred Stock and the
Series D Preferred Stock are as stated in the Company's Certificate of
Incorporation; and

(B) Common Stock. 10,000,000 shares of Common Stock,
------------
par value $.01 per share (the "Common Stock"), of which 2,864,643 shares
are issued and outstanding as of the date hereof.

(ii) Options and Warrants. The Purchaser has outstanding
--------------------
as of the date hereof options and warrants convertible into 1,550,082
shares of Common Stock.

(c) The authorized capital stock of Acquisition consists of 1000
shares of Common Stock, par value $.001 per share, of which 1000 are
outstanding and owned of record and beneficially by the Purchaser.

-13-

<PAGE>

7.02. Corporate Power and Authority; Effect of Agreement. The
--------------------------------------------------
execution, delivery and performance by each member of the Buyer Group of
this Agreement and the consummation by each member of the Buyer Group of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on their part, including due and valid
authorization by the Board of Directors of each member of the Buyer Group
and the stockholders of Acquisition. This Agreement has been duly and
validly executed and delivered by each member of the Buyer Group and
constitutes the valid and binding obligation of each member of the Buyer
Group, enforceable against such parties in accordance with its terms,
except to the extent that such enforceability (i) may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally, and (ii) is subject to general
principles of equity. The execution, delivery and performance by each
member of the Buyer Group of this Agreement and the consummation by each of
them of the transactions contemplated hereby will not, with or without the
giving of notice or the lapse of time, or both, (x) violate any provision
of law, rule, regulation, any order, judgment, writ, injunction or decree
applicable to them, (y) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice under
any material agreement to which each member of the Buyer Group is a party
or by which any member of the Buyer Group or any of such member's assets is
bound; or (z) violate any provision of their Certificate of Incorporation
or their by-laws; except, in the case of (x) or (y), for violations,
conflicts, breaches, defaults, accelerations, terminations, modifications,
cancellations, or failures to give notice, which in the aggregate, would
not materially delay, hinder or impair the consummation of the transactions
contemplated hereby.

7.03. Consents. Except as set forth in Section 7.03 of the
--------
Disclosure Schedule, no consent, approval or authorization of, or exemption
by, or filing with, any governmental authority is required in connection
with the execution, delivery and performance by each member of the Buyer
Group of this Agreement, or the taking of any other action contemplated
hereby excluding, however, consents, approvals, authorizations, exemptions
and filings, if any, which the Company is required to obtain or make.

7.04. Litigation. There is no Litigation pending or to any
----------
member of the Buyer Group's knowledge threatened, involving any member of
the Buyer Group (i) which is reasonably likely to have a material adverse
effect on the ability of any member of the Buyer Group to perform its
respective obligations under this Agreement or (ii) which seeks to enjoin
or obtain damages in respect of the consummation of the transactions
contemplated hereby. No member of the Buyer Group is subject to any
outstanding orders, rulings, judgments or decrees which would be reasonably
likely to have a material adverse effect on the ability of any member of
the Buyer Group to perform their respective obligations under this
Agreement.
-14-

<PAGE> ARTICLE 8

COVENANTS OF THE PARTIES
------------------------

8.01. Best Efforts. Subject to the terms and conditions herein
------------
provided, each of the parties hereto agrees to use its commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under
applicable laws and regulations or otherwise to consummate and effect the
transactions contemplated by this Agreement on or before ________ __, ____,
including, without limitation, obtaining all required consents and
approvals, making all required filings and applications and complying with
or responding to any requests by governmental agencies

8.02. [Intentionally Omitted]

8.03. Access. From the date hereof and prior to the Effective
------
Time, the Company shall provide Purchaser with such information as
Purchaser may from time to time reasonably request with respect to the
Company and its assets and properties and the transactions contemplated by
this Agreement, and shall provide Purchaser and its representatives
reasonable access during regular business hours and upon reasonable notice
to the personnel, representatives, properties, books and records of the
Company as Purchaser may from time to time reasonably request.

8.04. No Solicitation. Neither the Company nor its officers,
---------------
directors, employees, representatives or agents, shall, directly or
indirectly, encourage, solicit, participate in, initiate or continue
discussions or negotiations with, or provide any information to, any person
(other than Purchaser and its affiliates and representatives) concerning
any merger, sale of assets, sale of shares of capital stock or similar
transactions involving the Company and any existing discussions or
negotiations with third persons relating thereto shall be terminated
immediately.

8.05. Indemnification.
---------------

(a) Definitions. As used in this Section 8.06, the
-----------
following terms shall have the following meanings.

(i) "Affiliate" as to any person means any entity,
directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with such
person.

(ii) "Buyer Group Claim" shall mean the following:

(A) the untruth, inaccuracy or breach of any
representation or warranty of the Company contained in
Article 6 hereof, or the breach of any

-15-

<PAGE>

agreement or covenant of the Company or any Stockholder
contained in this Agreement (including the Schedule and the
Exhibits attached hereto), or in any certificate delivered
in connection herewith at or before the Effective Time (or
any facts or circumstances constituting any such untruth,
inaccuracy or breach); or

(B) any claim, demand, liability or obligation
sustained or suffered by the Company, Purchaser, Acquisition
or the Surviving Corporation or any of them, arising from or
in connection with (1) the action of the Stockholders
required to approve the transactions contemplated by this
Agreement, or (2) any assertion of impropriety by any
Stockholder against the Company, Acquisition or the
Surviving Corporation, or any of them, with respect to any
actions or transactions of or involving the Company prior to
or at the Effective Time (including, without limitation, the
actions and transactions contemplated by this Agreement).

(iii) "Buyer Group Indemnified Persons" shall mean and
include Purchaser, Acquisition, the Surviving Corporation and
their Affiliates, successors and assigns, and their respective
officers and directors.

(iv) "Company Claim" shall mean the following:

(A) the untruth, inaccuracy or breach of any
representation or warranty of the Buyer Group contained in
Article 7 hereof, or the breach of any agreement or covenant
of the Buyer Group contained in this Agreement (including
the Schedule and the Exhibits attached hereto), or in any
certificate delivered in connection herewith at or before
the Effective Time (or any facts or circumstances
constituting any such untruth, inaccuracy or breach);

(B) any claim, demand, liability or obligation
sustained or suffered by the Company, arising from or in
connection with (1) the action of the Buyer Group required
to approve the transactions contemplated by this Agreement,
or (2) any assertion of impropriety by the Company against
the Buyer Group or the Surviving Corporation, or any of
them, with respect to any actions or transactions of or
involving the Buyer Group prior to or at the Effective Time
(including, without limitation, the actions and transactions
contemplated by this Agreement); or

-16-

<PAGE>

(C) any claim, demand, liability or obligation
sustained or suffered by the Company, arising from or in
connection with a breach by either member of the Buyer Group
of (1) Section 3.01(b) or (2) Section 8.07.

(iv) "Company Indemnified Persons" shall mean the
Company, its affiliates, successors and assigns, their officers
and directors and the Stockholders.

(v) "Indemnified Persons" shall mean the Buyer Group
Indemnified Persons or the Company Indemnified Persons, as the
case may be.

(vi) "Indemnifying Person" shall mean either member of
the Buyer Group or the Company, as the case may be.

(vii) "Losses" shall mean any and all losses, claims,
shortages, damages, liabilities, expenses (including reasonable
attorneys' and accountants' fees), assessments, tax deficiencies
and taxes (including interest or penalties thereon) sustained,
suffered or incurred by any Indemnified Person arising from or in
connection with any such matter which is the subject of
indemnification under Section 8.06(b).

(b) Indemnification Generally, Etc. (i) Until the three
-------------------------------
year anniversary of the Effective Time, each Stockholder shall, jointly and
severally, indemnify and hold harmless the Buyer Group Indemnified Persons,
and each of them, from and against any and all Losses arising from or in
connection with any Buyer Group Claim at such time as all Losses with
respect to such Buyer Group Claim exceed $37,500 and then only to the
extent of such excess. The maximum amount of all Losses payable with
respect to all Buyer Group Claims shall not exceed the value on the date
hereof of the shares of Purchaser's Common Stock delivered pursuant to
Section 3.01(a)(i) plus $300,000 (but only to the extent actually paid)
----
plus the value on the date hereof of the Escrow Shares released as of the
- ----
date of any Claim.

(ii) Until the three year anniversary of the Effective
Time, Purchaser and Acquisition shall, jointly and severally, indemnify and
hold harmless the Company Indemnified Persons, and each of them, from and
against any and all Losses arising from or in connection with any Company
Claim at such time as (A) all Losses with respect to such Company Claim
exceed $37,500 and then only to the extent of such excess. The maximum
amount of all Losses payable with respect to all Company Claims shall not
exceed the value on the date hereof of the shares of Purchaser's Common
Stock delivered pursuant to Section 3.01(a)(i) plus $300,000 (but only to
----
the extent actually paid) plus the value on the date hereof of the Escrow
----
Shares released as of the date of any Claim.

-17-

<PAGE>

(c) Assertion of Claims. No claim, demand, suit or cause
-------------------
of action shall be brought under Section 8.05(b) hereof unless the
Indemnified Persons, or any of them, give the Indemnifying Person written
notice of the existence of any such claim, demand, suit or cause of action
under Section 8.05(b) hereof. Upon the giving of such written notice as
aforesaid, the Indemnified Persons, or any of them, shall have the right to
commence legal proceedings for the enforcement of their rights under
Section 8.05(b).

8.06 Notice and Defense of Third Party Claims. The Indemnified
----------------------------------------
Person shall give prompt written notice to the Indemnifying Person of any
claim which might give rise to a claim by the Indemnified Persons based on
the indemnity agreement contained in Section 8.05(b), stating the nature
and basis of said claim, and the amount thereof, to the extent known. The
Indemnified Persons will use their best efforts to defend such action, suit
or proceeding and shall have the sole right to control such defense. The
Indemnifying Person shall be kept fully informed of such action, suit or
proceeding at all stages thereof. In addition, the Indemnifying Person may
at its expense, participate in the defense of any such action, suit or
proceeding with counsel of their choice; provided that the Indemnified
--------
Persons shall at all times have the right to control such defense. The
parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense or any such action, suit or proceeding.

8.07 Restrictive Covenant. Neither Purchaser, nor Acquisition,
--------------------
nor any affiliate or successor shall during the Employment Period (as such
term is defined in the Employment Agreement dated the date hereof, between
Acquisition and Deborah Ann Smith) (i) directly or indirectly engage in any
Competitive Business (as defined below), whether such engagement shall be
as an employer, owner, consultant, partner or other participant in any
Competitive Business or (ii) assist others in engaging in any Competitive
Business in the manner described in the foregoing clause (i). As used
herein, the term "Competitive Business" means any business which, directly
or indirectly, competes with the Company in the States of Georgia,
Tennessee or South Carolina.

ARTICLE 9

CONDITIONS TO PURCHASER'S AND ACQUISITION'S OBLIGATIONS
-------------------------------------------------------

The obligations of the Purchaser and Acquisition to consummate
the Merger shall be subject to the satisfaction (or waiver) on or prior to
the Closing Date of all of the following conditions:

-18-

<PAGE>

9.01. Representations, Warranties and Covenants of the Company.
--------------------------------------------------------

(a) The Company shall have performed and complied in all
material respects with its agreements and covenants contained herein to be
performed on or prior to the Closing Date.

(b) The representations and warranties of the Company
contained herein shall be true and correct in all material respects as of
the date of this Agreement.

9.02. No Prohibition. No order, decree or injunction of any
--------------
court or government authority shall be in effect which prohibits the
consummation of the transactions contemplated hereby.

9.03. Third Party Consents. The Company shall have received all
--------------------
consents, authorizations and approvals from non-governmental third parties,
in form reasonably acceptable to Purchaser, which are necessary in order to
enable (i) Purchaser and Acquisition to consummate the transactions
contemplated hereby and to (ii) enable the Company to conduct their
businesses after the Effective Time on the same basis as conducted prior to
the date hereof.

9.04. Governmental Consents. All consents, approvals,
---------------------
authorizations, exemptions and waivers from Government Entities that shall
be required in order to (i) enable Purchaser and Acquisition to consummate
the transactions contemplated hereby (except for such consents, approvals,
authorizations, exemptions and waivers, the absence of which would not
prohibit consummation of such transactions or render such consummation
illegal) and (ii) enable the Company to conduct its business after the
Effective Time on the same basis as conducted prior to the date hereof
shall have been obtained (excluding, however, the failure to obtain new
certificates or transfer of the existing Certificates).

9.05. Stockholders' Consent, Etc. All of the Stockholders of
---------------------------
the Company shall have consented in writing to the Merger and shall have
surrendered the certificates representing all of their shares subject only
to the receipt of the Merger Consideration in accordance with Section 5.02.

9.06. Company Counsel Opinion. Purchaser and Acquisition shall
-----------------------
have received an opinion from Long Aldridge & Norman dated the Closing
Date, substantially in the form set forth in Exhibit 9.06.

-19-

<PAGE>

ARTICLE 10

CONDITIONS TO THE COMPANY'S OBLIGATIONS
---------------------------------------

The obligations of the Company to consummate the Merger shall be
subject to the satisfaction (or waiver) on or prior to the Closing Date of
all of the following conditions:

10.01. Representations, Warranties and Covenants of Purchaser
------------------------------------------------------
and Acquisition.
- ---------------

(a) Purchaser and Acquisition each shall have performed and
complied in all material respects with their respective agreements and
covenants contained herein to be performed on or prior to the Closing Date.

(b) The representations and warranties of Purchaser and
Acquisition contained herein shall be true and correct in all material
respects as of the date of this Agreement.

10.02. No Prohibition. No order, decree or injunction of any
--------------
court or government authority shall be in effect which prohibits the
consummation of the transactions contemplated hereby.

10.03. Governmental Consents. All consents, approvals,
---------------------
authorizations, exemptions and waivers from Government Entities that shall
be required in order to enable the Company to consummate the transactions
contemplated hereby shall have been obtained (except for such consents,
approvals, authorizations, exemptions and waivers, the absence of which
would not prohibit consummation of such transactions or render such
consummation illegal).

10.04. Buyer Group Counsel Opinion. The Company shall have
---------------------------
received an opinion from O'Sullivan Graev & Karabell, LLP, counsel to the
Buyer Group, reasonably acceptable to the Company, dated the Closing Date,
substantially in the form of Exhibit 10.04.

ARTICLE 11

[Intentionally Omitted]

ARTICLE 12

MISCELLANEOUS
-------------

12.01. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties in this Agreement or any certificate
delivered pursuant to this Agreement shall survive until the three year
anniversary of the Effective Time.

-20-

<PAGE>

12.02. Entire Agreement. This Agreement (including the
----------------
Disclosure Schedule and all Exhibits hereto) constitutes the sole
understanding of the parties with respect to the subject matter hereof.
Matters disclosed in the Disclosure Schedule pursuant to any Section of
this Agreement shall be deemed to be disclosed with respect to all Sections
of this Agreement.

12.03. Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto; provided, however, that this
-------- -------
Agreement may not be assigned by any party without the prior written
consent of the other parties, except that the Purchaser and Acquisition may
assign this Agreement to any of their affiliates, but no such assignment
shall release Purchaser or Acquisition from any liability hereunder.

12.04. Headings. The headings of the Articles, Sections and
--------
paragraphs of this Agreement are inserted for convenience only and shall
not be deemed to constitute part of this Agreement or to affect the
construction hereof.

12.05. Modification and Waiver. No amendment, modification or
-----------------------
alteration of the terms or provisions of this Agreement shall be binding
unless the same shall be in writing and duly executed by the parties
hereto, except that any of the terms or provisions of this Agreement may be
waived in writing at any time by the party which is entitled to the
benefits of such waived terms or provisions. No waiver of any of the
provisions of this Agreement shall be deemed to or shall constitute a
waiver of any other provision hereof (whether or not similar). No delay on
the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof.

12.06. Broker's Fees. Each of the parties hereto (i) represents
-------------
and warrants that it has not taken and will not take any action that would
cause the other party hereto to have any obligation or liability to any
person for a finder's or broker's fee, and (ii) agrees to indemnify the
other party hereto for breach of the foregoing representation and warranty,
whether or not the Closing occurs.

12.07. Expenses. Except as otherwise provided herein, the
--------
Company on the one hand and the Purchaser or Acquisition on the other hand
shall each pay all costs and expenses incurred by it or on its behalf in
connection with this Agreement and the transactions contemplated hereby
including, without limiting the generality of the foregoing, fees and
expenses of its own financial consultants, accountants and counsel.

12.08. Notices. Any notice, request, instruction or other
-------
document to be given hereunder by any party hereto to any other party shall
be in writing and shall be given (and will be deemed to have been duly
given upon receipt) by delivery in person, by electronic facsimile
transmission, cable, telegram, telex or

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<PAGE>

other standard forms of written telecommunications, by overnight courier or
by registered or certified mail, postage prepaid,

if to the Company to:

U.S. Health Connections, Inc.
200 North Cobb Parkway
Building 400, Suite 416
Marietta, GA 30062
Attention: Deborah Ann Smith
Telecopy:

with a copy to:

Long Aldridge & Norman
One Peachtree Center, Suite 5300
303 Peachtree Street
Atlanta, Georgia 30308
Attention: Barbara Blackford, Esq.
Telecopy: (404) 527-4198

if to Purchaser or Acquisition to:

Advanced Health Corporation
560 White Plains Road, Second Floor
Tarrytown, New York 10591
Attention: President
Telecopy: (914) 332-1186

with a copy to:

O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: John J. Suydam, Esq.
Telecopy: (212) 408-2420

12.09. Governing Law. This Agreement shall be construed in
-------------
accordance with and governed by the laws of the State of New York
applicable to agreements made and to be performed wholly within such
jurisdiction. Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of New York and of the United States of America, in
each ease located in County of New York, for any litigation arising out of
or relating to this Agreement and the transactions contemplated hereby (and
agrees not to commence any litigation relating thereto except in such
courts), and further agrees that: service of any process, summons, notice
or document by U.S. registered mail to its respective address set forth in
Section 12.08 shall be effective service of process for any Litigation
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue
of any litigation arising out of

-22-

<PAGE>

this Agreement or the transactions contemplated hereby in the courts of the
State of New York or the United States of America, in each case located in
County of New York, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such
litigation brought in any such court has been brought in an inconvenient
forum.

12.10. Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument.

* * *

-23-

<PAGE>

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.

US HEALTH CONNECTIONS, INC.

ATTEST: By: /s/ Deborah Ann Smith
---------------------------
Name: Deborah Ann Smith
Title: President

By: /s/
----------------------
Name:
Title: Secretary

ATTEST: ADVANCED HEALTH CORPORATION

By:/s/ Richard W. Kaplan By: /s/ Steve Hochberg
---------------------- ---------------------------
Name: Richard W. Kaplan Name: Steve Hochberg
Title: Secretary Title: President

ATTEST: ADVANCED CLINICAL NETWORKS
CORPORATION

By: /s/ Walter E. Birch By: /s/ Richard W. Kaplan
---------------------- ---------------------------
Name: Walter E. Birch Name: Richard W. Kaplan
Title: Secretary Title: President

-24-

Exhibit 10.4

MED-E-MAIL CORPORATION

INVESTORS' RIGHTS AGREEMENT

____________________________

August 31, 1993

<PAGE>

TABLE OF CONTENTS
-----------------

Page
1. Registration Rights . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . 1
1.2 Request for Registration . . . . . . . . . . . . . 2
1.3 Company Registration . . . . . . . . . . . . . . . 4
1.4 Obligations of the Company . . . . . . . . . . . . 4
1.5 Furnish Information . . . . . . . . . . . . . . . 6
1.6 Expenses of Demand Registration . . . . . . . . . 6
1.7 Expenses of Company Registration . . . . . . . . . 7
1.8 Underwriting Requirements . . . . . . . . . . . . 7
1.9 Delay of Registration . . . . . . . . . . . . . . 8
1.10 Indemnification . . . . . . . . . . . . . . . . . . 8
1.11 Reports Under Securities Exchange Act of 1934 . . . 10
1.12 Form S-3 Registration . . . . . . . . . . . . . . 11
1.13 Assignment of Registration Rights . . . . . . . . 12
1.14 "Market Stand-Off" Agreement . . . . . . . . . . . 13
1.15 Termination of Registration Rights . . . . . . . . 14

Covenants of the Company . . . . . . . . . . . . . . . . 14
2.1 Financial Statements and Other Information . . . . 14
2.2 Inspection of Property . . . . . . . . . . . . . . 16
2.3 Right of First Offer . . . . . . . . . . . . . . . 16
2.4 Positive Covenants . . . . . . . . . . . . . . . . 18
2.5 Negative Covenants . . . . . . . . . . . . . . . . 19
2.6 Termination of Certain Covenants . . . . . . . . . 20

3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 20
3.1 Successors and Assigns . . . . . . . . . . . . . . 20
3.2 Governing Law . . . . . . . . . . . . . . . . . . 20
3.3 Counterparts . . . . . . . . . . . . . . . . . . . 20
3.4 Titles and Subtitles . . . . . . . . . . . . . . . 20
3.5 Notices . . . . . . . . . . . . . . . . . . . . . 20
3.6 Expenses . . . . . . . . . . . . . . . . . . . . . 20
3.7 Amendments and Waivers . . . . . . . . . . . . . . 21
3.8 Severability . . . . . . . . . . . . . . . . . . . 21
3.9 Entire Agreement. . . . . . . . . . . . . . . . 21

-i-

<PAGE>

INVESTORS' RIGHTS AGREEMENT
---------------------------

THIS INVESTORS' RIGHTS AGREEMENT (the "Agreement") is made as of the
31st day of August, 1993, by and between Med-E-Mail Corporation, a Delaware
corporation (the "Company"), Financial Strategic Portfolios, Inc. - Health
Sciences Portfolio ("FSP") and The Global Health Sciences Fund ("Global
Fund") (FSP and Global Fund are referred to individually herein as the
"Investor" and collectively as the "Investors").

RECITALS
--------

WHEREAS, the Company and the Investors are parties to the certain
Series A Preferred Stock Purchase Agreement of even date herewith (the
"Series A Agreement");

WHEREAS, in order to induce the Company to enter into the Series A
Agreement and to induce the Investors to invest funds in the Company
pursuant to the Series A Agreement, the Investors and the Company hereby
agree that this Agreement shall govern the rights of the Investors to cause
the Company to register shares of Common Stock issuable to the Investors
and certain other matters as set forth herein;

NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:

1. Registration Rights. The Company covenants and agrees as
-------------------
follows:

1.1 Definitions. For purposes of this Section 1:
-----------

(a) The term "Act" means the Securities Act of 1933, as amended.

(b) The term "Common Stock" means shares of the common stock of the
Company, par value $.01 per share.

(c) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted
by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the
SEC.

(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.

(e) The term "1934 Act" means the Securities Exchange Act of 1934, as
amended.

<PAGE>

(f) The term "Series A Preferred Stock" means shares of the Company's
Series A Convertible Preferred Stock, par value $.01 per share.

(g) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.

(h) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, (ii)
any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of the shares referenced in (i) and (ii) above, excluding in
all cases, however, any Registrable Securities sold by a person in a
transaction in which his rights under this Section 1 are not assigned.

(i) The term "SEC" shall mean the Securities and Exchange Commission.

1.2 Request for Registration.
------------------------

(a) If the Company shall receive at any time after the earlier of (i)
four (4) years after the date of this Investors' Rights Agreement or (ii)
the effective date of the first registration statement for a public
offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or an SEC Rule
145 transaction), a written request from the Holders of fifty percent (50%)
of the Registrable Securities then outstanding that the Company file a
registration statement under the Act covering the registration of at least
twenty-five percent (25%) of the Registrable Securities then outstanding,
and provided that such shares have a reasonably anticipated aggregate
offering price of at least $2,000,000, the Company shall:

(i) within ten (10) days of the receipt thereof, give written notice,
in accordance with Section 3.5 hereof, of such request to all Holders; and

(ii) file as soon as practicable, and in any event within sixty (60)
days of the receipt of such request, and to use its best efforts to cause
to become effective as soon as practicable, the registration under the Act
of all Registrable Securities which the Holders request to be registered,
subject to the limitations of Subsection 1.2(b).

(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the

-2-

<PAGE>

Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request
made pursuant to Subsection 1.2(a) and the Company shall include such
information in the written notice referred to in Subsection 1.2(a). The
underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such
event, the right of any Holder to include his Registrable Securities in
such registration shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting (unless otherwise mutually agreed by a majority in
interest of the Initiating Holders and such Holder) to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company as provided in Subsection
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding
any other provision of this Section 1.2, if the underwriter advises the
Initiating Holders in writing that marketing factors require a limitation
of the number of shares to be underwritten, then the Initiating Holders
shall so advise all Holders of Registrable Securities which would otherwise
be underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the underwriting shall be allocated
among all Holders thereof, including the Initiating Holders, in proportion
(as nearly as practicable) to the amount of Registrable Securities of the
Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
underwriting.

(c) Notwithstanding the foregoing, if the Company shall furnish to the
Initiating Holders a certificate signed by the Chief Executive Officer of
the Company stating that, in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company
and its stockholders for such registration statement to be filed and it is
therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer taking action with respect to such
filing for a period of not more than ninety (90) days after receipt of the
request of the Initiating Holders; provided, however, that the Company may
not utilize this right more than once in any twelve (12) month period.

(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:

(i) After the Company has effected two (2) registrations pursuant to
this Section 1.2, excluding any registrations effected on Form S-3, and
such registrations have been declared or ordered effective;

-3-

<PAGE>

(ii) During the period starting with the date sixty (60) days prior to
the Company's good faith estimate of the date of filing of, and ending on a
date one hundred eighty (180) days after the effective date of, the first
registration statement for a public offering subject to Section 1.3 hereof;
provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become
effective;

(iii) During the period starting with the date sixty (60) days prior to
the Company's good faith estimate of the date of filing of, and ending on a
date ninety (90) days after the effective date of, any subsequent
registration statement for a public offering subject to Section 1.3 hereof;
provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become
effective;

(iv) If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below; or

(v) If the Company delivers to the Initiating Holders an opinion, in
form and substance acceptable to such Initiating Holders, of counsel
satisfactory to the Initiating Holders that the Registrable Securities
requested to be registered by the Initiating Holders may be sold or
transferred pursuant to Rule 144(k) of the Act.

1.3 Company Registration. If (but without any obligation to do so)
--------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public
offering of such securities (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a
registration relating solely to a Rule 145 transaction, a registration on
any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of
the Registrable Securities or a registration in which the only Common Stock
being registered is Common Stock issuable upon conversion of debt
securities which are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within twenty (20) days after
giving of such notice by the Company in accordance with Section 3.5, the
Company shall, subject to the provisions of Section 1.8, cause to be
registered under the Act all of the Registrable Securities that each such
Holder has requested to be registered.

1.4 Obligations of the Company. Whenever required under this
--------------------------
Section 1 to effect the registration of any

-4-

<PAGE>

Registrable Securities, the Company shall, as expeditiously as reasonably
possible:

(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and keep such registration
statement effective for a period of up to one hundred twenty (120) days or
until the distribution contemplated in the Registration Statement has been
completed, whichever first occurs; provided, however, that such one hundred
twenty (120) day period shall be extended for a period of time equal to the
period the Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company, and provided further that in the case of any
registration of Registrable Securities on Form S-3 that are intended to be
offered on a continuous or delayed basis, such one hundred twenty (120) day
period shall be extended until all such Registrable Securities are sold, if
applicable rules under the Act governing the obligation to file a post-
effective amendment permit, in lieu of filing a post-effective amendment
which (I) includes any prospectus required by Section 10(a)(3) of the Act
or (II) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (I)
and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the 1934 Act in the registration statement.

(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as, in the opinion of counsel to the Company, may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.

(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.

(d) Use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or Blue Sky laws
of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions, unless
the Company is already subject to service in such jurisdiction and except
as may be required by the Act.

-5-

<PAGE>

(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing.

(g) Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange on which similar securities issued
by the Company are then listed.

(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of
such registration.

1.5 Furnish Information.
-------------------

(a) It shall be a condition precedent to the obligations of the Company
to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish
to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such
securities as shall be required to effect the registration of such Holder's
Registrable Securities.

(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to
the operation of Subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in
the registration does not equal or exceed the number of shares or the
anticipated aggregate offering price required to originally trigger the
Company's obligation to initiate such registration as specified in
Subsection 1.2(a) or Subsection 1.12(b)(2), whichever is applicable.

-6-

<PAGE>

fees and disbursements of counsel for the Company and the reasonable fees
and disbursements of one counsel for the selling Holders shall be borne by
the Company; provided, however, that the Company shall not be required to
pay for any expenses of the second long-form registration requested
pursuant to Section 1.2, or of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such
expenses), unless the Holders of a majority of the Registrable Securities
agree to forfeit their right to one demand registration pursuant to Section
1.2 or unless such withdrawal is based upon material adverse information
relating to the Company that is different from information known or
available (upon request from the Company or otherwise) to the Holders
requesting registration at the time of their request.

1.7 Expenses of Company Registration. The Company shall bear and
--------------------------------
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers' and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements
of one counsel for the selling Holders, but excluding underwriting
discounts and commissions relating to Registrable Securities.

1.8 Underwritinq Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 1.3 to include any of a
Holder's securities in such underwriting unless such Holder accepts the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine
in their sole discretion will not jeopardize the success of the offering by
the Company. If the total amount of securities, including Registrable
Securities, requested by stockholders to be included in such offering
exceeds the amount of securities sold other than by the Company that the
underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in
the offering only that number of such securities, including Registrable
Securities, which the underwriters determine in their sole discretion will
not jeopardize the success of the offering (the securities so included to
be apportioned pro rata among the Holders according to the total amount of
Registrable Securities entitled to be included therein owned by each Holder
or in such other proportions as shall mutually be agreed to by the
Holders); provided, however, that the number of shares of Registrable
Securities to be included in such underwriting shall not be so reduced
unless the securities of other selling stockholders are

-7-

<PAGE>

first entirely excluded from the underwriting. For purposes of the
preceding parenthetical concerning apportionment, for any selling
stockholder that is a holder of Registrable Securities and that is a
partnership or corporation, the partners, retired partners and stockholders
of such holder, or the estates and family members of any such partners and
retired partners and any trusts for the benefit of any of the foregoing
persons shall be deemed to be a single "selling stockholder", and any pro-
rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by
all entities and individuals included in such "selling stockholder", as
defined in this sentence.

1.9 Delay of Reqistration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 1.

1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:

(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the officers and directors of each Holder
participating in such registration, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any
losses, claims, damages, or liabilities (joint or several) to which they
may become subject under the Act, or the 1934 Act, or otherwise insofar as
such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii)
the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Act, the 1934 Act, or any rule or regulation promulgated under the Act,
or the 1934 Act, and the Company will pay to each such Holder, underwriter
or controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Subsection 1.10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company,
which consent shall not be unreasonably withheld, nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or
action to the extent that it arises out of or is

-8-

<PAGE>

based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.

(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the Act, or the 1934 Act,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each
such Holder will pay, as incurred, any legal or other expenses reasonably
incurred by any person intended to be indemnified pursuant to this
Subsection 1.10(b), in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; provided, that, in no
event shall any selling Holder's liability under this Subsection 1.10(b)
exceed the proceeds received by such Holder from the offering (net of any
underwriting discounts and commissions).

(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
1.10, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party (together with all other
indemnified parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees
and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the

-9-

<PAGE>

commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under
this Section 1.10.

(d) If the indemnification provided for in this Section 1.10 is held by
a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.

(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.

(f) The obligations of the Company and Holders under this Section 1.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.

1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees
to:

(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;

-10-

<PAGE>

(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable
Securities, such action to be taken as soon as practicable after the end of
the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is
declared effective;

(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and

(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company
that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at
any time after it has become subject to such reporting requirements),
(ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC which permits the selling of
any such securities without registration or pursuant to such form.

1.12 Form S-3 Registration. In case the Company shall receive at any
---------------------
time after the completion of the first registration statement for a public
offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or an SEC Rule
145 transaction), a written request from the Holders of twenty percent
(20%) of the Registrable Securities then outstanding that the Company
effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities
owned by such Holder or Holders, the Company will:

(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and

-11-

<PAGE>

registration, qualification or compliance, pursuant to this Section 1.12:
(1) if Form S-3 is not available for such offering by the Holders; (2) if
the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate
price to the public (net of any underwriting discounts or commissions) of
less than $500,000; (3) if the Company shall furnish to the Holders a
certificate signed by the President of the Company stating that, in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall
have the right to defer the filing of the Form S-3 registration statement
for a period of not more than ninety (90) days after receipt of the request
of the Holder or Holders under this Section 1.12; provided, however, that
the Company shall not utilize this right more than once in any twelve (12)
month period; (4) if the Company has already effected two (2) registrations
on Form S-3, or any equivalent successor form, for the Holders pursuant to
this Section 1.12; or (5) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification
or compliance.

(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so
requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection
with a registration requested pursuant to this Section 1.12, including,
without limitation, all registration, filing, qualification, printers' and
accounting fees and the reasonable fees and disbursements of one (1)
counsel for the selling Holder or Holders and counsel for the Company, but
excluding any underwriting discounts or commissions associated with
Registrable Securities, shall be borne by the Company. Registrations
effected pursuant to this Section 1.12 shall not be counted as
registrations effected pursuant to Sections 1.2 or 1.3.

(d) The Company shall not be obligated to effect any registration
pursuant to this Section 1.12 if the Company delivers to the Holders
requesting registration under this Section 1.12 an opinion, in form and
substance acceptable to such Holders, of counsel satisfactory to such
Holders, that the Registrable Securities so requested to be registered may
be sold or transferred pursuant to Rule 144(k) under the Act.

-12-

<PAGE>

such investment company (a "Related Mutual Fund") that has the same
investment adviser as the transferring investment company, without
restriction or requirement as to number of shares, or to a transferee or
assignee of such securities who, as a result of such assignment or
transfer, acquires at least twenty percent (20%) of such transferring
Holder's shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations,
recapitalizations and any similar events), provided: (a) the Company is,
within a reasonable time after such transfer, furnished with written notice
of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; (b) such
transferee or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Agreement, including without limitation the
provisions of Section 1.14 below; and (c) such assignment shall be
effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted
under the Act.

1.14 "Market Stand-Off" Agreement. Each Investor hereby agrees that,
----------------------------
during the period of duration specified by the Company and an underwriter
of Common Stock or other securities of the Company, following the effective
date of a registration statement of the Company filed under the Act, it
shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including,
without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be
similarly bound) any securities of the Company held by it at any time
during such period except Common Stock included in such registration;
provided, however:

(a) that such market stand-off time period shall not exceed one hundred
eighty (180) days following the effective date of the Company's first
registration of Common Stock or other securities under the Act and ninety
(90) days following the effective date with respect to all subsequent
registrations; and

(b) all officers and directors of the Company and all five percent (5%)
or greater stockholders of the Company enter into similar agreements.

In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of
each Investor (and the shares or securities of every other person subject
to the foregoing restriction) until the end of such period.

Notwithstanding the foregoing, the obligations described in this
Section 1.14 shall not apply to a registration relating solely to employee
benefit plans on Form S-8 or similar forms which may be promulgated in the
future, or a registration

-13-

<PAGE>

relating solely to an SEC Rule 145 transaction on Form S-4 or similar forms
which may be promulgated in the future.

1.15 Termination of Registration Rights. No Holder shall be entitled
----------------------------------
to exercise any right provided for in this Section 1 after three (3) years
following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection
with a firm commitment underwritten offering of its securities to the
general public resulting in gross proceeds to the Company of at least
$10,000,000 and at a price per share to the public of at least $30.00 (as
adjusted for stock splits, combinations and similar transactions) (a
"Qualified Public Offering").

2. Covenants of the Company.
------------------------

2.1 Financial Statements and Other Information. Except as otherwise
------------------------------------------
set forth below in this Section 2.1, until the Company is subject to the
reporting requirements of the 1934 Act, the Company will deliver to each of
the Investors, for so long as such Investor holds any shares of the
Company's Series A Preferred Stock (or Common Stock issued upon conversion
thereof):

(a) as soon as available, but in any event within forty-five (45)
days after the end of each quarterly accounting period in each fiscal year,
unaudited consolidated statements of operations and consolidated cash flows
of the Company and its subsidiaries for such quarterly period and for the
period from the beginning of the fiscal year to the end of such quarter,
and consolidated balance sheets of the Company and its subsidiaries as of
the end of such quarterly period, setting forth in each case comparisons to
the annual budget and to the corresponding period in the preceding fiscal
year, and all such statements will be prepared in accordance with generally
accepted accounting principles, consistently applied (except for the
absence of notes and subject to normal year-end adjustments);

(b) as promptly as possible (but in any event within ninety (90)
days) after the end of each fiscal year, consolidated statements of operations
and a consolidated statement of cash flows of the Company and its
subsidiaries for such fiscal year and consolidated balance sheets and
statements of stockholders' equity of the Company and its subsidiaries as
of the end of such fiscal year, setting forth comparisons to the annual
budget and to the preceding fiscal year, all prepared in accordance with
generally accepted accounting principles, consistently applied, and
accompanied by an unqualified opinion (except for qualifications regarding
specified contingent liabilities) of an independent accounting firm
selected by the Company's Board of Directors;

(c) prior to the end of each fiscal year, an annual budget (approved by
the Board of Directors) prepared on a monthly, consolidated basis for the
Company and its subsidiaries

-14-

<PAGE>

for the succeeding fiscal year (displaying detailed anticipated statements
of operations and cash flows and balance sheets), and promptly upon
preparation thereof any other significant budgets which the Company
prepares and any revisions of such annual or other budgets;

(d) promptly (and in any event within thirty (30) days) after the
discovery or receipt of notice of any event or circumstance affecting the
Company or its subsidiaries that is determined in good faith by the Company
to be material to the Company and its subsidiaries, taken as a whole,
including but not limited to, the filing of any material litigation against
the Company or its subsidiaries, acquisitions, mergers, substantial sales
of assets, significant regulatory or legal developments, the commencement
of voluntary or involuntary bankruptcy proceedings, natural or other
disasters, significant changes in management or directors, changes in
auditors, and execution or termination of, or defaults under, material
contracts, a letter from the Chief Executive Officer or Chief Financial
Officer of the Company specifying the nature and period of existence
thereof and, in the case of material litigation, what actions the Company
and its subsidiaries have taken and propose to take with respect thereto;

(e) promptly after transmission thereof, copies of all financial
statements, proxy statements, reports and any other written communications
which the Company sends to its stockholders generally and copies of all
registration statements and all regular, special or periodic reports which
it files with the SEC or with any securities exchange on which any of its
securities are then listed, and copies of all press releases and other
statements made available generally by the Company to the public;

(f) a notice specifying the terms of all sales of the Company's
securities, promptly following the consummation thereof;

(g) within fifteen (15) days after the end of each month, an income
statement for such month and a balance sheet of the Company for and as of
the end of such month, together with such other business and financial data
as may be reasonably requested by each Investor.

Each of the financial statements referred to in this Section 2.1 will
be true and correct in all material respects and will fairly present the
Company's consolidated financial position and results of operations as of
the dates and for the periods stated therein, subject in the case of the
unaudited financial statements to changes resulting from normal year-end
audit adjustments (none of which would, alone or in the aggregate, be
materially adverse to the Company's financial condition, operating results
or business prospects). The Company's obligation to provide to the Investor
the materials described in

-15-

<PAGE>

Subsection (e) above will continue after the Company is subject to the
reporting requirements of the 1934 Act until the Investors no longer hold
any shares of the Company's Series A Preferred Stock (or Common Stock
issued upon conversion thereof).

2.2 Inspection of Property. Until the Company is subject to the
----------------------
reporting requirements of the 1934 Act, the Company will permit each of the
Investors, or any representatives designated by an Investor, upon
reasonable notice and during normal business hours and such other times as
an Investor may reasonably request, to (i) visit and inspect any of the
properties of the Company and its subsidiaries, (ii) examine the corporate
and financial records of the Company and its subsidiaries and make copies
thereof or extracts therefrom, (iii) discuss the affairs, finances and
accounts of the Company and its subsidiaries with the directors, senior
management and independent accountants of the Company and its subsidiaries,
and (iv) consult with and advise the management of the Company and its
subsidiaries as to their affairs, finances and accounts.

2.3 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.3, the Company hereby grants to each Holder a
right of first offer with respect to future sales by the Company of its
Shares (as hereinafter defined). A Holder shall be entitled to apportion
the right of first offer hereby granted it among itself and its partners
and affiliates and, in the case of a Holder that is a registered investment
company, among itself and its Related Mutual Funds, in such proportions as
it deems appropriate.

Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares
to each Holder in accordance with the following provisions:

(a) The Company shall deliver a notice by certified mail ("Notice")
to the Holders stating (i) its bona fide intention to offer such Shares, (ii)
the number of such Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.

(b) By written notification received by the Company, within twenty
(20) calendar days after giving of the Notice, the Holder may elect to purchase
or obtain, at the price and on the terms specified in the Notice, up to
that portion of such Shares which equals the proportion that the number of
shares of Common Stock issued and held, or issuable upon conversion of the
Series A Preferred Stock then held, by such Holder bears to the total
number of shares of Common Stock of the Company then outstanding (assuming
full conversion of all convertible securities) ("Pro Rata Share"). To the
extent a Holder does not elect to purchase or obtain the full amount of its
Pro Rata Share, the unsubscribed portion of such Holder's Pro Rata Share

-16-

<PAGE>

may be purchased or obtained by any other Holder or Holders, on a pro rata
basis, at the price and on the terms specified in the Notice, provided that
such purchase shall be consummated within thirty-five (35) days after
giving of the Notice.

(c) If all Shares referred to in the Notice which Holders are entitled
to obtain pursuant to Subsection 2.3(b) are not elected to be obtained as
provided in Subsection 2.3(b) hereof, the Company may, during the thirty
(30) day period following the expiration of the period provided in
Subsection 2.3(b) hereof, offer the remaining unsubscribed portion of such
Shares to any person or persons at a price not less than, and upon terms no
more favorable to the offeree than those specified in the Notice. If the
Company does not enter into an agreement for the sale of the Shares within
such period, or if such agreement is not consummated within thirty (30)
days of the execution thereof, the right provided hereunder shall be deemed
to be revived and such Shares shall not be offered unless first reoffered
to the Holders in accordance herewith.

(d) The right of first offer in this Section 2.3 shall not be
applicable to

(ii) Common Stock issued in connection with bona fide research,
licensing or corporate partnering relationships, in connection with
equipment lease financings, or upon exercise of warrants issued to
institutional lenders in connection with non-convertible debt financings,
in each case approved by the Board of Directors of the Company, provided
that such issuances are for other than primarily equity financing purposes,
and provided, further, that the cumulative, aggregate number of shares
issued in connection with such equipment lease financings and debt
financings combined does not exceed five percent (5%) of the number of
shares of Common Stock then outstanding (assuming full conversion of the
then outstanding Series A Preferred Stock and exercise or conversion into
Common Stock of all other securities then outstanding that are exercisable
for or convertible into Common Stock);

(iii) Common Stock issued or issuable upon conversion of the Series
A Preferred Stock; or

(iv) Common Stock issued or issuable in connection with a merger or
consolidation as a result of which the holders of the Company's outstanding
securities immediately

-17-

<PAGE>

prior to the consummation of such transaction hold securities in excess of
fifty percent (50%) of the voting power of the surviving or resulting
entity.

(e) The right of first offer set forth in this Section 2.3 may not be
assigned or transferred, except that (i) such right is assignable by each
Holder to any wholly-owned subsidiary or parent of, or to any corporation
or entity that is, within the meaning of the Act, controlling, controlled
by or under common control with, any such Holder and (ii) such right may be
assigned by a Holder that is a registered investment company to a Related
Mutual Fund.

2.4 Positive Covenants. So long as any shares of the Series A
------------------
Preferred Stock are outstanding, the Company agrees as follows:

(a) The Company will retain independent public accountants of
recognized national standing who shall certify the Company's financial
statements at the end of each fiscal year. In the event the services of the
independent public accountants so selected, or any firm of independent
public accountants hereafter employed by the Company are terminated, the
Company will promptly thereafter notify the Holders and will request the
firm of independent public accountants whose services are terminated to
deliver to the Holders a letter from such firm setting forth the reasons
for the termination of their services. In the event of such termination,
the Company will promptly thereafter engage another firm of independent
public accountants of recognized national standing. In its notice to the
Holders the Company shall state whether the change of accountants was
recommended or approved by the Board of Directors of the Company or any
committee thereof.

(b) The Company will cause senior management personnel and key
employees now or hereafter employed by it or any subsidiary to enter into a
proprietary information and inventions agreement.

(d) [reserved]

(e) The Company shall, promptly following the date of this Agreement,
obtain, and thereafter maintain in full force and effect, fire, casualty,
workmen's compensation and liability insurance policies, with extended
coverage, in such amounts and with such coverage as are carried by
companies in a position similar to that of the Company.

(f) [reserved]

-18-

<PAGE>

2.5 Negative Covenants. So long as any shares of Series A Preferred
------------------
Stock are outstanding, the Company shall not without first obtaining the
written consent of the holders of at least two-thirds of the then
outstanding shares of Series A Preferred Stock:

(a) sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate
with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of the Company is
disposed of;

(b) increase or decrease (other than by conversion) the total number of
authorized shares of Series A Preferred Stock or amend the terms of the
Series A Preferred Stock so as to affect the Series A Preferred Stock
adversely;

(c) authorize or issue, or obligate itself to issue, any other equity
security, including any other security or debt instrument convertible into
or exercisable for any such equity security, having a preference over, or
being on a parity with, the Series A Preferred Stock with respect to
dividends, redemption or liquidation;

(d) engage in any spin-out, distribution or sale of any business unit
of the Company;

(e) enter into any transactions with affiliates of the Company except
on arms-length terms;

(f) increase the authorized number of directors of the Company to more
than seven (7) members;

(g) redeem or repurchase any outstanding equity securities of the
Company except for: a) repurchases of unvested or restricted shares of
Common Stock at cost from employees, consultants, or members of the Board
of Directors pursuant to repurchase options of the Company (i) currently
outstanding or (ii) hereafter entered into pursuant to a stock option plan
or restricted stock plan approved by the Company's Board of Directors;

(h) redeem, purchase or otherwise acquire for value any share or
shares of Series A Preferred Stock except pursuant to an offer made upon the
same terms pro rata to all holders of outstanding shares of Series A Preferred
Stock;

(i) liquidate, dissolve or otherwise wind up the affairs of the
Company; or

(j) adopt any stock option, restricted stock or like plan providing for
the grant of equity incentives to employees, directors or consultants.

-19-

<PAGE>

2.6 Termination of Certain Covenants. The covenants set forth in
--------------------------------
Section 2.4 and 2.5 shall terminate and be of no further force or effect
upon the consummation of a Qualified Public Offering.

3. Miscellaneous
-------------

3.1 Successors and Assigns. Except as otherwise provided herein,
----------------------
the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in
this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

3.2 Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of New York, disregarding New York
principles of conflicts of laws which would otherwise provide for the
application of the substantive laws of another jurisdiction.

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

3.4 Titles and subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

3.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be notified
or four (4) days after deposit with the United States Post Office or air
courier in the case of non-U.S. Investors, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written
notice to the other parties with a copy for the Company to Bachner, Tally,
Polevoy & Misher, 380 Madison Avenue, New York, New York 10017-2590.

3.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.

-20-

<PAGE>

3.7 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the
holders of two-thirds of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section 3.7 shall be
binding upon each holder of any Registrable Securities then outstanding,
each future holder of all such Registrable Securities, and the Company.

3.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.

3.9 Entire Agreement. This Agreement constitutes the full and
----------------
entire understanding and agreement between the parties with regard to the
subjects hereof.

-21-

<PAGE>

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

MED-E-MAIL CORPORATION

By: /s/ Steven Hochberg
-------------------------
Steven Hochberg, President

Address: 230 Park Avenue
Suite C-301
New York, New York 10169

-22-

<PAGE>

INVESTORS:

FINANCIAL STRATEGIC PORTFOLIOS,
INC. - HEALTH SCIENCES PORTFOLIO

By: /s/ Glen A. Payne
-------------------------------

Name: Glen A. Payne
Title: Secretary

Address: c/o Invesco Trust Company
7800 East Union Avenue
Suite 800
Denver, Colorado 80237
Attn: Barry Kurokawa

THE GLOBAL HEALTH SCIENCES FUND

By: /s/ John Kaluzski
--------------------------------

Name: John Kaluzski
Title: President

Address: c/o Invesco Trust Company
7800 East Union Avenue
Suite 800
Denver, Colorado 80237
Attn: Barry Kurokawa

-23-

Exhibit 10.5

MED-E-MAIL CORPORATION

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

-------------------
March 16, 1994

<PAGE>

TABLE OF CONTENTS
-----------------

Page
----

1. Registration Rights 1

1.1 Definitions . . . . . . . . . . . . . . . . . . . 1
1.2 Request for Registration . . . . . . . . . . . . . 2
1.3 Company Registration . . . . . . . . . . . . . . . 4
1.4 Obligations of the Company . . . . . . . . . . . . 5
1.5 Furnish Information . . . . . . . . . . . . . . . 6
1.6 Expenses of Demand Registration . . . . . . . . . 7
1.7 Expenses of Company Registration . . . . . . . . . 7
1.8 Underwriting Requirements . . . . . . . . . . . . 7
1.9 Delay of Registration . . . . . . . . . . . . . . 8
1.10 Indemnification . . . . . . . . . . . . . . . . 8
1.11 Reports Under Securities Exchange Act of 1934 . . 10
1.12 Form S-3 Registration . . . . . . . . . . . . . 11
1.13 Assignment of Registration Rights . . . . . . . . 13
1.14 [Reserved] . . . . . . . . . . . . . . . . . . . 13
1.15 Termination of Registration Rights . . . . . . . 13

2. Covenants of the Company . . . . . . . . . . . . . . . . 13

2.1 Financial Statements and Other Information . . . 13
2.2 Inspection of Property . . . . . . . . . . . . . 15
2.3 Right of First Offer . . . . . . . . . . . . . . 15
2.4 Positive Covenants . . . . . . . . . . . . . . . 17
2.5 Negative Covenants . . . . . . . . . . . . . . . 20
2.6 Termination of Certain Covenants . . . . . . . . 21

3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 21

3.1 Successors and Assigns . . . . . . . . . . . . . . 21
3.2 Governing Law . . . . . . . . . . . . . . . . . . 21
3.3 Counterparts . . . . . . . . . . . . . . . . . . . 21
3.4 Titles and Subtitles . . . . . . . . . . . . . . . 21
3.5 Notices . . . . . . . . . . . . . . . . . . . . . 21
3.6 Expenses . . . . . . . . . . . . . . . . . . . . . 22
3.7 Amendments and Waivers . . . . . . . . . . . . . . 22
3.8 Severability . . . . . . . . . . . . . . . . . . . 22
3.9 Entire Agreement. . . . . . . . . . . . . . . 22

-i-

<PAGE>

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
------------------------------------------------

THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "Agreement")
is made as of the 16th day of March, 1994, by and between Med-E-Mail
Corporation, a Delaware corporation (the "Company"), Financial Strategic
Portfolios, Inc. - Health Sciences Portfolio ("FSP") and The Global Health
Sciences Fund ("Global Fund") (FSP and Global Fund are referred to
collectively herein as the "Investors" and sometimes individually as an
"Investor").

RECITALS
--------

WHEREAS, the Company and the Investors are parties to that certain
Series A Preferred Stock Purchase Agreement dated as of August 31, 1993
(the "Series A Stock Purchase Agreement");

WHEREAS, to induce the Company to enter into the Series A Stock
Purchase Agreement and to induce the Investors to invest funds in the
Company pursuant to the Series A Stock Purchase Agreement, the Investors
and the Company entered into an Investors' Rights Agreement dated August
31, 1993 (the "Old Agreement"), governing the rights of the Investors to
cause the Company to register shares of Common Stock issuable to the
Investors upon conversion of shares of Series A Preferred Stock purchased
by the Investors pursuant to the Series A Stock Purchase Agreement, and
certain other matters as set forth therein;

WHEREAS, the Company and FSP are parties to that certain Series B
Preferred Stock Purchase Agreement of even date herewith (the "Series B
Stock Purchase Agreement"); and

WHEREAS, to induce the Company to enter into the Series B Stock
Purchase Agreement and to induce FSP to invest funds in the Company
pursuant to the Series B Stock Purchase Agreement, the Investors and the
Company hereby agree that this Agreement shall govern the rights of the
Investors to cause the Company to register shares of Common Stock issuable
to the Investors and certain other matters as set forth herein;

NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto amend and restate the Old Agreement in
its entirety and agree as follows:

1. Registration Rights. The Company covenants and agrees as
---------------------
follows:

1.1 Definitions. For purposes of this Section 1:
-----------

(a) The term "Act" means the Securities Act of 1933, as amended.

<PAGE>

(b) The term "Common Stock" means shares of the common stock of the
Company, par value $.01 per share.

(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.

(e) The term "1934 Act" means the Securities Exchange Act of 1934, as
amended.

(f) The term "Series A Preferred Stock" means shares of the Company's
Series A Convertible Preferred Stock, par value $.01 per share.

(g) The term "Series B Preferred Stock" means shares of the Company's
Series B Convertible Preferred Stock, par value $.01 per share.

(h) The term "Preferred Stock" means the Company's Series A Preferred
Stock and Series B Preferred Stock.

(i) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.

(j) The term "Registrable Securities" means (i) the Common Stock issuable
or issued upon conversion of the Preferred Stock, (ii) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of the
shares referenced in (i) and (ii) above, excluding in all cases, however,
any Registrable Securities sold by a person in a transaction in which his
rights under this Section 1 are not assigned.

(k) The term "SEC" shall mean the Securities and Exchange Commission.

1.2 Request for Registration.
------------------------

-2-

<PAGE>

offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or an SEC Rule
145 transaction), a written request from the Holders of fifty percent (50%)
of the Registrab!e Securities then outstanding that the Company file a
registration statement under the Act covering the registration of at least
twenty-five percent (25%) of the Registrable Securities then outstanding,
and provided that such shares have a reasonably anticipated aggregate
offering price of at least $2,000,000, the Company shall:

(i) within ten (10) days of the receipt thereof, give written notice,
in accordance with Section 3.5 hereof, of such request to all Holders; and

(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise
the Company as a part of their request made pursuant to Subsection 1.2(a)
and the Company shall include such information in the written notice
referred to in Subsection 1.2(a). The underwriter will be selected by the
Company and shall be reasonably acceptable to a majority in interest of the
Initiating Holders. In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise
mutually agreed by a majority in interest of the Initiating Holders and
such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with
the Company as provided in Subsection 1.4(e)) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected
for such underwriting. Notwithstanding any other provision of this Section
1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Holders thereof,
including the Initiating Holders, in proportion (as nearly as practicable)
to the amount of Registrable Securities of the Company owned by each
Holder; provided, however, that the number of shares of Registrable
Securities to be included in such

-3-

<PAGE>

underwriting shall not be reduced unless all other securities are first
entirely excluded from the underwriting.

(c) Notwithstanding the foregoing, if the Company shall furnish to the
initiating Holders a certificate signed by the Chief Executive Officer of
the Company stating that, in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company
and its stockholders for such registration statement to be filed and it is
therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer taking action with respect to such
filing for a period of not more than ninety (90) days after receipt of the
request of the Initiating Holders; provided, however, that the Company may
not utilize this right more than once in any twelve (12) month period.

(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:

(ii) If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below; or

(iii) If the Company delivers to the Initiating Holders an opinion, in
form and substance acceptable to such Initiating Holders, of counsel
satisfactory to the Initiating Holders that the Registrable Securities
requested to be registered by the Initiating Holders may be sold or
transferred pursuant to Rule 144(k) of the Act.

-4-

<PAGE>

Company in accordance with Section 3.5, the Company shall, subject to the
provisions of Section 1.8, cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be
registered.

1.4 Obligations of the Company. Whenever required under this Section
--------------------------
1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:

(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and keep such registration
statement effective for a period of up to one hundred twenty (120) days or
until the distribution contemplated in the Registration Statement has been
completed, whichever first occurs; provided, however, that such one hundred
twenty (120) day period shall be extended for a period of time equal to the
period the Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company, and provided further that in the case of any
registration of Registrable Securities on Form S-3 that are intended to be
offered on a continuous or delayed basis, such one hundred twenty (120) day
period shall be extended until all such Registrable Securities are sold, if
applicable rules under the Act governing the obligation to file a post-
effective amendment permit, in lieu of filing a post-effective amendment
which (I) includes any prospectus required by Section 10(a)(3) of the Act or
(II) reflects facts or events representing a material or fundamental change
in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (I)
and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the 1934 Act in the registration statement.

-5-

<PAGE>

shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process
in any such states or jurisdictions, unless the Company is already subject
to service in such jurisdiction and except as may be required by the Act.

(g) Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange on which similar securities issued
by the Company are then listed.

1.5 Furnish Information.
-------------------

-6-

<PAGE>

1.6 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company and the reasonable fees and disbursements of one counsel for the
selling Holders shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of the second long-
form registration requested pursuant to Section 1.2, or of any registration
proceeding begun pursuant to Section 1.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating
Holders shall bear such expenses), unless the Holders of a majority of the
Registrable Securities agree to forfeit their right to one demand
registration pursuant to Section 1.2 or unless such withdrawal is based
upon material adverse information relating to the Company that is different
from information known or available (upon request from the Company or
otherwise) to the Holders requesting registration at the time of their
request.

1.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers' and accounting fees
relating or apportionable thereto and, for one such registration only, the
reasonable fees and disbursements of one counsel for the selling Holders,
but excluding underwriting discounts and commissions relating to
Registrable Securities.

-7-

<PAGE>

to the total amount of Registrable Securities entitled to be included
therein owned by each Holder or in such other proportions as shall mutually
be agreed to by the Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
so reduced unless the securities of other selling stockholders are first
entirely excluded from the underwriting. For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder that is
a holder of Registrable Securities and that is a partnership or
corporation, the partners, retired partners and stockholders of such
holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons
shall be deemed to be a single "selling stockholder", and any pro rata
--- ----
reduction with respect to such "selling stockholder" shall be based upon
the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder", as defined
in this sentence.

1.9 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 1.

1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:

-8-

<PAGE>

Subsection 1.10(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company, which consent shall not be
unreasonably withheld, nor shall the Company be liable in any such case for
any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by any such Holder, underwriter or
controlling person.

-9-

<PAGE>

the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability
to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.10, but the
omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.

-10-

<PAGE>

(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and

(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company
that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at
any time after it has become subject to such reporting requirements), (ii)
a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.

1.12 Form S-3 Registration. In case the Company shall receive at any
---------------------
time after the completion of the first registration statement for a public
offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or an SEC Rule
145 transaction), a written request from the Holders of at least twenty
percent (20%) of the Registrable Securities then outstanding that the
Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities
owned by such Holder or Holders, the Company will:

(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and

-11-

<PAGE>

Registrable Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within twenty (20) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 1.12: (1) if Form S-3 is not available for such offering by the
Holders; (2) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any)
at an aggregate price to the public
(net of any underwriting discounts or commissions) of less than $500,000;
(3) if the Company shall furnish to the Holders a certificate signed by the
President of the Company stating that, in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such Form S-3 Registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more than
ninety (90) days after receipt of the request of the Holder or Holders
under this Section 1.12; provided, however, that the Company shall not
utilize this right more than once in any twelve (12) month period; (4) if
the Company has already effected two (2) registrations on Form S-3, or any
equivalent successor form, for the Holders pursuant to this Section 1.12;
or (5) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or
compliance.

-12-

<PAGE>

1.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may
be assigned (but only with all related obligations) by a Holder to any
partner or shareholder of such Holder or, in the case of a Holder that is
an investment company registered under the Investment Company Act of 1940,
to another such investment company (a "Related Mutual Fund") that has the
same investment advisor as the transferring investment company, without
restriction or requirement as to number of shares, or to a transferee or
assignee of such securities who, as a result of such assignment or
transfer, acquires at least twenty percent (20%) of such transferring
Holder's shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations,
recapitalizations and any similar events), provided: (a) the Company is,
within a reasonable time after such transfer, furnished with written notice
of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; (b) such
transferee or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Agreement, including without limitation the
provisions of Section 1.14 below; and (c) such assignment shall be
effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted
under the Act.

1.14 [Reserved]

1.15 Termination of Registration Rights. No Holder shall be entitled to
----------------------------------
exercise any right provided for in this Section 1 after three (3) years
following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection
with a firm commitment underwritten offering of its securities to the
general public resulting in gross proceeds to the Company of at least
$10,000,000 and at a price per share to the public of at least $1,200.00
(as adjusted for stock splits, combinations and similar transactions) (a
"Qualified Public Offering").

2. Covenants of the Company.
------------------------

2.1 Financial Statements and Other Information. Except as otherwise
------------------------------------------
set forth below in this Section 2.1, until the Company is subject to the
reporting requirements of the 1934 Act, the Company will deliver to each of
the Investors, for so long as such Investor holds any shares of the
Company's Preferred Stock (or Common Stock issued upon conversion thereof):

-13-

<PAGE>

such quarter, and consolidated balance sheets of the Company and its
subsidiaries as of the end of such quarterly period, setting forth in each
case comparisons to the annual budget and to the corresponding period in
the preceding fiscal year, and all such statements will be prepared in
accordance with generally accepted accounting principles, consistently
applied (except for the absence of notes and subject to normal year-end
adjustments);

(b) as promptly as possible (but in any event within ninety (90) days)
after the end of each fiscal year, consolidated statements of operations
and a consolidated statement of cash flows of the Company and its
subsidiaries for such fiscal year and consolidated balance sheets and
statements of stockholders' equity of the Company and its subsidiaries as
of the end of such fiscal year, setting forth comparisons to the annual
budget and to the preceding fiscal year, all prepared in accordance with
generally accepted accounting principles, consistently applied, and
accompanied by an unqualified opinion (except for qualifications regarding
specified contingent liabilities) of an independent accounting firm
selected by the Company's Board of Directors;

(c) prior to the end of each fiscal year, an annual budget {approved by
the Board of Directors) prepared on a monthly, consolidated basis for the
Company and its subsidiaries for the succeeding fiscal year (displaying
detailed anticipated statements of operations and cash flows and balance
sheets), and promptly upon preparation thereof any other significant
budgets which the Company prepares and any revisions of such annual or
other budgets;

(d) promptly (and in any event within thirty (30) days) after the discovery
or receipt of notice of any event or circumstance affecting the Company or
its subsidiaries that is determined in good faith by the Company to be
material to the Company and its subsidiaries, taken as a whole, including
but not limited to, the filing of any material litigation against the
Company or its subsidiaries, acquisitions, mergers, substantial sales of
assets, significant regulatory or legal developments, the commencement of
voluntary or involuntary bankruptcy proceedings, natural or other
disasters, significant changes in management or directors, changes in
auditors, and execution or termination of, or defaults under, material
contracts, a letter from the Chief Executive Officer or Chief Financial
Officer of the Company specifying the nature and period of existence
thereof and, in the case of material litigation, what actions the Company
and its subsidiaries have taken and propose to take with respect thereto;

-14-

<PAGE>

the SEC or with any securities exchange on which any of its securities are
then listed, and copies of all press releases and other statements made
available generally by the Company to the public;

(f) a notice specifying the terms of all sales of the Company's
securities, promptly following the consummation thereof;

(h) notice of the effectiveness under the Act of the registration
covering the Company's initial public offering, such notice to be provided
by telecopier immediately following the SEC's notification to the Company
of such effectiveness.

2.2 Inspection of Property. Until the Company is subject to the
----------------------
reporting requirements of the 1934 Act, the Company will permit the
Investors, or any representatives designated by either of the Investors,
upon reasonable notice and during normal business hours and such other
times as either of the Investors may reasonably request, to (i) visit and
inspect any of the properties of the Company and its subsidiaries,
(ii) examine the corporate and financial records of the Company and its
subsidiaries and make copies thereof or extracts therefrom, (iii) discuss
the affairs, finances and accounts of the Company and its subsidiaries with
the directors, senior management and independent accountants of the Company
and its subsidiaries, and (iv) consult with and advise the management of
the Company and its subsidiaries as to their affairs, finances and
accounts.

2.3 Right of First Offer. Subject to the terms and conditions specified
--------------------
in this Section 2.3, the Company hereby

-15-

<PAGE>
grants to each Holder a right of first offer with respect to future sales by the
Company of its Shares (as hereinafter defined). A Holder shall be entitled to
apportion the right of first offer hereby granted it among itself and its
partners and affiliates and, in the case of a Holder that is a registered
investment company, among itself and its Related Mutual Funds, in such
proportions as it deems appropriate.

Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Holder in accordance with the following provisions:

(a) The Company shall deliver a notice by certified mail
("Notice") to the Holders stating (i) its bona fide intention to offer such
Shares, (ii) the number of such Shares to be offered, and (iii) the price and
terms, if any, upon which it proposes to offer such Shares.

(b) By written notification received by the Company, within
twenty (20) calendar days after giving of the Notice, the Holder may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up to
that portion of such Shares which equals the proportion that the number of
shares of Common Stock issued and held, or issuable upon conversion of the
Preferred Stock then held, by such Holder bears to the total number of shares of
Common Stock of the Company then outstanding (assuming full conversion of all
convertible securities) ("Pro Rata Share"). To the extent a Holder does not
elect to purchase or obtain the full amount of its Pro Rata share, the
unsubscribed portion of such Holder's Pro Rata Share may be purchased or
obtained by any other Holder or Holders, on a pro rata basis, at the price and
--- ----
on the terms specified in the Notice, provided that such purchase shall be
consummated within thirty-five (35) days after giving of the Notice.

(c) If all Shares referred to in the Notice which Holders are
entitled to obtain pursuant to Subsection 2.3(b) are not elected to be obtained
as provided in Subsection 2.3(b) hereof, the Company may, during the thirty (30)
day period following the expiration of the period provided in Subsection 2.3(b)
hereof, offer the remaining unsubscribed portion of such Shares to any person or
persons at a price not less than, and upon terms no more favorable to the
offeree than those specified in the Notice. If the Company does not enter into
an agreement for the sale of the Shares within such Period, or if such agreement
is not consummated within thirty (30) days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such Shares shall not be
offered unless first reoffered to the Holders in accordance herewith.

(d) The right of first offer in this Section 2.3 shall not be
applicable to

-16-

<PAGE>
(i) shares of Common Stock issuable or issued to employees,
advisors, consultants or outside directors of the Company directly or pursuant
to a stock option plan or restricted stock plan approved by the Board of
Directors of the Company so long as the cumulative total number of shares of
Common Stock so issuable and issued (and not repurchased at cost by the Company
in connection with termination of employment does not exceed 11, 112 shares of
Common Stock;

(ii) Common Stock issued in connection with bona fide research,
licensing or corporate partnering relationships, in connection with equipment
lease financings, or upon exercise of warrants issued to institutional lenders
in connection with non-convertible debt financings, in each case approved by the
Board of Directors of the Company, provided that such issuances are for other
than primarily equity financing purposes, and provided, further, that the
cumulative, aggregate number of shares issued in connection with such equipment
lease financings and debt financings combined does not exceed five percent (5%)
of the number of shares of Common Stock then outstanding (assuming full
conversion of the then outstanding Preferred Stock and exercise or conversion
into Common Stock of all other securities then outstanding that are exercisable
for or convertible into Common Stock);

(iii) Common Stock issued or issuable upon conversion of the
Preferred Stock; or

(iv) Common Stock issued or issuable in connection with a merger
or consolidation as a result of which the holders of the Company's outstanding
securities immediately prior to the consummation of such transaction hold
securities in excess of fifty percent (50%) of the voting power of the surviving
or resulting entity.

(e) The right of first offer set forth in this Section 2.3 may
not be assigned or transferred, except that (i) such right is assignable by each
Holder to any wholly-owned subsidiary or parent of, or to any corporation or
entity that is within the meaning of the Act, controlling, controlled by or
under common control with, any such Holder and (ii) such right may be assigned
by a Holder that is a registered investment company to a Related Mutual Fund.

2.4 Positive Covenants. So long as any shares of the Preferred Stock
------------------
are outstanding, the Company agrees as follows;

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<PAGE>
will promptly thereafter notify the Holders and will request the firm of
independent public accountants whose services are terminated to deliver to the
Holders a letter from such firm setting forth the reasons for the termination of
their services. In the event of such termination, the Company will promptly
thereafter engage another firm of independent public accountants of recognized
national standing. In its notice to the Holders the Company shall state
whether the change of accountants was recommended or approved by the Board of
Directors of the Company or any committee thereof.

(b) The Company will cause senior management personnel and key
employees now or hereafter employed by it or any subsidiary to enter into a
proprietary information and inventions agreement.

(d) to the extent permitted by law, the Company will indemnify
and hold harmless the Investors against any losses, claims, damages, liabilities
(joint or several), obligations, penalties, actions, suits, costs, expenses and
disbursements of whatsoever kind and nature (including tort liabilities), and
all legal fees and expenses incurred by any Investor in defense thereof (singly,
a "Liability or Expense", collectively, "Liabilities and Expenses"), imposed on,
incurred by or asserted against any Investor, in any way relating to or arising
out of the Company's termination of Terrill Burnett's ("Burnett") employment by
Physician's Online, Inc. or the efforts of Physician's Online, Inc. to
repurchase from Burnett shares of the Common Stock of Physician's Online, Inc.,
including but not limited to Liabilities and Expenses that may result from any
action brought by the Company against Burnett. The Company will, to the extent
practicable, pay directly any and all Liabilities and Expenses indemnified
hereunder and, to the extent any such items are paid by any Investor, will
reimburse and indemnify such Investor therefor in accordance with the provisions
of this Subsection 2.4(d). In the event any Investor receives notice of any
Liability or Expense, it will promptly give the Company notice thereof, in
accordance with the provisions of Section 3.5 hereof; provided, however, that
the failure to provide any such notice shall not relieve the Company of its
obligations hereunder. The Company's obligation to indemnify the Investors will
not apply to (i) amounts paid in settlement of any Liability or Expense if such
settlement is effected without the consent of the Company, which consent will
not be unreasonably withheld, or (ii) losses incurred by an Investor solely by
reason of such Investor's status as a stockholder of the Company, including
diminution of the value of the Investor's investment in the Company.

(i) In the event that any Investor pays a Liability or Expense, such
Investor may make a demand for payment

-18-

<PAGE>
and reimbursement ("Demand") upon the Company by giving the Company notice in
accordance with the provisions of Section 3.5 hereof that such Investor has
incurred and paid a Liability or Expense together with such documentary evidence
as will support the making of such payment and demanding that the Company
reimburse and indemnify such Investor therefor. Within 10 (10) business days of
receipt of a Demand, the Company will reimburse the Investor for the Liabilities
and Expenses paid by such Investor as set forth in the Demand.

(ii) Promptly after receipt by any Investor of notice of the
commencement of any action, suit or proceeding against such Investor relating in
any way to the subject matter of this indemnity, the Investor will deliver to
the Company notice as provided in Section 3.5 of the commencement thereof;
however, the failure of any Investor to give notice to the Company of any suit,
action or proceeding will not affect in any way the Company's obligations to
indemnify the Investors under this Subsection 2.4(d). In case any such action
is brought against any Investor, the Company will be entitled to participate in,
and, to the extent that it may wish, assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to such Investor,
and after notice from the Company to such Investor of its election so to assume
the defense thereof, the Company will not be liable to such Investor under this
Section for any legal or other expenses subsequently incurred by such Investor
in connection with the defense thereof other than reasonable costs of
investigation. The Investor shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall not be at the expense of the Company if the
Company has assumed the defense of the action with counsel reasonably
satisfactory to the Investor; provided that the fees and expenses of such
counsel shall be at the expense of the Company if (i) the employment of such
counsel has been specifically authorized in writing by the Company or (ii) the
named parties to any such action (including any impleaded parties) include both
such Investor and the Company and the Investor has been advised by counsel that
there may be one or more defenses available to it and not available to the
Company (in which case the Company shall not have the right to assume the
defense of such action on behalf of such Investor, it being understood, however,
that the Company shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for all
such Investors). No settlement of any action against an Investor shall be made
without the consent of the Company, which shall not be unreasonably withheld in
light of all factors of importance to the Company.

(e) The Company shall, promptly following the date of this
Agreement, obtain, the thereafter maintain in full

-19-

<PAGE>
force and effect, fire, casualty, workmen's compensation and liability insurance
policies, with extended coverage, in such amounts and with such coverage as are
carried by companies in a position similar to that of the Company.

(f) [reserved]

2.5 Negative Covenants. So long as any shares of Preferred Stock are
------------------
outstanding, the Company shall not without first obtaining the written consent
of the holders of at least two-thirds of the then outstanding shares of each
series of Preferred Stock:

(a) Sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the Company is disposed of;

(b) increase or decrease (other than by conversion) the total
number of authorized shares of Preferred Stock or amend the terms of the
Preferred stock so as to affect the Preferred Stock adversely;

(c) authorize or issue, or obligate itself to issue, any other
equity security, including any other security or debt instrument convertible
into or exercisable for any such equity security, having a preference over, or
being on a parity with, the Series A Preferred Stock or Series B Preferred Stock
with respect to dividends, redemption or liquidation;

(d) engage in any spin-out, distribution or sale of any business
unit of the Company;

(e) enter into any transactions with affiliates of the Company
except on arms-length terms;

(f) increase the authorized number of directors of the Company
to more than seven (7) members;

(g) redeem or repurchase any outstanding equity securities of
the Company except for: a) repurchases of unvested or restricted shares of
Common Stock at cost from employees, consultants, or members of the Board of
Directors pursuant to repurchase options of the Company (i) currently
outstanding or (ii) hereafter entered into pursuant to a stock option plan or
(ii) hereafter entered into pursuant to a stock option plan or restricted stock
plan approved by the Company's Board of Directors;

(h) redeem, purchase or otherwise acquire for value any share or
shares of Preferred Stock except pursuant to an offer made upon the same terms
pro rata to all holders of outstanding shares of such Preferred Stock;
- --- ----

-20-

<PAGE>
(i) liquidate, dissolve or otherwise wind up the affairs of the
Company; or

(j) adopt any stock option, restricted stock or like plan
providing for the grant of equity incentives to employees, directors or
consultants.

2.6 Termination of Certain Covenants. The covenants set forth in
--------------------------------
Section 2.4 and 2.5 shall terminate and be of no further force or effect upon
the consummation of a Qualified Public Offering.

3. Miscellaneous.
-------------

3.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

3.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of New York, disregarding New York principles of
conflicts of laws which would otherwise provide for the application of the
substantive laws of another jurisdiction.

3.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

3.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or four (4)
days after deposit with the United States Post Office or air courier in the case
of non-U.S. parties, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties with a copy for
the Company to Bachner, Tally, Polevoy & Misher, 380 Madison Avenue, New York,
New York 10017-2590, Attention: Jill M. Cohen.

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<PAGE>
3.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.

3.7 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or prospectively), only with the written consent of the Company and
the holders of two-thirds of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section 3.7 shall be
binding upon each holder of any Registrable Securities then outstanding, each
future holder of all such Registrable Securities, and the Company.

3.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.

3.9 Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to the subjects
hereof.

-22-

<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

MED-E-MAIL CORPORATION

By: /s/ Steven Hochberg
------------------------------
Steven Hochberg, President

Address: 560 White Plains Road
2nd Floor
Tarrytown, New York 10591

<PAGE>

INVESTORS:

FINANCIAL STRATEGIC PORTFOLIOS, INC. -
HEALTH SCIENCES PORTFOLIO

By: /s/ Glen A. Payne
---------------------------------

Name: Glen A. Payne
-------------------------------

Title: Secretary
------------------------------

Address: c/o Invesco Trust Company
7800 East Union Avenue
Suite 800
Denver, Colorado 80237
Attn: Barry Kurokawa

THE GLOBAL HEALTH SCIENCES FUND

By: /s/ Glen A. Payne
---------------------------------

Name: Glen A. Payne
-------------------------------

Title: Secretary
------------------------------

Address: c/o Invesco Trust Company
7800 East Union Avenue
Suite 800
Denver, Colorado 80237
Attn: Barry Kurokawa

EXHIBIT 10.6

MED-E-SYSTEMS CORPORATION

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
________________________

January 27, 1995

<PAGE>

TABLE OF CONTENTS
-----------------
Page
----
1. Registration Rights 1

1.1 Definitions . . . . . . . . . . . . . . . . . . . 1
1.2 Request for Registration . . . . . . . . . . . . . 2
1.3 Company Registration . . . . . . . . . . . . . . . 4
1.4 Obligations of the Company . . . . . . . . . . . . 5
1.5 Furnish Information . . . . . . . . . . . . . . . 6
1.6 Expenses of Demand Registration . . . . . . . . . 7
1.7 Expenses of Company Registration . . . . . . . . . 7
1.8 Underwriting Requirements . . . . . . . . . . . . 7
1.9 Delay of Registration . . . . . . . . . . . . . . 8
1.10 Indemnification . . . . . . . . . . . . . . . . . 8
1.11 Reports Under Securities Exchange Act of 1934 . . . 10
1.12 Form S-3 Registration . . . . . . . . . . . . . . 11
1.13 Assignment of Registration Rights . . . . . . . . 13
1.14 [Reserved] . . . . . . . . . . . . . . . . . . . . 13
1.15 Termination of Registration Rights . . . . . . . . 13

2. Covenants of the Company

2.1 Financial Statements and Other Information . . . . 13
2.2 Inspection of Property . . . . . . . . . . . . . . 15
2.3 Right of First Offer . . . . . . . . . . . . . . . 15
2.4 Positive Covenants . . . . . . . . . . . . . . . . 17
2.5 Negative Covenants . . . . . . . . . . . . . . . . 20
2.6 Termination of Certain Covenants . . . . . . . . . 21

3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 21

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<PAGE>

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
------------------------------------------------

THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Agreement") is made as of the 27th day of January, 1995, by and between
Med-E-Systems Corporation, a Delaware corporation (the "Company"), Invesco
Strategic Portfolios, Inc. - Health Sciences Portfolio ("ISP") and The
Global Health Sciences Fund ("GHS") (ISP and Global Fund are referred to
collectively herein as the "Investors" and sometimes individually as an
"Investor").

RECITALS
--------

WHEREAS, the Company and the Investors are parties to that
certain Series A Preferred Stock Purchase Agreement dated as of August 31,
1993 (the "Series A Stock Purchase Agreement"), pursuant to which the
Investors and the Company entered into an Investors' Rights Agreement dated
as of August 31, 1993 (the "1993 Agreement"), governing the rights of the
Investors to cause the Company to register shares of Common Stock issuable
to the Investors upon conversion of shares of Series A Preferred Stock
purchased by the Investors pursuant to the Series A Stock Purchase
Agreement, and certain other matters as set forth therein;

WHEREAS, the Company and-ISP are parties to that certain Series B
Preferred Stock Purchase Agreement dated as of March 16, 1994 (the "Series
B Stock Purchase Agreement"), pursuant to which the Investors and the
Company entered into Amended and Restated Investors' Rights Agreement dated
as of March 16, 1994 (the "1994 Agreement"), to amend and restate the 1993
Agreement and to govern the rights of the Investors to cause the Company to
register shares of Common Stock issuable to the Investors and certain other
matters as set forth therein;

WHEREAS, the Company and GHS are parties to that certain Series C
Preferred Stock Purchase Agreement of even date herewith (the "Series C
Stock Purchase Agreement");

WHEREAS, the Company has effected a 1:100 split of its
outstanding Common Stock and Preferred Stock; and

WHEREAS, to induce GHS to invest funds in the Company pursuant to
the Series C Stock Purchase Agreement, the Investors and the Company hereby
agree that this Agreement shall govern the rights of the Investors to cause
the Company to register shares of Common Stock issuable to the Investors
and certain other matters as set forth herein;

NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereto amend and restate the 1994
Agreement in its entirety and agree as follows:

<PAGE>

1. Registration Rights. The Company covenants and agrees as
-------------------
follows:

1.1 Definitions. For purposes of this Section 1:
-----------

(a) The term "Act" means the Securities Act of 1933, as
amended.

(b) The term "Common Stock" means shares of the common stock
of the Company, par value $.0001 per share.

(c) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the
Company with the SEC.

(d) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.13 hereof.

(e) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.

(f) The term "Series A Preferred Stock" means shares of the
Company's Series A Convertible Preferred Stock, par value $.0001 per share.

(g) The term "Series B Preferred Stock" means shares of the
Company's Series B Convertible Preferred Stock, par value $.0001 per share.

(h) The term "Series C Preferred Stock" means shares of the
Company's Series C Convertible Preferred Stock, par value $.0001 per share.

(i) The term "Preferred Stock" means the Company's Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock.

(j) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.

(k) The term "Registrable Securities" means (i) the Common
Stock issuable or issued upon conversion of the Preferred Stock, (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of the shares referenced in (i) and (ii) above, excluding in
all cases, however, any Registrable Securities sold

-2-

<PAGE>

by a person in a transaction in which his rights under this Section 1 are
not assigned.

(1) The term "SEC" shall mean the Securities and Exchange
Commission.

1.2 Request for Registration.
------------------------

(a) If the Company shall receive at any time after the
earlier of (i) four (4) years after the date of this Amended and Restated
Investors' Rights Agreement or (ii) the effective date of the first
registration statement for a public offering of securities of the Company
(other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or an SEC Rule 145 transaction), a written request
from the Holders of fifty percent (50%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act
covering the registration of at least twenty-five percent (25%) of the
Registrable Securities then outstanding, and provided that such shares have
a reasonably anticipated aggregate offering price of at least $2,000,000,
the Company shall:

(i) within ten (10) days of the receipt thereof, give
written notice, in accordance with Section 3.5 hereof, of such request to
all Holders; and

(ii) file as soon as practicable, and in any event within
sixty (60) days of the receipt of such request, and to use its best efforts
to cause to become effective as soon as practicable, the registration under
the Act of all Registrable Securities which the Holders request to be
registered, subject to the limitations of Subsection 1.2(b).

-3-

<PAGE>

such underwriting. Notwithstanding any other provision of this Section 1.2,
if the underwriter advises the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten,
then the Initiating Holders shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto, and the
number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount
of Registrable Securities of the Company owned by each Holder; provided,
however, that the number of shares of Registrable Securities to be included
in such underwriting shall not be reduced unless all other securities are
first entirely excluded from the underwriting.

(c) Notwithstanding the foregoing, if the Company shall
furnish to the Initiating Holders a certificate signed by the Chief
Executive Officer of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental
to the Company and its stockholders for such registration statement to be
filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking
action with respect to such filing for a period of not more than ninety
(90) days after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than once in any
twelve (12) month period.

(d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 1.2:

(i) After the Company has effected two (2) registrations
pursuant to this Section 1.2, excluding any registrations effected on Form
S-3, and such registrations have been declared or ordered effective;

(ii) If the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below; or

(iii) If the Company delivers to the Initiating Holders an
opinion, in form and substance acceptable to such Initiating Holders, of
counsel satisfactory to the Initiating Holders that the Registrable
Securities requested to be registered by the Initiating Holders may be sold
or transferred pursuant to Rule 144(k) of the Act.

1.3 Company Registration. If (but without any obligation to do
--------------------
so) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the
Holders) any of its stock or other securities under the Act in connection
with the public offering

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<PAGE>

of such securities (other than a registration relating solely to the sale
of securities to participants in a Company stock plan, a registration
relating solely to a Rule 145 transaction, a registration on any form which
does not include substantially the same information as would be required to
be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock
being registered is Common Stock issuable upon conversion of debt
securities which are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within twenty (20) days after
giving of such notice by the Company in accordance with Section 3.5, the
Company shall, subject to the provisions of Section 1.8, cause to be
registered under the Act all of the Registrable Securities that each such
Holder has requested to be registered.

1.4 Obligations of the Company. Whenever required under this
--------------------------
Section 1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:

(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective, and keep such
registration statement effective for a period of up to one hundred twenty
(120) days or until the distribution contemplated in the Registration
Statement has been completed, whichever first occurs; provided, however,
that such one hundred twenty (120) day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter
of Common Stock (or other securities) of the Company, and provided further
that in the case of any registration of Registrable Securities on Form S-3
that are intended to be offered on a continuous or delayed basis, such one
hundred twenty (120) day period shall be extended until all such
Registrable Securities are sold, if applicable rules under the Act
governing the obligation to file a post-effective amendment permit, in lieu
of filing a post-effective amendment which (I) includes any prospectus
required by Section 10(a)(3) of the Act or (II) reflects facts or events
representing a material or fundamental change in the information set forth
in the registration statement, the incorporation by reference of
information required to be included in (I) and (II) above to be contained
in periodic reports filed pursuant to Section 13 or 15(d) of the 1934 Act
in the registration statement.

(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as, in the opinion of counsel
to the Company, may be necessary to comply with the provisions of the Act
with respect to the

-5-

<PAGE>

disposition of all securities covered by such registration statement.

(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities
owned by them.

(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do business
or to file a general consent to service of process in any such states or
jurisdictions, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Act.

(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.

(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Act of the happening of any event as
a result of which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing.

(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which
similar securities issued by the Company are then listed.

(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for
all such Registrable Securities, in each case not later than the effective
date of such registration.

1.5 Furnish Information.
-------------------

(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 1 with respect to
the Registrable Securities of any selling Holder that such Holder shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such
securities as

-6-

<PAGE>

shall be required to effect the registration of such Holder's Registrable
Securities.

(b) The Company shall have no obligation with respect to
any registration requested pursuant to Section 1.2 or Section 1.12 if, due
to the operation of Subsection 1.5(a), the number of shares or the
anticipated aggregate offering price of the Registrable Securities to be
included in the registration does not equal or exceed the number of shares
or the anticipated aggregate offering price required to originally trigger
the Company's obligation to initiate such registration as specified in
Subsection 1.2(a) or Subsection 1.12(b)(2), whichever is applicable.

1.7 Expenses of Company Registration. The Company shall bear
--------------------------------
and pay all expenses incurred in connection with any registration, filing
or qualification of Registrable Securities with respect to the
registrations pursuant to Section 1.3 for each Holder, including (without
limitation) all registration, filing, and qualification fees, printers' and
accounting fees relating or apportionable thereto and, for one such
registration only, the reasonable fees and disbursements of one counsel for
the selling Holders, but excluding underwriting discounts and commissions
relating to Registrable Securities.

1.8 Underwriting Requirements. In connection with
-------------------------
any offering involving an underwriting of shares of the Company's capital
stock, the Company shall not be required under Section 1.3 to include any
of a Holder's securities in such underwriting unless such Holder accepts
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to

-7-

<PAGE>

select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the
success of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by stockholders to be included
in such offering exceeds the amount of securities sold other than by the
Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be
required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters determine in their
sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the Holders
--- ----
according to the total amount of Registrable Securities entitled to be
included therein owned by each Holder or in such other proportions as shall
mutually be agreed to by the Holders); provided, however, that the number
of shares of Registrable Securities to be included in such underwriting
shall not be so reduced unless the securities of other selling stockholders
are first entirely excluded from the underwriting. For purposes of the
preceding parenthetical concerning apportionment, for any selling
stockholder that is a holder of Registrable Securities and that is a
partnership or corporation, the partners, retired partners and stockholders
of such holder, or the estates and family members of any such partners and
retired partners and any trusts for the benefit of any of the foregoing
persons shall be deemed to be a single "selling stockholder," and any pro
---
rata reduction with respect to such "selling stockholder" shall be based
- -----
upon the aggregate amount of shares carrying registration rights owned by
all entities and individuals included in such "selling stockholder," as
defined in this sentence.

1.9 Delay of Registration. No Holder shall have any right to
---------------------
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 1.

1.10 Indemnification. In the event any Registrable Securities
---------------
are included in a registration statement under this Section 1:

-8-

<PAGE>

statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, or
any rule or regulation promulgated under the Act, or the 1934 Act, and the
Company will pay to each such Holder, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this Subsection 1.10(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company, which consent
shall not be unreasonably withheld, nor shall the Company be liable in any
such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.

(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Act, any
underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other
Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under
the Act, or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with
such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Subsection 1.10(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Subsection 1.10(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any selling Holder's liability under this
Subsection 1.10(b) exceed the proceeds received by such Holder from the
offering (net of any underwriting discounts and commissions).

-9-

<PAGE>

(c) Promptly after receipt by an indemnified party under
this Section 1.10 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this
Section 1.10, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party (together with all other
indemnified parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees
and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under
this Section 1.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 1.10.

(d) If the indemnification provided for in this Section
1.10 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand and
of the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.

(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten
public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.

-10-

<PAGE>

(f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.

1.11 Reports Under Securities Exchange Act of 1934. With a view
---------------------------------------------
to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public
without registration or pursuant to a registration on Form S-3, the Company
agrees to:

(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety
(90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general
public;

(b) take such action, including the voluntary registration
of its Common Stock under Section 12 of the 1934 Act, as is necessary to
enable the Holders to utilize Form S-3 for the sale of their Registrable
Securities, such action to be taken as soon as practicable after the end of
the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is
declared effective;

(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and

(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC
Rule 144 (at any time after ninety (90) days after the effective date of
the first registration statement filed by the Company), the Act and the
1934 Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company,
and (iii) such other information as may be reasonably requested in availing
any Holder of any rule or regulation of the SEC which permits the selling
of any such securities without registration or pursuant to such form.

1.12 Form S-3 Registration. In case the Company shall receive at
---------------------
any time after the completion of the first registration statement for a
public offering of securities of the Company (other than a registration
statement relating either to the sale of securities to employees of the
Company pursuant to a stock option, stock purchase or similar plan or an
SEC Rule 145 transaction), a written request from the Holders of at least
twenty percent (20%) of the Registrable Securities then outstanding that
the Company effect a registration on Form S-3

-11-

<PAGE>

and any related qualification or compliance with respect to all or a part
of the Registrable Securities owned by such Holder or Holders, the Company
will:

(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and

(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of
such Holder's or Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance,
pursuant to this Section 1.12: (1) if Form S-3 is not available for such
offering by the Holders; (2) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriting discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President
of the Company stating that, in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company
and its shareholders for such Form S-3 Registration to be effected at such
time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than ninety
(90) days after receipt of the request of the Holder or Holders under this
Section 1.12; provided, however, that the Company shall not utilize this
right more than once in any twelve (12) month period; (4) if the Company
has already effected two (2) registrations on Form S-3, or any equivalent
successor form, for the Holders pursuant to this Section 1.12; or (5) in
any particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.

(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after
receipt of the request or requests of the Holders. All expenses incurred in
connection with a registration requested pursuant to this Section 1.12,
including, without limitation, all registration, filing, qualification,
printers' and accounting fees and the reasonable fees and disbursements of
one (1) counsel for the selling Holder or Holders and counsel for the
Company, but excluding any underwriting discounts or commissions associated
with Registrable Securities, shall be

-12-

<PAGE>

borne by the Company. Registrations effected pursuant to this Section 1.12
shall not be counted as registrations effected pursuant to Sections 1.2 or
1.3.

(d) The Company shall not be obligated to effect any
registration pursuant to this Section 1.12 if the Company delivers to the
Holders requesting registration under this Section 1.12 an opinion, in form
and substance acceptable to such Holders, of counsel satisfactory to such
Holders, that the Registrable Securities so requested to be registered may
be sold or transferred pursuant to Rule 144(k) under the Act.

1.14 [Reserved]

1.15 Termination of Registration Rights. No Holder shall be
----------------------------------
entitled to exercise any right provided for in this Section 1 after three
(3) years following the consummation of the sale of securities pursuant to
a registration statement filed by the Company under the Act in connection
with a firm commitment underwritten offering of its securities to the
general public resulting in gross proceeds to the Company of at least
$10,000,000 and at a price per share to the public of at least $12.00 (as
adjusted for stock splits, combinations and similar transactions) (a
"Qualified Public Offering").

-13-

<PAGE>

2. Covenants of the Company.
------------------------

2.1 Financial Statements and Other Information. Except as
------------------------------------------
otherwise set forth below in this Section 2.1, until the Company is subject
to the reporting requirements of the 1934 Act, the Company will deliver to
each of the Investors, for so long as such Investor holds any shares of the
Company's Preferred Stock (or Common Stock issued upon conversion thereof):

(a) as soon as available, but in any event within forty-
five (45) days after the end of each quarterly accounting period in each
fiscal year, unaudited consolidated statements of operations and
consolidated cash flows of the Company and its subsidiaries for such
quarterly period and for the period from the beginning of the fiscal year
to the end of such quarter, and consolidated balance sheets of the Company
and its subsidiaries as of the end of such quarterly period, setting forth
in each case comparisons to the annual budget and to the corresponding
period in the preceding fiscal year, and all such statements will be
prepared in accordance with generally accepted accounting principles,
consistently applied (except for the absence of notes and subject to normal
year-end adjustments);

(b) as promptly as possible (but in any event within ninety
(90) days) after the end of each fiscal year, consolidated statements of
operations and a consolidated statement of cash flows of the Company and
its subsidiaries for such fiscal year and consolidated balance sheets and
statements of stockholders' equity of the Company and its subsidiaries as
of the end of such fiscal year, setting forth comparisons to the annual
budget and to the preceding fiscal year, all prepared in accordance with
generally accepted accounting principles, consistently applied, and
accompanied by an unqualified opinion (except for qualifications regarding
specified contingent liabilities) of an independent accounting firm
selected by the Company's Board of Directors;

(c) prior to the end of each fiscal year, an annual budget
(approved by the Board of Directors) prepared on a monthly, consolidated
basis for the Company and its subsidiaries for the succeeding fiscal year
(displaying detailed anticipated statements of operations and cash flows
and balance sheets), and promptly upon preparation thereof any other
significant budgets which the Company prepares and any revisions of such
annual or other budgets;

-14-

<PAGE>

the commencement of voluntary or involuntary bankruptcy proceedings,
natural or other disasters, significant changes in management or directors,
changes in auditors, and execution or termination of, or defaults under,
material contracts, a letter from the Chief Executive Officer or Chief
Financial Officer of the Company specifying the nature and period of
existence thereof and, in the case of material litigation, what actions the
Company and its subsidiaries have taken and propose to take with respect
thereto;

(e) promptly after transmission thereof, copies of all
financial statements, proxy statements, reports and any other written
communications which the Company sends to its stockholders generally and
copies of all registration statements and all regular, special or periodic
reports which it files with the SEC or with any securities exchange on
which any of its securities are then listed, and copies of all press
releases and other statements made available generally by the Company to
the public;

(f) a notice specifying the terms of all sales of the
Company's securities, promptly following the consummation thereof;

(g) within fifteen (15) days after the end of each month,
an income statement for such month and a balance sheet of the Company for
and as of the end of such month, together with such other business and
financial data as may be reasonably requested by each Investor; and

(h) notice of the effectiveness under the Act of the
registration covering the Company's initial public offering, such notice to
be provided by telecopier immediately following the SEC's notification to
the Company of such effectiveness.

Each of the financial statements referred to in this Section 2.1
will be true and correct in all material respects and will fairly present
the Company's consolidated financial position and results of operations as
of the dates and for the periods stated therein, subject in the case of the
unaudited financial statements to changes resulting from normal year-end
audit adjustments (none of which would, alone or in the aggregate, be
materially adverse to the Company's financial condition, operating results
or business prospects). The Company's obligation to provide to the
Investors the materials described in Subsection (e) above will continue
after the Company is subject to the reporting requirements of the 1934 Act
until the Investors no longer hold any shares of the Company's Preferred
Stock (or Common Stock issued upon conversion thereof).

-15-

<PAGE>

during normal business hours and such other times as either of the
Investors may reasonably request, to (i) visit and inspect any of the
properties of the Company and its subsidiaries, (ii) examine the corporate
and financial records of the Company and its subsidiaries and make copies
thereof or extracts therefrom, (iii) discuss the affairs, finances and
accounts of the Company and its subsidiaries with the directors, senior
management and independent accountants of the Company and its subsidiaries,
and (iv) consult with and advise the management of the Company and its
subsidiaries as to their affairs, finances and accounts.

Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of
its capital stock ("Shares"), the Company shall first make an offering of
such Shares to each Holder in accordance with the following provisions:

(a) The Company shall deliver a notice by certified mail
("Notice") to the Holders stating (i) its bona fide intention to offer such
Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.

(b) By written notification received by the Company, within
twenty (20) calendar days after giving of the Notice, the Holder may elect
to purchase or obtain, at the price and on the terms specified in the
Notice, up to that portion of such Shares which equals the proportion that
the number of shares of Common Stock issued and held, and issuable upon
conversion of the Preferred Stock then held, by such Holder bears to the
total number of shares of Common Stock of the Company then outstanding
(assuming full conversion of all convertible securities) ("Pro Rata
Share"). To the extent a Holder does not elect to purchase or obtain the
full amount of its Pro Rata Share, the unsubscribed portion of such
Holder's Pro Rata Share may be purchased or obtained by any other Holder or
Holders, on a pro rata basis, at the price and on the terms specified in
--- ----
the Notice, provided that such purchase shall be consummated within thirty-
five (35) days after giving of the Notice.

(c) If all Shares referred to in the Notice which Holders
are entitled to obtain pursuant to Subsection 2.3(b) are not elected to be
obtained as provided in

-16-

<PAGE>

Subsection 2.3(b) hereof, the Company may, during the thirty (30) day
period following the expiration of the period provided in Subsection 2.3(b)
hereof, offer the remaining unsubscribed portion of such Shares to any
person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company
does not enter into an agreement for the sale of the Shares within such
period, or if such agreement is not consummated within thirty (30) days of
the execution thereof, the right provided hereunder shall be deemed to be
revived and such Shares shall not be offered unless first reoffered to the
Holders in accordance herewith.

(d) The right of first offer in this Section 2.3 shall not
be applicable to

(ii) Common Stock issued in connection with bona fide
research, licensing, acquisitions or corporate partnering relationships
including physician practice management arrangements, in connection with
equipment lease financings, or upon exercise of warrants issued to
institutional lenders in connection with non-convertible debt financings,
in each case approved by the Board of Directors of the Company, provided
that such issuances are for other than primarily equity financing purposes,
and provided, further, that the cumulative, aggregate number of shares
issued in connection with such corporate partnering relationships, or
equipment lease financings and debt financings combined, does not exceed
five percent (5%) of the number of shares of Common Stock then outstanding
(assuming full conversion of the then outstanding Preferred Stock and
exercise or conversion into Common Stock of all other securities then
outstanding that are exercisable for or convertible into Common Stock);

(iii) Common Stock issued or issuable upon conversion of the
Preferred Stock; or

(iv) Common Stock issued or issuable in connection with a
merger or consolidation as a result of which the holders of the Company's
outstanding securities immediately prior to the consummation of such
transaction hold securities in excess of fifty percent (50%) of the voting
power of the surviving or resulting entity.

(e) The right of first offer set forth in this Section 2.3
may not be assigned or transferred, except that

-17-

<PAGE>

(i) such right is assignable by each Holder to any wholly-
owned subsidiary or parent of, or to any corporation or entity that is,
within the meaning of the Act, controlling, controlled by or under common
control with, any such Holder and (ii) such right may be assigned by a
Holder that is a registered investment company to a Related Mutual Fund.

2.4 Positive Covenants. So long as any shares of the Preferred
------------------
Stock are outstanding, the Company agrees as follows:

(a) The Company will retain independent public accountants
of recognized national standing who shall certify the Company's financial
statements at the end of each fiscal year. In the event the services of the
independent public accountants so selected, or any firm of independent
public accountants hereafter employed by the Company are terminated, the
Company will promptly thereafter notify the Holders and will request the
firm of independent public accountants whose services are terminated to
deliver to the Holders a letter from such firm setting forth the reasons
for the termination of their services. In the event of such termination,
the Company will promptly thereafter engage another firm of independent
public accountants of recognized national standing. In its notice to the
Holders the Company shall state whether the change of accountants was
recommended or approved by the Board of Directors of the Company or any
committee thereof.

(b) The Company will cause senior management personnel and
key employees now or hereafter employed by it or any subsidiary to enter
into a proprietary information and inventions agreement.

(d) To the extent permitted by law, the Company will
indemnify and hold harmless the Investors against any losses, claims,
damages, liabilities (joint or several), obligations, penalties, actions,
suits, costs, expenses and disbursements of whatsoever kind and nature
(including tort liabilities), and all legal fees and expenses incurred by
any Investor in defense thereof (singly, a "Liability or Expense,"
collectively, "Liabilities and Expenses"), imposed on, incurred by or
asserted against any Investor, in any way relating to or arising out of the
Company's termination of Terrill Burnett's ("Burnett") employment by
Physician's Online, Inc. or the efforts of Physician's Online, Inc. to
repurchase from Burnett shares of the common stock of Physician's Online,
Inc., including but not limited to Liabilities and Expenses that may result
from any action brought by the Company against Burnett. The Company will,
to the extent practicable, pay directly any and all Liabilities and
Expenses indemnified hereunder and, to the extent any such items are paid
by any Investor, will reimburse and indemnify such Investor therefor in
accordance with the provisions of this

-18-

<PAGE>

Subsection 2.4(d). In the event any Investor receives notice of any
Liability or Expense, it will promptly give the Company notice thereof, in
accordance with the provisions of Section 3.5 hereof; provided, however,
that the failure to provide any such notice shall not relieve the Company
of its obligations hereunder. The Company's obligation to indemnify the
Investors will not apply to (i) amounts paid in settlement of any Liability
or Expense if such settlement is effected without the consent of the
Company, which consent will not be unreasonably withheld, or (ii) losses
incurred by an Investor solely by reason of such Investor's status as a
stockholder of the Company, including diminution of the value of the
Investor's investment in the Company.

(i) In the event that any Investor pays a Liability or
Expense, such Investor may make a demand for payment and reimbursement
("Demand") upon the Company by giving the Company notice in accordance with
the provisions of Section 3.5 hereof that such Investor has incurred and
paid a Liability or Expense together with such documentary evidence as will
support the making of such payment and demanding that the Company reimburse
and indemnify such Investor therefor. Within ten (10) business days of
receipt of a Demand, the Company will reimburse the Investor for the
Liabilities and Expenses paid by such Investor as set forth in the Demand.

-19-

<PAGE>

Investor has been advised by counsel that there may be one or more defenses
available to it and not available to the Company (in which case the Company
shall not have the right to assume the defense of such action on behalf of
such Investor, it being understood, however, that the Company shall not, in
connection with any one such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for all such
Investors). No settlement of any action against an Investor shall be made
without the consent of the Company, which shall not be unreasonably
withheld in light of all factors of importance to the Company.

(e) The Company shall, promptly following the date of this
Agreement, obtain, and thereafter maintain in full force and effect, fire,
casualty, workmen's compensation and liability insurance policies, with
extended coverage, in such amounts and with such coverage as are carried by
companies in a position similar to that of the Company.

(f) [reserved]

2.5 Negative Covenants. So long as any shares of Preferred
------------------
Stock are outstanding, the Company shall not without first obtaining the
written consent of the holders of at least two-thirds of the then
outstanding shares of each series of Preferred Stock:

(a) sell, convey, or otherwise dispose of or encumber all
or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned
subsidiary corporation) or effect any transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of
the Company is disposed of;

(b) increase or decrease (other than by conversion) the
total number of authorized shares of Preferred Stock or amend the terms of
the Preferred Stock so as to affect the Preferred Stock adversely;

(c) authorize or issue, or obligate itself to issue, any
other equity security, including any other security or debt instrument
convertible into or exercisable for any such equity security, having a
preference over, or being on a parity with, the Series A Preferred Stock,
the Series B Preferred Stock or the Series C Preferred Stock with respect
to dividends, redemption or liquidation;

(d) engage in any spin-out, distribution or sale of any
business unit of the Company;

(e) enter into any transactions with affiliates of the
Company except on arms-length terms;

-20-

<PAGE>

(f) increase the authorized number of directors of the
Company to more than seven (7) members;

(g) redeem or repurchase any outstanding equity securities
of the Company except for: a) repurchases of unvested or restricted shares
of Common Stock at cost from employees, consultants, or members of the
Board of Directors pursuant to repurchase options of the Company (i)
currently outstanding or (ii) hereafter entered into pursuant to a stock
option plan or restricted stock plan approved by the Company's Board of
Directors;

(h) redeem, purchase or otherwise acquire for value any
share or shares of Preferred Stock except pursuant to an offer made upon
the same terms pro rata to all holders of outstanding shares of such
--- ----
Preferred Stock;

(i) liquidate, dissolve or otherwise wind up the affairs of
the Company; or

(j) adopt any stock option, restricted stock or like plan
providing for the grant of equity incentives to employees, directors or
consultants.

2.6 Termination of Certain Covenants. The covenants set forth in
----------------------------------
Section 2.4 and 2.5 shall terminate and be of no further force or effect
upon the consummation of a Qualified Public Offering.

3. Miscellaneous.
-------------

3.1 Successors and Assigns. Except as otherwise provided
----------------------
herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including transferees of any shares of Registrable Securities).
Nothing in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.

-21-

<PAGE>

3.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

3.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be notified
or four (4) days after deposit with the United States Post Office or air
courier in the case of non-U.S. parties, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written
notice to the other parties with a copy for the Company to Bachner, Tally,
Polevoy & Misher, 380 Madison Avenue, New York, New York 10017-2590,
Attention: Jill M. Cohen.

3.8 Severability. If one or more provisions of this Agreement
------------
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.

3.9 Entire Agreement. This Agreement constitutes the full and
----------------
entire understanding and agreement between the parties with regard to the
subjects hereof.

-22-

<PAGE>

SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

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

MED-E-SYSTEMS CORPORATION

By:/s/ Steven Hochberg
__________________________
Steven Hochberg, President

Address: 56O White Plains Road
2nd Floor
Tarrytown, New York 10591

-23-

<PAGE>

SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

INVESTORS:

INVESCO STRATEGIC PORTFOLIOS, INC. -
HEALTH SCIENCES PORTFOLIO

By: /s/ Glen A. Payne
------------------------------------

Name: Glen A. Payne
----------------------------------

Title: Secretary
---------------------------------

Address: c/o Invesco Trust Company
7800 East Union Avenue
Denver, Colorado 80237
Attn: Director of Private Placements

THE GLOBAL HEALTH SCIENCES FUND

By: /s/ Glen A. Payne
------------------------------------

Name: Glen A. Payne
----------------------------------

Title: Secretary
---------------------------------

Address: c/o Invesco Trust Company
7800 East Union Avenue
Denver, Colorado 80237
Attn: Director of Private Placements

-24-

EHXIBIT 10.7

ADVANCED HEALTH CORPORATION

INVESTORS' RIGHTS AGREEMENT

_______________________

August 23, 1995

<PAGE>

TABLE OF CONTENTS
-----------------

Page
----
I. Registration Rights . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . 1
1.2 Request for Registration . . . . . . . . . . . . . 2
1.3 Company Registration . . . . . . . . . . . . . . . 4
1.4 Obligations of the Company . . . . . . . . . . . . 4
1.5 Furnish Information . . . . . . . . . . . . . . . 6
1.6 Expenses of Demand Registration . . . . . . . . . 6
1.7 Expenses of Company Registration . . . . . . . . . 7
1.8 Underwriting Requirements . . . . . . . . . . . . 7
1.9 Indemnification . . . . . . . . . . . . . . . . . 7
1.10 Reports Under Securities Exchange Act of 1934 . . . 9
1.11 Form S3 Registration . . . . . . . . . . . . . . . 10
1.12 Assignment of Registration Rights . . . . . . . . 11
1.13 Termination of Registration Rights . . . . . . . . 11

2. Covenants of the Company . . . . . . . . . . . . . . . . . 12
2.1 Financial Statements and Other Information . . . . 12
2.2 Inspection of Property . . . . . . . . . . . . . . 13
2.3 Right of First Offer . . . . . . . . . . . . . . . 14
2.4 Positive Covenants . . . . . . . . . . . . . . . . 16
2.5 Negative Covenants . . . . . . . . . . . . . . . . 16
2.6 Termination of Certain Covenants . . . . . . . . . 17

3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 18
3.1 Successors and Assigns . . . . . . . . . . . . . . 18
3.2 Governing Law . . . . . . . . . . . . . . . . . . 18
3.3 Counterparts . . . . . . . . . . . . . . . . . . . 18
3.4 Titles and Subtitles . . . . . . . . . . . . . . . 18
3.5 Notices . . . . . . . . . . . . . . . . . . . . . 18
3.6 Expenses . . . . . . . . . . . . . . . . . . . . . 18
3.7 Amendments and Waivers . . . . . . . . . . . . . . 18
3.8 Severability . . . . . . . . . . . . . . . . . . . 19
3.9 Entire Agreement . . . . . . . . . . . . . . . . . 19

-i-

<PAGE>

INVESTORS' RIGHTS AGREEMENT
---------------------------

THIS INVESTORS' RIGHTS AGREEMENT (the "Agreement") is made as of the
23rd day of August, 1995, by and among Advanced Health Corporation, a
Delaware corporation (the "Company"), and 21st Century Communications
Partners, L.P., 21st Century Communications T-E Partners, L.P. and 21st
Century Communications Foreign Partners, L.P. (each an "Investor",
collectively the "Investors").

RECITALS
--------

WHEREAS, the Company and the Investors are parties to that certain
Series D Preferred Stock Purchase Agreement of even date herewith (the
"Series D Stock Purchase Agreement"); and

WHEREAS, to induce the Investors to invest funds in the Company
pursuant to the Series D Stock Purchase Agreement, the Investors and the
Company hereby agree that this Agreement shall govern the rights of the
Investors to cause the Company to register shares of Common Stock issuable
to the Investors and certain other matters as set forth herein;

NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:

1 Registration Rights. The Company covenants and agrees as follows:
-------------------

1.1 Definitions. For purposes of this Section 1:
-----------

(a) The term "Act" means the Securities Act of 1933, as amended.

(b) The term "Common Stock" means shares of the common stock of the
Company, par value $.01 per share.

(c) The term "Form S-3" means such form under the Act as in effect
on the date hereof or any registration form under the Act subsequently adopted
by the SEC which permits inclusion or incorporation of substantial information
by reference to other documents filed by the Company with the SEC.

(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.

(e) The term "1934 Act" means the Securities Exchange Act of 1934, as
amended.

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<PAGE>

(f) The term "Series A Preferred Stock" means shares of the
Company's Series A Convertible Preferred Stock, par value $.01 per share.

(g) The term "Series B Preferred Stock" means shares of the
Company's Series B Convertible Preferred Stock, par value $.01 per share.

(h) The term "Series C Preferred Stock" means shares of the
Company's Series C Convertible Preferred Stock, par value $.01 per share.

(i) The term "Series D Preferred Stock" means shares of the
Company's Series D Convertible Preferred Stock, par value $.01 per share.

(j) The term "Preferred Stock" means the Company's Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock.

(k) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.

(1) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series D Preferred Stock, (ii)
the Common Stock issuable or issued upon exercise of that certain Common
Stock Purchase Warrant issued to 21st Century Communications Partners, L.P.
dated the date hereof, (iii) the Common Stock issuable or issued upon
exercise of that certain Common Stock Purchase Warrant issued to 21st
Century Communications T-E Partners, L.P. dated the date hereof, (iv) the
Common Stock issuable or issued upon exercise of that certain Common Stock
Purchase Warrant issued to 21st Century Communications Foreign Partners,
L.P. dated the date hereof and (v) any Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of the shares referenced in (i),
(ii), (iii) or (iv) above, excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which his rights under this
Section 1 are not assigned.

(m) The term "SEC" shall mean the Securities and Exchange Commission.

1.2 Request for Registration.
------------------------

(a) If the Company shall receive at any time after twelve (12)
months after the effective date of the first registration statement for a
public offering of securities of the Company (other than a registration
statement relating either to the sale of securities to employees of the
Company pursuant to a stock option, stock purchase or similar plan or an
SEC Rule 145 transaction), a written request from the Holders of fifty
percent (50%) of the Registrable

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<PAGE>

Securities then outstanding that the Company file a registration statement
under the Act covering the registration of at least twenty-five percent
(25%) of the Registrable Securities then outstanding, and provided that
such shares have a reasonably anticipated aggregate offering price of at
least S2,000,000, the Company shall:

(i) within ten (10) days of the receipt thereof, give written notice,
in accordance with Section 3.5 hereof, of such request to all Holders; and

(ii) file as soon as practicable, and in any event within sixty (60) days
of the receipt of such request, and to use its best efforts to cause to
become effective as soon as practicable, the registration under the Act of
all Registrable Securities which the Holders request to be registered,
subject to the limitations of Subsection 1.2(b).

(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise
the Company as a part of their request made pursuant to Subsection 1.2(a)
and the Company shall include such information in the written notice
referred to in Subsection 1.2(a). The underwriter will be selected by the
Company and shall be reasonably acceptable to a majority in interest of the
Initiating Holders. In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise
mutually agreed by a majority in interest of the Initiating Holders and
such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with
the Company as provided in Subsection 1.4(e)) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected
for such underwriting. Notwithstanding any other provision of this Section
1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall exclude from such underwriting (x)
first, the maximum number of securities, if any, other than Registrable
Securities and shares of Common Stock issuable upon conversion of the
Company's Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock ("Third Party Registrable Securities") being sold for the
account of other than the Company, as is necessary to reduce the size of
the offering and (y) then the minimum number of Registrable Securities and
Third Party Registrable Securities, pro rata to the extent practicable, on
--- ----
the basis of the number of Registrable Securities and Third Party
Registrable Securities requested to be registered among the participating
holders of Registrable Securities and Third Party Registrable Securities,
as is necessary in the opinion of the managing underwriter(s) to reduce the
size of the offering.

(c) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:

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<PAGE>

(i) After the Company has effected three (3) registrations
pursuant to this Section 1.2, excluding any registrations effected on Form
S-3, and such registrations have been declared or ordered effective;

(ii) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of,
and ending on a date ninety (90) days after the effective date of any
registration statement for a public offering subject to Section 1.3 hereof;
provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become
effective;

(iii) If the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.11 below; or

(iv) If the Company delivers to the Initiating Holders an
opinion, in form and substance acceptable to such Initiating Holders, of
counsel satisfactory to the Initiating Holders that the Registrable
Securities requested to be registered by the Initiating Holders may be sold
or transferred pursuant to Rule 144(k) of the Act.

1.3 Company Registration. If (but without any obligation to
--------------------
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the
Holders) any of its stock or other securities under the Act in connection
with the public offering of such securities (other than a registration
relating solely to the sale of securities to participants in a Company
stock plan, a registration relating solely to a Rule 145 transaction, a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which
the only Common Stock being registered is Common Stock issuable upon
conversion of debt securities which are also being registered), the Company
shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty
(20) days after giving of such notice by the Company in accordance with
Section 3.5, the Company shall, subject to the provisions of Section 1.8,
cause to be registered under the Act all of the Registrable Securities that
each such Holder has requested to be registered.

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<PAGE>

any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company, and
provided further that in the case of any registration of Registrable
Securities on Form S-3 that are intended to be offered on a continuous or
delayed basis, such two hundred seventy (270) day period shall be extended
until all such Registrable Securities are sold, if applicable rules under
the Act governing the obligation to file a post-effective amendment permit,
in lieu of filing a post-effective amendment which (I) includes any
prospectus required by Section 10(a)(3) of the Act or (II) reflects facts
or events representing a material or fundamental change in the information
set forth in the registration statement, the incorporation by reference of
information required to be included in (I) and (II) above to be contained
in periodic reports filed pursuant to Section 13 or 15(d) of the 1934 Act
in the registration statement.

(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as, in the opinion of counsel
to the Company, may be necessary to comply with the provisions of the Act
with respect to the disposition of all securities covered by such
registration statement.

(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities
owned by them.

(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do business
or to file a general consent to service of process in any such states or
jurisdictions, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Act.

(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering.
Each Holder participating in such underwriting shall also enter into and
perform its obligations under such an agreement.

(f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.

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<PAGE>

(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which
similar securities issued by the Company are then listed.

(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for
all such Registrable Securities, in each case not later than the effective
date of such registration.

1.5 Furnish Information.
-------------------

(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish
to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such
securities as shall be required to effect the registration of such Holder's
Registrable Securities.

(b) The Company shall have no obligation with respect to
any registration requested pursuant to Section 1.2 or Section 1.12 if, due
to the operation of Subsection 1.2(b) or 1.5(a), the number of shares or
the anticipated aggregate offering price of the Registrable Securities to
be included in the registration does not equal or exceed the number of
shares or the anticipated aggregate offering price required to originally
trigger the Company's obligation to initiate such registration as
specified in Subsection 1.2(a) or Subsection 1.12(b)(2), whichever is
applicable.

1.6 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company and the reasonable fees and disbursements of one counsel for the
selling Holders shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 1.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating
Holders shall bear such expenses), unless the Holders of a majority of the
Registrable Securities agree to forfeit their right to one demand
registration pursuant to Section 1.2 or unless such withdrawal is based
upon material adverse information relating to the Company that is different
from information known or available (upon request from the Company or
otherwise) to the Holders requesting registration at the time of their
request; and provided, further, that the Company shall be required to pay
the expenses only of the first two registrations pursuant to Section 1.2.
Notwithstanding the preceding sentence, the Company shall be required to
pay the expenses of a third registration pursuant to Section 1.2, if the
number of Registrable Securities requested by the Investors to be included
in the first two registrations pursuant to Section 1.2 has been reduced by
more than one-third.

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<PAGE>

1.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 1.3 to include any of a
Holder's securities in such underwriting unless such Holder accepts the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine
in their sole discretion will not jeopardize the success of the offering by
the Company. If the total amount of securities, including Registrable
Securities, requested by stockholders to be included in such offering
exceeds the amount of securities sold other than by the Company that the
underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall exclude from such
underwriting (x) first, the maximum number of securities, if any, other
than Registrable Securities and Third Party Registrable Securities being
sold for the account of other than the Company, as is necessary to reduce
the size of the offering and (y) then the minimum number of Registrable
Securities and Third Party Registrable Securities, pro rata to the extent
--- ----
practicable, on the basis of the number of Registrable Securities and Third
Party Registrable Securities requested to be registered among the
participating holders of Registrable Securities and Third Party Registrable
Securities, as is necessary in the opinion of the managing
underwriter(s) to reduce the size of the offering. For purposes of
apportionment, for any selling stockholder that is a holder of Registrable
Securities or Third Party Registrable Securities and that is a partnership
or corporation, the partners, retired partners and stockholders of such
holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons
shall be deemed to be a single "selling stockholder," and any pro rata
--------
reduction with respect to such "selling stockholder" shall be based upon
the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder," as defined
in this sentence.

1.9 Indemnification. In the event any Registrable
---------------
Securities are included in a registration statement under this Section 1:

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<PAGE>

omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii)
the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Act, the 1934 Act, or any rule or regulation promulgated under the Act,
or the 1934 Act, and the Company will pay to each such Holder, underwriter
or controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Subsection 1.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company,
which consent shall not be unreasonably withheld, nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or
action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any
such Holder, underwriter or controlling person.

(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the Act, any
underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other
Holder, against any losses. claims, damages. or liabilities (joint or
several) to which any of the foregoing persons may become subject, under
the Act, or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with
such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Subsection 1.9(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Subsection 1.9(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any selling Holder's liability under this
Subsection 1.9(b) exceed the proceeds received by such Holder from the
offering (net of any underwriting discounts and commissions).

(c) Promptly after receipt by an indemnified party
under this Section 1.9 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under
this Section 1.9, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties;
provided,

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<PAGE>

however, that an indemnified party (together with all other indemnified
parties which may be represented without conflict by one counsel) shall
have the right to retain one separate counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 1.9, but the omission so to deliver written notice to the
indemnifying party, will not relieve it of any liability that it may have
to any indemnified party otherwise than under this Section 1.9.

(d) If the indemnification provided for in this
Section 1.9 is held by a court of competent jurisdiction to be unavailable
to an indemnified party with respect to any loss, liability, claim, damage,
or expense referred to therein, then the indemnifying party in lieu of
indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand and
of the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.

(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten
public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.

(f) The obligations of the Company and Holders under
this Section 1.9 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1,
and otherwise.

1.10 Reports Under Securities Exchange Act of 1934. With a
---------------------------------------------
view to making available to the Holders the benefits of Rule 144
promulgated under the Act and any other rule or regulation of the SEC that
may at any time permit a Holder to sell securities of the Company to the
public without registration or pursuant to a registration on Form S-3, the
Company agrees to:

(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective

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<PAGE>

date of the first registration statement filed by the Company for the
offering of its securities to the general public;

(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable
after the end of the fiscal year in which the first registration statement
filed by the Company for the offering of its securities to the general
public is declared effective;

(c) file with the SEC in a timely manner all reports
and other documents required of the Company under the Act and the 1934 Act;
and

(d) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of SEC
Rule 144 (at any time after ninety (90) days after the effective date of
the first registration statement filed by the Company), the Act and the
1934 Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company,
and (iii) such other information as may be reasonably requested in availing
any Holder of any rule or regulation of the SEC which permits the selling
of any such securities without registration or pursuant to such form.

1.11 Form S-3 Registration. In case the Company shall
---------------------
receive at any time after the completion of the first registration
statement for a public offering of securities of the Company (other than a
registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or
similar plan or an SEC Rule 145 transaction), a written request from the
Holders of at least twenty percent (20%) of the Registrable Securities then
outstanding that the Company effect a registration on Form S-3 and any
related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company will:

(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and

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<PAGE>

any) at an aggregate price to the public (net of any underwriting discounts
or commissions) of less than $500,000; or (3) in any particular
jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting
such registration, qualification or compliance.

(c) Subject to the foregoing, the Company shall file
a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after
receipt of the request or requests of the Holders. All expenses incurred in
connection with a registration requested pursuant to this Section 1.11,
including, without limitation, all registration, filing, qualification,
printers' and accounting fees and the reasonable fees and disbursements of
one (1) counsel for the selling Holder or Holders and counsel for the
Company, but excluding any underwriting discounts or commissions associated
with Registrable Securities, shall be borne by the Company. Registrations
effected pursuant to this Section 1.11 shall not be counted as
registrations effected pursuant to Sections 1.2 or 1.3.

(d) The Company shall not be obligated to effect any
registration pursuant to this Section 1.11 if the Company delivers to the
Holders requesting registration under this Section 1.11 an opinion, in form
and substance acceptable to such Holders, of counsel satisfactory to such
Holders, that the Registrable Securities so requested to be registered may
be sold or transferred pursuant to Rule 144(k) under the Act.

1.12 Assignment of Registration Rights. The rights to
---------------------------------
cause the Company to register Registrable Securities pursuant to this
Section 1 may be assigned (but only with all related obligations) by a
Holder to any partner or shareholder of such Holder or, in the case of a
Holder that is an investment company registered under the Investment
Company Act of 1940, to another such investment company (a "Related Mutual
Fund") that has the same investment advisor as the transferring investment
company, without restriction or requirement as to number of shares, or to a
transferee or assignee of such securities who, as a result of such
assignment or transfer, acquires at least twenty percent (20%) of such
transferring Holder's shares of Registrable Securities (subject to
appropriate adjustment for stock splits, stock dividends, combinations,
recapitalizations and any similar events), provided: (a) the Company is,
within a reasonable time after such transfer, furnished with written notice
of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; (b) such
transferee or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Agreement, including without limitation the
provisions of Section 1.13 below; and (c) such assignment shall be
effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted
under the Act.

1.13 Termination of Registration Rights. No Holder shall
----------------------------------
be entitled to exercise any right provided for in this Section 1 after
three (3) years following the consummation of the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with a firm commitment underwritten offering of its securities
to the general public resulting in gross proceeds to the Company of at
least $15,000,000 and at a price per share to the public of at least
$13.125 (as adjusted for stock splits, combinations and similar
transactions) (a

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<PAGE>

"Qualified Public Offering"), provided, however, that a Holder who is an
- ---------------------------
affiliate of the Company shall be entitled to exercise any right provided
for in this Section 1 for five (5) years after a Qualified Public Offering.

2. Covenants of the Company.
------------------------

2.1 Financial Statements and Other Information. Except as
------------------------------------------
otherwise set forth below in this Section 2.1, until the Company is subject
to the reporting requirements of the 1934 Act, the Company will deliver to
each of the Investors, for so long as such Investor holds any shares of the
Company's Series D Preferred Stock (or Common Stock issued upon conversion
thereof):

(a) as soon as available, but in any event within
forty-five (45) days after the end of each quarterly accounting period in
each fiscal year, unaudited consolidated statements of operations and
consolidated cash flows of the Company and its subsidiaries for such
quarterly period and for the period from the beginning of the fiscal year
to the end of such quarter, and consolidated balance sheets of the Company
and its subsidiaries as of the end of such quarterly period, setting forth
in each case comparisons to the annual budget and to the corresponding
period in the preceding fiscal year, and all such statements will be
prepared in accordance with generally accepted accounting principles,
consistently applied (except for the absence of notes and subject to normal
year-end adjustments);

(b) as promptly as possible (but in any event within
ninety (90) days) after the end of each fiscal year, consolidated
statements of operations and a consolidated statement of cash flows of the
Company and its subsidiaries for such fiscal year and consolidated balance
sheets and statements of stockholders' equity of the Company and its
subsidiaries as of the end of such fiscal year, setting forth comparisons
to the annual budget and to the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles, consistently
applied, and accompanied by an unqualified opinion (except for
qualifications regarding specified contingent liabilities) of an
independent accounting firm selected by the Company's Board of Directors;

(c) prior to the end of each fiscal year, an annual
budget (approved by the Board of Directors) prepared on a monthly,
consolidated basis for the Company and its subsidiaries for the succeeding
fiscal year (displaying detailed anticipated statements of operations and
cash flows and balance sheets), and promptly upon preparation thereof any
other significant budgets which the Company prepares and any revisions of
such annual or other budgets;

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<PAGE>

proceedings, natural or other disasters, significant changes in management
or directors, changes in auditors, and execution or termination of, or
defaults under, material contracts, a letter from the Chief Executive
Officer or Chief Financial Officer of the Company specifying the nature and
period of existence thereof and, in the case of material litigation, what
actions the Company and its subsidiaries have taken and propose to take
with respect thereto;

(e) promptly after transmission thereof, copies of all
financial statements, proxy statements, reports and any other written
communications which the Company sends to its stockholders generally and
copies of all registration statements and all regular, special or periodic
reports which it files with the SEC or with any securities exchange on
which any of its securities are then listed, and copies of all press
releases and other statements made available generally by the Company to
the public;

(f) a notice specifying the terms of all sales of the
Company's securities, promptly following the consummation thereof;

(g) within fifteen (15) days after the end of each month,
an income statement for such month and a balance sheet of the Company for and
as of the end of such month, together with such other business and financial
data as may be reasonably requested by each Investor; and

(h) notice of the effectiveness under the Act of the
registration covering the Company's initial public offering, such notice to
be provided by telecopier immediately following the SEC's notification to
the Company of such effectiveness.

Each of the financial statements referred to in this Section
2.1 will be true and correct in all material respects and will fairly
present the Company's consolidated financial position and results of
operations as of the dates and for the periods stated therein, subject in
the case of the unaudited financial statements to changes resulting from
normal year-end audit adjustments (none of which would, alone or in the
aggregate, be materially adverse to the Company's financial condition,
operating results or business prospects). The Company's obligation to
provide to the Investors the materials described in Subsection (e) above
will continue after the Company is subject to the reporting requirements of
the 1934 Act until the Investors no longer hold any shares of the Company's
Series D Preferred Stock (or Common Stock issued upon conversion thereof).

2.2 Inspection of Property. Until the Company is subject
----------------------
to the reporting requirements of the 1934 Act, the Company will permit the
Investors, or any representatives designated by any of the Investors, upon
reasonable notice and during normal business hours and such other times as
either of the Investors may reasonably request, to (i) visit and inspect
any of the properties of the Company and its subsidiaries, (ii)examine the
corporate and financial records of the Company and its subsidiaries and
make copies thereof or extracts therefrom, (iii) discuss the affairs,
finances and accounts of the Company and its subsidiaries with the
directors, senior management and independent accountants of the Company and
its subsidiaries, and (iv)

-13-

<PAGE>

consult with and advise the management of the Company and its subsidiaries
as to their affairs, finances and accounts.

2.3 Right of First Offer. Subject to the terms and
--------------------
conditions specified in this Section 2.3, the Company hereby grants to each
Holder a right of first offer with respect to future sales by the Company
of its Shares (as hereinafter defined). A Holder shall be entitled to
apportion the right of first offer hereby granted it among itself and its
partners and affiliates and, in the case of a Holder that is a registered
investment company, among itself and its Related Mutual Funds, in such
proportions as it deems appropriate.

Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of
its capital stock ("Shares"), the Company shall first make an offering of
such Shares to each Holder in accordance with the following provisions:

(a) The Company shall deliver a notice by certified
mail ("Notice") to the Holders stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the
price and terms, if any, upon which it proposes to offer such Shares.

(b) By written notification received by the Company,
within twenty (20) calendar days after giving of the Notice, the Holder may
elect to purchase or obtain, at the price and on the terms specified in the
Notice, up to that portion of such Shares which equals the proportion
that the number of shares of Common Stock issued and held, and issuable
upon conversion of the Series D Preferred Stock then held by such Holder
bears to the total number of shares of Common Stock of the Company then
outstanding (assuming full conversion of all convertible securities) ("Pro
Rata Share"). To the extent a Holder does not elect to purchase or obtain
the full amount of its Pro Rata Share, the unsubscribed portion of such
Holder's Pro Rata Share may be purchased or obtained by any other Holder or
Holders, on a pro rata basis, at the price and on the terms specified in
--------
the Notice, provided that such purchase shall be consummated within thirty-
five (35) days after giving of the Notice.

(c) If all Shares referred to in the Notice which
Holders are entitled to obtain pursuant to Subsection 2.3(b) are not
elected to be obtained as provided in Subsection 2.3(b) hereof, the Company
may, during the thirty (30) day period following the expiration of the
period provided in Subsection 2.3(b) hereof, offer the remaining
unsubscribed portion of such Shares to any person or persons at a price not
less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement
for the sale of the Shares within such period, or if such agreement is not
consummated within thirty (30) days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such Shares shall not
be offered unless first reoffered to the Holders in accordance herewith.

(d) The right of first offer in this Section 2.3 shall not
be applicable to

-14-

<PAGE>

(i) shares of Common Stock issuable or issued to
employees, advisors, consultants or outside directors of the Company
directly or pursuant to a stock option plan or restricted stock plan
approved by the Board of Directors of the Company so long as the cumulative
total number of shares of Common Stock so issuable and issued for a
consideration per share less than the Conversion Price (as defined in the
Certificate of Designations, Powers, Preferences and Rights of the Series D
Preferred Stock) (and not repurchased at cost by the Company in connection
with the termination of employment) does not exceed 940,000 shares of
Common Stock (of which there are options outstanding on the date of this
Agreement for the purchase of 436,000 shares of Common Stock);

(ii) Common Stock issued in connection with the
acquisition of management service organizations, physician groups or any
business complementary with the business of the Company, provided, that the
cumulative, aggregate number of shares issued in connection with such
acquisitions does not exceed 456,333 shares, excluding shares issued to (i)
the founders of Majean, Inc., a Delaware corporation, (ii) Richard
Ventimiglia and Steven Peltz in connection with the acquisition of Peltz
Ventimiglia, Inc. and (iii) the owners of U.S. Health Connections, Inc. in
connection with the acquisition of such business;

(iii) Common Stock issued or issuable upon
conversion of the Preferred Stock,

(iv) Common Stock issued or issuable in
connection with a merger or consolidation as a result of which the holders
of the Company's outstanding securities immediately prior to the
consummation of such transaction hold securities in excess of fifty percent
(50%) of the voting power of the surviving or resulting entity; or

(v) Common Stock issued in connection with
equipment lease financings, or upon exercise of warrants issued to
institutional lenders in connection with non-convertible debt financings,
in each case approved by the Board of Directors of the Corporation,
provided that such issuances are for other than primarily equity financing
purposes, and provided, further, that the cumulative, aggregate number of
shares issued in connection with such equipment lease financings and debt
financings does not exceed five percent (5%) of the number of shares of
Common Stock then outstanding (assuming full conversion of the then
outstanding Preferred Stock, and exercise or conversion into Common Stock
of all other securities then outstanding that are exercisable for or
convertible into Common Stock).

(vi) Common Stock issuable upon exercise of
Common Stock Purchase Warrants, dated as of even date herewith, issued to
the Investors.

(e) The right of first offer set forth in this Section
2.3 may not be assigned or transferred, except that (i) such right is
assignable by each Holder to any wholly-owned subsidiary or parent of, or
to any corporation or entity that is, within the meaning of the Act,
controlling, controlled by or under common control with, any such Holder
and (ii) such right may be assigned by a Holder that is a registered
investment company to a Related Mutual Fund.

-15-

<PAGE>

2.4 Positive Covenants. So long as any shares of the Series
------------------
D Preferred Stock are outstanding, the Company agrees as follows:

(a) The Company will retain independent public
accountants of recognized national standing who shall certify the Company's
financial statements at the end of each fiscal year. In the event the
services of the independent public accountants so selected, or any firm of
independent public accountants hereafter employed by the Company are
terminated, the Company will promptly thereafter notify the Holders and
will request the firm of independent public accountants whose services are
terminated to deliver to the Holders a letter from such firm setting forth
the reasons for the termination of their services. In the event of such
termination, the Company will promptly thereafter engage another firm of
independent public accountants of recognized national standing. In its
notice to the Holders the Company shall state whether the change of
accountants was recommended or approved by the Board of Directors of the
Company or any committee thereof.

(b) The Company will cause senior management personnel and
key employees now or hereafter employed by it or any subsidiary to enter into a
proprietary information and inventions agreement.

(d) The Company shall, promptly following the date of
this Agreement, obtain, and thereafter maintain in full force and effect,
fire, casualty, workmen's compensation and liability insurance policies,
with extended coverage, in such amounts and with such coverage as are
carried by companies in a position similar to that of the Company.

2.5 Negative Covenants. So long as any shares of Series D
------------------
Preferred Stock are outstanding, the Company shall not without first
obtaining the written consent of the holders of at least two-thirds of the
then outstanding shares of Series D Preferred Stock:

(a) sell, convey, or otherwise dispose of or encumber
all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned
subsidiary corporation) or effect any transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of
the Company is disposed of;

(b) increase or decrease (other than by conversion)
the total number of authorized shares of Series D Preferred Stock or amend
the terms of the Series D Preferred Stock so as to affect the Series D
Preferred Stock adversely;

(c) authorize or issue, or obligate itself to issue,
any other equity security, including any other security or debt instrument
convertible into or exercisable for any

-16-

<PAGE>

such equity security, having a preference over, or being on a parity with,
the Series D Preferred Stock with respect to dividends, redemption or
liquidation;

(d) engage in any spin-out, distribution or sale of
any material business unit of the Company;

(e) enter into any transactions with affiliates of
the Company except on arm's-length terms;

(f) increase the authorized number of directors of the
Company to more than seven (7) members;

(g) redeem or repurchase any outstanding equity
securities of the Company except for: a) repurchases of unvested or
restricted shares of Common Stock at cost from employees, consultants, or
members of the Board of Directors pursuant to repurchase options of the
Company (i) currently outstanding or (ii) hereafter entered into pursuant
to a stock option plan or restricted stock plan approved by the Company's
Board of Directors;

(h) redeem, purchase or otherwise acquire for value
any share or shares of Series D Preferred Stock except pursuant to an offer
made upon the same terms pro rata to all holders of outstanding shares of
--------
such Series D Preferred Stock;

(i) liquidate, dissolve or otherwise wind up the
affairs of the Company;

(j) adopt any stock option, restricted stock or like
plan providing for the grant of equity incentives to employees, directors
or consultants;

(k) issue bank loans or debt securities of the
Company or any subsidiary of the Company in excess of $4,000,000;

(l) allow a subsidiary of the Company to declare and
pay any dividend or distribution other than a dividend or distribution to
the Company; or

(m) issue more than 10% of the outstanding Common Stock
of the Corporation (assuming conversion or exercise of all outstanding
securities convertible into or exercisable for the Corporation's Common
Stock) in a single transaction (or a series of transactions to related
individuals or entities) other than pursuant to Qualified Public Offering.
-------------------------

2.6 Termination of Certain Covenants. The covenants set forth in
--------------------------------
Sections 2.3, 2.4 and 2.5 shall terminate and be of no further force or
effect upon the consummation of a Qualified Public Offering.

-17-

<PAGE>

3. Miscellaneous.
-------------

3.1 Successors and Assigns. Except as otherwise provided
---------- --- -------
herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including transferees of any shares of Registrable Securities).
Nothing in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.

3.2 Governing Law. This Agreement shall be governed by
-------------
and construed under the laws of the State of New York, disregarding New
York principles of conflicts of laws which would otherwise provide for the
application of the substantive laws of another jurisdiction.

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

3.4 Titles and Subtitles. The titles and subtitles used
--------------------
in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.

3.5 Notices. Unless otherwise provided, any notice
-------
required or permitted under this Agreement shall be given in writing and
shall be deemed effectively given upon personal delivery to the party to
be notified or four (4) days after deposit with the United States Post
Office or air courier in the case of non-U.S. parties, by registered or
certified mail, postage prepaid and addressed to the party to be notified
at the address indicated for such party on the signature page hereof, or at
such other address as such party may designate by ten (10) days' advance
written notice to the other parties with a copy for the Company to Bachner,
Tally, Polevoy & Misher LLP, 380 Madison Avenue, New York, New York 10017-
2590, Attention: Marc S. Goldfarb, Esq.

3.6 Expenses. If any action at law or in equity is
--------
necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which such party
may be entitled.

3.7 Amendments and Waivers. Any term of this Agreement
----------------------
may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the
Company and the holders of two-thirds of the Registrable Securities then
outstanding. Any amendment or waiver effected in accordance with this
Section 3.7 shall be binding upon each holder of any Registrable Securities
then outstanding, each future holder of all such Registrable Securities,
and the Company.

-18-

<PAGE>

3.8 Severability. If one or more provisions of this
------------
Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
--

3.9 Entire Agreement. This Agreement constitutes the full
----------------
and entire underwriting and agreement between the parties with regard to
the subjects hereof.

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

ADVANCED HEALTH CORPORATION

By: /s/ Steven Hochberg
----------------------------
Steven Hochberg, President

Address: 560 White Plains Road
2nd Floor
Tarrytown, New York 10591

INVESTORS:

21ST CENTURY COMMUNICATIONS PARTNERS, L.P.

By: Sandler Investment Partners, L.P.,
a General Partner

By: Sandler Capital Management, a General
Partner

By: Emebe Corp., a General Partner

By: /s/ Barry Lewis
-------------------------------
Name: Barry Lewis
Title: President

Address: c/o Sandler Investment Partners
767 Fifth Avenue, 45th Floor
New York, New York 10153

-19-

<PAGE>

21ST CENTURY COMMUNICATIONS T-E PARTNERS,
L.P.

By: Sandler Investment Partners, L.P., a
General Partner

By: Sandler Capital Management, a General
Partner

By: Emebe Corp., a General Partner

By: /s/ Barry Lewis
-------------------------------------
Name: Barry Lewis
Title: President

Address: c/o Sandler Investment Partners
767 Fifth Avenue, 45th Floor
New York, New York 10153

21ST CENTURY COMMUNICATIONS FOREIGN
PARTNERS, L.P.

By: 21st Century Management Ltd.,
Administrative General Partner

Name:
-----------------------------------
Title:
-----------------------------------
Address: One Capital Place, 3rd Floor
Shedden Road
Georgetown, Grand Cayman Island
British West Indies

-20-

Exhibit 10.8

REGISTRATION RIGHTS AGREEMENT dated
February 28, 1996, among ADVANCED HEALTH
CORPORATION, a Delaware corporation (the
"Corporation"), and the INVESTORS (as herein
defined).

The Investors have the right to purchase or otherwise acquire
shares of the Common Stock (as hereinafter defined) of the Corporation.
The Corporation and the Investors deem it to be in their respective best
interests to set forth the rights of the Investors in connection with
public offerings and sales of the Common Stock and are entering into this
Agreement as a condition to and in connection with the Purchase Agreement
(as defined herein).

NOW, THEREFORE, in consideration of the premises and mutual
covenants and obligations hereinafter set forth, the Corporation and the
Investors hereby agree as follows:

SECTION 1. DEFINITIONS. As used in this Agreement, the
-----------
following terms shall have the following meanings:

(a) "Commission" means the Securities and Exchange
Commission or any other Federal agency at the time administering the
Securities Act.

(b) "Common Stock" means the common stock, $.001 par value
per share, of the Corporation.

(c) "Exchange Act" means the Securities Exchange Act of
1934 or any successor Federal statute, and the rules and regulations
of the Commission promulgated thereunder, all as the same shall be in
effect from time to time.

(d) "Investors" means each of the persons set forth on
SCHEDULE I and each additional person who shall execute a counterpart
----------
signature page hereto, and includes any successor to, or assignee or
transferee of, any such person who or which agrees in writing to be
treated as an Investor hereunder and to be bound by the terms and
comply with all applicable provisions hereof.

(e) "Other Shares" means at any time those shares of Common
Stock which do not constitute Primary Shares or Registrable Shares.

(f) "Primary Shares" means at any time the authorized but
unissued shares of Common Stock and shares of Common Stock held by the
Corporation in its treasury.

<PAGE>

(g) "Purchase Agreement" means the Note and Warrant
Purchase Agreement dated the date hereof, among the Corporation and
the Investors.

(h) "Registrable Shares" means Restricted Shares which
constitute Common Stock.

(i) "Restricted Shares" means shares of Common Stock
issuable upon the exercise of the Warrants issued to the Investors on
the date hereof pursuant to the Purchase Agreement or otherwise. As
to any particular Restricted Shares, once issued, such Restricted
Shares shall cease to be Restricted Shares when (i) they have been
registered under the Securities Act, the registration statement in
connection therewith has been declared effective and they have been
disposed of pursuant to such effective registration statement, (ii)
they are sold or distributed pursuant to Rule 144 (including, without
limitation, Rule 144(k)), or (iii) they shall have ceased to be
outstanding.

(j) "Registration Date" means the date upon which the
registration statement pursuant to which the Corporation shall have
initially registered shares of Common Stock under the Securities Act
for sale to the public shall have been declared effective.

(k) "Rule 144" means Rule 144 promulgated under the
Securities Act or any successor rule thereto or any complementary rule
thereto (such as Rule 144A).

(l) "Securities Act" means the Securities Act of 1933 or
any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to
time.

SECTION 2. PIGGYBACK REGISTRATION. If the Corporation at any
----------------------
time after the Registration Date proposes for any reason, or is required,
to register Primary Shares or Other Shares under the Securities Act (other
than on Form S-4 or Form S-8 promulgated under the Securities Act or any
successor forms thereto), it shall promptly give written notice to the
Investors of its intention to so register such Primary Shares or Other
Shares and, upon the written request, delivered to the Corporation within
30 days after delivery of any such notice by the Corporation, of the
Investors to include in such registration Registrable Shares (which request
shall specify the number of Registrable Shares proposed to be included in
such registration), the Corporation shall use its best efforts to cause all
such Registrable Shares to be included in such registration on the same
terms and conditions as the securities otherwise being sold in such
registration; provided, however, that if the managing underwriter advises
-------- -------
the Corporation that the inclusion of all Registrable Shares requested to
be included in such registration

-2-

<PAGE>

would interfere with the successful marketing (including pricing) of the
Primary Shares or Other Shares proposed to be registered by the
Corporation, then the number of Primary Shares, Registrable Shares and
Other Shares proposed to be included in such registration shall be included
in the following order:

(a) if the Corporation proposes to register Primary Shares:

(i) first, the Primary Shares;
-----

(ii) second, the Other Shares requested to be included
------
in such registration, which are issued and outstanding on the
date hereof or are issued in respect of shares issued and
outstanding on the date hereof; and

(iii) third, the Registrable Shares (pro rata among the
----- --- ----
holders thereof based upon the number of Registrable Shares held
by each holder); or

(b) if the Corporation proposes to register Other Shares
pursuant to a request for registration by the holders of such Other Shares:

(i) first, the Other Shares held by the parties
-----
demanding such registration;

(ii) second, the Registrable Shares requested to be
------
registered by the holders thereof (pro rata among the holders
--- ----
thereof based on the number of Registrable Shares held by such
holders); and

(iii) third, the Primary Shares.
-----

SECTION 3. REGISTRATIONS ON FORM S-3. At such time as the
-------------------------
Corporation shall have qualified for the use of Form S-3 promulgated under
the Securities Act or any successor form thereto, (A) the Corporation shall
use its best efforts to continue to qualify at all times for registration
of its capital stock on Form S-3 or such successor form, and (B) the
holders of at least 50% of the Registrable Shares then outstanding shall
have the right to request in writing two registrations on Form S-3 or such
successor form of Registrable Shares, which request shall (i) specify the
number of Registrable Shares intended to be sold or disposed of and the
holders thereof, (ii) state the intended method of disposition of such
Registrable Shares and (iii) relate to Registrable Shares having an
anticipated aggregate offering price of at least $250,000. The Corporation
shall use its best efforts to effect such registration; provided, however,
-------- -------
that the Corporation shall not be obligated to effect any registration
under the Securities Act except in accordance with the following
provisions:

-3-

<PAGE>

(a) the Corporation shall not be obligated to use its
best efforts to file and cause to become effective any registra-
tion statement during any period in which any other registration
statement (other than on Form S-8 promulgated under the
Securities Act or any successor forms thereto) pursuant to which
Primary Shares or Other Shares are to be or were sold has been
filed and not withdrawn or has been declared effective within the
prior 90 days; and

(b) the Corporation may delay the filing or
effectiveness of any registration statement for a period of up to
90 days after the date of a request for registration pursuant to
this Section 3 if at the time of such request (i) the Corporation
is engaged, or has fixed plans to engage within 90 days of the
time of such request, in a firm commitment underwritten public
offering of Primary Shares in which the holders of Registrable
Shares may include Registrable Shares pursuant to Section 2 or
(ii) for a period of up to 45 Business Days after the date of a
request for registration pursuant to this Section 3 if at the
time of such request the Corporation reasonably determines that
such registration and offering would interfere with any material
transaction involving the Corporation, as approved by the Board
of Directors, and the Corporation delivers to the Investors a
certificate signed by its Chief Financial Officer as to such
determination.

SECTION 4. PREPARATION AND FILING. If and whenever the
----------------------
Corporation is under an obligation pursuant to the provisions of this
Agreement to use its best efforts to effect the registration of any
Registrable Shares, the Corporation shall, as expeditiously as practicable:

(a) use its best efforts to cause a registration
statement that registers such Registrable Shares to become and
remain effective for a period of 120 days or until all of such
Registrable Shares have been disposed of (if earlier);

(b) furnish, at least five business days before filing
a registration statement that registers such Registrable Shares,
a prospectus relating thereto or any amendments or supplements
relating to such a registration statement or prospectus, to one
counsel selected by the Investors (the "Investors' Counsel"),
copies of all such documents proposed to be filed (it being
understood that such five-business-day period need not apply to
successive drafts of the same document proposed to be filed so
long as such successive drafts are supplied to the Investors'

-4-

<PAGE>

Counsel in advance of the proposed filing by a period of time that is
customary and reasonable under the circumstances);

(c) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective for at least a period
of 120 days or until all of such Registrable Shares have been
disposed of (if earlier) and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of
such Registrable Shares;

(d) notify in writing the Investors' Counsel promptly
(i) of the receipt by the Corporation of any notification with
respect to any comments by the Commission with respect to such
registration statement or prospectus or any amendment or
supplement thereto or any request by the Commission for the
amending or supplementing thereof or for additional information
with respect thereto, (ii) of the receipt by the Corporation of
any notification with respect to the issuance by the Commission
of any stop order suspending the effectiveness of such
registration statement or prospectus or any amendment or
supplement thereto or the initiation or threatening of any
proceeding for that purpose and (iii) of the receipt by the
Corporation of any notification with respect to the suspension of
the qualification of such Registrable Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding
for such purposes;

(e) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws
of such jurisdictions as the Investors reasonably request and do
any and all other acts and things which may be reasonably
necessary or advisable to enable the Investors to consummate the
disposition in such jurisdictions of the Registrable Shares owned
by the Investors; provided, however, that the Corporation will
-------- -------
not be required to qualify generally to do business, subject
itself to general taxation or consent to general service of
process in any jurisdiction where it would not otherwise be
required to do so but for this paragraph (e) or to provide any
material undertaking or make any changes in its By-laws or
Certificate of Incorporation which the Board of Directors
determines to be contrary to the best interests of the
Corporation;

(f) furnish to the Investors holding such Registrable
Shares such number of copies of a summary

-5-

<PAGE>

prospectus, if any, or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act,
and such other documents as such Investors may reasonably request in
order to facilitate the public sale or other disposition of such
Registrable Shares;

(g) use its best efforts to cause such Registrable
Shares to be registered with or approved by such other
governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Corporation to
enable the Investors holding such Registrable Shares to
consummate the disposition of such Registrable Shares;

(h) notify the Investors holding such Registrable
Shares on a timely basis at any time when a prospectus relating
to such Registrable Shares is required to be delivered under the
Securities Act within the appropriate period mentioned in
subparagraph (a) of this Section 4, of the happening of any event
as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and, at
the request of the Investors, prepare and furnish to such
Investors a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the offerees of such shares, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;

(i) subject to the execution of confidentiality
agreements in form and substance satisfactory to the Corporation,
make available upon reasonable notice and during normal business
hours, for inspection by the Investors holding such Registrable
Shares, any underwriter participating in any disposition pursuant
to such registration statement and any attorney, accountant or
other agent retained by the Investors or underwriter
(collectively, the "Inspectors"), all pertinent financial and
other records, pertinent corporate documents and properties of
the Corporation (collectively, the "Records"), as shall be
reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Corporation's officers,
directors and employees to supply all information (together with
the Records, the

-6-

<PAGE>

"Information") reasonably requested by any such Inspector in
connection with such registration statement. Any of the Information
which the Corporation determines in good faith to be confidential, and
of which determination the Inspectors are so notified, shall not be
disclosed by the Inspectors unless (i) the disclosure of such
Information is necessary to avoid or correct a misstatement or
omission in the registration statement, (ii) the release of such
Information is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction or (iii) such Information has been
made generally available to the public; the Investors agree that they
will, upon learning that disclosure of such Information is sought in a
court of competent jurisdiction, give notice to the Corporation and
allow the Corporation, at the Corporation's expense, to undertake
appropriate action to prevent disclosure of the Information deemed
confidential;

(j) use its best efforts to obtain from its
independent certified public accountants "cold comfort" letters
in customary form and at customary times and covering matters of
the type customarily covered by cold comfort letters;

(k) use its best efforts to obtain from its counsel an
opinion or opinions in customary form;

(l) provide a transfer agent and registrar (which may
be the same entity and which may be the Corporation) for such
Registrable Shares;

(m) issue to any underwriter to which the Investors
holding such Registrable Shares may sell shares in such offering
certificates evidencing such Registrable Shares;

(n) list such Registrable Shares on any national
securities exchange on which any shares of the Common Stock are
listed or, if the Common Stock is not listed on a national
securities exchange, use its best efforts to qualify such
Registrable Shares for inclusion on the automated quotation
system of the National Association of Securities Dealers, Inc.
(the "NASD"), or such other national securities exchange as the
holders of a majority of such Registrable Shares shall reasonably
request;

(o) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make
available to its securityholders, as soon as reasonably
practicable, earnings statements

-7-

<PAGE>

(which need not be audited) covering a period of 12 months beginning
within three months after the effective date of the registration
statement, which earnings statements shall satisfy the provisions of
Section 11(a) of the Securities Act; and

(p) use its best efforts to take all other steps
necessary to effect the registration of such Registrable Shares
contemplated hereby.

Each holder of the Registrable Shares, upon receipt of any notice
from the Corporation of any event of the kind described in Section 4(h)
hereof, shall forthwith discontinue disposition of the Registrable Shares
pursuant to the registration statement covering such Registrable Shares
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 5(h) hereof, and, if so directed by the
Corporation, such holder shall deliver to the Corporation all copies, other
than permanent file copies then in such holder's possession, of the
prospectus covering such Registrable Shares at the time of receipt of such
notice.

SECTION 5. EXPENSES. All expenses (other than underwriting
--------
discounts and commissions relating to the Registrable Shares, as provided
in the last sentence of this Section 5, incurred by the Corporation in
complying with Section 4, including, without limitation, the fees and
expenses of Investors' counsel, all registration and filing fees (including
all expenses incident to filing with the NASD), fees and expenses of
complying with securities and blue sky laws, printing expenses and fees and
expenses of the Corporation's counsel and accountants shall be paid by the
Corporation; provided, however, that all underwriting discounts and selling
-------- -------
commissions applicable to the Registrable Shares shall be borne by the
holders selling such Registrable Shares, in proportion to the number of
Registrable Shares sold by each such holder.

SECTION 6. INDEMNIFICATION. In connection with any registration
---------------
of any Registrable Shares under the Securities Act pursuant to this
Agreement, the Corporation shall indemnify and hold harmless the holders of
Registrable Shares, each underwriter, broker or any other person acting on
behalf of the holders of Registrable Shares and each other person, if any,
who controls any of the foregoing persons within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several (or actions in respect thereof), to which any of the foregoing
persons may become subject under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or allegedly
untrue statement of a material fact contained in the registration statement
under which such Registrable Shares were registered under the Securities
Act, any preliminary prospectus or final

-8-

<PAGE>

prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any Registrable Shares, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading or, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under which they were made
not misleading, or any violation by the Corporation of the Securities Act
or state securities or blue sky laws applicable to the Corporation and
relating to action or inaction required of the Corporation in connection
with such registration or qualification under such state securities or blue
sky laws; and shall reimburse the holders of Registrable Shares, such
underwriter, such broker or such other person acting on behalf of the
holders of Registrable Shares and each such controlling person for any
legal or other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Corporation shall not be liable in any
-------- -------
such case to the extent that any such loss, claim, damage, liability or
action (including any legal or other expenses incurred) arises out of or is
based upon an untrue statement or allegedly untrue statement or omission or
alleged omission made in said registration statement, preliminary
prospectus, final prospectus, amendment, supplement or document incident to
registration or qualification of any Registrable Shares in reliance upon
and in conformity with written information furnished to the Corporation
through an instrument duly executed by the holders of Registrable Shares or
their counsel or underwriter specifically for use in the preparation
thereof; provided further, however, that the foregoing indemnity agreement
-------- ------- -------
is subject to the condition that, insofar as it relates to any untrue
statement, allegedly untrue statement, omission or alleged omission made in
any preliminary prospectus but eliminated or remedied in the final
prospectus (filed pursuant to Rule 424 of the Securities Act), such
indemnity agreement shall not inure to the benefit of any Investor,
underwriter, broker or other person acting on behalf of holders of the
Restricted Shares from whom the person asserting any loss, claim, damage,
liability or expense purchased the Restricted Shares which are the subject
thereof, if a copy of such final prospectus had been made available to such
person and such Investor, underwriter, broker or other person acting on
behalf of holders of the Registrable Shares and such final prospectus was
not delivered to such person with or prior to the written confirmation of
the sale of such Registrable Shares to such person.

In connection with any registration of Registrable Shares under
the Securities Act pursuant to this Agreement, each holder of Registrable
Shares shall severally and not jointly indemnify and hold harmless (in the
same manner and to the same extent as set forth in the preceding paragraph
of this Section 6)

-9-

<PAGE>

the Corporation, each director of the Corporation, each officer of the
Corporation who shall sign such registration statement, each underwriter,
broker or other person acting on behalf of the holders of Registrable
Shares and each person who controls any of the foregoing persons within the
meaning of the Securities Act with respect to any statement or omission
from such registration statement, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any Registrable Shares, if such statement or omission was
made in reliance upon and in conformity with written information furnished
to the Corporation or such underwriter specifically for use in connection
with the preparation of such registration statement, preliminary
prospectus, final prospectus, amendment, supplement or document; provided,
--------
however, that the maximum amount of liability in respect of such
- -------
indemnification shall be limited, in the case of each seller of Registrable
Shares, to an amount equal to the net proceeds actually received by such
Seller from the sale of Registrable Shares effected pursuant to such
registration.

Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 6, such indemnified party will, if a claim in
respect thereof is made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action
is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with
any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not
be responsible for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof; provided,
--------
however, that if any indemnified party shall have reasonably concluded that
- -------
there may be one or more legal or equitable defenses available to such
indemnified party which are additional to or conflict with those available
to the indemnifying party, or that such claim or litigation involves or
could have an effect upon matters beyond the scope of the indemnity
agreement provided in this Section 6, the indemnifying party shall not have
the right to assume the defense of such action on behalf of such
indemnified party and such indemnifying party shall reimburse such
indemnified party and any person controlling such indemnified party for
that portion of the fees and expenses of any counsel retained by the
indemnified party which is reasonably related to the matters covered by the
indemnity agreement provided in this Section 6.

If the indemnification provided for in this Section 8 is held by
a court of competent jurisdiction to be unavailable to

-10-

<PAGE>

an indemnified party with respect to any loss, claim, damage, liability or
action referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the
amounts paid or payable by such indemnified party as a result of such loss,
claim, damage, liability or action in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or
omissions which resulted in such loss, claim, damage, liability or action
as well as any other relevant equitable considerations. The relative fault
of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or
by the indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission.

SECTION 7. UNDERWRITING AGREEMENT. Notwithstanding the
----------------------
provisions of Sections 4, 5, and 6, to the extent that the Investors shall
enter into an underwriting or similar agreement, which agreement contains
provisions covering one or more issues addressed in such Sections, the
provisions contained in such agreement addressing such issue or issues
shall control; provided, however, that any such agreement to which the
-------- -------
Corporation is not a party shall not be binding upon the Corporation.

SECTION 8. INFORMATION BY HOLDER. The Investors shall furnish
---------------------
to the Corporation such written information regarding the Investors and the
distribution proposed by the Investors as the Corporation may reasonably
request in writing and as shall be reasonably required in connection with
any registration, qualification or compliance referred to in this
Agreement.

SECTION 9. EXCHANGE ACT COMPLIANCE. From the Registration Date
-----------------------
or such earlier date as a registration statement filed by the Corporation
pursuant to the Exchange Act relating to any class of the Corporation's
securities shall have become effective, the Corporation shall comply with
all of the reporting requirements of the Exchange Act applicable to it
(whether or not it shall be required to do so, but specifically excluding
Section 14 of the Exchange Act if not then applicable to the Corporation)
and shall comply with all other public information reporting requirements
of the Commission which are conditions to the availability of Rule 144 for
the sale of the Common Stock. The Corporation shall cooperate with the
Investors in supplying such information as may be necessary for the
Investors to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of
Rule 144.

-11-

<PAGE>

SECTION 10. NO CONFLICT OF RIGHTS. The Corporation shall not,
---------------------
after the date hereof, grant any registration rights which conflict with or
impair the registration rights granted hereby.

SECTION 11. TERMINATION. This Agreement shall terminate and be
-----------
of no further force or effect when there shall no longer be any Registrable
Shares outstanding.

SECTION 12. SUCCESSORS AND ASSIGNS. This Agreement shall bind
----------------------
and inure to the benefit of the Corporation and the Investors and, subject
to Section 13, the respective successors and assigns of the Corporation and
the Investors.

SECTION 13. ASSIGNMENT. Each Investor may assign its rights
----------
hereunder to any purchaser or transferee of Registrable Shares; provided,
--------
however, that such purchaser or transferee shall, as a condition to the
- -------
effectiveness of such assignment, be required to execute a counterpart to
this Agreement agreeing to be treated as an Investor whereupon such
purchaser or transferee shall have the benefits of, and shall be subject to
the restrictions contained in, this Agreement as if such purchaser or
transferee was originally included in the definition of an Investor herein
and had originally been a party hereto.

SECTION 14. ENTIRE AGREEMENT. This Agreement, the Note and
----------------
Warrant Purchase Agreement among the Corporation and the Investors named
therein, and the other writings referred to therein or delivered pursuant
thereto, contain the entire agreement among the investors with respect to
the subject matter hereof and supersede all prior and contemporaneous
arrangements or understandings with respect thereto.

SECTION 15. NOTICES. All notices, requests, consents and other
-------
communications hereunder to any party shall be given in the manner provided
for in the Purchase Agreement.

SECTION 16. MODIFICATIONS; AMENDMENTS; WAIVERS. The terms and
----------------------------------
provisions of this Agreement may not be modified or amended, nor may any
provision be waived, except pursuant to a writing signed by the Corporation
and the holders of at least
a majority of the Registrable Shares then outstanding; provided, however,
-------- -------
that any amendment to or modification of this Agreement which would have a
disproportionate adverse affect on the rights of any Investor shall require
the written consent of such Investor.

SECTION 17. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement
----------------------------------
may be executed in any number of counterparts, and each such counterpart
hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement. Facsimile
counterpart signatures to this Agreement shall be acceptable at the Closing
(as defined in the

-12-

<PAGE>

Series B Subscription Agreement) if the originally executed counterpart is
delivered within a reasonable period thereafter.

SECTION 18. HEADINGS. The headings of the various sections of
--------
this Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of this Agreement.

SECTION 19. GOVERNING LAW. This Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed wholly therein.

-13-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement on the date first written above.

ADVANCED HEALTH CORPORATION

By: /s/ Alan B. Masarek
----------------------------------
Name: Alan B. Masarek
Title: Treasurer/CFO

PARK AVENUE CAPITAL, L.P.

By: ACCESS INDUSTRIES, INC.,
its General Partner

By: /s/ Steven Chernys
----------------------------------
Name: Steven Chernys
Title: Vice President

ACCESS INDUSTRIES, LLC

By: /s/ Steven Chernys
----------------------------------
Name: Steven Chernys
Title: Vice President

Exhibit 10.17

STANDARD FORM OF OFFICE LEASE
The Real Estate Board of New York, Inc.

AGREEMENT OF LEASE, made as of this 30th day of November, 1995,
between TARRYTOWN CORPORATE CENTER IV, LP., having an office at 580 White
Plains Road, Tarrytown, New York 10591, party of the first part,
hereinafter referred to as OWNER and ADVANCED HEALTH CORPORATION, having an
office at 560 White Plains Road, Tarrytown, New York 10591

WITNESSETH: party of the second part,
hereinafter referred to as TENANT, (2nd) floor in the building known as and
located at 560 White Plains Road, Tarrytown, New York (the "Building"),
which demised premises are comprised of Twenty-Six Thousand, Three Hundred
and Two (26,302) rentable square feet as more particularly shown on Exhibit
"A" annexed hereto and made a part hereof (the "Demised Premises"); to
commence on the Commencement Date and expire on the Expiration Date (as
such terms are defined in Section 5 of Rider to this Lease) and at such
rental rates as set forth in Section 5 of the Rider to this Lease.

which Tenant agrees to pay in lawful money of the United States which shall
be legal tender in payment of all debts and dues, public and private, at
the payment of payment, in equal monthly installments in advance of the
first day of each month during said term, at the office of Owner or such
other place as Owner may designate, without any set off or deduction
whatsoever, except that Tenant shall pay the first monthly
installment(s) on the execution hereof (unless this lease be a renewal).

In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner
pursuant to the terms of another lease with Owner or with Owner's
predecessor in interest, Owner may at Owner's option and without notice to
Tenant add the amount of such arrears to any monthly installment of rent
payable hereunder and the same shall be payable to Owner as additional
rent.

The Parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns,
hereby covenant as follows:

Rent Occupancy 1. Tenant shall pay the rent as above and as hereinafter
provided,
2. Tenant shall use and occupy demised premises for
executive and administrative offices and for no other
purpose.

Tenant
Alterations: 3. THIS SECTION INTENTIONALLY OMITTED.

Maintenance 4. Tenant shall, throughout the term of this lease, take
and good care of the demised premises and the fixtures and
Repairs: appurtenances therein. Tenant shall be responsible for
all damage or injury to the demised premises or any
other part of the building and the systems and equipment thereof, whether
requiring structural or nonstructural repairs caused by or resulting from
carelessness, omission, neglect or improper conduct of Tenant, Tenant's
subtenants, agents, employees, invitees or licensees, or which arise out of
any work, labor, service or equipment done for or supplied to Tenant or any
subtenant or arising out of the installation, use or operation of the
property or equipment of Tenant or any subtenant. Tenant shall also repair
all damage to the building and the demised premises caused by the moving of
Tenant's fixtures, furniture and equipment. Tenant shall promptly make, at
Tenant's expense, all repairs in and to the demised premises for which
Tenant is responsible, using only the contractor for the trade or trades in
question, selected from a list of at least two contractors per trade
submitted by Owner. Any other repairs in or to the building or the
facilities and systems thereof for which Tenant is responsible shall be
performed by Owner at the Tenant's expense. Owner shall maintain in good
working order and repair the exterior and the structural portions of the
building, including the structural portions of its demised premises, and
the public portions of the building interior and the building plumbing,
electrical, heating and ventilating systems (to the extent such systems
presently exist) serving the demised premises. Tenant agrees to give
prompt notice of any defective condition in the premises for which Owner
may be responsible hereunder. There shall be no allowance to Tenant for
diminution of rental value and no liability on the part of Owner by reason
of inconvenience, annoyance or injury to business arising from Owner or
others making repairs, alterations, additions or improvements in or to any
portion of the building or the demised premises or in and to the fixtures,

<PAGE>

appurtenances or equipment thereof. It is specifically agreed that Tenant
shall not be entitled to any setoff or reduction of rent by reason of any
failure of Owner to comply with the covenants of this or any other article
of this Lease. Tenant agrees that Tenant's sole remedy at law in such
instance will be by way of an action for damages for breach of contract.
The provisions of this Article 4 shall not apply in the case of fire and
other casualty which are dealt with in Article 9 hereof.

Window 5. Tenant will not clean not require, permit, suffer or
Cleaning: allow any window in the demised premises to be cleaned
from the outside in violation of Section 202 of the
Labor Law or any other applicable law or of the Rules of the Board of
Standards and Appeals, or of any other Board or body having or asserting
jurisdiction.

Requirements 6. Prior to the commencement of the lease term, if
of Law, Tenant is then in possession, and at all times
Fire Insurance, thereafter, Tenant, at Tenant's sole cost and expense,
Floor Loads: shall promptly comply with all present and future laws,
orders and regulations of all state, federal, municipal
and local governments, departments, commissions and boards and any
direction of any public officer pursuant to law, and all orders, rules and
regulations of the New York Board of Fire Underwriters, Insurance Services
Office, or any similar body which shall impose any violation, order or duty
upon Owner or Tenant with respect to the demised premises, whether or not
arising out of Tenant's use or manner of use thereof, (including Tenant's
permitted use) or, with respect to the building if arising out of Tenant's

<PAGE>

use of manner of use of the premises or the building (including the use
permitted under the lease). Nothing herein shall require Tenant to make
structural repairs or alterations unless Tenant has, by its manner of use
of the demised premises or method of operation therein, violated any such
laws, ordinances, orders, rules, regulations or requirements with respect
thereto. Tenant may, after securing Owner to Owner's satisfaction against
all damages, interest, penalties and expenses, including, but not limited
to, reasonable attorney's fees, by cash deposit or by surety bond in an
amount and in a company satisfactory to Owner, contest and appeal any such
laws, ordinances, orders, rules, regulations or requirements provided same
is done with all reasonable promptness and provided such appeal shall not
subject Owner to prosecution for a criminal offense or constitute a default
under any lease or mortgage under which Owner may be obligated, or cause
the demised premises or any part thereof to be condemned or vacated.
Tenant shall not do or permit any act or thing to be done in or to the
demised premises which is contrary to law, or which will invalidate or be
in conflict with public liability, fire or other policies of insurance at
any time carried by or for the benefit of Owner with respect to the demised
premises or the building of which the demised premises form a part, or
which shall or might subject Owner to any liability or responsibility to
any person or for property damage. Tenant shall not keep anything in the
demised premises except as now or hereafter permitted by the Fire
Department, Board of Fire Underwriters, Fire Insurance Rating Organization
or other authority having jurisdiction, and then only in such manner and
such quantity so as not to increase the rate for fire insurance applicable
to the building, nor use the premises in a manner which will increase the
insurance rate for the building or any property located therein over that
in effect prior to the commencement of Tenant's occupancy. Tenant shall
pay all costs, expenses, fines, penalties, or damages, which may be imposed
upon Owner by reason of Tenant's failure to comply with the provisions of
this article and if by reason of such failure the fire insurance rate
shall, at the beginning of this lease or at any time thereafter, be higher
than it otherwise would be, then Tenant shall reimburse Owner, as
additional rent hereunder, for that portion of all fire insurance premiums
thereafter paid by Owner which shall have been charged because of such
failure by Tenant. In any action or proceeding wherein Owner and Tenant
are parties, a schedule or "make-up" of rate for the building or demised
premises issued by the New York Fire Insurance Exchange, or other body
making fire insurance rates applicable to said premises shall be conclusive
evidence of the facts therein stated and of the several items and charges
in the fire insurance rates than applicable to said premises. Tenant shall
not place a load upon any floor of the demised premises exceeding the floor
load per square foot area which it was designed to carry and which is
allowed by law. Owner reserves the right to prescribe the weight and
position of all safes, business machines and mechanical equipment. Such
installations shall be placed and maintained by Tenant, at Tenant's
expense, in setting sufficient, in Owner's judgement, to absorb and prevent
vibration, noise and annoyance.

Subordination 7. THIS SECTION INTENTIONALLY OMITTED.

Property 8. Owner or its agents shall not be liable for damages to
Loss, Damage, property of Tenant or of others entrusted to employees of the
Reimburse- building, nor for loss or damage to any property of Tenant by
ment, Indem- theft or otherwise, nor for any injury or damage to persons or
nity: property resulting from any cause of whatsoever nature, unless
caused by or due to the negligence of Owner, its agents or
employees. Owner or its agents will not be liable for any such damage caused
by other tenants or persons in, upon or about said building or caused by
operations in instruction of any private, public or quasi public work.

If at any time any windows of the demised premises are temporarily closed,
darkened or bricked up (or permanently closed, darkened or bricked up, if
required by law) for any reason whatsoever including, but not limited to Owner's
own acts, Owner shall not be liable for any damage Tenant may sustain thereby
and Tenant shall not be entitled to any compensation therefor nor abatement or
diminution of rent nor shall the same release Tenant from its obligations
hereunder nor constitute an eviction. Tenant shall indemnify and save
harmless Owner against and from all liabilities, obligations, damages,
penalties, claims, costs and expenses for which Owner shall not be reimbursed
by insurance, including reasonable attorneys fees, paid, suffered or incurred
as a result of any breach by Tenant, Tenant's agents, contractors, employees,
invitees, or licensees, of any covenant or condition of this lease, or the
carelessness, negligence of improper conduct of the Tenant, Tenant's agents,
contractors, employees, invitees or licensees. Tenant's liability under this
lease

<PAGE>

extends to the acts and omissions of any sub-tenant, and any agent,
contractor, employee, invitee or licensee of any sub-tenant. In case any
action or proceeding is brought against Owner by reason of any such claim,
Tenant, upon written notice from Owner, will, at Tenant's expense, resist
or defend such action or proceeding by counsel approved by Owner in writing
such approval not to be unreasonably withheld.

Destruction 9. (a) If the demised premises or any part thereof shall
Fire and Other be damaged by fire or other casualty, Tenant shall give
Casualty: immediate notice thereof to Owner and this lease shall
continue in full force and effect except as hereinafter
set forth. (b) If the demised premises are partially damaged or rendered
partially unusable by fire or other casualty, the damages thereto shall be
repaired by and at the expense of Owner and the rent, until such repair
shall be substantially completed, shall be apportioned from the day
following the casualty according to the part of the premises which is
usable. (c) If the demised premises are totally damaged or rendered
wholly unusable by fire or other casualty, then the rent shall be
proportionate by paid up to the time of the casualty and thenceforth shall cease
until the date when the premises shall have been repaired and restored by
Owner subject to Owner's right to elect not to restore the same as
hereinafter provided. (d) If the demised premises are rendered wholly
unusable or (whether or not the demised premises are damaged in whole or in
part) if the building shall be so damaged that Owner shall decide to
demolish it or to rebuild it, then, in any of such events, Owner may elect
to terminate this lease by written notice to Tenant, given within 90 days
after such fire or casualty, specifying a date for the expiration of the
lease, which date shall not be more than 60 days after the giving of such
notice, and upon the date specified in such notice the term of this lease
shall expire as full and completely as if such date were the date set forth
above for the termination of this lease and Tenant shall forthwith quit,
surrender and vacate the premises without prejudice however, to Landlord's
rights and remedies against Tenant under the lease provisions in effect
prior to such termination, and any rent owing shall be paid up to such date
and any payments of rent made by Tenant which were on account of any period
subsequent to such date shall be returned to Tenant. Unless Owner shall
serve a termination notice as provided for herein, Owner shall make the
repairs and restorations under the conditions of (b) and (c) hereof, with
all reasonable expedition, subject to delays due to adjustment of insurance
claims, labor troubles and causes beyond Owner's control. 1. After any such
casualty, Tenant shall cooperate with Owner's restoration by removing from
the premises as promptly as reasonably possible all of Tenant's salvageable
inventory and movable equipment, furniture, and other property. Tenant's
liability for rent shall resume five (5) days after written notice from
Owner that the premises are substantially ready for Tenant's occupancy.
2.(e) Nothing contained hereinabove shall relieve Tenant from liability

<PAGE>

that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, each party shall look first to any insurance
in its favor before making any claim against the other party for recovery for
loss or damage resulting from fire or other casualty, and to the extent that
such insurance is in force and collectible and to the extent permitted by law,
Owner and Tenant each hereby releases and waives all right of recovery against
the other or any one claiming through or under each of them by way of
subrogation or other otherwise. The foregoing release and waiver shall be in
force only if both releasors' insurance policies contain a clause providing
that such a release or waiver shall not invalidate the insurance. If, and to
the extent, that such waiver can be obtained only by the payment of additional
premiums, then the party benefitting from the waiver shall pay such premium
within ten days after written demand or shall be deemed to have agreed that
the party obtaining insurance coverage shall be free of any further obligation
under the provisions hereto with respect to waiver of subrogation. Tenant
acknowledges that Owner will not carry insurance on Tenant's furniture
and/or furnishings of any fixtures or equipment, improvements, or
appurtenances removable by Tenant and agrees that Owner will not be
obligated to repair any damage thereto or replace the same. (f) Tenant
hereby waives the provisions of Section 227 of the Real Property Law and
agrees that the provisions of this article shall govern and control in lieu
thereof.

Eminent 10. If the whole or any part of the demised premises shall
Domain be acquired or condemned by Eminent Domain for any
public or quasi public use or purpose, then and in
that event the term of this lease shall cease and terminate from the date of
title vesting in such proceeding and Tenant shall have no claim for the
value of any unexpired term of said lease and assigns to Owner, Tenant's
entire interest in any such award.

Assignment, 11. THIS SECTION INTENTIONALLY OMITTED.
Mortgage,
Etc.:

Electric 12. Rates and conditions in respect to submetering or rent
Current: inclusion, as the case may be, to be added in RIDER
attached hereto. Tenant covenants and agrees that at
all times its use of electric current shall not exceed the capacity of
existing feeders to the building or the risers or wiring installation and
Tenant may not use any electrical equipment which, in Owner's opinion,
reasonably exercised, will overload such installations or interfere with the
use thereof by other tenants of the building. The change at any time of the
character of electric service shall in no wise make Owner liable or responsible
to Tenant, for any loss, damages or expenses which Tenant may sustain.

Access to 13. Owner or Owner's agents shall have the right (but shall
Premises: not be obligated) to enter the demised premises in any emergency
at any time, and, at other reasonable times (3) to examine the
same and to make such repairs, replacements and improvements as Owner may deem
necessary and reasonably desirable to the demised premises or to any other
portion of the building or which Owner may elect to perform. Tenant shall
permit Owner to use and maintain and replace pipes and conduits in and through
the demised premises and to erect new pipes and conduits therein provided they
are concealed within the walls, floor, or ceiling. Owner may, during the
progress of any work in the demised premises, take all necessary materials and
equipment into said premises without the same constituting an eviction nor
shall the Tenant be entitled to any abatement of rent while such work is in
progress nor to any damages by reason of loss or interruption of business or
otherwise (4). Throughout the term hereof Owner shall have the right to enter
the demised premises at reasonable hours for the purpose of showing the

<PAGE>

sale to prospective purchasers or mortgagees of the building, and during the
last six months of the term for the purpose of showing the same to prospective
tenants. If Tenant is not present to open and permit an entry into the
premises, Owner or Owner's agents may enter the same whenever such entry may
be necessary or permissible by master key or forcibly and provided reasonable
care is exercised to safeguard Tenant's property, such entry shall not render
Owner or its agents liable therefor, nor in any event shall the obligations of
Tenant hereunder be affected. If during the last month of the term Tenant
shall have removed all or substantially all of Tenant's property therefrom
Owner may immediately enter, alter, renovate or redecorate the demised premises
without limitation or abatement of rent, or incurring liability to Tenant for
any compensation and such act shall have no effect on this lease or Tenant's
obligations hereunder.

Vault, 14. No Vaults, vault space or area, whether or not enclosed
Vault Space, or covered, not within the property line of the
Area: building is leased hereunder, anything contained in or
indicated on any sketch, blue print or plan, or
anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of
the building. All vaults and vault space and all such areas not within the
property line of the building, which Tenant may be permitted to use and/or
occupy, is to be used and/or occupied under a revocable license, and if any
such license be revoked, or if the amount of such space or area be
diminished or required by any federal, state or municipal authority or
public ability, Owner shall not be subject to any liability nor shall
Tenant be entitled to any compensation or diminution or abatement of rent,
nor shall such revocation, diminution or requisition be deemed constructive
or actual eviction. Any tax, fee or charge of municipal authorities for
such vault or area shall be paid by Tenant.

Occupancy: 15. Tenant will not at any time use or occupy the demised
premises in violation of the certificate of occupancy
issued for the building of which the demised premises are a part. Tenant has
inspected the premises and accepts them as is, subject to the riders annexed
hereto with respect to Owner's work, if any. In any event, Owner makes no
representation as to the condition of the premises and Tenant agrees to accept
the same subject to violations, whether or not of record.

Bankruptcy: 16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by
the sending of a written noticed to Tenant within a reasonable time after the
happening of any one or more of the following events: (1) the commencement of
a case in bankruptcy or under the laws of any state naming Tenant as the debtor;
or (2) the making by Tenant of an assignment or any other arrangement for the
benefit of creditors under any state statute. Neither Tenant nor any
person claiming through or under Tenant, or by reason of any statute or
order of court, shall thereafter be entitled to possession of the premises
demised but shall forthwith quit and surrender the premises. If this lease
shall be assigned in accordance with its terms, the provisions of this
Article 16 shall be applicable only to the party then owning Tenant's
interest in this lease.

(b) it is stipulated and agreed that in the event of
the termination of this lease pursuant to (a) hereof, Owner shall
forthwith, notwithstanding any other provisions of this lease to the
contrary, be entitled to recover from Tenant as and for liquidated damages
an amount equal to the difference between the rent reserved hereunder for
the unexpired portion of the term demised and the fair and reasonable
rental value of the demised premises for the same period. In the
computation of such damages the difference between any installment of rent
becoming due hereunder after the date of termination and the fair and
reasonable rental value of the demised premises for the period for which
such installment was payable shall be discounted to the date of termination
at the rate of four percent (4%) per annum. If such premises or any part
thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
reletting shall be deemed to be the fair and reasonable rental value for
the part or the whole of the premises so re-let during the term of the re-
letting. Nothing herein contained shall limit or prejudice the right of
the Owner to prove for and obtain as liquidated damages by reason of such
termination, an amount equal to the maximum allowed by any statute or rule
of law in effect at the time when, and governing the proceedings in which,
such damages are to be proved, whether or not such amount be greater, equal
to, or less than the amount of the difference referred to above.

Default: 17. (1) If Tenant defaults in fulfilling any of the
covenants of this lease other than the covenants for the
payment of rent or additional rent; or if the demised premises become vacant
or deserted; or if any execution or attachment shall be issued against Tenant
or any of Tenant's property whereupon the demised premises shall be taken or
occupied by someone other than Tenant; or if this lease be rejected under
Sec. 235 of Title 11 of the U.S. Code (bankruptcy code); or if Tenant shall
fail to move into or take possession of the premises within fifteen (15) days
after the commencement of the term of this lease, then, in any one or more of
such events, upon Owner serving a written five (5) days notice upon Tenant
specifying the nature of said default and upon the expiration of said five
(5) days, if Tenant shall have failed to comply with or remedy such
default, or if the said default or omission complained of shall be of a
nature that the same cannot be completely cured or remedied within said
five (5) day period, and if Tenant shall not have diligently commenced
curing such default within such five (5) day period, and shall not
thereafter with reasonable diligence and in good faith, proceed to remedy
or cure such default, then Owner may serve a written three (3) day's notice

<PAGE>

of cancellation of this lease upon Tenant, and upon the expiration of said
three (3) days this lease and the term thereunder shall end and expire as
fully and completely as if the expiration of such three (3) day period were
the day herein definitely fixed for the end and expiration of this lease
and the term thereof and Tenant shall then quit and surrender the demised
premises to Owner but Tenant shall remain liable as hereinafter provided.

(2) If the notice provided for in (1) hereof shall have
been given, and the term shall expire as aforesaid; or if Tenant shall make
default in the payment of the rent reserved herein or any item of
additional rent herein mentioned or any part of either or in making any
other payment herein required; then and in any of such events Owner may
without notice, re-enter the demised premises either by force or otherwise,
and dispossess Tenant by summary proceedings or otherwise, and the legal
representative of Tenant or other occupant of demised premises and remove
their effects and hold the premises as if this lease had been made, and
Tenant hereby waives the service of notice of intention to re-enter or to
institute legal proceedings to that end. If Tenant shall make default
hereunder prior to the date fixed as the commencement of any renewal or
extension of this lease, Owner may cancel and terminate such renewal or
extension agreement by written notice.

Remedies of 18. In case of any such default, re-entry, expiration and/
Owner and or dispossess by summary proceedings or otherwise, (a) the rent
Waiver shall of become due thereupon and be paid up to the time of such
Redemption: re-entry, dispossess and/or expiration, (b) Owner may re-let
the premises or any part or parts thereof, either in the name
of Owner or otherwise, for a term or terms, which may at Owner's option be
less than or exceed the period which would otherwise have constituted the
balance of the term of this lease and may grant concessions or free rent or
charge a higher rental than that in this lease, and/or (c) Tenant or the legal
representatives of Tenant shall also pay Owner as liquidated damages for the
failure of Tenant to observe and perform said Tenant's covenants herein
contained, any deficiency between the rent hereby reserved and/or covenanted
to be paid and the net amount, if any, of the rents collected on account of
the lease or leases of the demised premises for each month of the period which
would otherwise have constituted the balance of the term of this lease. The
failure of Owner to re-let the premises or any apart or parts thereof shall not
release or affect Tenant's liability for damages. (5) In computing such
liquidated damages there shall be added to the said deficiency such
expenses as Owner may incur in connection with re-letting, such as legal
expenses, attorneys' fees, brokerage, advertising and for keeping the
demised premises in good order or for preparing the same for re-letting.
Any such liquidated damages shall be paid in monthly installments by Tenant
on the rent day specified in this lease and any suit brought to collect the
amount of the deficiency for any month shall not prejudice in any way the
rights of Owner to collect the deficiency for any subsequent month by a
similar proceeding. Owner, in putting the demised premises in good order
or preparing the same for re-rental may,at Owner's option, make such
alteration, repairs, replacements, and/or decorations in the demised
premises as Owner, in Owner's sole judgement, considers advisable and
necessary for the purpose of re-letting the demised premises, and the
making of such alterations, repairs, replacements, and/or decorations shall
not operate or be construed to release Tenant form liability hereunder as
aforesaid. Owner shall in no event be liable in any way whatsoever for
failure to re-let the demised premises, or in the event that the demised
premises are re-let, for failure to collect he rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess,
if any, of such net rents collected over the sums payable by Tenant to
Owner hereunder. In the event of a breach or threatened breach by Tenant
of any of the covenants or provisions hereof, Owner shall have the right of
injunction and the right to invoke any remedy allowed at law or in equity
as if re-entry, summary proceedings and other remedies were not herein
provided for. Mention in this lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of Tenant being evicted or dispossessed
for any cause, or in the event of Owner obtaining possession of demised
premises, by reason of the violation by Tenant of any of the covenants and
conditions of this lease, or otherwise.

Fees and 19. If Tenant shall default in the observance or
Expenses: performance of any term or covenant on Tenant's part to be
observed or performed under or by virtue of any of the terms or
provisions in any article of this lease, then, unless otherwise provided
elsewhere in this lease, Owner may immediately or at any time thereafter and
without notice perform the obligation of Tenant thereunder. If Owner, in
connection with the foregoing or in connection with any default by

<PAGE>

Tenant in the covenant to pay rent hereunder, makes any expenditures or
incurs any obligations for the payment of money, including but not limited
to attorney's fees, in instituting, prosecuting or defending any action or
proceeding, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses
incurred by reason of Tenant's default shall be deemed to be additional
rent hereunder and shall be paid by Tenant to Owner within five (5) days of
rendition of any bill or statement to Tenant therefor. If Tenant's lease
term shall have expired at the time of making of such expenditures or
incurring of such obligations, such sums shall be recoverable by Owner as
damages.

Building 20. Owner shall have the right at any time without the same
Alteration constituting an eviction and without incurring liability to Tenant
and therefor to change the arrangement and/or location of public
Management: entrances, passageways, doors, doorways, corridors, elevators,
stairs, toilets or other public parts of the building and to
change the name, number or designation by which the building may be known.
(6) There shall be no allowance to Tenant for diminution of rental value and
no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising form Owner or other Tenants making any repairs in
the building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition
of such controls of the manner of access to the building by Tenant's social or
business visitors as the Owner amy deem necessary for the security of the
building and its occupants.

No Repre- 21. Nether Owner not Owners's agents have made any
sentations by representations or promises with respect to the physical
Owner: condition of the building, the land upon which

<PAGE>

it is elected or the demised premises, the rents, leases, expenses of
operation or any other matter or thing affecting or related to the premises
except as herein expressly set forth and no rights, casements or licenses are
acquired by Tenant by implication or otherwise except as expressly set forth
in the revisions of this lease. Tenant has inspected the building and the
demised premises and is thoroughly acquainted with their condition and agrees
to take the same "as is" and acknowledges that the taking of possession of the
demised premises by Tenant shall be conclusive evidence that the said premises
and the building of which the same form a part were in good and satisfactory
condition at the time such possession was so taken, except as to latent
defects. All understandings and agreements heretofore made between the
parties hereto are merged in this contract, which alone fully and completely
expresses the agreement between Owner and Tenant and any executory agreement
hereafter made shall be ineffective to change, modify, discharge or effect an
abandonment of it in whole or in part, unless such executory agreement is in
writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought.

End of 22. Upon the expiration or other termination of the term of
Term: this lease, Tenant shall quit and surrender to Owner the
demised premises, broom clean, in good order and condition,
ordinary wear and damages which Tenant is not required to repair as provided
elsewhere in this lease excepted, and Tenant shall remove all its property.
Tenant's obligation to observe or perform this covenant shall survive the
expiration or other termination of this lease. If the last day of the term of
this Lease or any renewal thereof, falls on Sunday, this lease shall expire at
noon on the preceding Saturday unless it be a legal holiday in which case it
shall expire at noon on the preceding business day.

Quiet 23. Owner covenants and agrees Tenant may peaceably and quietly
Enjoyment: enjoy the premises hereby demised, subject, nevertheless, to the
terms and conditions of this lease including, but not limited to,
Article 31 hereof and to the ground leases, underlying leases and mortgages
herein before mentioned.

Failure 24. If Owner is unable to give possession of the demised
to Give premises on the date of the commencement of the term hereof,
Possession: because of the holding-over or retention of possession of any
tenant, undertenant or occupants or if the demised premises are
located in a building being constructed, because such building has not been
sufficiently completed to make the premises ready for occupancy or because of
the fact that a certificate of occupancy has not been procured or for any
other reason, Owner shall not be subject to any liability at or failure to
give possession on said date and the validity of the lease shall not be
impaired under such circumstances, nor shall the same be construed in any wise
to extend the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession) until after Owner shall have given Tenant written notice that
the premises are substantially ready for Tenant's occupancy. If permission
is given to Tenant to enter into the possession of the demised premises or
to occupy premises other than the demised premises prior to the date
specified as the commencement of the term of this lease, Tenant covenants
and agrees that such occupancy shall be deemed to be under all the terms,
covenants, conditions and provisions of this lease, except as to the
covenant to pay rent. The provisions of this article are intended to
constitute "an express provision to the contrary" within the meaning of
Section 223-a of the New York Real Property Law.

No Waiver: 25. The failure of Owner to seek redress for violation of,
or to insist upon the strict performance of any covenant or
condition of this lease or of any of the Rules or Regulations, set forth or
hereafter adopted by Owner, shall not prevent a subsequent act which would have
originally constituted a violation from having all the force and effect of
an original violation. The receipt by Owner of rent with knowledge of the
breach of any covenant of this lease shall be deemed to have been waived by
Owner unless such waiver be in writing signed by Owner. No payment by
Tenant or receipt by Owner of a lesser amount than the monthly rent herein
stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement of statement of any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Owner may accept such check or payment without prejudice
to Owner's right to recover the balance of such rent or pursue any other
remedy in his lease provided. No act or thing done by Owner or Owner's
agents during the term hereby demised shall be deemed an acceptance of a
surrender of said premises, and no agreement to accept such surrender
shall be valid unless in writing sighed by Owner. No employee of Owner or
Owner's agent shall have any power to accept the keys of said premises
prior to the termination of the lease and the delivery of key to any such
agent or employee shall not operate as a termination of the lease or a
surrender of premises.

Waiver of 26. It mutually agreed by and between Owner and Tenant that
Trial by Jury: the respective parties hereto shall and they hereby do waive
trial by jury in any action, proceeding or counter-claim brought
by either of the parties hereto against the other (except for personal injury
or property damage) on any matters whatsoever arising out of or in any way
connected with this lease, the relationship of Owner and Tenant, Tenant's use
of or occupancy of said premises, and any emergency statutory or any other
statutory remedy. It is further mutually agreed that in the event Owner
commences any summary proceeding for possession of the premises, Tenant will
not interpose any counterclaim of whatever nature or description in any such
proceeding including a counterclaim under Article 4.

Inability to 27. This Lease and the obligation of Tenant to pay rent
Perform: hereunder and perform all of the other covenants and agreements
hereunder on part of Tenant to be performed shall in no wise be
affected, impaired or excused because Owner is unable to fulfill any of its
obligations under this lease or to supply or is delayed in supplying any
service expressly or impliedly to be supplied or is unable to make, or is
delayed in making any repair, additions, alterations or decorations or is
unable to supply or is delayed in supplying any equipment or fixtures if Owner
is prevented or delayed from so doing by reason of strike or labor troubles or
any cause whatsoever including, but not limited to, government preemption in
connection with a National Emergency or by reason of any rule, order or
regulation of any department or subdivision thereof of any government
agency or by reason of the conditions of supply and demand which have been
or are affected by war or other emergency.

Bills and 28. Except as otherwise in this lease provided, a bill,
Notices: statement, notice or communication which Owner may desire or be
required to give to Tenant, shall be deemed sufficiently given
or rendered if, in writing, delivered to Tenant personally or sent by registered
or certified mail addressed to Tenant at the building of which the demised
premises form a part or at the last known residence address or business address
of Tenant or left at any of the aforesaid premises addressed to Tenant (7).
and the time of the rendition of such bill or statement and of the giving of
such notice or communication shall be deemed to be the time when the same is
delivered to Tenant, mailed, or left at the premises as herein provided. Any
notice by Tenant to owner must be served by registered or certified mail
addressed to Owner at the address first hereinabove given or at such other
address as Owner shall designate by written notice. (8)

Services 29. As long as Tenant is not in default under any of the
Provided by convents of this lease, Owner shall provide: (a) necessary
Owners elevator facilities and have one elevator subject to call at
all other times; (b) heat to the demised premises when and as
required by law, on business days from 8 a.m. to 6 p.m.; (c) water for ordinary
lavatory purposes, but if Tenant uses or consumes water for any other purposes
or in unusual quantities (of which fact Owner shall be the sole judge). Owner
may install a water meter at Tenant's expense which Tenant shall thereafter
maintain at Tenant's expense in good working order and repair to register
such water consumption and Tenant shall pay for water consumed as shown on
said meter as additional rent as and when bills are rendered; (d) cleaning
service for the demised premises on business days at Owner's expense
provided that the same are kept in order by Tenant; (e) If the demised
premises are serviced by Owner's air conditioning/cooling and ventilating
system, air conditioning/cooling will be furnished to tenant form May 15th
through September 30th on business days (Mondays through Fridays, holidays
excepted) from 8:00 a.m. to 6:00 p.m., and ventilation will be furnished on
business days during the aforesaid hours except when air conditioning/cooling
is being furnished as aforesaid.

<PAGE>

If Tenant requires air conditioning/cooling or ventilation for more extended
hours or on Saturdays, Sundays or on holidays, as defined under Owner's
contract with Operating Engineers Local 94-94A, Owner will furnish the same at
Tenant's expense. RIDER to be added in respect to rates and conditions for
such additional service:

(f) Owner reserves the right to stop services of the heating, elevators,
plumbing, air-conditioning, power systems or cleaning or other services, if
any, when necessary by reason of accident or for repairs, alterations,
replacements or improvements necessary or desirable in the judgment of
Owner for as long as may be reasonably required by reason thereof. If the
building of which the demised premises are a part supplies manually
operated elevator service, Owner at any time may substitute automatic-
control elevator service and upon ten days's written notice to Tenant,
proceed with alterations necessary therefor without in any wise affecting
this lease or the obligation of Tenant hereunder. The same be done with a
minimum of inconvenience to Tenant and Owner shall pursue the alteration
with due diligence.

Caption: 30. The Captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the
scope of this lease nor the intent of any provisions thereof.

Definitions: 31. The term "office", or "offices", wherever used in this
lease, shall not be construed to mean premises used as a store
or stores, for the sale or display, at any time, or goods, wares or
merchandise, of any kind, or as a restaurant, shop, booth, bootblack or other
stand, barber shop, or for other similar purposes or for manufacturing. The
term "Owner" means a landlord or lessor, and as used in this lease means only
the owner or the mortgagee in possession, for the time being of the land and
building (or the owner of a lease of the building or of the land and building)
of which the demised premises form a part, so that in the event of any sale or
sales of said land and building or of said lease, or in the event of a
lease of said building, or of the land and building, the said Owner shall
be and hereby is entirely freed and relieved of all covenants and
obligations of Owner hereunder, and it shall be deemed and construed
without further agreement between the parties or their successors in
interest, or between the and the purchaser, at any such sale, or the said
lessee of the building, or of the land and building, that the purchaser or
the lessee of the building has assumed and agreed to carry out any and all
covenants and obligations of Owner, hereunder. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical
legal meaning. The term "business days" as used in this lease shall
exclude Saturdays (except such portion thereof as is covered by specific
hours in Article 29 hereof), Sundays and all days observed by the State or
Federal Government as legal holidays and those designated as holidays by
the applicable building service union employees service contract or by the
applicable Operating Engineers contract with respect to IIVAC service.

<PAGE>

Adjacent
Excavation--
Shoring: 32. If an excavation shall be made upon land adjacent to the
demised premises, or shall be authorized to be made, Tenant
shall afford to the person causing or authorized to cause such excavation,
license to enter upon the demised premises for the purpose of doing such work
as said person shall deem necessary to preserve the wall or the building of
which demised premises form a part from injury or damage and to support the
same by proper foundations without any claim for damages or indemnity against
Owner, or diminution or abatement or rent.

Rule and
Regulations: 33. Tenant and Tenant's servants, employees, agents, visitors,
and licensees shall observe faithfully, and comply strictly
with, the Rules and Regulations and such other and further reasonable Rules and
Regulations as Owner or Owner's agents may from time to time adopt. Notice of
any additional rules or regulations shall be given in such manner as Owner may
elect. In case Tenant disputes the reasonableness of any additional Rule or
Regulation hereafter made or adopted by Owner or Owner's agents, the parties
hereto agree to submit the question of the reasonableness of such Rule or
Regulation for decision to the New York office of the American Arbitration
Association, whose determination shall be final and conclusive upon the parties
hereto. The right to dispute the reasonableness of any additional Rule or
Regulation upon Tenant's part shall be deemed waived unless the same shall be
asserted by service of a notice, in writing upon Owner within ten (10) days
after the giving of notice thereof. Nothing in this lease contained shall be
construed to impose upon Owner any duty or obligation to enforce the Rules and
Regulations or terms, covenants or conditions in any other lease, as against any
other tenant and Owner shall not be liable to Tenant for violation of the same
by any other tenant, its servants, employees, agents, visitors or licensees.

Security: 34. Tenant has deposited with Owner the sum of $ as
--------
security for the faithful performance and observance by Tenant of the terms,
provisions and conditions of this lease; it is agreed that in the event Tenant
defaults in respect of any of the terms, provisions and conditions of this
lease, including, but not limited to, the payment of rent and additional rent,
Owner may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional
rent or any other sum as to which Tenant is in default or for any sum which
Owner may expend or may be required to expend by reason of Tenant's default in
respect of any of the terms, covenants and conditions of this lease, including
but not limited to, any damages or deficiency in the reletting of the premises,
whether such damages or deficiency accrued before or after summary proceedings
or other re-entry by Owner. In the event that Tenant shall fully and faithfully
comply with all of the terms, provisions, covenants and conditions of this
lease, the security shall be returned to Tenant after the date fixed as the
end of the Lease and after delivery of entire possession of the demised premises
to Owner. In the event of a sale of the land and building or leasing of the
building, of which the demised premises form a part, Owner shall have the right
to transfer the security to the vendee or lessee and Owner shall thereupon be
released by Tenant from all liability for the return of such security; and
Tenant agrees to look to the new Owner solely for the return of said security,
and it is agreed that the provisions hereof shall apply to every transfer or
assignment made of the security to a new Owner. Tenant further covenants that
it will not assign or encumber or attempt to assign or encumber the monies
deposited herein as security and that neither Owner nor its successors or
assigns shall be bound by any such assignment, encumbrance, attempted assignment
or attempted encumbrance.

Estoppel 35. THIS SECTION
Certificate INTENTIONALLY
OMITTED.

Successors 36. The covenants, conditions and agreements contained in this
and Assigns: lease shall bind and inure to the benefit of Owner and
Tenant and their respective heirs, distributees, executors,

<PAGE>
administrators, successors, and except as otherwise provided
in this lease, their assigns.

The annexed Rider to Lease containing Sections 1 through 30, the Cleaning
Specifications and EXHIBITS "A," "B," and "C" are hereby incorporated herein by
reference as though set forth fully hereat.

IN WITNESS WHEREOF, Owner and Tenant have executed this lease as of the
date and year first written above.
TARRYTOWN CORPORATE CENTER IV, LP., (OWNER)

By:________________________________________
Name:______________________________________
Title:_____________________________________

ADVANCED HEALTH CORPORATION, (Tenant)

By:________________________________________
Name:______________________________________
Title:_____________________________________

CORPORATE OWNER
STATE OF NEW YORK, ss.:
County of

On this day of ,19 , before me

personally came
to me known, who being by me duly sworn, did depose and say that he resides

that he is the of

the corporation described in and which executed the foregoing instrument, as
OWNER; that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation, and that he signed his name thereto by like
order.

________________________________________

INDIVIDUAL OWNER
STATE OF NEW YORK, ss.:
County of

On this day of ,19 , before me

personally came

to me known and known to me to be the individual
described in and who, as OWNER, executed the foregoing instrument and
acknowledged to me that he executed the same.

________________________________________

CORPORATE TENANT
STATE OF NEW YORK, ss.:
County of

On this day of ,19 , before me

personally came
to me known, who being by me duly sworn, did depose and say that he resides in

that he is the of

the corporation described in and which executed the foregoing instrument, as
TENANT; that he knows The seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation, and that he signed his name thereto by
like order.

________________________________________

INDIVIDUAL TENANT
STATE OF NEW YORK, ss.:
County of

On this day of ,19 , before me
personally came

to me known and known to be the individual
described in and who, as TENANT, executed the foregoing instrument and
acknowledged to me that he executed the same.

_____________________________________________

<PAGE>

GUARANTY

FOR VALUE RECEIVED, and in consideration for, and as an inducement to OWNER
making the within lease with Tenant, the undersigned guarantees to Owner,
Owner's successors and assigns, the full performance and observance of all the
covenants, conditions and agreements, therein provided to be performed and
observed by Tenant, including the "Rules and Regulations" as therein provided,
without requiring any notice of non-payment, non-performance, or non-observance,
or proof, or notice, or demand, whereby to charge the undersigned therefor, all
of which the undersigned hereby expressly waives and expressly agrees that the
validity of this agreement and the obligations of the guarantor hereunder shall
in no wise be terminated, affected or impaired by reason of the assertion by
Owner against Tenant of any of the rights or remedies reserved to Owner pursuant
to the provisions of the within lease. The undersigned further covenants and
agrees that this guaranty shall remain and continue in full force and effect as
to any renewal, modification or extension of this lease and during any period
when Tenant is occupying the premises as a "statutory tenant." As a further
inducement to Owner to make this lease and in consideration thereof, Owner and
the undersigned covenant and agree that in any action or proceeding brought by
either Owner or the undersigned against the other on any matters whatsoever
arising out of, under, or by virtue of the terms of this lease or of this
guarantee that Owner and the undersigned shall and do hereby waive trial by
jury.

Dated:___________________________19_______________

___________________________________________________________
Guarantor

___________________________________________________________
Witness
___________________________________________________________
Guarantor's Residence

__________________________________________________________
Business Address

__________________________________________________________
Firm Name

State of New York )ss.:
County of )

On this day of ,19 , before me
personally came
----------------------------------------------------------------
to me known and known to me to be the individual described in, and who executed
the foregoing Guaranty and acknowledged to me that he executed the same.

______________________
Notary

IMPORTANT - PLEASE READ

RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 33.

1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber
tires and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.

2. The water and wash closets and plumbing fixtures shall not be used for any
purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.

3. No carpet, rug or other article shall be hung or shaken out of any window of
the building; and no Tenant shall sweep or throw or permit to be swept or thrown
from the demised premises any dirt or other substances into any of the corridors
or halls, elevators, or out of the doors or windows or stairways of the building
and Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the demised premises, or permit or suffer the demised
premises to be occupied or used in a manner offensive or objectionable to Owner
or other occupants of the building by reason of noise, odors, and/or vibrations,
or interfere in any way with other Tenants or those having business therein, nor
shall any animals or birds be kept in or about the building. Smoking or
carrying lighted cigars or cigarettes in the elevators of the building is
prohibited.

4. No awnings or other projections shall be attached to the outside walls of
the building without the prior written consent of Owner.

5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation of the foregoing by any Tenant,
Owner may remove same without any liability, and may charge the expense incurred
by such removal to Tenant or Tenants violating this rule. Interior signs on
doors and directory tablet shall be inscribed, painted or affixed for each
Tenant by Owner at the expense of such Tenant, and shall be of a size, color and
style acceptable to Owner.

6. No Tenant shall mark, paint, drill into, or in any way deface any part of
the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or
other similar floor covering, so that the same shall come in direct contact with
the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.

7. No additional locks or bolts of any kind shall be pleased upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each Tenant must, upon the termination of his Tenancy,
restore to Owner all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to Owner the cost thereof.

8. Freight, furniture, business equipment, merchandise and bulky matter of any
description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease or which these Rules and Regulations are a part.

9. Canvassing, soliciting and peddling in the building is prohibited and each
Tenant shall cooperate to prevent the same.

10. Owner reserves the right to exclude from the building between the hours of
6 P.M. and 8 A.M. and at all hours on Sundays, and legal holidays all persons
who do not present a pass to the building signed by Owner. Owner will furnish
passes to persons for whom any Tenant requests same in writing. Each Tenant
shall be responsible for all persons for whom he requests such pass and shall
be liable to Owner for all acts of such persons.

11. Owner shall have the right to prohibit any advertising by any Tenant which
in Owner's opinion, tends to impair the reputation of the building or its
desirability as a building for offices, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.

12. Tenant shall not bring or permit to be brought or kept in or on the demised
premises, any inflammable, combustible or explosive fluid, material, chemical or
substance, or cause or permit any odors of cooking or other processes, or any
unusual or other objectionable odors to permeate in or emanate from the demised
premises.

13. If the building contains central air conditioning and ventilation, Tenant
agrees to keep all windows closed at all times and to abide by all rules and
regulations issued by the Owner with respect to such services. If Tenant
requires air conditioning or ventilation after the usual hours, Tenant shall
give notice in writing to the building superintendent prior to 3:00 P.M. in
the case of services required on week days, and prior to 3:00 P.M. on the day
prior in the case of after hours service required on weekends or on holidays.

14. Tenant shall not move any safe, heavy machinery, heavy equipment, bulky
matter, or fixtures into or out of the building without Owner's prior written
consent. If such safe, machinery, equipment, bulky matter or fixtures requires
special handling, all work in connection therewith shall comply with the
Administrative Code of the City of New York and all other laws and regulations
applicable thereto and shall be done during such hours as Owner may designate.

Address

Premises
TO

STANDARD FORM OF

Office
Lease

Dated 19

Rent Per Year

Rent Per Month

Term
From
To

Drawn by_____________Checked by_____________
Entered by______________Approved by________________
<PAGE>
RIDER TO A LEASE DATED AS OF NOVEMBER , 1995
BETWEEN
TARRYTOWN CORPORATE CENTER IV, L.P.
OWNER
AND
ADVANCED HEALTH CORPORATION
TENANT

In the event of a conflict between the terms, covenants, condition, and
provisions of this Rider with those of the Standard Form of Office Lease to
which this Rider is attached, or any of the Exhibits or Schedules attached
hereto, the terms, covenants, conditions and provisions of this Rider shall
govern and control the rights and obligations of the parties hereto. The
following changes are hereby made to the Standard Form of Office Lease where
indicated:

1. In the event that Owner elects to make the required repairs and/or
restore the demised premises and/or access thereto and fails to
complete said repairs and/or provide such access within Thirty (30)
days from the date of such damage or destruction, then from and after
the Thirtieth (30th) day from the date of such damage or destruction,
Owner agrees to use its best efforts to provide Tenant with up to
Twenty-Five Thousand, Four Hundred (25,400) square feet of interim
space ("Interim Space") first in the Building, then in any other
building in the Tarrytown Corporate Center, and then in any other
building in Westchester County (provided that such building is within
a reasonable distance from the Tarrytown Corporate Center) in which to
operate its business. In the event that Owner cannot provide Tenant
with Interim Space in either the Building or the Tarrytown Corporate
Center, and Owner and Tenant cannot agree on suitable Interim Space in
Westchester County within Sixty (60) days from the date of such damage
or destruction, then in such event, Tenant shall have the right, no
later than Seventy-Five (75) days from the date of such damage or
destruction (time being of the essence with respect to said date) to
serve on Owner notice of its intention to terminate this Lease on a
date which shall be not more than Thirty (30) days from the date of
Tenant's notice. If Tenant gives notice of its intention to cancel
this Lease as provided herein, then in such events, this Lease shall
terminate on the expiration of such thirty (30) day period as if such
termination date were the Expiration Date, and the Fixed Rent and
Additional Rent shall be apportioned as of such date of sooner
termination and any prepaid portion of Fixed Rent and Additional Rent
for any period after such date shall be refunded by Owner to Tenant,
PROVIDED, HOWEVER, that in the event that Tenant shall have used all
or any part of the Interim Allowance and/or Allowance (as those terms
are hereinafter defined) to perform Work (as hereinafter defined) to
the demised premises, Tenant shall be obligated to pay Owner's for the
cost of all or any part of the Work, less the amount by which Owner
was paid by its insurance company. This provision shall survive
termination of this Lease. Tenant's failure to notify Owner within
the Seventy-Five (75) day period shall be deemed a waiver of the right
to terminate this Lease.

Tenant shall have the right to use and occupy the Interim Space for a
term commencing on the date such Interim Space becomes available and
expiring at noon fifteen (15) business days from the date that Owner
notifies Tenant that the demised premises shall be repaired and/or
restored and rebuilt to its condition of the date preceding such
damage or destruction and a certificate of occupancy for the demised
premises has been issued by the governmental authority have
jurisdiction thereof (the "Interim Space Term").

During and in respect of the Interim Space Term, Tenant agrees to pay
Owner a use and occupancy charge each month equal to the Fixed Rent
and Additional Rent then due and payable immediately before such
damage or destruction together with the usual and customary electric
charge for such building. In the event that Tenant fails to vacate
the Interim Space upon the expiration of the Interim Space Term, then
in such event Tenant shall be obligated to pay Owner use and occupancy
charges at two times the then Fixed Rent and Additional Rent, until
Tenant vacates the Interim Space, in addition to all other rights and
remedies provided to Owner pursuant hereto. Owner acknowledges that
prior to expiration of Interim Space Term, Tenant may occupy the
Interim Space and demised premises and agrees that Tenant shall not be
obligated to pay Fixed Rent and Additional Rent for both premises
unless it shall holdover after the Interim Space Term.

The Interim Space Charge shall be paid, in advance, on the first day
of each and every

Page 1 of 25

<PAGE>
month during the Interim Space Term, provided, however, that if
the Interim Space Charge shall be payable for any period other
than a full month, then such Interim Space Charge shall be paid
in a proportionate amount for the number of days in each such
period and paid as and when the next monthly payment of Interim
Space Charge is due.

Tenant agrees to accept the Interim Space in its "AS IS" state
and condition during and in respect of the Interim Space Term,
without any representation or warranty, express or implied, in
fact or by law, by Owner and without recourse to Owner, as to the
nature, condition, or usability thereof or as to the use or
occupancy which may be made thereof. Owner shall not be required
to perform any alterations in and/or work to the Interim Space.
Notwithstanding the foregoing, the Interim Space shall be
suitable for general office use.

In the event that Tenant retains possession of the Interim Space,
or any part thereof, after termination of the Interim Space Term,
for any reason whatsoever, without the prior written approval of
Owner, Tenant shall: (i) pay to Owner all damages, consequential
as well as direct (including fees of counsel incurred in
connection therewith) sustained by reason of Tenant's retention
of possession of the Interim Space; and (ii) be in default under
the Lease and Owner shall be entitled to all rights and remedies
provided therein.

2. In the event that the demised premises are destroyed by reason of
fire or other casualty, and Owner elects to rebuild the demised
premises, and provided that Tenant shall have used all or any
part of the Interim Allowance and/or Allowance (as those terms
are hereinafter defined) to perform Work (as hereinafter defined)
to the demised premises, and provided further that Owner's
insurance company shall have paid Owner for the cost of all or
any part of the Work, then in such event, Tenant's obligation to
reimburse Owner for the cost of the Work shall be reduced by an
amount equal to the amount that Owner was paid by its insurance
company.

3. upon reasonable notice

4. In the event that Owner is unable to provide services which it is
obligated to provide under this Lease solely as a result of
Owner's negligence or wilful acts, and the loss of such services
causes all or a portion of the Demised Premises to be unusable or
access to the Demised Premises is barred for more than five (5)
consecutive business days, then in such event, Tenant shall be
entitled to a pro rata abatement of fixed rent according to the
part of the Demised Premises which is unusable commencing with
the sixth (6th) day that same are unusable; PROVIDED HOWEVER,
that Tenant shall not be entitled to any abatement of fixed rent
if such instability is (a) caused by any act or omission of
Tenant or any of Tenant's servants, employees, agents, visitors
or licensees; or (b) where Tenant requests Owner to make a
decoration, alteration, improvement or addition (except to the
extent caused by the negligent or wilful acts of Owner; or (c)
where the repair in question are those which Tenant is obligated
to make or furnish under any of this provisions of this Lease.

5. except that Owner will use its best efforts to reset the
premises.

6. provided that Tenant's use of the demised premises shall not be
adversely affected thereby.

7. with a copy to Jeffrey I. Citron, Esq., at Salon, Marrow, &
Dyckman, 685 Third Avenue, New York, New York 10017.

8. with a copy to Steven C. Hirsch, Esq., at 666 Old Country Road,
Suite 207, Garden City, New York 11530

Page 2 of 25

<PAGE>

RIDER TO A LEASE DATED AS OF NOVEMBER , 1995
BETWEEN
TARRYTOWN CORPORATE CENTER IV, L.P.
OWNER
AND
ADVANCED HEALTH CORPORATION
TENANT

In the event of a conflict between the terms, covenants, conditions,
and provisions of this Lease with the terms of that certain Lease between
Owner and Integrated System Solutions Corporation ("ISSC") dated January
14, 1992, or that certain sublease between ISSC and American Software, USA,
Inc. dated June 2, 1994, or any of the exhibits or schedules attached
hereto, the terms, covenants, conditions and provisions of this Lease shall
govern and control the rights and obligations of the parties hereto.

In the event of a conflict between the terms, covenants, conditions,
and provisions of this Rider with those of Standard Form of Office Lease to
which this Rider is attached, or any of the Exhibits or Schedules attached
hereto, the terms, covenants, conditions and provisions of this Exhibits or
Schedules attached hereto, the terms, covenants, conditions and provisions
of this Rider shall govern and control the rights and obligations of the
parties hereto.

This Lease is presented to the Tenant for signature by Tenant's
designee solely in said designee's capacity as representative of Tenant and
is hereby made expressly subject to the Owner's acceptance and approval by
execution by Owner and delivery to Tenant. This Lease is not to be
construed as an offer to lease and shall not in any way bind the Owner or
its designee until such time as the Owner has executed and delivered this
Lease as aforesaid.

SECTION 1
Indemnity, Liability, Insurance

Notwithstanding that joint or concurrent liability may be imposed upon
Owner by statute, ordinance, rule, regulation or court decision, and
notwithstanding any insurance furnished by Tenant to Owner pursuant to this
Lease or otherwise, Tenant covenants agrees to indemnify and save Owner and
its agency and designees harmless from and against any and all loss,
liability, fine, suits, claims, obligations, damages, costs and expenses
arising out of (a) damage or injury to goods, wares, merchandise and
property (b) for any personal injury or loss of life in, upon or about the
demised premises, or on the sidewalks adjoining the demised premises or the
building or land of the demised premises is a part (the "Property") or (c)
any failure on the part of Tenant to perform or comply with any terms,
covenants, agreements or provisions contained in this Lease to the extent
caused by Tenant, its agents, employees and contractors, except such claims
as may be the result of the negligence of Owner, its agents, employees or
contractors. Subject to the preceding sentence, Owner covenants and agrees
to indemnify and save Tenant and its agents and designees harmless from and
against liability, fines, suits, claims, obligations, damages costs and
expenses arising out of the negligent acts or omissions of Owner, its
agents, employees or contractors. The provisions of this Section shall
survive the expiration or termination of this Lease.

Tenant covenants, at its sole cost and expense, to provide to Owner on
or before the Commencement Date (as hereinafter defined), and to keep in
force during the term hereof for the benefit of Tenant, and naming Owner as
an additional insured, a commercial general liability insurance policy
protecting Owner against any liability whatsoever occasioned by accident or
negligence on or about the demised premises and/or the Property or any
appurtenances thereto. The limits of liability thereunder shall not be
less than the amount of One Million ($1,000,000.00) Dollars in respect of
any one occurrence; shall not be less than the amount of One Million Five
Hundred Thousand ($1,500,000.00) Dollars in respect of any personal injury
and advertising injury; shall not be less than the amount of Five Hundred
Thousand ($500,000.00) Dollars in respect to products and completed
operations liability, and shall not be less than a One Million
($1,000,000.00) Dollar aggregate limit. If the Tenant has other locations
that it owns or leases the said policy must include an aggregate per
location endorsement or otherwise provide that any payment with respect to
another location shall not diminish the coverage available at the demised
premises. Such policy shall name the Owner as an additional insured.
Tenant represents that it and its company level and that such program
provides coverages equal to, or exceeding the coverages required hereunder,
and such coverages will be maintained by Tenant throughout the term of this
Lease. Tenant's failure to provide and keep in force the aforementioned
insurance shall be regarded as a material default hereunder entitling Owner
to exercise any or all of the remedies as provided in this Lease in the
event of Tenant's default.
Page 3 of 25

<PAGE>
SECTION 2
Taxes

The term "Impositions" shall mean the aggregate of all taxes, charges,
transfer taxes, excises, levies, assessments and any other governmental charges
of any kind or nature, general or special, ordinary to extraordinary, presently
existing or created hereafter, foreseen or unforeseen, and any personal property
taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and
appurtenances in, upon or used in connection with the Property for the operation
thereof, which in any fiscal tax year may be assessed, levied, confirmed,
imposed upon or become due and payable out of or become a lien upon the Property
or any appurtenances thereto, provided that if because of any change in the
method of taxation of real estate any other or additional tax or assessment is
imposed upon Owner and/or the owner of the land and/or building, upon or with
respect to the land and/or building or the rents or income therefrom, or are
substitutes for or in lieu of or in addition to any taxes or assessments which
would otherwise be a real estate tax of the type referred to above, such other
tax or assessment shall also be deemed an Imposition, PROVIDED, HOWEVER, that,
except if and to the extent otherwise provided in the succeeding sentence,
Impositions shall not mean federal, state or local income taxes, franchise,
excise, gift, transfer, capital stock, estate, succession or inheritance taxes.

The term "Base Impositions" shall mean the Impositions levied or imposed
against the Property for the city and school taxes for the 1995 State, County &
Town and 1994/1995 School.

Tenant agrees to pay Owner, throughout the term of this Lease, as
additional rental, a sum equal to 20.80% percent ("Tenant's Proportionate
Share") of the amount by which the Impositions levied against the Property in
each fiscal tax year (or, in the event this Lease shall expire on other than
December 31, the applicable portion thereof) exceeds the Base Impositions.

Any amount due to Owner under the provisions of this Section shall be
payable in equal monthly installments commencing with the first day of the month
on which the Owner shall submit to Tenant a bill therefore ("Owner's Tax
Statement"). Owner shall submit to Tenant a photostatic copy of the tax bills
from the taxing authorities as conclusive evidence of the Impositions for the
prior fiscal year. Tenant shall pay to Owner upon rendition of the first
Owner's Tax Statement the amount of Tenant's Proportionate Share of the
Impositions for the fiscal tax year prior to the date of the rendition of such
first Owner's Tax Statement. Owner shall adjust all impositions for Tenant's
months in occupancy. Thereafter, such payments shall be made in equal monthly
installments of one twelfth (1/12) of the Impositions for the prior fiscal tax
year, and when the Impositions shall be ascertained for the then current fiscal
tax year, the installment then due shall be increased by an amount sufficient to
compensate Owner for any previous deficiencies in installments and thereafter
the installments shall be pro rata increases based on the Impositions for the
current fiscal tax year so that one month prior to the end of such fiscal tax
year Tenant's Proportionate share of the Impositions levied against the Property
shall be paid in full to Owner. If Owner shall be required to pay any increase
in Impositions for any fiscal tax year after Owner shall have rendered an
Owner's Tax Statement to Tenant for such fiscal tax year, the amount of Tenant's
Proportionate Share of Impositions for such fiscal tax year shall be increased,
and Tenant, on Owner's demand, shall pay its Proportionate Share of the increase
within Thirty (30) days from the date of notice therefore.

No interest shall be paid by Owner to Tenant on the monthly installments by
Tenant of Tenant's Proportionate Share of such Impositions and if an Imposition
is payable in full before the expiration of the fiscal tax year in question,
whether in installments or by a lump sum payment, the monthly payments by Tenant
shall be in such amounts that there will be a fund in the Owner's hands
sufficient to make payment of the total Imposition One (1) month prior to the
date it is due and payable without premium or penalty. Any increase in
Impositions for the fiscal tax year in which this Lease shall end shall be
apportioned so that Tenant shall pay its Proportionate Share of only that
portion of the increase for such tax year which corresponds with that portion of
the tax year as falls within the term. The Impositions for any fiscal tax year
in respect to which Tenant is obligated to pay a portion of the increase as
above set forth in this Section shall be the amount of such Impositions as
finally determined to be legally payable by legal proceedings or otherwise. In
no event shall Tenant be obligated to pay any interest or penalties imposed upon
Owner for late payment.

The Owner reserves the sole right, through available legal remedies, to
contest the validity of any Impositions or the amount of the assessed valuation
of the Property for any fiscal tax year. The commencement, maintenance,
settlement and conduct thereof shall be in the sole discretion of Owner. Tenant
shall have no right to institute or participate in any tax proceedings or other
proceedings of a similar nature.

Page 4 of 25

<PAGE>
Tenant acknowledges that Owner has, prior to the date of this Lease,
initiated application for a decrease in the assessed valuation with respect to
the Building. Tenant acknowledges and agrees that any reduction in Impositions
which may result from any proceeding involving application for a decrease in
Impositions with respect to the Building will not be paid to Tenant in the
amount of Tenant's Proportionate Share or otherwise and will not be subtracted
from the Impositions payable or paid by Tenant for the tax year to which the
reduction, refund or abatement applies and that no reimbursement shall be made
by Owner to Tenant after Owner receives or is credited with such refund
reduction or abatement. If Owner obtains a reduction in tax assessments which
results in a reduction in Impositions for any tax year, other than the Base
Year, as a result of proceedings applications filed or made on or after the date
of execution of this Lease, then for purposes of calculating Tenant's
Proportionate Share of Impositions due pursuant to this Lease for such tax year
the Impositions imposed shall be reduced accordingly and, if Owner shall receive
any tax refund or remission in respect to the Impositions for any tax year which
the Tenant has paid its Proportionate Share thereof, after first deducting
therefrom the share of Owner's cost and expense in procuring such refund or
remission proportionately attributed to the reimbursement due Tenant.

SECTION 3
Operating Cost Increases

The term "Operating Costs" shall mean and include the aggregate of all
those expenses, adjusted for full occupancy, to the extent incurred in respect
to the operation and maintenance of the Property in accordance with accepted
principles of sound management and accounting practices as applied to the
operation and maintenance of non-institutional first class office properties,
including any and all of the following: salaries, wages, hospitalization,
medical, surgical and general welfare benefits (including group life insurance),
pension payment, payroll taxes and workmen's compensation of and respecting
employees of Owner directly engaged in the operation and maintenance of the
Property, including, among others, that of the Property manager and the
manager's administrative staff (PROVIDED, HOWEVER, that in event said employee
spends part of his or her time at another building by Owner, then in such event
only that portion allocable to the Property shall be included herein); all
insurance carried by Owner applicable to the Property (including, without
limitation, primary and excess liability, vehicle insurance, fire and extended
coverage, vandalism and all broad form coverage, riot, strike and war risk
insurance, flood insurance, boiler insurance, plate glass insurance, rent
insurance and sign insurance); maintenance and repairs of grounds (including,
without limitation, all landscaping, statuary, exhibits, displays, walks,
parking and other vehicle ways and areas and common areas) underground conduits,
pipes, line equipment and systems, repaving or resurfacing portion(s) of the
Property, painting, (including line painting) and removal of snow, ice, trash,
garbage and other refuse; public light and power, steam, fuel (including oil
and/or gas used to heat the Building), utility taxes and water and sewer rental
(to the extent not otherwise included in Impositions); Property cleaning and
cleaning supplies, and window cleaning; reasonable legal expenses (other than
those for preparation of this and other leases) and accounting fees; sales and
use taxes (to the extent not otherwise included in Impositions); service
contract with independent contractors, energy providers and/or consultants,
security systems and security personnel, and traffic systems and traffic
personnel; the cost of any capital equipment or capital expenditures, subject to
the limitations hereinafter provided; and; all other expenses paid in connection
with the operation of the Property; such expenses being subject to Owner's
overhead and administrative cost of Fifteen percent (15%) PROVIDED, HOWEVER,
that Owner shall not be entitled to an overhead and administrative cost on
interest paid for any capital equipment or expenditures as provided for in this
Lease.

If Owner shall purchase any item of capital equipment or make any capital
expenditure intended to result in savings or reductions in Operating Costs and
which Owner reasonably believes shall provide Tenant with the benefit of a
savings or reduction in such Operating Costs based upon the advice of Owner's
consultants, then the costs for same shall be included in Operating Costs, to
the extent hereinafter set forth. Owner shall deliver to Tenant, promptly
following Tenant's request, a copy of any concluded studies conducted by Owner
which show anticipated savings or reductions in Operating Costs as a result of
any planned capital expenditure or purchase of capital equipment. The costs of
capital equipment or capital expenditures shall be included in Operating Costs
in the year in which the costs are incurred and in any subsequent year, on a
straight-line basis, amortized over the useful life of such items, with an
interest factor equal to the interest rate payable by Owner on such item. If
Owner shall lease any such item of capital equipment designed to result in
savings or reductions in any Operating Costs, then the rentals and other costs
paid pursuant to such leasing shall be included in such Operating Costs for the
year in which they were incurred.

If Owner shall purchase any item of capital equipment or make any other
capital expenditure in order to comply with legal requirements or environmental
laws or in order to
Page 5 of 25

<PAGE>
benefit or increase the safety and security of the Building, Property, or
its tenants and/or invitees, then the costs for same shall be included in
Operating Costs for the year in which the costs are incurred and subsequent
years, on a straight-line basis, amortized over the useful life of such
items, with an interest factor equal to the interest rate payable by Owner
on such items at the time Owner incurred said costs. If Owner shall lease
any such item of capital equipment to comply with legal requirements,
insurance requirements, environmental laws or to increase safety and
security then, in such event, the rentals and other costs paid pursuant to
such leasing shall be included in Operating Costs for the year in which
they were incurred.

Operating Costs shall not include: (a) costs of repairs or other work
occasioned by fire, windstorm or other casualty or condemnation to the
extent reimbursed to Owner by insurers or by governmental authorities in
eminent domain; (b) leasing commissions, attorney's fees, costs and
disbursements and other expenses incurred in connection with negotiations
or leases with tenants, other occupants, or prospective tenants or other
occupants of the Property and similar costs incurred in connection with the
disputes between Owner and tenants, other occupants, or prospective tenants
or other occupants of the Property; (c) costs incurred in renovating,
decorating, redecorating or otherwise improving (as opposed to making
repairs to) space for tenants in, or other occupants of, the Property or
vacant leasable space in the Property; (d) costs of correcting defects
(including latent defects) in the construction of the Building or in any
equipment used therein, except that, for the purposes hereof, conditions
(not occasioned by construction defects) resulting from ordinary wear and
tear use, fires, casualty, vandalism and other matters not occasioned by
construction defects shall not be deemed to be defects; (e) Owner's costs
of electricity and other services sold to tenants, which services are not
standard for the Property and for which Owner is reimbursed by tenants as
an additional charge or rental; (f) depreciation and mortgage loan
amortization, except as otherwise provided in this Lease; (g) expenses in
connection with services or other benefits of a type which are not standard
for the Property and which are not available to Tenant without specific
charge therefor, but which are provided to another tenant or occupant and
for which Owner would have the right to charge such other tenant or
occupant; (h) except for the management fee described in this Lease and
other fees to the Owner specifically provided in this Lease, overhead and
profit increments paid to subsidiaries or other affiliates of Owner for
services on or to the Property, to the extent that the cost of such
services exceed those rendered by persons or entities of similar skill,
competence and experience, other than a subsidiary or other affiliate of
Owner; (i) interest on debt or amortization payment on any mortgage or
mortgages, and rental under any ground or underlying Lease or leases
(except to the extent that same may be made to pay or reimburse, or may be
measured by, as valorem taxes); (j) any compensation paid to clerks,
attendants or other persons in commercial concessions (such as snack bar or
restaurant), if any, operated by Owner; (k) all items and services for
which Tenant specifically reimburses Owner (other than Base Rent and
Additional Rent) or for which Tenant contracts directly with third parties
after receiving Owner's written approval; (l) advertising and promotional
expenses incurred to publicize the Property; (m) the cost of installing,
operating and maintaining a broadcasting facility, luncheon club or
athletic club; and (n) wages, salaries or other compensation paid to any
executive employee of Lessor above the grade of Building manager and those
employees whose time is not spent directly in the operation of the
Property.

The term "Base Operating Costs" shall mean the Operating Costs in
effect for the calendar year ending December 31, 1995 (whether or not
retroactively determined).

Except as otherwise specifically provided for herein, if the Operating
Costs at any time during the term of this Lease shall increase such that
Operating Costs, when calculated on an annualized basis, shall exceed the
Base Operating Costs or the highest annualized Operating Costs theretofore
charged to Tenant in accordance herewith, Tenant shall pay as additional
rent in each subsequent year of the term (or, in the event this Lease shall
terminate on other than December 31, applicable portion thereof) a sum
equal to Tenant's Proportionate Share of the amount by which the Operating
Costs for any such year exceeds the Base Operating Costs. Tenant shall pay
to Owner upon rendition of the first such bill pursuant to this Section,
the amount of Tenant's Proportionate Share (20.80%) of the increase in
adjusted Operating Costs for the calendar year prior to the date of the
rendition of such bill. Thereafter, such payments shall made in equal
monthly installments based on the increase in Operating Costs for the prior
calendar year, and when the Operating Costs shall be ascertained for the
then current calendar year, the installment then due shall be increased by
an amount sufficient to compensate Owner for any previous deficiencies in
installments and thereafter the installments shall be pro rata increases
based on the increase in Operating Costs for the current calendar year so
that one month prior to the end of such calendar year Tenant's
Proportionate Share of the increase in Operating Costs levied against the

<PAGE>
Property shall be paid in full. Owner shall give Tenant written notice of
each increase in the Operating Costs which will be effective to create or
change Tenant's obligation to pay additional rent pursuant to the
provisions of this Section promptly after Owner calculated such increase at
the end of such year, and such notice shall contain Owner's calculation of
the annual rate of additional rent payable resulting from such change in
the

Page 6 of 25

<PAGE>
Operating Costs. If an increase in the Operating Costs is made with
retroactive effect, Tenant shall pay Owner the total amount of the
additional rent incurred consequent thereon with the next monthly
installment of fixed rent, such retroactive increase to be effective to the
date of the Operating Costs increase, if necessary. During the first two
(2) years of the term of this Lease, in the event that the Operating Costs
in any such year exceed the Base Operating Costs by seven (7%) percent,
then in such event, Tenant shall not obligated to pay Tenant's
Proportionate Share of the excess over seven (7%) percent, then in such
event, Tenant shall not be obligated to pay Tenant's Proportionate Share of
the excess over excess over seven (7%) percent.

Every notice given by Owner pursuant to this Section shall be
conclusive and binding upon Tenant unless (i) within Sixty (60) days after
the receipt of such notice Tenant shall notify Owner that it disputes the
correctness of the notice, specifying the particular respects in which the
notice is claimed to be incorrect. Pending the determination of such
dispute by agreement or otherwise, Tenant shall pay additional rent or
accept credit in accordance with Owner's notice and such payment or
acceptance shall be without prejudice to Tenant's position. If the dispute
shall be determined in Tenant's favor, Owner shall forthwith pay Tenant the
amount of Tenant's overpayment of rents resulting from compliance with
Owner's statement. Owner, upon request of Tenant, shall either make
available to Tenant such documentation as may be in Owner's possession to
support a particular Operating Cost or permit Tenant to examine relevant
portions of Owner's books and records.

SECTION 4
Alterations

After completion of the initial preparation of the demised premises as
provided for in Section 19 of this Lease, and subsequent to receipt of a
final Certificate of Occupancy if required with respect thereto, Tenant may
not, at any time during the term of this Lease, without Owner's prior
approval (which approval shall not be unreasonably withheld), make any
alterations, additions, installations, substitutions, improvements and/or
decorations (affixed to the Demised Premises, including painting and wall
coverings) in and to the demised premises ("Alteration(s)"). If Owner, in
Owner's sole and absolute discretion, shall approve any Alteration(s), such
Alteration(s) shall be performed on the following conditions, provided that
in no event shall such Alterations result in a violation of or require a
change in the Certificate of Occupancy applicable to the demised premises:
(a) the outside appearance, character or use of the building of which the
demised premises are a part shall not be affected; (b) no Alterations shall
weaken or impair the structural strength or, in the opinion of Owner,
lessen the value of the building of which the demised premises are a part
and/or the Property and no part of the building outside of the demised
premises shall be physically affected; (c) the proper functioning of any of
the mechanical, electrical, sanitary and other service systems of the
building of which the demised premises are a part and/or the Property shall
not be adversely affected; (d) before proceeding with any Alteration Tenant
shall submit to Owner plans and specifications for the work to be done, for
Owner's approval in writing, and, if such Alteration(s) requires approval
by or notice to the lessor of a Superior Lease or the holder of a Superior
Mortgage (as such terms are hereinafter defined), the Alteration shall be
delayed until such approval has been received, or such notice has been
given, as the case may be, and all applicable conditions and provisions of
said Superior leases or Superior Mortgages with respect to the proposed
Alterations have been met or complied with at Tenant's expense; (e) any
Alteration for which approval has been received shall be performed strictly
in accordance with the approved plans and specifications, and no amendments
or additions to such plans and specifications shall be made without the
prior written consent of Owner; (f) Tenant shall not be permitted to
install and make part of the demised premises any materials, fixtures or
articles which are subject to liens, conditional sales contracts, security
agreements or chattel mortgages; (g) Tenant shall comply with all other
terms and conditions of this Lease in connection with Alterations; and (h)
Notwithstanding anything else to the contrary, Owner shall have the option
of performing any and all Alterations (exclusive of decorations not affixed
to the Demised Premises) which Cost (as hereinafter defined) in excess of
Ten Thousand and 00/100 ($10,000.00) Dollars pursuant to the provisions of
Sections 19(d), (e) and (f) of this Rider to Lease.

In the event Owner shall not exercise its option to perform any
Alteration(s) pursuant to Subsection 4(h) above, Tenant may perform such
Alteration(s) as are otherwise in compliance with the foregoing paragraph
in accordance herewith and pursuant to the provisions of Section 20 of this
Rider to Lease. All Alterations shall at all times comply with laws,
orders and regulations of governmental authorities having jurisdiction
thereof, and all rules and regulations of Owner, and Tenant, at its
expense, shall obtain all necessary governmental and certificates for the
commencement and prosecution of Alterations and for final approval thereof
upon completion, and shall cause Alterations to be performed in compliance

<PAGE>
therewith and with all applicable requirements of insurance bodies, and in
good and first class workmanlike manner, using materials and equipment at
least equal in quality and class to the original installations of the
building of which the demised premises are a part. Alterations shall be
performed in such manner as not to interfere with the occupancy of any
other tenant in the building of which the

Page 7 of 25

<PAGE>
Premises are a part nor delay, or impose any additional expense upon Owner
in the maintenance or operation of the building, and shall be performed by
contractors or mechanics approved by Owner. Throughout the performance of
such Alterations, Tenant, at its expense, shall carry, and shall cause all
contractors, agents and other persons performing such Alterations to carry
insurance as shall be specified by and satisfactory to Owner. Tenant shall
furnish Owner with reasonably satisfactory evidence that such interest is
in effect at or before the commencement of such Alterations and, on
request, at reasonable intervals thereafter during the continuance of such
Alterations. No Alterations shall involve the removal of any fixtures,
equipment or other property in the demised premises which are not Tenant's
property, unless Owner's prior written consent is first obtained and unless
such fixtures, equipment or other property shall be promptly replaced, at
Tenant's expense and free of superior title, liens and claims, with
fixtures, equipment or other property (as the case may be) of like utility
and at least equal (which replaced fixtures, equipment or other property
(as the case may be) of like utility and at least equal value (which
replaced fixtures, equipment or other property shall thereupon become the
property of Owner), unless Owner shall otherwise expressly consent in
writing.

SECTION 5
Commencement Date, Rent Commencement Date; Rent

The Lease shall commence on April 1, 1997 (the "Commencement Date")
and shall end on March 31, 2002 (the "Expiration Date"). Tenant's
obligations to pay rent shall commence on the Commencement Date.

(a) Tenant shall pay to Owner, or to such other person as Owner may
from time to time designee, at Owner's address specified above, fixed rent,
over and above the other and additional payments to be made by Tenant as
herein provided, as follows:

(i) During and in respect of the period from the
Commencement Date to the date preceding the third (3rd) anniversary of the
Commencement Date (both dates inclusive), an amount each year equal to Five
Hundred and Thirty-Two Thousand, Six Hundred and Fifteen and 56/100
($532,615.56) Dollars, payable in equal monthly installments of Forty-Four
Thousand, Three Hundred and Eighty-Four and 63 ($44,384.63) Dollars; and

(ii) During and in respect of the period from the third
(3rd) anniversary of the Commencement Date to the day preceding the fourth
(4th) anniversary of the Commencement Date (both dates inclusive), an
amount each year equal to Five Hundred and Seventy-Two Thousand, and Sixty-
Eight and 56/100 ($572,068.56) Dollars, payable in equal monthly
installments of Forty-Seven Thousand, Six Hundred and Seventy-Two and
38/100 ($47,672.38) Dollars; and

(iii) During an in respect of the period from the fourth
(4th) anniversary of the Commencement Date to the Expiration Date (both
dates inclusive), an amount each year equal to Five Hundred and Eighty-Five
Thousand, Two Hundred and Nineteen and 48/100 ($585,219.48) Dollars,
payable in equal monthly installments of Forty-Eight Thousand, Seven
Hundred and Sixty-Eight and 29/100 ($48,768.29) Dollars.

(b) (i) If Owner is unable to give possession of any portion
of the demised premises on the date of the commencement of the term,
because of the holding-over or retention of possession of any tenant,
undertenant or occupants, Owner shall not be subject to any liability for
failure to give possession on said date and the validity of the Lease shall
not be impaired under such circumstances, nor shall the same be construed
in any wise to extend or diminish the duration of Term, but the rent or
additional rent payable hereunder for that portion of the demised premises
which Owner has not delivered to Tenant shall not become payable (provided
Tenant is not responsible for Owner's inability to obtain possession) until
the date Owner delivers possession of that portion of the demised premises
to Tenant.

(ii) If permission is given to Tenant to enter into the
possession of the demised premises or to occupy premises other than the
demised premises prior to the date specified as the commencement of this
Lease, Tenant covenants and agrees that such occupancy shall be deemed to
be under all the terms, covenants, conditions and provisions of this Lease,
except as to the covenant to pay fixed rent.

(c) The provisions of Section 5(b) of this Rider to Lease are
intended to constitute "an express provision to the contrary" within the
meaning of Section 223-a of the New York Real Property law.

Page 8 of 25

<PAGE>
SECTION 6
Tenant's Extraordinary Use
of
Building Facilities

Except for electricity as otherwise specifically provided for in this
Lease, in the event that Tenant requests overtime services, including but
not limited to, extra building maintenance, building employee overtime, or
the furnishing of air cooling, heat, or ventilation outside Normal Working
Hours (as hereinafter defined), then in such event, Tenant agrees to pay
Owner an overtime charge therefor. As used hereinafter defined), then in
such event, Tenant agrees to pay Owner an overtime charge therefor. As
used herein, the term "Normal Working Hours" shall mean only those between
the hours of 8:00 A.M. and 6:00 P.M., Monday through Friday, exclusive of
New Years Day, the day designated as the legal holiday for the celebration
of Washington's Birthday, Memorial Day, Fourth of July, Labor Day,
Thanksgiving Day and Christmas Day. Notwithstanding the foregoing, Tenant
shall have access to the demised premises Twenty-Four (24) hours a day,
Seven (7) days a week.

Provided Physicians On Line, a third party tenant in the building,
extends their Lease for a five (5) year period, Owner shall throughout the
term of this Lease, (i) provide Tenant at no charge, with one (1)
additional hour of air conditioning each day from 6 P.M. to 7 P.M. for the
sixteen (16) week cooling season, and (ii) provide Tenant, at no charge,
with sixteen (16) full days of air conditioning which can be used on any
Saturday, Sunday, or both during the cooling season.

Owner shall furnish such overtime service to Tenant provided that (i)
Tenant pays to Owner as additional rent a special overtime charge therefore
which shall be at an hourly rate, along with Tenant's next monthly
installment of fixed rent if such service shall have been furnished to
Tenant prior to the Fifteenth (15th) day of the month or along with the
subsequent monthly installment of fixed rent if such service shall have
been furnished to Tenant after the Fifteenth (15th) day of the month, (ii)
that Tenant's request shall be received by Owner by not later than 2:00
P.M. on the day for which after hours service is requested (and by not
later than 2:00 P.M. on the day for which after hours service is requested
(and by not later than 2:00 P.M. on the day preceding any requested before-
hours service), and (iii) that Owner shall not be required to furnish such
overtime services to Tenant for more than Twenty (20) hours in any One (1)
week.

SECTION 7
Brokerage

The parties warrant and represent to each other that no broker has
negotiated or brought about this transaction. Tenant shall defend,
indemnify and save harmless Owner from and against any claim which may be
asserted against Owner by any broker other than Broker if the claim (a) is
made in connection wit this transaction and (b) arises our of conversations
or dealings between Tenant and any claiming broker. Tenant shall reimburse
Owner for reasonable expenses, losses, costs and damages (including
reasonable attorneys' fees and court costs if Tenant fails or refused to
defend herein required) incurred by Owner in connection with such claims.

SECTION 8
Tenant's Property

At or before the expiration or termination of this Lese, Tenant shall
remove from the demised premises, at its expense, all of Tenant's property
and shall repair any damage and make any replacements to the demised
premises or the Property resulting from or necessitated by such removal and
shall pay all other costs of such removal. Notwithstanding the foregoing,
Tenant shall not be required to restore the demised premises to its
condition prior to any Alterations (as hereinafter defined) or work which
has been approved by Owner pursuant to the terms of this Lease.

Any items of Tenant's property which shall remain in the demised
premises or the Property after the expiration or termination of this Lease,
may, at the option of the Owner, without the requirement of eviction,
attachment or other further judicial process, be deemed to have been
abandoned, and in such case either may be (i) retained by Owner as its
property, or (ii) stored by Owner for the account of Tenant, or (iii)
disposed of, without accountability, in such manner as Owner may see fit.
Tenant agrees to reimburse Owner for the costs of removal and/or storage
and for the cost of repairing any damage to the demised premises or the
building of which the demised premises are a part arising out of Tenant's
failure to remove Tenant's property pursuant to the terms of this Lease.

SECTION 9
Conveyance; Liability of Partners

Page 9 of 25

<PAGE>
As used in this Lease, the term "Owner" shall mean only the owner or the
mortgagee in possession of the Property or the holder of a Lease on said
building and the land on which Property is located so that in the event of any
sale of the Property or an assignment of this Lease or any underlying Lease or a
demise of both Property and land, Owner shall be and hereby is entirely released
and discharged from any and all further liability and obligations of Owner
thereafter to be performed hereunder, except any that may have theretofore
accrued.

Notwithstanding anything to the contrary provided in this Lease, it is
specifically understood and agreed, such agreement being a primary consideration
for the execution of this Lease by Owner, that including, without limitation,
any remedy for collection of any award, judgment or other judicial process
regarding the payment of money, there shall be absolutely no personal liability
on the part of Owner, its partners, directors, stockholders, employees,
successors or assigns or any mortgagee in possession (for the purposes of this
paragraph collectively referred to as "Owner"), with respect to any of the
terms, covenants and conditions of this Lease, and that Tenant shall look solely
to the equity of Owner in the demised premises for the satisfaction of each and
every remedy of Tenant in the event of any breach by Owner of any of the terms,
covenants and conditions of this Lease to be performed by Owner, such
exculpation of liability to be absolute and without any exceptions whatsoever.

SECTION 10
Corporate Authority

(a) Tenant represents and warrants that it is a corporation duly organized
and in good standing under the laws of the State of Delaware. Tenant represents
and warrants that it has all requisite corporate authority to execute and to
enter into this Lease and that the execution of this Lease will not constitute a
violation of any internal by-law, agreement or other rule of governance.

(b) Tenant represents and warrants that the individual executing this
Lease on behalf of Tenant is so authorized and Tenant will supply Owner with a
verified corporate resolution or similar written documentation evidencing such
authority upon or prior to Tenant's execution of this Lease.

(c) Owner represents and warrants that it has all requisite partnership
authority to enter into this Lease and that the execution of this Lease will not
constitute a violation of any internal by law, agreement or other rules of
governance.

(d) Owner represents and warrants that the individual executing the Lease
on behalf of Owner is so authorized.

SECTION 11
Tenant's Certificate

Tenant shall, without charge, at any time and from time to time, within ten
(10) business days after requested by Owner, certify by written instrument, duly
executed, acknowledged and delivered, to any mortgagee, assignee of any mortgage
or purchaser, or any proposed mortgagee, assignee of any mortgage or purchaser,
or any other person, in such form as is specified by Owner setting forth:

(a) That this Lease is unmodified and in full force and effect (or, if
there has been a modification(s), that the same is in full force and effect as
modified and stating the modifications);

(b) Whether or not owner is in default in keeping, observing or performing
any term covenant, agreement, provision, condition or limitation contained in
this Lease, and, if there is a default, specifying such default.

(c) The dates, if any, to which the rental and other charges hereunder
have been paid in advance and/or to which Owner may have consented, released or
relieved Tenant from Tenant's obligations fully to perform all of the terms,
covenants and conditions of this Lease on Tenant's part to be performed, it
being intended that only such statement delivered pursuant to this Section may
be relied upon by Owner, any mortgagee or prospective purchaser, assignee of
owner's interest in this Lease or the Mortgagee's interest in any mortgage.

SECTION 12
Tenant's Electric

Tenant covenants that at all times its use of electric current shall never
exceed the capacity of existing feeders and risers to the Property or the risers
or wiring installation.

Page 10 of 25

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(a) Tenant acknowledges and agrees that Owner shall furnish
electricity to Tenant based on the method of including the use thereof
within the fixed rent and, accordingly, Tenant agrees that the rent
provided for in Section 5 of the Rider has been increased to compensate
Owner for supplying the electrical current as an additional service as
hereinafter provided on the basis of Two and 25/100 Dollars ($2.25) per
square foot per annum for each square foot contained in the demised
premises (hereinafter referred to as the "Base Charge"). By the execution
of this Lease, Tenant acknowledges and agrees that the Base Charge shall
not be contestable by Tenant at a future date and shall only be increased
by Owner at a future date in accordance with this Section. Owner will
furnish electricity to Tenant through presently installed electrical
facilities for Tenant's reasonable use.

(b) Tenant shall make no substantial alterations or additions to the
initial lighting, electrical appliances or office equipment without first
obtaining written consent from Owner in each instance. Owner warrants that
the electricity servicing the demised premises is in good working order and
can accommodate a normal office installation with associated office
machinery and equipment.

(c)(i) If at any time prior to or during the term of this Lease,
subject to the restrictions contained elsewhere in this Lease: (i) Tenant
installs substantial additional or substituted lighting, electrical
appliances, office equipment or otherwise increases its use of electric
current, and/or; (ii) subject to the provisions of Section 4 of this Rider
to Lease, electrical feeders, risers, wiring or other electrical facilities
serving the demised premises shall be installed by Owner, Tenant or others,
on behalf of Tenant or any person claiming through or under Tenant in
addition to the feeders, risers, wiring or other electrical facilities
necessary to serve the lighting fixtures, electrical appliances, office
equipment and electrical receptacles initially located in the demised
premises (the "Additional Electric Service"); then the fixed rent shall be
increased by an amount determined by the electrical engineer selected by
Owner who shall survey the increase in electric current and certify the
amount of the fixed rent to be increased in writing to Owner and Tenant
(the "Electric Survey"). Following any such determination and
certification by the electrical engineer, this Lease shall automatically be
modified by increasing the fixed rent by an amount equal to (i) the product
of the Base Charge times the percentage increase in Tenant's use of
electrical current over that for Tenant's initially installed lighting,
electrical appliances and office equipment and/or (ii) the product of the
Base Charge times the percentage increase in the potential additional
electrical energy made available to Tenant annually based upon the
estimated capacity of such additional electrical feeders, risers, wiring or
other electrical facilities, as the case may be.
As evidence of such modification such electrical engineer's certification
shall be delivered by Owner to Tenant and also appended hereto. Any such
increase shall be effective as of the date of the first use by Tenant of
such additional service and retroactive to such date if necessary. In
addition, Tenant shall pay to Owner, as additional rent, within Thirty (30)
days of the date of a notice therefore from Owner, the total cost to Owner
of the additional electrical feeders, risers, wiring, or other electrical
facilities serving the demised premises as determined in accordance with
Section 19(b) of this Rider to Lease.

(ii) Owner's Electric Survey shall be conclusive and binding upon
Tenant unless within sixty (60) days after receipt of such Owner's Electric
Survey, Tenant shall notify Owner that it disputes the reasonableness or
correctness of Owner's Electric Survey, specifying the respects in which
Owner's Electric Survey is claimed to be unreasonable or incorrect.
Pending the determination of any such dispute respecting an Electric Survey
by agreement or as otherwise provided herein, Tenant shall pay such
increase in accordance with the applicable Owner's Electric Survey, and
such payment will be without prejudice to Tenants's position. If the
dispute shall be finally determined in Tenant's favor as provided for
herein, Owner shall forthwith pay Tenant the amount of Tenant's overpayment
resulting from compliance with Owner's Electric Survey together with
interest thereon at the legal rate. Owner, upon request of Tenant, shall
either make available to Tenant such documentation as may be in Owner's
possession to support the Electric Survey or permit Tenant, its agents
and/or auditors to examine relevant portions of the Building and the
electrical facilities relating to and/or supplying electric current to the
demised premises.

(iii) A. In the event that Owner and Tenant are unable to agree
on the amount of the Additional Electric Service, then either Owner or
Tenant (hereinafter referred to as the "initiating Party") may give the
other party (hereinafter called the "Responding Party") a notice
designating the name and address of the electrical engineer designated by
the Initializing Party to act on its behalf in the arbitration process
hereinafter described (the "Review Notice").

<PAGE>
B. If the Initiating Party gives a Review Notice, then within
twenty (20) days after giving of such Review Notice, the Responding Party
shall give notice to the Initiating Party specifying in such notice the
name and address of the electrical engineer designated by the Responding
Party to act on its behalf. In the event the Responding Party shall fail
to give such notice within such twenty (20) day period, then the
appointment of such electrical engineer shall be made in the same manner as
hereinafter provided for the

Page 11 of 25

<PAGE>
appointment of a third electrical engineer in a case where two electrical
engineers are appointed hereunder and the parties are unable to agree to
such appointment. The two electrical engineers so chosen shall meet within
thirty (30) days after the second electrical engineer is appointed and
shall exchange sealed envelopes each containing such electrical engineers
written determination of the Additional Electric Service. The additional
electric service specified by Owner's electrical engineer shall be called
the "Owner's Submitted Value" and the additional electric service specified
by Tenant's electrical engineer shall be called the "Tenant's Submitted
Value". Copies of such written determinations shall promptly be sent to
both Owner and Tenant. Any failure of either such electrical engineer to
meet and exchange such determinations shall be acceptance of the other
party's electrical engineer's determination as to the additional electric
service, if, and only if, such failure persists for five (5) days after
notice to the party for whom such electrical engineer is acting, and,
provided that such five (5) day period shall be extended by reason of any
unavoidable delays. If the higher determination of the additional electric
service is not more than one hundred and five (105%) percent of the lower
determination of the additional electric service, then the Additional
Electric Service shall be deemed to be the average of the two
determinations. If, however, the higher determination is more than one
hundred and five (105%) percent of the lower determination, then within ten
(10) days of the date the electrical engineers submitted their respective
additional electric service determinations, the two electrical engineers
shall appoint a third electrical engineer. In the event of their being
unable to agree upon such appointment within ten (10) days after the
exchange of the sealed envelopes, the third electrical engineer shall be
selected by the parties themselves if they can agree thereon within a
further period of ten (10) days. If the parties do not so agree, then
either party, on behalf of both and on notice to the other, may request
such an appointment by the American Arbitration Association (or any
successor organization) in accordance with its rules then prevailing or if
the American Arbitration Association (or any successor organization) shall
fail to appoint said third electrical engineer within fifteen (15) days
after such request is made, then either party may apply for such
appointment, on notice to the other, to the President of the National
Electrical Contractors Association. Within ten (10) days after the
appointment of such third electrical engineer, the Owner's electrical
engineer shall submit Owner's Submitted Value to such third electrical
engineer and the Tenant's electrical engineer shall submit Tenant's
Submitted Value to such third electrical engineer. Such third electrical
engineer shall, within thirty (30) days after the end of such fifteen (15)
day period, make his own determination of the Additional Electric Service,
and send copies of his determination promptly to both Owner and Tenant
specifying whether Owner's Submitted Value or Tenant's Submitted Value was
closer to the determination by such third electrical engineer of the
Additional Electric Service. Whichever of Owner's Submitted Value or
Tenant's Submitted Value shall be closer to the determination by such third
electrical engineer shall conclusively be deemed to the Additional Electric
Service.

C. In no event shall the electrical engineers enlarge upon, or alter
or amend, this Lease or Owner's or Tenant's rights as provided in this
Lease, it being understood that the sole issue for determination by the
electrical engineers shall be the single issue of fact of the Additional
Electric Service.

D. Except as otherwise provided in the following sentence, the fees
and expenses of an arbitration proceeding shall be borne by the parties
equally. The fees of respective counsel engaged by the parties the fees
and expenses of expert witnesses and other witnesses called and the cost of
transcripts shall be borne by the parties engaging such counsel or calling
such witness or ordering such transcripts.

(iii) Notwithstanding the foregoing, except for Tenant's
extraordinary use of the demised premises (which shall not include the
intermittent use of the demised premises outside of Normal Working Hours by
several of Tenant's employees and/or executives), Owner agrees that it will
not conduct an Electric Survey prior to the second anniversary of the
Commencement Date of this Lease.

(d) If, at any times or times after the date of this Lease, the
rates at which Owner purchases electrical energy from the public utility
corporation supplying electrical service to the building of which the
demised premises are a part shall be increased, or any tax is imposed upon
Owner's receipt from the sale or resale of electrical energy or gas or
telephone service to Tenant by any Federal, State or Municipal Authority,
or any charges incurred or taxes payable by Owner in connection therewith
shall be increased, the rent shall be increased by an amount equal to the
product of the Base Charge times the percentage increase in the rates at
which Owner purchases electrical energy from the public utility corporation
as aforesaid, over those rates in effect on the date of the calculation of
the Base Charge. Following any such rate increase or other charge, this
Lease shall automatically be modified by increasing the rent for the

<PAGE>
remainder of the term hereof in accordance with this Subsection 12(c) and,
as evidence of such modification documentation of such rate increase or
other charge shall be delivered by Owner to Tenant and also appended
hereto. Any such increase in the rent shall be effective as of the date of
any such increase in cost or other charge to Owner in and shall be
retroactive to such date if necessary.

(e) Notwithstanding anything contained to the contrary in this
Section 12, Owner shall have

Page 12 of 25

<PAGE>
the right, at its option, to conduct a survey of Tenant's demised premises
by an electrical engineer of Owner's choosing at any time during the term
of this Lease in order to determine Tenant's demised premises by an
electrical engineer of Owner's choosing at any time during the term of this
lease in order to determine Tenant's actual use of electrical current
therein. In the event that Owner's survey provided for in the preceding
sentence shall indicate that Tenant's use of electrical current then
exceeds that at the time of Tenant's initial installation of its lighting
fixtures, electrical appliances and office equipment, Tenant, upon receipt
of notice from Owner shall pay to Owner an increase in fixed rent equal to
an amount determined by multiplying the Base Charge times the percentage
increase in Tenant's use of electrical current over that for Tenant'
initially installed lighting, electrical appliances and office equipment.
Any such increase shall be payable in accordance with the terms of this
Section 12 and shall be effective as of the date of such survey.

(f) Owner shall not be liable or responsible to Tenant for any
loss or damage or expense which Tenant may sustain or incur if either the
quantity or character of electric services is changed unless caused by
Owner or is not longer available or suitable for Tenant's requirements.

SECTION 12A
Supplemental Air Conditioning

If during the term hereof, Tenant requires the use of a supplemental
air conditioning system in the demised premises, Owner shall furnish to
Tenant electric current for use of such a system in the demised premises
("Supplemental electric Current").

Tenant agrees that it shall purchase or receive such @@ directly from
Owner and to pay directly to Owner all charges for @@ rendered or supplied
to the demised premises throughout the term hereof. The Owner shall in no
way be liable for any loss, damage, or expense which Tenant may incur as a
result of the change, at any time, for the character or quality of the @@
or any failure of or defect in the @@ by reason of any public or private
utility company then supplying such service to the Property, Building or
the demised premises and Tenant agrees to hold the Owner harmless and to
indemnify it from and against any loss, liability or damage in connection
therewith, except to the extent caused by Owner's negligence. This
indemnity shall survive the expiration or other termination of this Lease.

Tenant's consumption of @@ shall be measured by means of separate
electric submeter, and Tenant shall pay during the entire term of this
lease, all costs and expenses including the payments of any taxes and/or
penalties in connection therewith for all @@ uses, consumed or provided to
the demised premises. Owner shall maintain and repair at its cost and
expense the submeter during the term of this Lease.

Tenant shall pay for all @@ consumed, used or provided to the demised
premises as hereinabove provided within thirty (30) days after rendition of
a bill for same by Owner (the "Electric Bill"). Owner shall bill Tenant at
Owner's cost for all @@ and Owner shall be entitled to and administrative
fee of ten (10%) percent of all @@ charged or otherwise billed pursuant to
the Electric Bill. All @@ billed by Owner to Tenant shall be deemed
Additional Rent. Each Electric Bill shall be conclusive and binding upon
Tenant unless within thirty (30) days after receipt of such electric Bill
Tenant shall notify Owner that it disputes the reasonableness or
correctness of the Electric Bill, specifying the respects in which the
electric Bill is claimed to be unreasonable or incorrect. Pending the
determination of such dispute by agreement or otherwise, Tenant shall pay
for @@ in accordance with applicable Electric Bill, and such payment will
be without prejudice to Tenant's position. If the dispute shall be finally
determined in Tenant's favor by a court of competent jurisdiction, Owner
shall forthwith pay Tenant the amount of Tenant's overpayment of @@
resulting from compliance with the applicable electric Bill. Owner, upon
request of Tenant, shall either make available to Tenant such documentation
as may be in Owner's possession to support a particular Electric Bill or
permit Tenant to examine relevant portions of Owner's books and records.

Page 13 of 25

<PAGE>
SECTION 13
Holding Over

If the Tenant retains possession of the demised premises or any part
thereof after the termination of the term by lapse of time or otherwise, without
prior written approval of Owner, the Tenant shall pay the Owner rent at 1.2
times the monthly rental rate then being paid by Tenant specified in Article 1
and as otherwise increased in accordance with terms of this Lease for the time
the Tenant thus remains in possession, and in addition thereto shall pay the
Owner all damages, consequential as well as direct (including fees of counsel
incurred in connection therewith), sustained by reason of the Tenant's retention
of possession. Notwithstanding the foregoing, Tenant shall not be liable for
consequential damages until forty-five (45) days after the termination of the
term by lapse of time or otherwise. If the Tenant remains in possession of the
demised premises, or any part thereof, after the termination of the term by
lapse of time or otherwise, such holding over shall, at the election of the
Owner expressed in a written notice to the Tenant and not otherwise, constitute
an extension of this Lease on a month to month basis at 1.2 times the monthly
rental set forth in Article 1 and as otherwise increased in accordance with the
terms of this Lease. The provisions of this Section do not exclude the Owner's
right of re-entry or any other right hereunder, including without limitation,
all rights given at law or in equity, in the case of holdovers, to remove Tenant
and anyone claiming through or under Tenant.

SECTION 14
Additional Rent

All costs, charges, adjustments and expenses which Tenant assumes or agrees
to pay pursuant to this lease shall Owner's election be treated as additional
rent and, in the vent of nonpayment, Owner shall ave the rights and remedies
herein provided for in the case nonpayment of rent or breach of condition. If
Tenant shall default in making any payment required to be made by Tenant (other
than the payment of rent required pursuant to this Lease) or shall default in
performing any term, covenant or condition of this Lease on the part of Tenant
to be performed hereunder, Owner at Owner's option may (but shall not be
obligated to) immediately or at any time thereafter on ten (10) days' notice
(provided no notice shall be required for Owner to perform any covenant or
condition in the event of an emergency) make such payment, or on behalf of
Tenant, cause the same to be performed for the account of Tenant and expend such
sum as may be necessary to perform and fulfill such term, covenant or condition,
and any and all sums so expended by Owner, with interest thereon at the highest
legal rate per annum from the date of such expenditure, shall be and be deemed
to be additional rent, in addition to the fixed rent, and shall be repaid by
Tenant to Owner on demand, but not such payment or expenditure by Owner shall be
deemed a waiver of Tenant's default not shall it affect any other remedy of
Owner by reason of such default. Tenant's obligation to pay additional rent
shall survive any termination of this Lease.

SECTION 15
Mechanics' Liens

If, because of any act or omission of Tenant or anyone claiming through or
under Tenant, any mechanics' or other lien or order for the payment of money
shall be filed against the demised premises an/or the building of which the
demised premises are a part and/or the Property and/or the Owner (whether or not
such lien or order is valid or enforceable as such), Tenant shall, at Tenant's
own cost and expense, cause the same to be canceled and discharged of record
within Twenty (20) days after the date of filing thereof, and shall also
indemnify and save harmless Owner from and against any and all costs expenses,
claims, losses or damages, including but not limited to fees of counsel,
resulting therefrom or by reason thereof.

SECTION 16
Rights Reserved by Owner

Without abatement or diminution in rent, Owner reserves and shall have the
following additional rights:

(a) To change the street address and/or the name of the building of
which the demised premises are a part and/or the Property (an at least ninety
(90) days notice to Tenant) and/or the locations of entrances, passageways,
doors, doorways, corridors, elevators, stairs, toilets, or the other public
parts of the building and/or Property without liability to Tenant, PROVIDED,
HOWEVER, that same does not unreasonably interfere with Tenant'S use of or
access to the demised premises.

(b) To approve in writing all signs and all sources furnishing sign
painting and lettering, drinking water, towels and toilet supplies or other like
services used in the demised premises and to

Page 14 of 25

<PAGE>
approve all sources furnishing cleaning services, construction work,
painting, decorating, repairing, maintenance and any other work in or about
the demised premises.

(c) To enter the demised premises at all reasonable times and
upon reasonable notice, except tat not notice shall be required in the
event of an emergency, (i) for the making of inspections, decorations,
alterations, improvements and repairs, as Owner may deem necessary or
desirable, (ii) to exhibit the demised premises to prospective purchasers
or lessees during the last nine (9) months of the term of this Lease, (iii)
for any purpose whatsoever relating to thereto or to the safety, protection
or preservation of the demised premises and/or for the building of which
the demised premises are a part and/or of the Property and/or of Owner's
interest, and (iv) to take material into and upon the demised premises in
connection therewith, provided if Tenant requests, Owner shall be
accompanied (except in the case of an emergency) by a representative of
Tenant.

(d) At any time or times, Owner either voluntarily or pursuant
to governmental requirement may, at Owner's own expense, make repairs,
alterations or improvements in or to the building of which the demised
premises are a part and/or the Property or any part thereof and during
alterations, may close entrances, doors, windows, corridors, elevators or
other facilities; provided that such acts shall not unreasonably interfere
with Tenant's use and occupancy of the demised premises as a whole.

(e) To erect, use and maintain pipes and conduits in and through
the demised premises provided that same are located within the walls and
same does not unreasonably interfere with Tenant's use and occupancy of the
demised premises or unreasonably restrict access thereto.

(f) To charge to tenant any expense including overtime cost
incurred by Owner in the event that repairs, alterations, decorating or
other work in the demised premises are made or done after ordinary business
hours at Tenant's request.

(g) To immediately enter and alter, renovate, and redecorate the
demised premises (without reduction or abatement of rent or incurring any
liability to Tenant for compensation), if during the last sic (6) months of
the term or of a renewal term Tenant shall have removed all or
substantially all of Tenant's property therefrom.

(h) To grant to anyone the exclusive right to conduct any
particular business or undertaking in the building of which the demised
premises are a part.

Owner may exercise any or all of the foregoing rights hereby reserved
to Owner without being deemed guilty of an eviction, actual or
constructive, or disturbance or interruption of Tenant's use or possession
and without being liable in any manner toward Tenant and without limitation
or abatement of rent or other compensation, and such acts shall have no
effect on this Lease.

SECTION 17
Sprinklers

From and after the Commencement Date, if there now is or shall be
installed in the building of which the demised premises are a part a
"sprinkler system" and such system or any of its appliances shall be
damaged or injured, or not in proper working order by reason of Tenant's
use of the demised premises, or that of Tenant's agents, servants,
employees, licensees or visitors, Tenant shall forthwith restore the same
to good working condition at its own expense, and; if the Board of Fire
Underwriters or any bureau, department or official of the state or city
government having jurisdiction shall require or recommend that any changes,
modification, alterations or additional sprinkler heads or other equipment
be made or supplied by reason of Tenant's particular business, other than
general office use, or the location of partition, trade fixtures, or other
contents of the demised premises, or if any such changes, modification,
alterations, additional sprinkler heads or other equipment become necessary
to prevent the imposition of a penalty or charge against the full allowance
for a sprinkler system in the fire insurance rate as fixed by said Board,
or by any Fire insurance Company by reason of Tenant's particular business,
other than general office use, Tenant shall, at Tenant's expense promptly
make and supply such changes, modifications, alterations, additional
sprinkler heads or other equipment.

Page 15 of 25

<PAGE>
SECTION 18
Adjustment for Owner Protected Rent
THIS SECTION HAS BEEN INTENTIONALLY OMITTED

SECTION 19
Owner's Allowance for Work; Owner's Work

(a) Owner and Tenant agree that Tenant will take the demised
premises on the commencement date of the terms in "as is" condition and
except as otherwise specifically provided for herein, Owner shall have no
obligation to perform any work or build-out in the demised premises.

(b) Owner will provide Tenant with a Thirty Thousand and 00/100
($30,000.00) Dollar interim allowance ("Interim Allowance") as of the
execution date of this Lease for purposes of renovating the demised
premises, including the installation of data and tele-communication cables
and a reception desk.

(c)(i) On or before March 15, 1997, Tenant shall deliver to
Owner, an audited financial statement for the year ending December 1996.
In the event that Tenant's audited financial statement for the year ending
December 31, 1996 reveals that Tenant's has a net profit equal to or
greater than One Million and 00/100 ($1,000,000.00) Dollars (hereinafter
called the "financial Condition Precedent"), then in such event, Owner
shall provide Tenant with an allowance of Two Hundred and Thirty Thousand
and 00/100 ($230,000.00) Dollars ("Allowance") to make improvements in the
demised premises (the "Work"). In the event that Tenant's has not
satisfied the Financial Condition Precedent, then in such event, Owner
agrees to provide Tenant with the Allowance, provided that Tenant's
financial condition as of December 31, 1996 is such that Owner in its
reasonable judgment determines that an Institutional Lender would be
willing to loan Tenant two Hundred and Thirty Thousand ($230,000.00)
Dollars at the then prevailing rate of interest for a time not to exceed
the term of this Lease excluding any renewal terms) and containing such
other customary terms required by Institutional Lender's (hereinafter
called the "Alternative Financial Condition Precedent"). In the event that
Tenant has not satisfied either the Financial Condition Precedent or
Alternative Financial Condition Precedent, then in such event, Owner shall
have not obligation whatsoever to provide Tenant with the Allowance and
this Lease shall nevertheless remain in full force and effect.

(ii) In the event that Tenant satisfies either the Financial
Condition Precedent or the Alternative Financial Condition Precedent, the
Allowance shall be available to Tenant within thirty (30) days after
Owner's receipt of Final Plans (as hereinafter defined).

(d) Any portion of the Allowance and/or Interim Allowance
utilized by Tenant, shall be repaid to Owner with interest thereon as
follows. the principal amount of the Interim Allowance and Allowance shall
be amortized over the balance of the term of the Lease at an interest rate
equal to 300 basis points over the then current five (5) year treasury rate
and paid in equal monthly installments which shall be added to the fixed
rent provided for in Section of this Lease. In the event Tenant utilizes
all or any portion of the Interim Allowance, there shall not be any
interest charged or accrued for any period prior to April 1, 1997.

(e) Owner shall act as general contractor, or retain a general
contractor, with respect to the design and build-out of the demised
premises and, in such capacity, shall perform the Work on behalf of Tenant,
at Tenant's cost (as hereinafter defined) and in accordance with the Final
Plans. Any increase in the scope of work to be performed by Owner beyond
that contained in the Final Plans ("Extra Work") shall be approved as
follows: (i) a written request for any such Extra work (including any and
all change orders) defining the scope of such Extra work plus any possible
time delay and containing an "Extra Work Cost Estimate" shall be prepared
by Owner, Owner shall pursue completion of the Extra Work stipulated
therein at Tenant's sole cost and Expense. In the event that the cost of
the Extra work exceeds the allowance, Tenant shall pay to Owner the cost of
the Extra Work upon the commencement of such Extra Work.

(f) to the extent (i) Owner (which term as used herein may be
deemed to mean Owner and/or Owner's affiliated or non-affiliated general
contractor) may be or is required to or actually does perform Work pursuant
to this Section 19, and/or (ii) Owner performs other build-out or similar
work or alterations to the demised premises of any kin or any other
demolition, renovation or construction on Tenant's behalf during the term
of this Lease, pursuant to Section 4 of this Lease and otherwise the
"Cost", as such term is used herein shall mean that Owner will perform all
such services on a "cost plus" basis, whereby Cost shall include, but not
be limited to, the cost of sub-contractors, material, equipment rental,
transportation

Page 16 of 25

<PAGE>
and delivery items, permits, fees, taxes, insurance's, debris removal,
demolition, safety protection, labor, supervision, project management,
purchasing, expediting and material handling, and shall also include a
contingency, based on the complexity of the work to be performed, of up to five
percent (5%) of the total of all such items otherwise included within such
definition. In addition, Cost shall include Owner's fee for acting as a general
contractor which shall be equal to Fifteen percent (15%) of the total Cost
otherwise determined; provided however, that with respect to decorating only,
such fee shall be applicable to labor service items and costs of installation
and other labor but shall not be applicable to the cost of furniture, art an
similar items otherwise included therein.

(g)(i) Tenant shall cause its architect to prepare and deliver to
Owner for Owner's approval two (2) sets of preliminary plans for the Work,
prepared in strict accordance with the provisions contained herein, initialed by
Tenant. Owner shall notify Tenant of the matters, if any, in which the
preliminary plans to fail to conform to the standards established for the
property, Building, building equipment and/or demised premises, or otherwise
fail to meet with Owner's approval. Tenant shall promptly upon receipt of any
such notice or notices from Owner cause the preliminary plans to be revised in
such manner as is requisite to obtaining Owner's approval and shall resubmit
said revised preliminary plans initialed by Tenant as aforesaid for Owner's
approval within fifteen (15) days of said notice. When Owner shall determine
that the preliminary plans are satisfactory to Owner, Owner shall cause one set
thereof to be initialed on behalf of Owner, thereby evidencing the approval
thereof by the Owner, and shall return such set so initialed to Tenant. The
preliminary plans or revised preliminary plans, as the case may be, so approved
by Owner are hereinafter referred to as the "Preliminary Plans". If such
Preliminary Plans are not approved by Owner within thirty (30) days after
submission to Owner, Owner shall advise Tenant of such disapproval and Tenant's
architect shall revise said plans and such plans shall be deemed approved by
both Tenant and Owner.

(ii) Within fifteen (15) days after Owner's approval of Tenant's
Preliminary Plans, Tenant shall cause to be prepared and delivered to Owner four
(4) complete sets of working drawings and specifications showing the Work,
prepared in conformity with Preliminary Plans, and such working drawings and
specifications shall have been initialed by Tenant, evidencing Tenant's approval
thereof. Owner shall notify Tenant of the matters, if any, win which said
working drawings and specifications fail to conform to the Preliminary Plans
and/or standards established for the property, Building, building equipment
and/or demised premises. Tenant shall promptly upon receipt of such notice from
Owner cause sid working drawings and specifications to be revised in such manner
as is requisite to obtaining Owner's approval and shall resubmit revised working
drawings and specifications or revised working drawings and specifications, as
the case may be, conform to the Preliminary Plans and are satisfactory to Owner,
Owner shall cause the plans and specifications to be initialed on behalf of
Owner, thereby evidencing the approval thereof by Owner, and shall return two
(2) sets initialed by Owner to Tenant and such working drawings and
specifications shall be deemed approved by both Tenant and Owner (the "Final
Plans").

(iii) All the Work shall be designed in accordance with all
governmental authorities, legal requirements, insurance requirements and
environmental laws and other agencies having jurisdiction and with the over-all
design and construction standards of the property, Building, building equipment
and demised premises in order to insure the structural integrity of the building
of which the demised premises are a part and/or to preserve the value,
character, appearance, use, and functioning of the demised premises, the
Building of which the demised premises are a part and the Property generally.
the architectural and engineering plans and specifications for the Work shall be
prepared by a licensed architect and shall describe all the work which under
this Lease is to be performed and showing in sufficient detail the location of
all utilities, partitions, bathrooms, offices, storage and/or locker facilities
and any other matters which may affect the construction work to be performed in
the demised premises and/or Building. Owner shall make available plans and
specifications for the Building and building equipment, if requested by Tenant
or its architect.

(iv) If such Tenant's work requires approval by or notice to the
lessor of a Superior Lease or the holder of a Superior Mortgage, the Work shall
be delayed until such approval has been received, or such notice has been given,
as the case may be, an all applicable conditions and provisions of said Superior
leases or Superior Mortgages with respect to the Work have been met or complied
with at Tenant's expense.

(h) With respect to the Work, Owner agrees to solicit bids from at
least three (3) separate sub-contractors with respect to each portion of the
Work to be performed, one (1) of whom may be supplied by Tenant. Upon receipt
of the respective bids, Owner shall provide Tenant's architect with copies of
each such bid by either facsimile or overnight courier. Within forty-eight (48)
hours after receipt of such bids

Page 17 of 25

<PAGE>
by Tenant's architect, Owner and Tenant's architect shall select those sub-
contractor who are best qualified to perform that portion of the work specified
in such bids. In the event that Tenant's architect fails to notify Owner within
forty-eight (48) hours after receipt of the bids as to which sub-contractor it
believes is best qualified to perform that portion of the work specified in such
bids, then Owner shall have the absolute right to select that sub-contractor who
submitted the Lowest Responsive Bid (as hereinafter defined) to perform such
work. In the event Owner and Tenant's architect shall be unable to agree within
forty-eight (48) hours after Tenant's architect's receipt of the bids and
provided that the highest bid is not more than one hundred and 10 (110%) percent
of the lowest bid, then Owner shall have the right to select that sub-contractor
who it wishes to perform such work. In the event Owner and Tenant's architect
shall be unable to agree within forty-eight (48) hours after Tenant' architect's
receipt of the bids and if the higher bid is more than one hundred and ten
(110%) percent of the lowest bid, then Owner shall select that sub-contractor
who submitted the Lowest Responsive Bid to perform such work. As used herein
the term "Lowest Responsive Bid" shall mean that sub-contractor who submitted
the lowest actual bid for the work and who can perform such work in accordance
with the schedule contained in the final Plans. Owner agrees to provide
Tenant's architect with at least two (2) bids with respect to each portion of
the work to be performed.

(i) (i) Owner and Tenant agree that Tenant will take the
demised premises on the commencement date of the terms in "as is" condition,
except that prior to the commencement of the term of this Lease, Owner shall, at
its sole cost and expense, shall perform certain work in the demised premises so
as to make them a self contained unit ("Owner's Work") in accordance with Plans
and specifications annexed hereto as EXHIBIT "B." Owner shall use diligence to
complete Owner's Work so as to have the demised premises ready for occupancy as
soon as possible. However, Owner's agreement to complete Owner's Work shall not
require it to incur overtime costs and expenses and shall be subject to any
delays due to acts of God, governmental restrictions or guidelines, strikes,
labor disturbances, shortages of materials and supplies and for any other causes
or events whatsoever beyond Owner's reasonable control. Owner has made, and
makes, no representations as to the date when the demised premises will be ready
for Tenant's occupancy.

(ii) Owner agrees that it will use its best efforts to deliver the
IMI Premises on or before April 1, 1997. In the event that the IMI Premises are
not available for occupancy by April 1, 1997, then in such event, Owner, agrees
to reimburse Tenant for any additional construction costs that Tenant shall
incur which are directly attributable to the failure to deliver the IMI Premises
before April 1, 1997. Notwithstanding the foregoing, Owner shall not be
obligated, under any circumstances, to reimburse Tenant for more than Five
Thousand and 00/100 ($5,000 .00) Dollars of any additional construction costs as
provided for herein.

SECTION 20
Tenant's Work

(a) To the extent Tenant shall perform or contract for any work,
changes, alterations, decorating, demolition, renovation or construction within
the demised premises, pursuant to Section 4 of this Rider to Lease ("Tenant's
Work"), in all events Owner shall serve as "Owner's Representative" with respect
to all Tenant's Work (exclusive of decorations not affixed to the demised
premises). As Owner's Representative, Owner may require that Tenant submit
detailed plans illustrating all Tenant's work to be performed, and may require
that such plans be prepared or approved by licensed architects, engineers or
other qualified building personnel, in advance of any such Tenant's Work being
commenced. Owner shall have the right to alter and amend such plans for
Tenant's Work as it shall reasonably determine in order to insure the structural
integrity of the Building of which the demised premises are a part and/or to
preserve the value, character, appearance, use and functioning of the demised
premises, the building of which the demised premises are a part and the Property
generally. If such Tenant's Work requires approval by or notice to the lessor
of a Superior Lease or the holder of a Superior mortgage, the Tenant's Work
shall be delayed until such approval has been received, or such notice has been
given, as the case may be, and all applicable conditions and provisions of said
Superior leases or Superior Mortgages with respect to the proposed Tenant's Work
for which approval has been received shall bee preformed strictly in accordance
with approved plans and specifications, and no amendments or additions to such
plans and specifications shall be made without the prior written consent of
Owner. Tenant shall not be permitted to install and make a part of the demised
premises any materials, fixtures or articles other than moveable office machines
and furniture which are subject to liens, conditional sales contracts, security
agreements or chattel mortgages and Tenant shall comply with all other terms and
conditions of this Lease in connection with Tenant's Work. Further, Owner
requires that Tenant to maintain insurance in connection with any and all
Tenant's Work in a reasonable amount, naming Owner as an additional insured, to
insure against damage to the demised premises, the building of which the demised
premises are a part and/or the Property and/or injury

Page 18 of 25

<PAGE>
to laborers and other working personnel and bystanders resulting from occurring
in connection with Tenant's Work.

(b) As a fee for serving as Owner's Representative with respect to any
and all Tenant's Work to be performed, Tenant shall pay to Owner: (i) with
respect to any and all Tenant's Work which shall require the issuance of a
building permit from applicable local authorities, a fee equal in amount to
Fifteen percent (15%) of the total Cost less the general contractor fee of
Owner provided therein of all such Tenant's Work, or (ii) with respect to any
and all Tenant's Work which shall not require the issuance of a building permit
from applicable local authorities, a fee equal in amount to Five percent (5%)
of the total Cost less the general contractor fee of Owner provided therein of
all such Tenant's Work; provided however, that with respect to decorating only,
such fees shall be applicable to labor, service items and costs of installation
and other labor but shall not be applicable to the cost of furniture, art and
similar items otherwise included therein. Tenant agrees that the same shall be
collectible as additional rent pursuant to the Lease, and in default of payment
thereof Owner shall, in addition to all other remedies, have the same rights as
in the event of default of payment of rent.

SECTION 21
Estimated Charges

Notwithstanding anything contained to the contrary in this Lease, Owner
shall have the option, in lieu of the procedures set forth in Sections 2,3 and
12 of this Rider to Lease, to notify Tenant from time to time of the amounts
which Owner estimates will be the Tenant's share of Impositions pursuant to
Section 2 herein (if applicable) and/or Operating Costs pursuant to Section 3
herein (if applicable), and/or electrical charge increases pursuant to Section
12 herein (if applicable) for the next calender or fiscal year, as the case may
be, and Tenant shall pay such amount(s) in equal monthly installments in
advance on or before the first day of each month for such next year. Within a
reasonable period of time following the end of each year Owner shall submit to
Tenant a statement showing either the Impositions and/or Operating Costs and/or
electrical charge increases to be paid by Tenant with respect to such year, the
amount(s) thereof theretofore paid by Tenant and the amount(s) of the resulting
balance due thereon, or overpayment thereof, as the case may be. Each statement
shall be final and conclusive between the parties, their successors and assigns,
as to the matters set forth therein. In the event that any year shall be less
than Twelve (12) months, the respective amount(s) of Impositions Operating Costs
or electrical charge increases for such year shall be reduced by an amount
computed by multiplying each respective charge by a fraction, the numerator of
which is the difference between Three Hundred Sixty (360) and the actual number
of days in such year and the denominator or which is Three Hundred Sixty (360).

SECTION 22
Interest

Any payment required to be made by Tenant pursuant to this Lease,
including all payments of rent, additional rent or other charges, whether by
reason of retroactive application or because such payments are not made by
Tenant as and when due, shall thereupon be deemed to be due and payable by
Tenant to Owner on demand with interest thereon from the date when the
particular amount becomes due to the date of payment thereof to Owner at the
rate of the greater Fifteen percent (15%) per annum or Five percent (5%) above
the Citibank N.A. prime rate then in effect per annum; provided however, that
such rate shall not be greater than the highest rate permitted by law.

In the event of Tenant's monetary default, Owner will give Tenant written
notice of such monetary default and give Tenant five (5) days to cure. Owner
shall not be obligated to notify Tenant of monetary default more than once in
any twelve (12) month period.

SECTION 23
Subordination, Attornment, Estoppel and Recording

This Lease, and all rights of Tenant hereunder, are and shall be (a)
subject and subordinate in all respects to all present and future ground
leases, over-riding leases and underlying leases and/or grants of term of the
Property and/or the land and/or the building of which the demised premises are
a part or the portion thereof in which the demised premises are located in
whole or in part now or hereafter existing ("Superior Lease(s)"), (b) subject
and subordinate in all respects to all mortgages and building loan agreements
which may now or hereafter affect the Property and/or the land and/or the
building of which the demised premises are a part ("Superior Mortgage(s)"),
whether or not the Superior leases or Superior Mortgages shall also cover other
lands and/or buildings, and the foregoing shall extend to each and every advance
or hereafter to be made under the Superior Mortgages, and to all renewals,
modifications, replacements and extensions of the Superior leases and Superior
Mortgages and spreaders, consolidations

Page 19 of 25

<PAGE>
and correlation's of the Superior Mortgages. This Section shall be self-
operative (after the holder of any Superior Mortgages exercises its option
or grants its consent, as above provided) and no further instrument of
subordination shall be required. In confirmation of such subordination,
Tenant shall promptly execute and deliver at its own cost and expense any
instrument, in recordable form, if required, that Owner, the lessor of
any Superior Lease or the holder of any Superior Mortgage or any of their
respective successors in interest may request to evidence such
subordination.

Tenant agrees without further instruments of attornment in each case,
to attorn to lessor under any Superior Lease, or to the holder of any
Superior Mortgage or any successor to such holder's interest, upon such
holder's or successor's request, as the case may be, to waive the
provisions of any statute or rule or law now or hereafter in effect which
may give or propose to give the Tenant any right of election to terminate
this Lease or to surrender possession of the demised premises in the event
a Superior Lease is terminated or a Superior Mortgage is foreclosed, and
that unless and until said lessor, or holder, as the case may be, shall
elect to terminate this Lease, Tenant's obligations under this Lease shall
not be affected in any way whatsoever by any such proceeding or termination
(it being understood, however, that such holder or successor in interest
shall under no circumstances be bound by any payment of rent for more than one
month in advance, except for the Security Deposit, if any, or be bound by any
amendment or modification of the Lease without the consent of such holder or
successor in interest), and Tenant shall take no steps to terminate this Lease
without giving written notice to said lessor under the Superior Lease, or holder
of a Superior Mortgage, and a reasonable opportunity to cure (without such
lessor or holder being obligated to cure), any default on the part of the Owner
under this Lease. In confirmation of such attornment, Tenant shall promptly
execute and deliver at its own cost and expense any instrument, in recordable
form, if required, that Owner, the lessor of any Superior Lease or the holder
of any Superior Mortgage or any of their respective successors in interest
may request to evidence such attornment. Notwithstanding anything to the
contrary contained in this Section, Tenant agrees to subordinate and attorn
to the successor Owner of the Building if such successor Owner agrees to
honor all of the terms and conditions of this Lease. In the event that the
holder of any Superior Mortgage shall foreclose and shall elect to
terminate this Lease, and provided that Tenant shall have used all or any
part of the Interim Allowance and/or Allowance to perform Work, then in
such event, Tenant's obligation to reimburse Owner for the amount of the
Interim Allowance and/or Allowance, as the case may be, shall be
terminated.

Tenant agrees, at any time and form time to time, as requested by
Owner, or the holder of any Superior Lease or Superior Mortgage, upon not
less than Ten(10) days prior notice, to execute and deliver without cost or
expense to the Owner, a statement certifying that this Lease is unmodified
and in full force and effect (or if there have been modifications, that the
same is in full force and effect as modified and stating the modifications),
certifying the dates to which the rent and additional rent have been paid,
and stating whether or not, to the best knowledge of Tenant, Owner is in
default in performance of any of its obligations under this Lease, and, if
so, specifying each such default of which the Tenant may have knowledge,
specifying that Tenant shall not look to the holder of a Superior Lease or
Superior Mortgage for the return of any Security Deposit to the extent that
the Security Deposit, if any, has not been transferred to such holder, and
specifying as to such other matters as may be requested and as are part of
the standard form or request of such holder, it is being intended that any
such statement delivered pursuant thereto may be relied upon by any other
person with whom the Owner, or the holder of any Superior Lease or Superior
Mortgage, may be dealing.

Tenant agrees not to record this Lease. At the request of either
party, Owner and Tenant shall promptly execute, acknowledge and deliver a
memorandum with respect to this Lease sufficient for recording, which
Tenant may record at Tenant's cost and expense. Such memorandum shall not
in any circumstances be deemed to change or otherwise affect any of the
obligations or provisions of this Lease. If Tenant should record this
Lease, or if a memorandum of this Lease is recorded and this Lease is
terminated, then Owner may record a notice of termination of this Lease,
which shall be effective with Owner's signature solely appearing thereon.

Owner agrees to use its best efforts to obtain a non-disturbance
agreement affecting the demised premises in a form reasonably satisfactory
to counsel for the holder of any Superior Mortgage or Superior Lease,
pursuant to which such Superior Mortgagee or Lessee, as the case may be,
shall agree that Tenant's right to possession shall not be altered,
affected, terminated or in any manner disturbed by any default of Owner so
long as Tenant is not in default hereunder. It is hereby understood and
agreed that in the event Owner is unable to obtain the non-disturbance
agreement referred to herein, this Lease shall nevertheless be binding and
remain in full force and effect.

Page 20 of 25

<PAGE>

SECTION 24
Compliance With Laws and Requirements
of Public Authorities; Rules and Regulations

Tenant shall promptly notify Owner of any written notice it receives
of the violation of any law, statute, code, rule, regulation or requirement
of any Federal, State, Municipal or other public authorities which shall,
with respect to the demised premises or the Property or the use and
occupation thereof or the abatement of any nuisance, impose any violation,
order of duty arising from (i) Tenant's or any other party's use of the
demised premises, (ii) the manner of conduct of any business or operation
of its installations, equipment or other property therein, (iii) any cause
or condition created by or at the instance of Tenant or any other party, or
(iv) breach of any of Tenant's obligations hereunder.

Tenant and its employees and agents shall, at their cost and expense,
faithfully observe and comply with (a) the Rules and Regulations attached
as a part of the Articles of Lease and such other reasonable rules and
regulations (whether by modification, elimination or addition) as Owner at
any time or times hereafter may maintain or make and communicate in writing
to Tenant, which do not unreasonably affect the conduct of Tenant's
business in the demised premises.

SECTION 25
Mortgaging, Assignment and Subletting

Neither this Lease nor the term and estate hereby granted, nor any
part hereof or thereof, nor the interest of Tenant in any sublease or the
rentals thereunder, shall be assigned, mortgaged, pledged, encumbered or
otherwise transferred by Tenant by operation of law or otherwise, and
neither the demised premises nor any part thereof, shall be encumbered in
any manner by reason of any act or omission on the part of Tenant or anyone
claiming under or through Tenant, or shall be sublet or be used or occupied
or permitted to be used or occupied, or utilized for desk space or for
mailing privileges, by anyone other than Tenant or for any purpose other
than as permitted by this Lease, except as expressly otherwise provided in
this Section. Any change in the capital structure of Tenant named herein
will not be deemed to constitute an assignment or sublease or encumbrance
hereunder, provided the net worth of Tenant is not substantially reduced.

If this Lease be assigned, whether or not in violation of the
provisions of this Lease, Owner may collect rent from the assignee. If the
demised premises or any part thereof be sublet or be used or occupied by
anybody other than Tenant, whether or not in violation of this Lease, Owner
may after default by Tenant, and expiration of Tenant's time to cure such
default, collect rent from the subtenant or occupant. In either event,
Owner may apply the net amount collected to the rents herein reserved, but
no such assignment, subletting, occupancy or collecting shall be deemed a
waiver of any other provisions of this Lease, or the acceptance of the
assignee, subtenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of Tenant's obligations under this Lease.
The consent by Owner to assignment, mortgaging, subletting or use or
occupancy by others not in any way be considered to relieve Tenant from
obtaining the express written consent of Owner to any other or further
assignment, mortgaging or subletting or use or occupancy by others not expressly
permitted by this Section. Tenant agrees to pay to Owner reasonable counsel
fees incurred by Owner in connection with any proposed assignment of Tenant's
interest in this Lease or any proposed subletting of the demised premises or
any part thereof. References in this Lease to use or occupancy by others, that
is, any one other than Tenant, shall not be construed as limited to subtenants
and those claiming under or through subtenants but as including also licenses
and others claiming under or through Tenant, immediately or remotely.

(a) Tenant shall notify Owner in writing at least Sixty (60) days in
advance of any proposed assignment or sublease, giving the name of the
person or entity with whom Tenant intends to enter into such assignment or
sublease. If a proposed assignment or sublease requires Owner's consent,
Tenant shall also provide the terms of the assignment or sublease, including
the assignee's or subtenant's proposed use. If a proposed assignment or
sublease requires Owner's consent, then upon receipt of such notice Owner
shall thereupon have the option and right, exercisable within Five (5) days
of receipt of such notice from Tenant, to terminate this Lease effective as
of a date specified by Owner in such notice which date shall not be later
than Thirty (30) days after the date of Owner's notice.

(b) If Tenant is a corporation, upon at least Thirty (30) days prior
notice to Owner, this Lease in its entirety may be assigned, or subleased
without Owner's consent to a corporation into which Tenant merges or
consolidates, or which controls, is controlled by or under common control
with Tenant, or assigned or subleased to a related or affiliated company,
so long as the demised premises continue to be used for the described in Article
2 of this Lease; the new worth of the assignee is at least equal to or in excess
of the net worth of Tenant at the time of execution of this Lease and
immediately prior to such

Page 21 of 25

<PAGE>

assignment or the assignee can otherwise secure and guaranty the payment to
Owner of all rent and any other amounts due from Tenant pursuant to this
Lease in a manner reasonably satisfactory to Owner; the assignee assumes
by documents satisfactory to Owner all of Tenant's obligations to be
performed under this Lease, and; provided such assignment shall be subject
to all of the other terms and conditions of this Lease.

(c) Tenant may only enter into any other assignment or sublease
provided Tenant obtains Owner's prior written consent, which consent shall
not be unreasonably withheld or delayed in Owner's sole discretion and shall
be withheld if Owner reasonably determines that: (i) an event of default
remains uncured; (ii) the proposed use by the assignee is not included within
the permitted uses as described in Article 2 of this Lease, or; (iii) the
proposed use by the assignee will violate the applicable building code for
the safe number of occupants for the demised premises.

(d) As to an assignment or sublease requiring Owner's consent, Owner
shall notify Tenant in writing within Five (5) business days of receipt of
Tenant's request either that Owner (i) exercised its right and option to
terminate the Lease as described in Subsection (a) above; (ii) consents to
such assignment or sublease, or; (iii) refuses to consent to such
assignment or sublease. If Owner consents to such assignment or sublease, such
consent shall be accompanied by an estoppel certificate of Owner addressed to
Tenant and to the proposed assignee, upon which they may each rely, setting
forth the matters described in Section 24 of this Rider to Lease. If Owner
refuses to consent then such refusal shall include Owner's particular reasons
for such refusal. Owner's failure to so respond within such Five (5) business
days period shall be deemed consent.

(e) If Owner consents to an assignment, Tenant and the assignee shall
enter into the assignment on the same terms described to Owner, and deliver
to Owner an executed original counterpart of such assignment prior to
assignee's occupancy of the demised premises. Upon any valid assignment
(but not a sublease), Tenant shall thereupon be released from its
obligation under this Lease.

(f) If Owner consents to a sublease (but not an assignment) of all
part of the demised premises, and the base rent or comparable payment under
the sublease is greater than the rent due under this Lease, Tenant may
collect all of such excess until Tenant has been fully reimbursed for all
reasonable and customary cost incurred by Tenant in connection with such
sublease, including without limitation, reasonable and customary brokerage
commissions, advertising expenses, attorneys' fees, and remodeling expenses,
and thereafter, Tenant shall pay to Owner Fifty percent (50%) of such net
excess. Such payments shall be due only if Tenant has collected such net
excess, and shall be payable on the next day on which rent is due which is
not less than Thirty (30) days after Tenant collects such net excess. Tenant
shall deliver to Owner an executed original of any sublease prior to
subtenant's occupancy of any part of the demised premises. Any sublease shall
be subject to this Lease and in no way shall be deemed to release Tenant from
its primary obligation under this Lease as of the date of the Sublease.
Notwithstanding the foregoing, in the event that Tenant subleases or assigns
all or part of the demised premises to an affiliated or related company for a
rent greater than the rent due under the Lease, Owner shall not be entitled to
any such excess.

(g) Anything herein contained to the contrary notwithstanding:

(i) Tenant shall not advertise but may list its space for
subletting or assignment, and may list its space at a rental rate lower
than the rental rate than being paid by Tenant to Owner only with respect
to subletting (but not assignment).

(ii) No assignment or subletting shall be made to any person or
entity which shall at that time otherwise be a tenant, sub-tenant or other
occupant of any part of the Property or which shall within the prior Six
(6) months have been negotiating with Owner to become such a tenant, sub-
tenant or occupant of the Property or Tarrytown Corporate Center, except
for Physicians On Line or any of Tenant's related or affiliated companies.

SECTION 26
This Section Has Been Intentionally Omitted

SECTION 27
Hazardous Substances

As used in this Lease, the term "Hazardous Substances" shall mean
pollutants, contaminants, toxic or hazardous waste(s), or any other
substances, the use and/or the removal of which is required or the use of
which is restricted, prohibited or penalized by any "Environmental Law",
which term shall mean any

Page 22 of 25

<PAGE>
federal, state or local law, ordinance or other statute of a governmental or
quasi-governmental authority relating to pollution or protection of the
environment. Tenant hereby agrees that (i) no activity will be conducted on the
demised premises that will produce any Hazardous Substance, except for such
activities that are part of the ordinary course of Tenant's business activities
(the "Permitted Activities") provided said Permitted Activities are conducted
in accordance with all Environmental Laws and have been approved in advance in
writing by Owner; Tenant shall be responsible for obtaining any required
permits and paying any fees and providing any testing required by any
governmental agency;(ii) the demised premises will not be used in any manner
for the storage of Hazardous Substances except for the temporary storage of
such materials that are used in the ordinary course of Tenant's business (the
"Permitted Materials") provided such Permitted Materials are properly stored
in a manner and location meeting all Environmental Laws and approved in advance
in writing by Owner; Tenant shall be responsible for obtaining any required
permits and paying and fees and providing any testing by any governmental
agency; (iii) no portion of the demised premises will be used as a landfill or a
dump; (iv) Tenant will not install any underground tanks of any type; (v) Tenant
will not allow any surface or subsurface conditions to exist or come into
existence that constitute, or with the passage of time may constitute a
public or private nuisance;(vi) Tenant will not permit any Hazardous
Substances to be brought onto the demised premises, except for the Permitted
Materials described below, and if so brought or found located thereon, the
same shall be immediately removed, with proper disposal, and all required
cleanup procedures shall be diligently undertaken pursuant to all
Environmental Laws. Owner or Owner's representatives shall have the right
but not the obligation to enter the demised premises for the purpose of
inspecting the storage, use and disposal of Permitted Materials to ensure
compliance with all Environmental Laws. Should it be determined, in Owner's
sole opinion, that said Permitted Materials are being improperly stored, used,
or disposed of, then Tenant shall immediately take such corrective action as
requested by Owner. Should Owner fail to take such corrective action within
twenty-four (24) hours, Owner shall have the right to perform such work and
Tenant shall promptly reimburse Owner for any and all costs associated with
said work. If at any time during or after the term of the Lease, the demised
premises is found to be so contaminated or subject to said conditions, Tenant
shall diligently institute proper thorough cleanup procedures at Tenant's
sole cost, and Tenant agrees to indemnify and hold Owner harmless from all
claims, demands, actions, liabilities, costs, expenses, damages and obligations
of any nature arising from or as a result of the use of the demised premises
by Tenant. The Foregoing indemnification and the responsibilities of Tenant
shall survive the termination or expiration of this Lease.

SECTION 28
Additional Premises

(a)(i) On or about October 20, 1995, Owner shall make available, and
Tenant shall occupy the Six Thousand, Five Hundred and Nine (6,509) rentable
square feet more particularly described on EXHIBIT "A" attached hereto and
made a part hereof and presently occupied by American Software U.S.A., Inc.
(the "American Premises"). The American Premises are currently occupied under
an IBM Sublease Agreement which expires on March 31, 1997. The current rent
being charged by IBM for the American Premises is $21.90 per rentable square
foot per annum, which figures include the cost of electricity. The American
Premises will be subleased to Tenant by American Software U.S.A., Inc for the
balance of the subleased term pursuant to a separate sublease agreement which
is annexed hereto as EXHIBIT "C." As of the occupancy date of the American
Premises, Tenant shall pay to Owner the amount which IBM is billing to American
Software U.S.A., Inc. for the American Premises, and Tenant shall abide by all
terms, covenants and conditions of the sublease agreement.

(ii) On or before April 1, 1997, Owner shall make available, and Tenant
shall occupy the Five Thousand, Five Hundred and Seventy-One (5,571) rentable
square feet more particularly described on EXHIBIT "A" attached hereto and
made a part hereof and presently occupied by IMI (the "IMI Premises"). The IMI
Premises are currently occupied under an IBM Sublease Agreement which expires on
March 31, 1997. The current rent being charged by IBM for the IMI Premises is
$20.62 per rentable square foot per annum, which figures include the cost of
electricity. In the event that prior to April 1, 1997, the IMI Premises become
vacant, Tenant shall have the right to occupy the IMI Premises on the date that
the IMI Premises become vacant to the end of the subleased term pursuant to a
separate sublease agreement substantially in the same form as that which is
annexed hereto as EXHIBIT "C." As of the occupancy date of the IMI Premises,
Tenant shall pay to Owner the amount which IBM is billing to IMI for the IMI
Premises, and Tenant shall abide by all terms, covenants and conditions of the
sublease agreement. Tenant shall, within twenty (20) days after receipt of the
notice from Owner that the IMI Premises are available for occupancy, notify
Owner of its intention to occupy the IMI Premises prior to April 1, 1997 (time
being of the essence with respect thereto). Tenant's failure to notify Owner
within the twenty (20) day period shall be deemed a waiver of the right to
occupy the IMI Premises prior to April 1, 1997.

Page 23 of 25

<PAGE>
(iii) The Advance Premises and the IMI Premises are hereinafter sometimes
collectively referred to as the Additional Space.

(b) In the event, Owner is unable to give possession of the Additional
Premises on the date of the commencement of the term, because of the holding-
over or retention of possession of any tenant, undertenant or occupants, Owner
shall not be subject to any liability for failure to give possession on said
date and the validity of the Lease shall not be impaired under such
circumstances, nor shall the same be construed in any wise to extend or diminish
the duration of Term, but the rent or additional rent payable hereunder for the
Additional Premises which Owner has not delivered to Tenant shall not become
payable (provided Tenant is not responsible for Owner's inability to obtain
possession) until the date Owner delivers possession of the Additional Premises
to Tenant.

SECTION 29
Tenant's Right to Give Back Space

Tenant shall have the right upon execution of this Lease or anytime
thereafter, to give Owner ninety (90) days prior written notice, that it
requires Owner to take back from Tenant approximately 2,000 rentable square feet
of the premises which Tenant is presently subleasing from IBM (The "Released
Premises"), which premises are more particularly described on EXHIBIT "A"
attached hereto and made a part hereof. In the event Tenant gives Owner such
notice, and Owner takes back the Released Premises, Owner shall use these
premises for the purposes of an exercise facility for the Tarrytown Corporate
Center or any other purpose Owner shall desire, provided, however, that Owner
shall have already constructed an exercise facility elsewhere in the Tarrytown
Corporate Center. Tenant shall receive a 15% discount on all memberships to
this health facility.

SECTION 30
Miscellaneous

(a) This Lease shall be governed in all respects by the laws of the State
of New York applicable to leases made and to be performed wholly therein.

(b) If any of the provisions of this Lease or the application thereof to
any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such provision or provisions
to persons or circumstances other than those as to whom or which it is held
invalid or unenforceable, shall not be affected thereby, and every provision of
this Lease shall be valid and enforceable to the fullest extent permitted by
law.

(c) The article headings in this Lease are inserted only as a matter of
convenience and reference and are not to be given any effect whatsoever in
constructing this Lease.

(d) This Lease contains the entire agreement between the parties and shall
not be modified in any manner except by an instrument in writing executed by
the parties or their respective successors in interest. No waiver or
modification by either party of any provision or covenant of this Lease shall be
deemed to have been made unless such waiver is expressed in writing and signed
by the party against whom such waiver or modification is charged.

(e) The covenants, agreements, terms, provisions and conditions contained
in this Lease shall apply to and inure to the benefit of and be binding upon
Owner and Tenant and their respective successors and assigns, except as
otherwise provided herein.

(f) Tenant's Proportionate Share for the Demised Premises is Twenty and
Eighty Hundredths (20.80%) Percent, which is the ratio that the Twenty-Six
Thousand, Three Hundred and Two (26,302) square feet of rentable area comprising
the demised premised bears to the One Hundred and Twenty-Six Thousand, Four
Hundred and Sixty-One (126,461) square feet of rentable area in the Building.

(g) Owner shall provided Tenant with its Proportionate Share of space on
the lobby directory and floor directional signs for Tenant and it's affiliated
companies, to the extent available. Other than the foregoing, Tenant shall not
place or suffer to be placed or maintain any sign, awning or canopy upon or
outside the demised premises or in the Building; nor shall Tenant place at the
store front any sign, decoration, lettering or advertising matter of any kind
without first obtaining Owner's written approval and consent in each instance.
In the event that Owner gives its consent hereunder, all signs shall be of a
size, color and design as is approved in writing by Owner and shall be installed
where designated by Owner and maintained in good condition, repair and
appearance at all times, according to Owner's standards and the laws of the
municipality having jurisdiction over such signs. If Owner shall deem it
necessary to

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<PAGE>
remove any sign in order to paint or to make any repairs, alterations or
improvements in or upon the demised premises or any part thereof, Owner shall
have the right to do so, provided the same be removed and replaced at Owner's
cost and expense unless having been occasioned by fault of Tenant. Owner shall
have the right, with or without notice to Tenant, to remove any signs (paper or
otherwise) installed by Tenant in violation of this paragraph and to charge
Tenant the cost of such removal without liability to Tenant for such removal.

IN WITNESS WHEREOF, the parties hereto have executed this Rider to The
Standard Form of Office Lease as of the date and year first written above.

TARRYTOWN CORPORATE CENTER IV, L.P. (Owner)

By: /s/
------------------------
Name:
Title:

ADVANCED HEALTH CORPORATION (Tenant)

By: /s/
------------------------
Name:
Title: Controller

Page 25 of 25

<PAGE>

EXHIBIT "A" TO A LEASE DATED AS OF NOVEMBER ,1995

BETWEEN

TARRYTOWN CORPORATE CENTER IV, L.P.

OWNER

AND

ADVANCED HEALTH CORPORATION,

TENANT

<PAGE>

[GRAPH]

<PAGE>

EXHIBIT "B" TO A LEASE DATED AS OF NOVEMBER ,1995

BETWEEN

TARRYTOWN CORPORATE CENTER IV, L.P.

OWNER

AND

ADVANCED HEALTH CORPORATION,

TENANT

<PAGE>

[GRAPH]

<PAGE>

EXHIBIT "C" TO LEASE DATED AS OF NOVEMBER , 1995

BETWEEN

TARRYTOWN CORPORATE CENTER IV, L.P.

OWNER

AND

ADVANCED HEALTH CORPORATION

TENANT

<PAGE>

SUBLEASE

THIS AGREEMENT, made as of the day of October, 1995, between
----
AMERICAN SOFTWARE, USA, INC., a Georgia corporation, with an office at 470
East Paces Ferry Road, Atlanta Georgia, 30305, hereinafter called the
"Sublessor" and ADVANCED HEALTH CORPORATION, having an office at 560 White
Plains road, Tarrytown, New York 10591 hereinafter referred to as the
"Sublessee."

W I T N E S S E T H:

WHEREAS, Tarrytown Corporate Center IV, is the fee simple owner
("Owner") of the building commonly known as and located at 560 White Plains
Road, Tarrytown, New York 10591 (the "Building")

WHEREAS, Owner entered into that certain lease dated January 14,
1992, with Integrated Systems Solutions Corporation ("ISSC"), as Tenant
(the "Prime Lease" for the Second, Third, and Fourth floors of the Building
for a term which expires on March 31, 1997. A copy of the Master Lease is
annexed hereto as EXHIBIT "A".

WHEREAS, ISSC entered into that certain sublease dated June 2,
1994, with Sublessor, for a portion of the Second (2nd) Floor of the
Building consisting of Six Thousand, Five Hundred and Nine (6,509) rentable
square feet more particularly described on EXHIBIT "B" annexed hereto (the
"Premises") for a period commencing on July 1, 1994 and ending on March 30,
1997 (the "Prime Sublease").

WHEREAS, Sublessee desires to sublease the Premises from
Sublessor.

NOW, THEREFORE, for and in consideration of the foregoing and for
other good and valuable consideration and of the mutual agreements
hereinafter set forth, Sublessor and Sublessee stipulate, covenant and
agree as follows:

PREMISES: 1. Sublessor does hereby sublease to Sublessee the
Premises which are more particularly described on
EXHIBIT "B" annexed hereto and made a part hereof.

TERM: 2. The term for the Premises shall commence on or about
October 20, 1995 and shall expire on March 29, 1997.

USES: 3. Sublessor shall use and occupy the Premises for
executive and administrative purposes only and for no
other purpose.

RENT AND
ADDITIONAL
RENT: 4. (A) Commencing as of the date that Sublessee occupies
the Premises, Sublessee shall pay Sublessor the annual
rent of One Hundred and Forty-two, Thousand, Five
Hundred and Forty-Seven and 16/100 ($142,547.16)
Dollars for the Premises, payable in equal monthly
installments of Eleven Thousand, Eight Hundred and
Seventy-Eight and 93/100 ($11,878.93) Dollars such
rental includes all tenant electric charges. the
annual rent shall be paid in advance on the first day
of each month during the term of this Sublease without
deduction, set off or demand. Rent for any portion of
a month shall be prorated on a thirty (3) day basis.
Rent

Page 1 of 8

<PAGE>

payments shall be made payable to "STEVEN C. HIRSCH, AS
ATTORNEY FOR THE BENEFIT OF TARRYTOWN CORPORATE CENTER
TRUST ACCOUNT" and delivered to Steven C. Hirsch, Esq.
666 Old Country Road, Suite 207 Garden City, New York
11530, or such other place as Sublessee may designate.
During the term, Sublessor shall pay its "pro rata
share," as hereinafter defined, of any Operating
Expenses and Real Estate Taxes that exceed the
Operating Expense Base Year and the Base year for Real
Estate Taxes for the Building, as hereinafter defined.
For purposes of calculating Additional Rent Sublessee's
Operating Expense Base Year will be the calendar year
ending December 31, 1994 and the Base Year for Real
Estate Taxes will be the 1994 State, County and Town
Tax year and the 1994/95 School Tax Year.

(B) Sublessee's pro rata share for the Premises is
Five and Fifteen Hundredths (5.15%) Percent, which is
the ratio that the Six Thousand Five Hundred and Nine
(6,509) square feet of rentable area comprising the
Premises bears to the One Hundred and Twenty-Six
Thousand, Four Hundred and Sixty-one (126,461) square
feet of rentable area in the Building. Sublessor shall
furnish Sublessee with a true copy of the Landlord's
Statement of Operating Expenses, Real Estate Taxes and
other Additional Rent, delivered ISSC to Sublessor
pursuant to the Prime Sublease and include thereon a
detailed statement of the Additional Rent to be paid by
Sublessee. Sublessee shall pay Sublessor within Thirty
(30) days after landlord's Statement is furnished to
Sublessee.

(C) Wherever in the Prime Lease the words "Tenant's
Share" are used, the words "Sublessee's pro rata share"
shall be substituted, and Sublessee's pro rata share
shall be as set forth in sub paragraph (B) hereof.

(D) Any Real Estate Tax reduction to ISSC under
Section 3.05(g) of the Prime Lease shall in no event
exceed the reduction granted to Sublessor for the
Premises under the Prime Sublease.

PREPARATION FOR
OCCUPANCY: 5. Sublessor has inspected the Premises and agrees to
accept the Premises in their "AS IS" state and
condition on the date it commences occupancy and
without any representation or warranty (except as
expressly set forth herein), express or implied, in
fact or by law.

THE PRIME LEASE
AND PRIME
SUBLEASE: 6. (A) This Sublease is subject to all of the terms of the
Prime Lease and Prime Sublease with the same force and
effect as if both were fully set forth herein at
length, excepting only as otherwise specifically
provided for herein and in the Prime Sublease. All of
the terms with which ISSC is bond to comply under the
Prime Lease and which Sublessor is bound to comply
under the Prime Sublease shall, to the extent only that
they

Page 2 of 8

<PAGE>

apply to the Premises and except as otherwise
specifically provided for herein and in the Prime
Sublease, be binding upon Sublessee, and Sublessor
acknowledges that all of the obligations of Owner set
forth in the Prime Lease shall, to the extent that they
apply to the Premises, inure to Sublessor's benefit.
It is the intention of the parties that, except as
otherwise provided in this Sublessor, the relationship
between Sublessee and Sublessor shall be governed by
the language of the various articles of the Prime Lease
and Prime Sublease as if they were typed out in this
Sublease in full, and the words "Lessor," "Lessee," and
"Lease" as used in the Prime lease, shall read,
respectively, " Sublessor," "Sublessor," and
"Sublease."

(B) For the purposes of this Sublease, the following
provisions of the Prime lease are hereby deleted or
modified as follows:

(i) Delete in its entirety Base Lease Information; Article
2, titled "Term;" Section 3.01, titled "Annual Rent;"
Section 3.06, titled "Electricity;" Article, titled
Preparation for Occupancy," Article 5, titled
"landlord's title and Allowable Use; "Section 6.02,
titled "Landlord's Failure to Provide Services;"
Article 7, titled "Parking," except the last two
sentences of Section 7.01(a) and all of
Section 7.01(b); Article 8, titled "use of Leased
Premises;" Section 9.03, titled "Landlord's Failure to
Make Repairs;" Section 10.02(a); Section 13.01, titled
"Tenant's Changes - No Approval;" Section 13.05, titled
"Landlord's Changes - Tenant's Approval"; Section
14(c); Section 17.03, titled "Project Sign and Name;"
Article 26, titled "Notices;" Article 27 titled
"Assignment and Subletting;" Article, titled "Quiet
Enjoyment;" Article 37, titled "Broker;" Section 40.03,
titled "Project Contractors and Suppliers;" Article 42,
titled "Binding Agreement;" Article 43, titled "Entire
Agreement;" and EXHIBIT A.

(ii) Modify: (a) Section 10.02(b) by deleting the second
sentence and Section 10.02(c) by deleting the words in
the first line "landlord hereby represents and warrants
that;"

(b) Section 13.04 by deleting this Section and
substituting "Tenant shall remove all or any of
Tenant's Property and, if as a condition to Sublessor's
approval to make alterations improvements, replacements
and other changes pursuant to Section 13.02(b),
Sublessee shall remove such alterations, improvements,
replacements and other changes prior to the end of the
term and restore the Premises to the condition required
by

Page 3 of 8

<PAGE>

Sublessor when it grants Sublessee such approval
provided, that Sublessee shall not be obligated to
remove alterations, improvements, replacements and
other changes which were consented to in writing by the
Owner and ISSC. Sublessee agrees that restoration as a
condition to such approval is a reasonable and
acceptable condition and Owner and/or ISCC's failure or
refusal to consent to Sublessee's request is a
reasonable basis for Sublessor to disapprove. Failure
or refusal of Sublessee to restore the Premises as
required above shall constitute a default under Section
24.01 of the Prime Lease and Sublessee's obligation to
restore and Sublessor's remedies and rights set forth
in this Sublease shall survive the expiration or
earlier termination of this Sublease and the Prime
lease. Any sums owed hereunder to Sublessor shall
constitute "Additional Rent."

(c) Article 18, titled "Subordination and Non-
disturbance," by deleting the Article in its entirety
and substituting the following:

"This Sublease shall be subordinate and subject to all
ground leases, the Prime Lease, the Prime Sublease and
all other underlying leases and to any mortgages
thereon and to any mortgages covering the fee interest
of the owner, and to all renewals, modifications or
replacements thereof."

QUIET ENJOYMENT: (A) Sublessor covenants and agrees with Sublessee that
upon Sublessee's paying the rent and additional rent
reserved in this Sublease and observing and performing
all of the other obligations, terms, covenants and
conditions of this Sublease on Sublessee's part to be
observed and performed, Sublessee may peaceably and
quietly enjoy the Premises during the term; provided,
however, that this Sublease shall automatically
terminate upon termination of the Prime Lease and/or
Prime Sublease and Sublessee shall have not claim
against Sublessor unless such termination was caused by
the default of Sublessor in the performance of its
obligations under the Prime Sublease which have been
assumed by Sublessor under this Sublessee and have not
been assumed by Sublessee hereunder.

(B) Sublessor covenants and agrees that Sublessee
shall not do or suffer or permit anything to be done
which would constitute a default under the Prime Lease
or Prime Sublease or would cause the Prime Lease or
Prime Sublease to be canceled, terminated or forfeited
by virtue of any rights of cancellation, termination,
or forfeiture reserved or vested in Owner under the
Prime Lease and/or Prime Sublease, and that Sublessee
will indemnify and hold harmless Sublessor from and
defend Sublessor against all claims, liabilities,
losses and damages of any kind whatsoever (excepting
special and consequential damages) that Sublessor may
incur by reason of, resulting from or arising out of
any such cancellation,

Page 4 of 8

<PAGE>

termination of forfeiture caused by Sublessee.

NOTICES: 8. Any notice, approvals, demand or request under this
Sublease shall be in writing and shall be considered
properly delivered when addressed as hereinafter
provided and delivered by private express mail service.
any notice, approval, demand or request by Sublessor to
Sublessee shall be addressed to Sublessee at 560 White
Plains road, Tarrytown, New York 10591, with a copy
sent simultaneously to (i) Jeffrey I. Citron, Esq.,
Salon, Marrow & Dyckman, 685 Third Avenue, New York,
New York 10017, (ii) Steven C. Hirsch, Esq., 666 Old
Country Road, Suite 207, Garden City, New York 11530;
and to (iii) Owner, 580 White Plains Road, Tarrytown,
New York 10591 with a copy sent simultaneously to: (i)
James R. McGuone, Esq., Gambrell & Stolz, One Peachtree
Center, 303 Peachtree Street NE, Suite 4300, Atlanta, GA
30308; and to (ii) Steven C. Hirsch, Esq., 666 Old Country
Road, Suite 207, Garden City, New York 11530; and to
(iii) Owner, 580 White Plains road, Tarrytown, New York
10591, Attention: Leasing Department

Rejection or other refusal to accept or the inability
to deliver because of a changed address of which no
notice was given shall be deemed to be receipt of the
notice, demand or request sent.

ASSIGNMENT AND
SUBLETTING: 9. Sublessee shall not assign, mortgage, transfer, pledge
or otherwise encumber its interest in this Sublease, in
whole or in part, or sublet or permit the subletting of
the Premises, or any part thereof, or permit the
Premises or any part thereof to be occupied or used by
any person or entity other than Sublessee without the
approval of Sublessor which Sublessor may withhold in
its reasonable discretion. Notwithstanding the
foregoing, Sublessor consents to Sublessee's right to
sublet a portion of the space to affiliates and/or
subsidiaries.

OWNER'S RESPON-
SIBILITIES: 10. Sublessee recognizes that Sublessor is not in a
position to furnish the services set forth in the Prime
Lease or Prime Sublease, or to perform certain other
obligations which are not within the control of
Sublessor, such as, without limitation, providing
services, maintenance, repairs, and replacements to the
Building and Premises, complying with laws or insuring
restoring of the Premises and Building after casualty
or condemnation. Therefore, notwithstanding anything
to the contrary contained in this Sublease, Sublessee
agrees that Sublessee shall look solely to Owner to
furnish all services and maintenance and to perform

Page 5 of 8

<PAGE>

all other obligations which Owner is required to
perform and observe under the Prime Lease and Prime
Sublease. Sublessor shall not be liable to Sublessee
or be deemed in default hereunder for failure of Owner
to observe or perform the same; provided that, whenever
under the terms of the Prime Lease, Owner shall fail to
perform any of its Prime lease obligations pertaining
to the Premises, Sublessee may, at its option, enforce
performance thereof if and to the extent authorized by
the terms of the Prime Lease and/or the Prime Sublease,
and Sublessor shall cooperate with Sublessee in such
enforcement. However, Sublessor shall not be obligated
to initiate any arbitration or legal proceeding or
otherwise to enforce the Prime Lease. However,
Sublessor will use reasonable efforts to cause Owner to
cure and make repairs. Notwithstanding anything herein
to the contrary, in the event of a constructive
eviction, or other similar claim which allows the
tenant to terminate its tenancy, notwithstanding the
fact that Sublessor was not obligated to act or did not
omit to do anything and this Sublease shall be deemed
terminated in the event of such constructive eviction
or similar claim, Sublessee maintains all rights
against Sublessor pursuant to Section 24.03 in the
event of Sublessor's or Owner's default.

CASUALTY/
CONDEMNATION: 11. Article 10, titled "Fire and Other Casualty" and
Article 12, titled "Condemnation" of the Prime Lease
are modified to provide that if by preparation of
either of these two Articles, the Prime Lease and the
Sublease are not terminated and continue in full force
and effect, until the Premises are restored in
accordance with these two Articles there shall be a
proportionate abatement of annual rent and Additional
Rent payable hereunder to the extent of damage to the
Premises as determined by Owner, Sublessor and
Sublessee; provided, however, that such abatement shall
in now event exceed the abatement granted to ISSC
under the Prime Lease and Sublessor under Prime
Sublease for the Premises and, provided further, that
not compensation or claim or reduction will be allowed
or paid by Sublessor by reason of inconvenience,
annoyance or injury to Sublessee's business arising
from the necessity of effecting repairs to the Premises
or any portion of the Building, whether such repairs
are required by operation of these two Articles or any
other provision of the Prime Lease, Prime Sublease or
this Sublease. Section 10 is further modified to
provide that each reference to a 180 day period therein
shall be deemed to refer to a 120 day period, and
reference to a 280 day period shall be deemed to refer
to a 140 day period.

PARKING 12. Sublessor shall, without charge to Sublessee, provide
and maintain for the non-exclusive use of Sublessee's
employees and invitees, parking area sufficient to
accommodate Three (3) cars in the covered parking area,
one of which shall be under the building. Sublessee
shall have access to the parking area twenty-four (24)
hours a day, seven days per week.

Page 6 of 8

<PAGE>

BINDING AND
ENTIRE
AGREEMENT: 13. This Sublease shall be binding on the respective legal
representatives successors and assigns of the parties.
This Sublease contains the entire agreement of the
parties with respect to the subject matter herein and
may not be modified except by instrument in writing
which is signed by both parties.

BROKER: 14. Sublessee warrants and represents to Sublessor and
Sublessor warrants and represents to Sublessee that no
broker consummated or brought about this transaction.
Sublessee and Sublessor shall defend, indemnify and
save harmless the other from and against any claim
which may be asserted against the indemnified party by
any person if (a) the claim is made in connection with
transaction and (b) such indemnifying party employed
the claiming person. the indemnifying party shall
reimburse the other for reasonable expenses, losses
costs and damages (including reasonable attorneys' fees
and court costs) the other incurred in connection with
such claims. This Article shall survive the expiration
or earlier termination of this Sublease.

COMPLIANCE: 15. Sublessee shall comply with all statutes, rules,
orders, codes, and regulations, and legal requirements
and standards issues thereunder (collectively the
"Laws") which are applicable to Sublessee's use and
manner of use of the Premises.

INDEM-
NIFICATION: 16. Sublessor and Sublessee each agree to indemnify and
save the other harmless from any and all claims for
bodily injury (including death) or property damage made
against one party hereto if (1) arising from any breach
or default by the other party hereto (including its
agents, invitees, employees or contractors) in the
performance of any covenant or agreement on its part to
be performed pursuant to the provisions of this
sublease, or (2) occurring within the Building and
common area and arising from the misconduct or gross
negligence of such party (including its agents,
invitees, employees, or contractors). This indemnity
shall include all court costs, reasonable attorneys'
fees, expenses and liabilities incurred by the
indemnified party against either Sublessor or Sublessee
by reason of any such claim, the indemnifying party
agrees to defend the action or proceeding at its
expense upon notice from the party to be indemnified.

CONSENT OF ISSC
AND OWNER: 17. Anything herein to the contrary notwithstanding, it is
understood and agreed that this sublease shall not
become effective unless and until Sublessor has
obtained and delivered to Sublessee the written consent
of ISSC and Owner to this subletting.

Page 7 of 8

<PAGE>

IN WITNESS WHEREOF, duly authorized representatives of the
parties hereto have executed this Sublease as of the day and year first
above written.

ADVANCE HEALTH CORPORATION, Sublessee

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

AMERICAN SOFTWARE USA, INC., Sublessor

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

Tarrytown Corporate Center IV, Owner, hereby consents to this
Sublease and agrees to be bound by the provisions thereof. Owner also
agrees that in the event Sublessee remains in the Premises beyond the
expiration or earlier termination of the Prime Lease or Prime Sublease, the
Owner shall not seek to recover from Sublessee or from Sublessor, on
account of Sublessor's holding over an amount greater than one-hundred and
ten (110%) percent of the Annual Rent relating to the Premises.
Notwithstanding the foregoing, nothing contained herein shall be construed
as permitting Sublessee to holdover in the Premises beyond the expiration
or earlier termination of the Prime Lease or Sublease.

TARRYTOWN CORPORATE CENTER IV, Owner

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

Integrated Systems Solutions Corporation hereby consents to this
Sublease and agrees to be bound by the provisions thereof.

INTEGRATED SYSTEMS SOLUTIONS CORPORATION

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

Page 8 of 8

<PAGE>

WORK SCHEDULE OF OWNER'S RESPONSIBILITY
FOR
ADVANCED HEALTH
560 WHITE PLAINS ROAD
TARRYTOWN, NEW YORK 10591

D. Telephone
---------

Tenant shall make arrangements with any pay telephone
company for installation of telephone service.

Tenant's telephone lines must be installed within the
ceiling of Tenant's leased space.

E. Circuits and Service
--------------------

The building will contain sufficient electrical facilities
to provide for all normal installation. the design capacity
is based on a combined lighting and receptacle load of four
(4) watts per square foot of usable area at 265/460 volts.
Within this (4) watts per square foot, Tenant will be
allowed 1.5 watts per usable square foot of 120 volt
services.

VIII. VENETIAN BLINDS:
---------------

Owner shall supply and install ceiling-high venetian blinds
on all exterior windows. These blinds shall be maintained
by Tenant.

XI. HEATING AND AIR CONDITIONING:
----------------------------

1. This work shall comprise essentially the design and
installation of the variable volume duct system on each
floor together with a reasonable amount of air
diffusers and associated fixtures, all supplied from a
central system designed to conform to the standards per
performance of the best new office buildings in
Suburban New York. Normal operating hours shall be
8:00 a.m. to 6:00 p.m., Monday through Friday.

The system shall be capable of delivering 100% outside
fresh air and shall never deliver less than 15% outside
fresh air, or less than 0.35 cfm and is based upon the
normal design of air conditioning, where four (4) watts
of light and power/square foot is available for
Tenant's use and an average occupancy of one (1) person
per 100 square feet.

The system shall be capable of maintaining inside
conditions of not more than 78F and 50% relative
humidity when outside conditions are not more than 95F
dry bulb and 75F wet bulb except that as the outside
temperature conditions vary the inside

<PAGE>

space conditions shall be maintained approximately as
follows:

OUTSIDE CONDITIONS MAXIMUM INSIDE CONDITIONS
------------------ ------------------------------

66 -- 72 db 72 + 2db, 25 -- 50 RH*
-
72 -- 80 db 74 + 2db, 35 -- 50 RH*
-
85 -- 90 db 76 + 2db, 35 -- 50 RH*
-
91 -- 95 db 78 + 2db, 35 -- 50 RH*
-

* with normal humidity tolerances

the performance requirements noted above shall be
maintained all year round, either by the use of varying
amounts of outside air or by mechanical refrigeration.

A. The above noted performance requirements
shall be based upon the following conditions
of internal heat and moisture gain.

1. One person per 100 square feet.

2. Four watts per square foot for Tenant
lighting and power use.

B. The system shall also be capable of
maintaining a minimum temperature throughout
the demised premises of 69F when the outside
temperature
is 0F.

2. System shall be automatically controlled, free of
noticeable noise vibration or drafts and require
minimum cost expenditure for fuel.

XIII. PARKING:
-------

Owner shall provide Tenant with 78 parking spaces in the
adjacent parking lots. 17 of these spaces shall be reserved
and undercover, and at least 3 of the reserved spaces shall
be under the building.

XIV. PUBLIC HALLS:
------------

Public halls on all floors shall be carpeted and will
receive textured vinyl wall coverings.

XV. SUBSTITUTIONS:
-------------

Tenant may substitute like items for Building Standard
items, but no credits for the Building Standard items will
be given against the cost of items so substituted. No
credit will be given for Building Standard items not
utilized by Tenant.

<PAGE>

CLEANING SPECIFICATIONS

1. The Landlord shall perform the following general Office Cleaning
services between the hours of 6:00 p.m. and 7:00 a.m., Monday through
Friday of each week and said cleaning shall not be rescheduled by Tenant's
overtime or extraordinary use of building or demised premises.

a. Empty all wastepaper baskets, damp wipe ashtrays and receptacles.

b. Sweep and/or dustmop all hard surfaced flooring with mops so
treated as to preserve the sheen and appearance of such flooring.

c. Carpet sweep all areas requiring same. Said areas must be
vacuumed clean twice weekly, conduct spot cleaning where
necessary.

d. Deposit all wastepaper from baskets in plastic bags (to be
supplied by Contractor), placing same in locations as shall be
designated convenient for the removal thereof. Landlord shall
not be responsible for the removal of large boxes, wooden pallets
or abnormal amounts of waste paper.

e. Hand dust all desks, chairs, worktables, office furniture and
equipment, window sills and moldings filing cabinets, bookcases,
open shelving and all other forms of office furniture and
fixtures within normal arms reach, and vacuum upholstered
furniture where necessary.

f. Damp dust and wipe clean all glass tops and all desks and tables,
removing all finger marks and smudges from same.

g. Wipe clean of finger marks and maintain in a brass and other
bright work.

h. Wash clean tops of all water coolers and fountains and floors and
wall areas surrounding them.

i. Hand dust all doors and other ventilation louvers located within
normal arms reach.

j. Dust clean interior of all wastepaper baskets and disposal cans.

k. Dust and sweep all open closet flooring.

l. Lift and dust under all telephones and other such lightweight
desk appurtenances, dusting and replacing same in their proper
locations. Telephones will be sanitized once a month.

m. Wisk brush all fabric covered furniture.

n. Instruct all employees to notify their supervisor, who in turn
shall notify the proper designated representative of the
building, of any irregularity found in any office during the
nightly tour of office cleaning.

o. After cleaning, all electric lamps are to be extinguished, office
windows closed, office doors securely locked and premises to be
left in a neat and orderly condition.

p. Do high dusting once per month.

<PAGE>

2. The Landlord shall perform the following Porter Services and
Janitorial Maintenance Services in the manner and with the scheduling
as set forth in the following:

a. Scour wash all public lavatory flooring, suing the proper
coefficient of disinfectant for same.

b. Thoroughly wash, scour clean and disinfect all basins, bowls and
urinals located in all public lavatories.

c. Damp dust and wipe clean all mirrors, powder shelves and enameled
surfaces located in all public lavatories.

d. Wipe clean of finger marks and maintain in a constant state of
uniform brightness, all brass and other bright work located in
all public lavatories.

e. Damp wipe clean all soap dispensers, receptacles, partitions,
stalls and tiled work within normal arms reach in all public
lavatories. Said areas to be washed down at least once during
the course of each weekly period.

f. Empty and clean all paper towel and sanitary disposal receptacles
in all public lavatories, depositing waste from same in
designated locations.

g. Refill all toilet tissue, hand soap and towel dispensers located
in all public lavatories.

h. Wash all terrazzo lobby flooring. Same to be machine scrubbed a
minimum of once during the course of each monthly period.

i. Hand dust all lobby marble, stone work and fixtures within normal
arms reach.

j. Dustmop and/or vacuum all public corridors as situated throughout
the entire building.

k. Thoroughly wash, wax and machine polish and/or refinish all
public corridors as situated throughout the entire building;
twice during the course of each weekly period. (Full floor
tenants responsible for floor maintenance of their entire floor;
building is not responsible for the maintenance of any elevator
corridors or aisles).

l. Thoroughly wash, wax and machine polish and/or refinish all
flooring as situated within the two elevator cabs.

m. Hand dust and clean all vertical surfaces located within the two
elevator cabs.

n. Dust clean exterior of overhead lighting fixtures. Wash clean
both inside and outside all of the lighting fixtures, fluorescent
and incandescent, situated in the core space of the building;
once during the course of each yearly period.

o. dust clean all overhead pipes, ventilating louvers, air
conditioning louvers and dusts, high moldings and other high
areas and surfaces situated on all floors of the building and not
reached during the regularly scheduled tours of

<PAGE>

nightly cleaning; twice during the course of each yearly period.

p. Damp mop all stairways and landings, dusting down all handrails,
stairway doors and frames, fire hoses, standpipe nozzles and
racks located in two sets of stairways; once during the course of
each weekly period.

q. Clean and polish saddles and entrance hardware in public areas
once a month.

r. All of the foregoing porter and janitorial maintenance services
are to be rendered nightly, from Monday through Friday of each
week, between the hours of 6:00 p.m. and 7:00 a.m., unless
otherwise scheduled.

s. Police parking areas of the building as required.

3. Interior and exterior window cleaning shall be performed once every
four months (three times a year).

4. No cleaning services shall be rendered on any legal holiday as
specified in Section 6 of the rider to the Lease or union holiday
listed below:

a. Lincoln's Birthday

b. Columbus Day

c. Election Day

d. Veteran's Day

e. Good Friday

f. Martin Luther King's Birthday

EXHIBIT 10.18

SUBLEASE

THIS AGREEMENT, made as of the 31st day of October, 1995, between
AMERICAN SOFTWARE, USA, INC., a Georgia Corporation, with an office at 470 East
Paces Ferry Road, Atlanta, Georgia, 30305, hereinafter called the "Sublessor"
and ADVANCED HEALTH CORPORATION, having an office at 560 White Plains Road,
Tarrytown, New York 10591 hereinafter referred to as the "Sublessee."

W I T N E S S E T H:

WHEREAS, Tarrytown Corporate Center IV, is the fee simple owner ("Owner")
of the building commonly known as and located at 560 White Plains Road,
Tarrytown, New York 10591 (the "Building").

WHEREAS, Owner entered into that certain lease dated January 14, 1992, with
Integrated Systems Solutions Corporation ("ISSC"), as Tenant (the "Prime Lease")
for the Second, Third, and Fourth floors of the Building for a term which
expires on March 31, 1997, which Prime Lease was thereafter assigned to and
assumed by International Business Machines Corporation ("IBM") pursuant to a
certain Assignment, Assumption and Release Agreement dated January 1, 1994. A
copy of the Prime Lease is annexed hereto as EXHIBIT "A".

WHEREAS, IBM entered into that certain sublease dated June 2, 1994, with
Sublessor, for a portion of the Second (2nd) Floor of the Building consisting of
Six Thousand, Five Hundred and Nine (6,509) rentable square feet more
particularly described on EXHIBIT "B" annexed hereto (the "Premises") for a
period commencing on July 1, 1994 and ending on March 30, 1997 (the "Prime
Sublease").

WHEREAS, Sublessee desires to sublease the Premises from Sublessor.

NOW THEREFORE, for and in consideration of the foregoing and for other good
and valuable consideration and of the mutual agreements hereinafter set forth
Sublessor and Sublessee stipulate, covenant and agree as follows:

Premises: 1. Sublessor does hereby sublease to Sublessee the
Premises which are more particularly described on
EXHIBIT "B" annexed hereto and made a part hereof.

Term: 2. The term for the Premises shall commence on or about
November, 1995 and shall expire on March 29, 1997.

Uses: 3. Sublessee shall use and occupy the Premises for
executive and administrative purposes only and for no
other purpose.

Rent and
Additional Rent: 4. (A) Commencing as of the date that Sublessee occupies
the Premises, Sublessee shall pay Sublessor the annual
rent of One Hundred and Forty-Two Thousand, Five
Hundred Forty-Seven and 16/100 ($142,547.16) Dollars
for the Premises, payable in equal monthly installments
of Eleven Thousand, Eight Hundred and Seventy-Eight and
93/100 ($11,878.93) Dollars. Such rental includes all
tenant electric charges. The annual rent shall be paid
in advance on the first day of each month during the
term

<PAGE>
of this Sublease without deduction, set off or demand.
Rent for any portion of a month shall be prorated on a
thirty (30) day basis. Rent payments shall be made
payable to "STEVEN C. HIRSCH, AS ATTORNEY FOR THE
BENEFIT OF TARRYTOWN CORPORATE CENTER TRUST ACCOUNT"
and delivered to Steven C. Hirsch, Esq. 666 Old Country
Road, Suite 207, Garden City, New York 11530, or such
other place as Sublessor may designate. During the
term, Sublessee shall pay its "pro rata share," as
hereinafter defined, of any Operating Expenses and Real
Estate Taxes that exceed the Operating Expense Base
Year and the Base Year for Real Estate Taxes for the
Building, as hereinafter defined. For purposes of
calculating Additional Rent, Sublessee's Operating
Expense Base Year will be the calendar year ending
December 31, 1994 and the Base Year for Real Estate
Taxes will be the 1994 State, County and Town Tax Year
and the 1994/95 School Tax Year.

(B) Sublessee's pro rate share for the Premises is
Five and Fifteen Hundredths (5.15%) Percent, which is
the ratio that the Six Thousand, Five Hundred and
Nine(6,509) square feet of rentable area comprising the
Premises bears to the One Hundred and Twenty-six
Thousand, Four Hundred and Sixty-One (126,461) square
feet of rentable area in the Building. Sublessor shall
furnish Sublessee with a true copy of the Landlord's
Statement of Operating Expenses, Real Estate Taxes and
other Additional Rent, delivered by IBM to Sublessor
pursuant to the Prime Sublease and include thereon a
detailed statement of the Additional Rent to be paid by
Sublessee. Sublessee shall pay Sublessor within Thirty
(30) days after Landlord's Statement is furnished to
Sublessee.

(C) Wherever in the Prime Lease the words Tenant's
"Share" are used, the words "Sublessee pro rata share"
shall be substituted, and Sublessee's pro rata share
shall be as set forth in sub paragraph (B) hereof.

(D) Any Real Estate Tax reduction to IBM under Section
3.05(g) of the Prime Lease shall in no event exceed the
reduction granted to Sublessor for the Premises under
the Prime Sublease.

Preparation for
Occupancy: 5. Sublessee has inspected the Premises and agrees to
accept the Premises in their "AS IS" state and
condition on the date it commences occupancy and
without any representation or warranty (except as
expressly set forth herein), express or implied, in
fact or by law.

The Prime Lease
and Prime Sublease: 6. (A) This Sublease is subject to all of the terms of
the Prime Lease and Prime Sublease with the same force
and effect as if both were fully set forth herein at
length, excepting only as otherwise specifically
provided for herein and in the Prime Sublease. All of
the terms with which IBM

Page 2 of 8

<PAGE>
is bound to comply under the Prime Lease and which
Sublessor is bound to comply under the Prime Sublease
shall, to the extent only that they apply to the
Premises and except as otherwise specifically provided
for herein and in the Prime Sublease, be binding upon
Sublessee, and Sublessor acknowledges that all of the
obligations of Owner set forth in the Prime Lease
shall, to the extent that they apply to the Premises,
inure to Sublessee's benefit. It is the intention of
the parties that, except as otherwise provided in this
Sublease, the relationship between Sublessor and
Sublessee shall be governed by the language of the
various articles of the Prime Lease and Prime Sublease
as if they were typed out in this Sublease in full, and
the words "Lessor," "Lessee," and "Lease" as used in
the Prime Lease, shall read, respectively, "Sublessor",
"Sublessee," and "Sublease."

(B) For the purposes of this Sublease, the following
provisions of the Prime Lease are hereby deleted or
modified as follows:

(i) Delete in its entirety Base Lease Information;
Article 2, titled "Term;" Section 3.01, titled
"Annual Rent;" Section 3.06, titled "electricity;"
Article 4, titled "Preparation for Occupancy;"
Article 5, titled "Landlord's Title and Allowable
Use;" Section 6.02, titled "Landlord's Failure to
Provide Services;" Article 7, titled "Parking,"
except the last two sentences of Section 7.01(a)
and all of Section 7.01(b); Article 8, titled
"Use of Leased Premises;" Section 9.03, titled
"Landlords Failure to Make Repairs;" Section
10.02(a); Section 13.01, titled "Tenant's Changes
- No Approval;" Section 13.05, titled "Landlord's
Changes - Tenant's Approval;" Section 14(c);
Section 17.03, titled "Project Sign and Name,"
Article 18, titled "Subordination and Non-
Disturbance;" Section 24.02, titled "Suspension
of Tenant Default;" the first and last sentences
of Section 24.03, titled "Default by Landlord;"
Article 26, titled "Notices;" Article 27, titled
"Assignment and Subletting;" Article 29, titled
"Quiet Enjoyment;" Article 37, titled "Broker;"
Section 40.03, titled "Project Contractors and
Suppliers;" Article 42, titled "Binding Agreement;
" Article 43, titled "Binding Agreement;" Article
43, titled "Entire Agreement," and EXHIBIT A.

(ii) Modify:(a) Section 10.02(b) by deleting the second
sentence and Section 10.02(c) by deleting the
words in the first line "landlord hereby
represents and warrants that;"

(b) Section 13.04, by deleting this Section and
substituting "Tenant shall remove all or any of
Tenant's Property and, if as a condition to
Sublessor's approval to make alterations,
improvements, replacements and other changes
pursuant to Section 13.02(b), Sublessee shall
remove such alterations,

Page 3 of 8

<PAGE>
improvements, replacements and other changes prior
to the end of the term and restore the Premises to
the condition required by Sublessor when it grants
Sublessee such approval provided, that Sublessee
shall not be obligated to remove alterations,
improvements, replacements and other changes which
were consented to in writing by the Owner and IBM.
Sublessee agrees that restoration as a condition
to such approval is a reasonable and acceptable
condition and Owner and/or ISCC's failure or
refusal to consent to Sublessee's request is a
reasonable basis for Sublessor to disapprove.
Failure or refusal of Sublessee to restore the
Premises as required above shall constitute a
default under Section 24.01 of the Prime Lease
and Sublessee's obligation to restore and
Sublessor's remedies and rights set forth in this
Sublease shall survive the expiration or earlier
termination of this Sublease and the Prime Lease.
Any sums owed hereunder to Sublessor shall
constitute "Additional Rent."

(c) Article 18, titled "Subordination and Non-
Disturbance," by deleting the Article in its
entirety and substituting the following:

"This Sublease shall be subordinate and subject to
all ground leases, the Prime Lease, the Prime
Sublease and all other underlying leases and to
any mortgages thereon and to any mortgages
covering the fee interest by the Owner, and to all
renewals, modifications or replacements thereof."

Quiet Enjoyment: 7. (A) Sublessor covenants and agrees with Sublessee that
upon Sublessee's paying the rent and additional rent
reserved in this Sublease and observing and performing
all of the other obligations, terms, covenants and
conditions of this Sublease on Sublessee's part to be
observed and performed, Sublessee may peaceably and
quietly enjoy the Premises during the term; provided,
however, that this Sublease shall automatically
terminate upon termination of the Prime Lease and/or
Prime Sublease and Sublessee shall have no claim
against Sublessor unless such termination was caused
by the default of Sublessor in the performance of its
obligations under the Prime Sublease which have been
assumed by Sublessor under this Sublease and have not
been assumed by Sublessee hereunder.

(B) Sublessee covenants and agrees that Sublessee
shall not do or suffer or permit anything to be done
which would constitute a default under the Prime Lease
or Prime Sublease or would cause the Prime Lease or
Prime Sublease to be cancelled, terminated or forfeited
by virtue of any rights of cancellation, termination,
or forfeiture reserved or vested in Owner under the
Prime Lease and/or Prime Sublease, and that Sublessee
will indemnify and hold harmless Sublessor from and
defend Sublessor against all claims, liabilities,
losses and damages of any kind whatsoever

Page 4 of 8

<PAGE>
(excepting special and consequential damages) that
Sublessor may incur by reason of, resulting from or
arising out of any such cancellation, termination or
forfeiture caused by Sublessee.

Notices: 8. Any notice, approvals, demand or request under this
Sublease shall be in writing and shall be considered
properly delivered when addressed as hereinafter
provided and delivered by registered or certified mail
(return receipt requested) which is deposited in the
United States general or branch post office, or
delivered by private express mail service. Any notice,
approval, demand or request by Sublessor to Sublessee
shall be addressed to Sublessee at 560 White Plains
Road, Tarrytown, New York 10591, with a copy sent
simultaneously to : (i) Jeffrey I. Citron, Esq., Salon,
Marrow & Dyckman, 685 Third Avenue, New York, New York
10017, (ii) Steven C. Hirsch, Esq., 666 Old Country
Road, Suite 207, Garden City, New York 11530; and to
(iii) Owner, 580 White Plains Road, Tarrytown, New York
10591, Attention: Leasing Department, until otherwise
directed in writing by Sublessee. Any notice, demand
or request by Sublessee to Sublessor shall be addressed
to Sublessor at 660 White Plains Road, Tarrytown, New
York 10591 with a copy sent simultaneously to : (i)
James R. McGuone, Esq., Gambrell & Stolz, One Peachtree
Center, 303 Peachtree Street NE, Suite 4300, Atlanta,
GA 30308; and to (ii) Steven C. Hirsch, Esq. 666 Old
Country Road, Suite 207, Garden City, New York 11530;
and to (iii) Owner, 580 White Plains Road, Tarrytown,
New York 10591, Attention: Leasing Department.

Rejection or other refusal to accept or the inability
to deliver because of a changed address of which no
notice was given shall be deemed to be receipt of the
notice, demand or request sent.

Assignment and
Subletting: 9. Sublessee shall not assign, mortgage, transfer, pledge
or otherwise encumber its interest in this Sublease, in
whole or in part, or sublet or permit the subletting of
the Premises, or any part thereof, or permit the
Premises or any part thereof to be occupied or used by
any person or entity other than Sublessee without the
approval of Sublessor which Sublessor may withhold in
its reasonable discretion. Notwithstanding the
foregoing, Sublessor consents to Sublessee's right to
sublet a portion of the space to affiliates and/or
subsidiaries.

Owner's
Responsibilities: 10. Sublessee recognizes that Sublessor is not in a
position to furnish the services set forth in the Prime
Lease or Prime Sublease, or to perform certain other
obligations which are not within the control of
Sublessor, such as, without limitation, providing
services, maintenance, repairs and replacements to the
Building and Premises, complying with laws, or insuring
and restoring of the Premises and Building after
casualty or condemnation. Therefore, notwithstanding
anything to the contrary

Page 5 of 8

<PAGE>
contained in this Sublease, Sublessee agrees that
Sublessee shall look solely to Owner to furnish all
services and mantenance and to perform all other
obligations which Owner is required to perform and
observe under the Prime Lease and Prime Sublease.
Sublessor shall not be liable to Sublessee or be deemed
in default hereunder for failure of Owner to observe or
perform the same; provided that, whenever under the
terms of the Prime Lease, Owner shall fail to perform
any of its Prime Lease obligations pertaining to the
Premises, Sublessee may, at its option, enforce
performance thereof if and to the extent authorized by
the terms of the Prime Lease and/or the Prime Sublease,
and Sublessor shall cooperate with Sublessee in such
enforcement. However, Sublessor shall not be obligated
to initiate any arbitration or legal proceeding or
otherwise to enforce the Prime Lease. However,
Sublessor will use reasonable efforts to cause Owner to
cure and make repairs. Notwithstanding anything herein
to the contrary, in the event of a constructive
eviction, or other similar claim which allows the
tenant to terminate its tenancy, notwithstanding the
fact that Sublessor was not obligated to act or did not
omit to do anything and this Sublease shall be deemed
terminated in the event of such constructive eviction
or similar claim, Sublessee maintains all rights
against Sublessor pursuant to Section 24.03 in the
event of Sublessor's or Owner's default.

Casualty/
Condemnation: 11. Article 10, titled "Fire and Other Casualty" and
Article 12, titled "Condemnation" of the Prime Lease
are modified to provide that if by operation of either
of these two Articles, the Prime Lease and the Sublease
are not terminated and continue in full force and
effect, until the Premises are restored in accordance
with these two Articles, there shall be a proportionate
abatement of annual rent and Additional Rent payable
hereunder to the extent of damage to the Premises as
determined by Owner, Sublessor and Sublessee; provided,
however, that such abatement shall in no event exceed
the abatement granted to IBM under the Prime Lease and
Sublessor under Prime Sublease for the Premises and,
provided further, that no compensation or claim or
reduction will be allowed or paid by Sublessor by
reason of inconvenience, annoyance or injury to
Sublessee's business arising from the necessity of
effecting repairs to the Premises or any portion of the
Building, whether such repairs are required by
operation of these two Articles or any other provision
of the Prime Lease, Prime Sublease, or this Sublease.
Section 10 is further modified to provide that each
reference to a 180 day period therein shall be deemed
to refer to a 90 day period, and reference to a 240 day
period shall be deemed to refer to a 120 day period,
and reference to a 280 day period shall be deemed to
refer to a 140 day period.

Parking: 12. Sublessor shall, without charge to Sublessee, provide
and maintain for the non-exclusive use of Sublessee's
employees and invitees, parking area sufficient to
accommodate Three (3) cars in the covered parking area,
one

Page 6 of 8

<PAGE>
of which shall be under the Building. Sublessee shall
have access to the parking area twenty-four (24) hours
a day, seven days per week.

Building and
Entire Agreement: 13. This Sublease shall be binding on the respective legal
representatives, successors and assigns of the parties.
This Sublease contains the entire agreement of the
parties with respect to the subject matter herein and
may not be modified except by instrument in writing
which is signed by both parties.

Broker: 14. Sublessee warrants and represents to Sublessor and
Sublessor warrants and represents to Sublessee that no
broker consummated or brought about this transaction.
Sublessee and Sublessor shall defend, indemnify and
save harmless the other from and against any claim
which may be asserted against the indemnified party by
any person if (a) the claim is made in connection with
this transaction and (b) such indemnifying party
employed the claiming person. The indemnifying party
shall reimburse the other for reasonable expenses,
losses, costs and damages (including reasonable
attorneys' fees and court costs) the other incurred in
connection with such claims. This Article shall
survive the expiration or earlier termination of this
Sublease.

Compliance: 15. Sublessee shall comply with all statutes, rules,
orders, codes, and regulations, and legal requirements
and standards issues thereunder (collectively the
"Laws") which are applicable to Sublessee's use and
manner of use of the Premises.

Indemnification: 16. Sublessor and Sublessee each agree to indemnify and
save the other harmless from any and all claims for
bodily injury (including death) or property damage made
against one party hereto if (1) arising from any breach
or default by the other party hereto (including its
agents, invitees, employees or contractors) in the
performance of any covenant or agreement on its part to
be performed pursuant to the provisions of this
Sublease, or (2) occurring within the Building and
common area and arising from the misconduct or gross
negligence of such party (including its agents,
invitees, employees or contractors). This indemnity
shall include all court costs, reasonable attorneys'
fees, expenses and liabilities incurred by the
indemnified party against which the claim is made. If
any action or proceeding is brought against either
Sublessor or Sublessee by reason of any such claim, the
indemnifying party agrees to defend the action or
proceeding at its expense upon notice from the party to
be indemnified.

Consent of IBM
and Owner: 17. Anything herein to the contrary notwithstanding, it is
understood and agreed that this Sublease shall not
become effective unless and until

Page 7 of 8

<PAGE>
Sublessor has obtained and delivered to Sublessee the
written consent of IBM and Owner to this subletting.

IN WITNESS WHEREOF, duly authorized representatives of the parties
hereto have executed this Sublease as of the day and year first above written.

ADVANCE HEALTH CORPORATION, Sublessee

By: /S/
-------------------------
Name: JEFFREY M. SAUERHOFF
Title: Controller

AMERICAN SOFTWARE USA, INC., Sublessor

By: /s/ James L. Altman
----------------------------
Name: JAMES L. ALTMAN
Title: Vice President

Tarrytown Corporate Center IV, Owner, hereby consents to this Sublease
and agrees to be bound by the provisions thereof. Owner also agrees that in the
event Sublessee remains in the Premises beyond the expiration or earlier
termination of the Prime Lease or Prime Sublease, the Owner shall not seek to
recover from Sublessor or from Sublessee, on account of Sublessee's holding over
an amount greater than one-hundred ten (110%) percent of the Annual Rent
relating to the Premises. Notwithstanding the foregoing, nothing contained
herein shall be construed as permitting Sublessee to holdover in the Premises
beyond the expiration or earlier termination of the Prime Lease or Sublease.

TARRYTOWN CORPORATE CENTER IV, L.P., Owner

By:_______________________________________
Name:
Title:

International Business Machines Corporation hereby consents to this
Sublease and agrees to be bound by the provisions thereof.

INTERNATIONAL BUSINESS MACHINES CORPORATION

By: /s/
------------------------------------------
Name:
Title: PROGRAM MANAGER
IBM REAL ESTATE SERVICE

Page 8 of 8

<PAGE>

Drawing (Premises 6,509 square feet labelled Exhibit "B")

EXHIBIT "B"
[BUILDING DIAGRAM]

Exhibit 10.19

OFFICE LEASE
------------

200 WEST ADAMS STREET
---------------------
CHICAGO, ILLINOIS
-----------------

THIS AGREEMENT OF OFFICE LEASE is made as of the 8th day of
---
December, 1995 (hereinafter referred to as the "Lease") between ADAMS
FAMILY, L.L.C., a Delaware limited liability company, beneficiary of Cole
Taylor Bank, not personally, but solely as Trustee under Trust Agreement
dated June 26, 1995 and known as Trust No. 95-6300 (hereinafter referred to
as "Landlord"), and ADVANCED HEALTH CORPORATION, a Delaware corporation
whose present address is 560 White Plains Road, 2nd Floor, Tarrytown, New
York 10591 (hereinafter referred to as "Tenant").

WITNESSETH:
----------

Landlord hereby leases to Tenant, and Tenant hereby accepts from
Landlord, the premises (hereinafter referred to as the "Premises")
containing approximately 10,742 square feet of rentable area on the 10th
floor, and, as of the date of this Lease, currently known as Suite 1000,
and designated on the plan attached hereto as Exhibit "A" in the building
known as 200 West Adams Street, Chicago, Illinois (hereinafter referred to
as the "Building") located on land (hereinafter referred to as the "Land"
and the Building and the Land are sometimes hereinafter together called the
"Property"), subject to the covenants, terms, provisions and conditions of
this Lease.

In consideration thereof, Landlord and Tenant covenant and agree as
follows:

1. Term. The term of this Lease (the "Term") shall commence on
----
April 1, 1996 (the "Commencement Date") and, unless sooner terminated as
provided herein, shall end, absolutely and without the need for notice from
either party to the other, on March 31, 2001 (the "Termination Date"). From
and after the date upon which Landlord substantially completes the Phase II
Work (as defined in the Work Letter attached hereto as Exhibit B), Tenant
shall have the right to take possession of and occupy the Premises, subject
to all of the terms of this Lease, except that Tenant shall not be required
to pay "rent" (as hereinafter defined) until the Commencement Date.
Notwithstanding the foregoing, if the Phase II Work is not substantially
completed before January 8, 1996 and if such delay is not caused in whole
or in part by Tenant, the Commencement Date shall be the date which is
ninety (90) days after substantial completion of the Phase II

<PAGE>

Work and the Term shall expire on the date which is five (5) years after
the Commencement Date (as so extended). If the Phase II Work is not
substantially completed before January 8, 1996 and if such delay is caused
in whole or in part by Tenant, the Commencement Date shall be the date
which is ninety (90) days (less the number of days of delay attributable to
or caused by Tenant) after substantial completion of the Phase II Work and
the Term shall expire on the date which is five (5) years after the
Commencement Date (as so extended).

2. Base Rent. Tenant shall pay Base Rent to Landlord as
---------
follows:

Payable in Monthly
Dates Installment of
- ----- --------------------

4/1/96 - 4/30/96 $134,946.36
5/1/96 - 12/31/96 -0-
1/1/97 - 3/31/97 $14,994.04
4/1/97 - 3/31/98 $15,441.63
4/1/98 - 3/31/99 $15,889.21
4/1/99 - 3/31/2000 $16,336.79
4/1/2000 - 3/31/2001 $16,784.38

The foregoing dates shall be extended if the Commencement Date is
extended pursuant to the provisions of Section 1 above. Base Rent shall be
paid in advance on or before the first day of each calendar month during
the Term; provided, however that Base Rent for the first (1st) month of the
Term shall be paid as follows: (a) $84,946.36 shall be paid upon execution
hereof by Tenant; and (b) $50,000.00 shall be paid on the later of (i)
March l, 1996, and (ii) the date of substantial completion of the Phase II
Work. If the Commencement Date is other than on the first day of a month or
ends other than on the last day of a month, the Base Rent for such month
shall be prorated. Within seven (7) days after substantial completion of
the Phase II Work, and provided Tenant has taken full occupancy of the
Premises and no Default exists hereunder, Landlord shall pay to Tenant a
moving allowance in the amount of $26,855.00.

3. Improvement and Fixturing of Premises.
-------------------------------------

(a) Landlord's Work. Landlord shall construct the
---------------
Premises for Tenant's use and occupancy in accordance with plans and
specifications prepared by Landlord or Landlord's architect, incorporating
in such construction all items of the Work described in Exhibit "B" (the
"Work Letter"). Landlord shall contribute, in accordance with the terms of
the Work Letter, an amount equal to

<PAGE>

$14.46 per square foot of rentable space in the Premises (the "Allowance")
towards the cost of the Work. Tenant shall pay all Excess Costs of the
Work, as defined in the Work Letter, in accordance with the terms of the
Work Letter. In the event of a conflict between the provisions of the Work
Letter and the provisions of this Section 3, the provisions of the Work
Letter shall control.

(b) Access; Acceptance of Work. Subject to the terms of the
--------------------------
Work Letter, Landlord shall afford Tenant and its employees, agents and
contractors access to the Premises at reasonable times prior to the
commencement of the Term and at Tenant's sole risk and expense, for the
purposes of inspecting and verifying Landlord's performance of the Work.
Tenant shall advise Landlord promptly of any objection to the performance
of such work.

(c) Delivery of Possession. Subject to the provisions of
----------------------
Section 3(d) below, if Landlord shall, for any reason, fail to make
available to Tenant possession of the Premises on or before the scheduled
Commencement Date or any other date, Landlord shall not be subject to any
liability for such failure. Under such circumstances, Tenant's obligations
to pay the Base Rent, the Tax Adjustment and the Operating Expense
Adjustment shall not commence until Landlord makes possession available;
and such failure to make available to Tenant possession of the Premises on
or before the scheduled Commencement Date or any other date, shall not in
any other way affect the validity of this Lease, or the Term, or the
obligations of Tenant hereunder, nor shall such failure be construed in any
way to extend the Term. Such deferral of rent shall be Tenant's sole and
exclusive right and remedy with respect to any such failure. There shall be
no deferral of rent, however, if any such failure is caused in whole or
part by a delay in taking occupancy caused by Tenant.

(d) Delay in Possession. Notwithstanding the provisions of
-------------------
Section 3(c) above, and in addition to the extension of the Commencement
Date pursuant to the provisions of Section I, if Landlord shall, for any
reason, fail to substantially complete the Phase II Work on or before
January 8, 1996, and such failure is not caused in whole or in part by
Tenant or by an event or circumstance beyond the control of Landlord, then
Tenant shall be entitled to an abatement of Base Rent for each day until
the Phase II Work is substantially completed as follows: (i) from January
15, 1996 through January 31, 1996, one (1) day of Base Rent abatement until
the Phase II Work is substantially completed; and (ii) from February 1,
1996 through April 15, 1996, two (2) days of Base Rent abatement until the
Phase II Work is substantially

<PAGE>

completed. Tenant shall not be entitled to any abatement of Base Rent or
any other rent pursuant to this Section 3(d) for any period of time after
April 15, 1996. If the Phase II Work is not substantially completed by
April 15, 1996, Tenant may thereafter terminate this Lease by written
notice to Landlord. For purposes of this Section 3(d), the per diem amount
of Base Rent shall be equal to $499.80.

4. Additional Rent. In addition to paying the Base Rent specified in
---------------
Paragraph 2 hereof, Tenant shall pay as "additional rent" the amounts
determined as hereinafter set forth in this Paragraph 4, any and all other
sums, expenses and charges due or payable by Tenant under this Lease, and
any and all costs, expenses and attorneys' fees incurred by Landlord in
collecting any and all Base Rent, amounts due pursuant to this Paragraph 4,
and such other sums, expenses, charges, or in enforcing any of Tenant's
obligations under this Lease. The Base Rent and such additional rent are
sometimes herein collectively referred to as "rent". All amounts due
under this Lease as additional rent shall be payable in the same manner and
at the same place as the Base Rent.

(a) Definitions. As used in this Paragraph 4, the
-----------
terms:

(i) "Base Year" shall mean the calendar year 1996.

(ii) "Calendar Year" shall mean each calendar year in which
any part of the Term falls, through and including the year in which the
Term expires.

(iii) Intentionally Deleted.

(iv) "Tenant's Proportionate Share" shall mean 1.623%.

(v) "Taxes" shall mean all real estate taxes and assessments
(general, extraordinary, special or otherwise) transit taxes, water and
sewer rents, taxes based upon the receipt of rent, including gross receipts
or sales taxes, or similar impositions and expenses, levied or assessed
upon or with respect to the Land and/or Building and ad valorem taxes for
any personal property used in connection therewith and all taxes levied or
assessed upon or with respect to the leasing, use or occupancy of the
Property or any part thereof or the rents or receipts paid or payable to
Landlord therefrom (including, without limitation, any general gross
receipts tax and any income tax levied or assessed especially with respect
to real property or any type of real

<PAGE>

property which includes the Property), which Landlord shall become
obligated to pay with respect to the Property during any Calendar Year, any
portion of which occurs during the Term (without regard to any different
fiscal year by the respective governmental or municipal authority).
Should the State of Illinois, or any political subdivision thereof, or any
other governmental authority having jurisdiction over the Property, impose
a tax, assessment, charge or fee, which Landlord shall be required to pay,
wholly or partially in substitution for or in addition to any of the above
Taxes, all such taxes, assessments, fees or charges shall be deemed to
constitute Taxes hereunder, but only to the extent such taxes, assessments,
fees or charges are in lieu of Taxes. "Taxes" shall include all reasonable
and customary fees and costs, including attorneys' fees, appraisals and
consultants' fees, incurred by Landlord in any year subsequent to the Base
Year in seeking to obtain a reduction of, or a limit on, any increase in
any Taxes (regardless of whether any reduction or limitation is obtained)
in excess of the aggregate amount of such fees and costs incurred by
Landlord in the Base Year for such purposes. "Taxes" shall not include any
taxes included in Operating Expenses.

(vi) "Operating Expenses" shall mean all expenses, costs and
disbursements (other than Taxes) of every kind and nature (determined for
the applicable Calendar Year on an accrual basis) paid or incurred by or on
behalf of Landlord in connection with the ownership, management, operation,
maintenance and repair of the Land and Building, except the following:

(A) Taxes (as such term is defined in the Lease);

(B) Costs of initial improvements and decorating to, or
alterations of, any tenant's premises or of Landlord's management office in
the Building;

(C) Principal or interest payments on loans and ground
lease payments, if any, and any other costs relating to the closing,
performance or servicing thereof;

(D) Costs of repairs, alterations or replacements caused
by casualty losses to the extent insurance proceeds are collected and
received by Landlord;

(E) Costs of repairs, alterations or replacements caused
by the exercise of the rights of eminent domain to the extent Landlord,
Landlord's mortgagee or ground lessor receives net condemnation proceeds
therefor;

<PAGE>

(F) Costs of any special services or supplies rendered
to or costs reimbursable by any tenants which are not, without additional
charge, generally rendered or supplied to office tenants in the Building
and other costs billed directly to tenants;

(G) Costs and expenses incurred in connection with
marketing, promoting and leasing space in the Building including without
limitation, legal fees for the preparation of leases, tenant allowances,
space planning fees, architectural and engineering fees, leasing
commissions and advertising and promotional expenses, and personnel costs
incurred with regard to leasing the Building, or portions thereof;

(H) Legal fees and court costs unless expressly included
hereunder;

(I) Personnel expense relating to any employee above the
grade of general manager;

(J) Any costs, including any management fee, paid to
affiliates of Landlord or Landlord's management agent which are in excess
of customary market amounts;

(K) Costs, other than costs of providing services
comparable to those provided to office tenants of the Building, of
providing any special or additional services to, or of operating, any or
food service facility;

(L) Costs of installation, operating and maintenance of
any master telephone switch or telephone system for the Building or the
Center;

(M) Costs, including without limitation interest and
fines, arising by reason of the non-payment of any taxes or assessments or
the knowing violation by Landlord of any contract or other legal
requirement applicable to the Building;

(N) Costs of acquiring, installing and replacing
paintings, sculpture and other artwork within, on, or outside of the
Building but Operating Expenses shall include the cost of maintaining and
insuring such artwork;

(0) Land trust fees;

(P) Except as specifically allowed hereunder,
depreciation or amortization of any improvements; and

<PAGE>

(Q) Costs of capital improvements, except that Operating
Expenses shall include the cost as amortized over such number of years as
Landlord may reasonably determine, with interest at the rate equal to the
greater of 10% per annum or 2% over the Prime Rate in effect from time to
time as announced by The First National Bank of Chicago, on the unamortized
amount, of any capital improvements made or installed after the Base Year
which, (1) in Landlord's reasonable opinion, will have the effect of
reducing any component cost included within Operating Expenses (but only to
the extent that Operating Expenses are reduced as a result of such capital
improvements as determined by Landlord), (2) are made or installed to keep
the Property in compliance with all governmental rules and regulations
applicable from time to time thereto, and (3) under generally applied real
estate accounting practices may be expensed or treated as deferred expenses
(and the amortization and interest so determined for each Calendar Year
shall be included in Operating Expenses for that Calendar Year).

(b) Expense Adjustment.
------------------

(i) Tenant shall pay as additional rent for each Calendar
Year, that amount ("Expense Adjustment Amount") which is Tenant's
Proportionate Share of the amount by which the Operating Expenses incurred
with respect to such Calendar Year exceed the amount thereof incurred with
respect to the Base Year; provided, however, that in determining the amount
of Operating Expenses for each Calendar Year subsequent to the Base Year,
if less than 95% of the Rentable Area of the Building shall have been
occupied at any time during such Calendar Year, Operating Expenses shall be
deemed for such Calendar Year to be in the amount reasonably determined by
Landlord to be equal to that amount of like expenses which vary in
accordance with the use and occupancy of the Building and which normally
would be expected to be incurred had such occupancy been 95% throughout
such Calendar Year.

(ii) The Expense Adjustment Amount with respect to each
Calendar Year shall be paid in monthly installments, payable in advance on
the first day of each calendar month during the course of such year, in
amounts estimated from time to time by Landlord and communicated by written
notice to Tenant. Landlord shall cause to be kept books and records showing
Operating Expenses in accordance with generally-accepted accounting
principles. Following the close of each Calendar Year, Landlord shall cause
the amount of the Expense Adjustment Amount for such Calendar Year to be
computed based on Operating Expenses for such Calendar Year, and Landlord
shall deliver to Tenant a statement of such amount and Tenant shall pay any
deficiency as shown by such

<PAGE>

statement to Landlord within 30 days after receipt of such statement. If
the total of the estimated monthly installments paid by Tenant during any
Calendar Year exceed the actual Expense Adjustment Amount due from Tenant
for such Calendar Year, then, at Landlord's option, such excess shall be
either credited against payments next due hereunder or refunded by
Landlord, provided Tenant is not then in default hereunder. Tenant's
obligations to pay the Expense Adjustment Amount and Landlord's obligations
to refund any excess amount shall survive the expiration or earlier
termination of this Lease.

(c) Adjustment for Services not Rendered by Landlord. If Landlord
------------------------------------------------
is not furnishing any particular work or service (the cost of which, if
furnished by Landlord would be included in Operating Expenses) to a tenant
who has undertaken to itself to perform or obtain such work or service in
lieu of the furnishing thereof by Landlord, Operating Expenses shall be
deemed for purposes of this Paragraph 4 to be increased by an amount equal
to the additional Operating Expenses, as reasonably determined by Landlord,
which would have been incurred during such period if Landlord had at its
own expense furnished such work or service to such tenant; provided,
however, that with respect to any such work or service, Landlord shall not
collect from Tenant more than Tenant's Proportionate Share of the amount
actually paid by Landlord for such work or service.

(d) Tax Adjustment. Tenant shall pay as additional rent, in
--------------
addition to the Base Rent required by Paragraph 2 hereof, an amount ("Tax
Adjustment Amount") equal to Tenant's Proportionate Share of the amount by
which the Taxes with respect to each Calendar Year exceeds the Taxes with
respect to the Base Year. The Tax Adjustment Amount with respect to each
Calendar Year shall be paid in monthly installments, payable in advance on
the first day of each calendar month during the course of such year in
amounts estimated from time to time by Landlord and communicated by written
notice to Tenant. Following the close of each Calendar Year, Landlord shall
cause the amount of the Tax Adjustment Amount for such Calendar Year to be
computed based on Taxes for such Calendar Year and Landlord shall deliver
to Tenant a statement of such amount and Tenant shall pay any deficiency as
shown by such statement to Landlord within 30 days after receipt of such
statement. If the total of the estimated monthly installments paid by
Tenant during any Calendar Year exceeds the actual Tax Adjustment Amount
due from Tenant for such Calendar Year, then, at Landlord's option such
excess shall be either credited against payments next due hereunder or
refunded by Landlord, provided Tenant is not then in default hereunder. The
amount of any refund of Taxes received by Landlord during the

<PAGE>

calendar year in which the Term expires shall be credited against Taxes for
the year in which such refund is received. In determining the amount of
Taxes for any year, the amount of special assessments to be included shall
be limited to the amount of the installment (plus any interest payable
thereon) of such special assessment required to be paid during such year as
if the Landlord had elected to have such special assessment paid over the
maximum period of time permitted by law; if the authority to whom such
assessment is to be paid shall not permit such assessment to be paid in
installments, the amount of such assessment shall be treated as being
amortized over such number of calendar years, beginning with the Calendar
Year in which the assessment is payable, as Landlord shall reasonably
determine, with interest at a rate equal to the greater of 10% per annum or
2% over the Prime Rate in effect from time to time as announced by The
First National Bank of Chicago, on the unamortized amount, and such
amortization and interest for each Calendar Year shall be included in Taxes
for that Calendar Year.

(e) Partial Year. If only part of any Calendar Year shall fall
------------
within the Term, the amounts computed as additional rent, with respect to
such Calendar Year under the foregoing provisions of this Paragraph 4 shall
be prorated in proportion to the portion of such Calendar Year falling
within the Term, but the expiration or termination of this Lease prior to
the end of such Calendar Year shall not impair the Tenant's obligation
hereunder to pay such prorated portion of such additional rent with respect
to that portion of such year falling within the Term, and such obligation
shall survive the expiration or termination of this Lease.

(f) Disputes. Landlord shall use reasonable efforts to deliver to
--------
Tenant a statement of Operating Expenses and Taxes within ninety (90) days
after the end of each calendar year but in no event shall such statement be
delivered later than one hundred twenty (120) days after the end of each
calendar year. Each such annual statement shall be prepared by a certified
public accountant selected by Landlord and certified by an officer of
Landlord. Any statement furnished to Tenant by Landlord under the
provisions of this Paragraph 4 shall constitute a final determination as
between Landlord and Tenant as to the rent set forth therein due from
Tenant for the period represented thereby, unless Tenant, within sixty (60)
days after such statement is furnished, shall give a notice to Landlord
that it disputes the correctness thereof, specifying in detail the basis
for such assertion. Pending resolution of such dispute, Tenant shall pay
all disputed amounts in accordance with the statement furnished by
Landlord. Landlord agrees, upon prior written request, during

<PAGE>

normal business hours to make available for Tenant's inspection, at
Landlord's offices, Landlord's books and records which are relevant to any
items in dispute and Tenant shall pay all costs and expenses incurred by
Landlord in connection with such dispute unless an independent audit
discloses that Operating Expenses and Taxes were overstated by more than
4%. If an audit discloses that Operating Expenses and Taxes were overstated
by more than 4%, Landlord shall pay the cost of such audit together with
all costs and expenses incurred by Tenant in connection with such dispute.
Any such audit will be performed by a firm of certified public accountants
with a national or regional reputation or practice selected by Landlord or
by such other firm which is mutually agreed upon by Landlord and Tenant.

(g) Place of Payment. Tenant shall, without any demand therefor
----------------
and without setoff, reduction or recoupment, pay, to Landlord's agent,
Amerimar Adams Management Co., Inc. at 200 West Adams Street, Suite 1201,
Chicago, Illinois 60606 Attention: Building Manager ("Agent") or to such
other person and/or at such other place as Landlord may from time to time
direct by notice given to Tenant, the Base Rent as well as all other sums
which may become due by Tenant under this Lease. All such other sums shall
be payable as additional rent. All checks shall be made payable to ADAMS
FAMILY, L.L.C. Tenant hereby covenants and acknowledges that Tenant's
obligation to pay Base Rent and all additional rent pursuant to this
Paragraph 4 is independent of each and every of Landlord's covenants and
agreements contained in this Lease.

(h) Delay in Computation. Delay in computation of the Expense
--------------------
Adjustment Amount, or Tax Adjustment Amount shall not be deemed a default
hereunder or a waiver of Landlord's right to collect any of such amounts.

(i) No Credit. Tenant shall not be entitled to any rebate or
---------
credit in the event either Taxes or Operating Expenses for any Calendar
Year is lower than the Base Year.

5. Use of Premises. Tenant shall use and occupy the Premises
---------------
solely for general office purposes and for any other use expressly
permitted by Landlord, and for no other purpose. The maximum permitted
occupancy of the Premises is one person for each 200 rentable square feet
of the Premises.

6. Condition of Premises. The Tenant's taking possession of the
---------------------
Premises or any portion thereof shall be conclusive evidence that the
Premises or any such portion was in good order and satisfactory condition
when the Tenant took possession and that the Work has been completed in
accordance with the terms and

<PAGE>

conditions of the Work Letter. At the expiration or other termination of
this Lease or of Tenant's right of possession, Tenant shall leave the
Premises, and during the Term will keep the same, in good order and
condition, ordinary wear and tear, damage by fire or other casualty (which
fire or other casualty has not occurred through the negligence of Tenant or
those claiming under Tenant or their employees or invitees respectively)
alone excepted; and for that purpose, Tenant shall make all necessary
repairs and replacements. Tenant shall give Landlord prompt notice of any
damage to or accident upon the Premises and of any breakage or defects in
the window glass, wires or plumbing, heating, ventilating or cooling or
electrical apparatus or systems on or serving the Premises. Subject to the
provisions of the Work Letter, Tenant shall at the expiration or
termination of this Lease or of Tenant's right of possession, remove from
the Premises all furniture, trade fixtures, office equipment and all other
items of Tenant's property so that Landlord may again have and repossess
the Premises. Tenant shall comply with all laws, rules, orders, ordinances
and regulations at any time issued or in force by any lawful authority,
applicable to Tenant or any other occupant of the Premises, or to the
Premises, or to the use or occupancy of the Premises; provided, Tenant
shall not be required to make any changes to the Premises required by
laws of general applicability to occupied office buildings and which
are not required by Tenant's specific use of the Premises. Tenant shall
repair, at or before expiration or termination of this Lease or of
Tenant's right of possession, all damage done to the Premises or any other
part of the Building by installation or removal of furniture and property
by Tenant or any subtenant or any agent, employee or invitee of Tenant or
any subtenant. Tenant shall, upon demand, pay to Landlord the amount of any
damages suffered or incurred by Landlord as a result of any injury to any
part of the Property other than the Premises, done by Tenant or any
subtenant or any agent, employee or invitee of Tenant or any subtenant.
Tenant shall not do or commit, or suffer or permit to be done or committed,
any act or thing as a result of which any policy of insurance of any kind
on or in connection with the Property shall become void or suspended, or
any insurance risk on or in connection with the Building or any other
portion of the Property shall (in the opinion of the insurer or any
insurance organization) be rendered more hazardous; without limitation of
all other rights and remedies of Landlord, Tenant shall pay as additional
rent the amount of any increase of premiums for such insurance, resulting
from any breach of this provision.

7. Services.
--------

<PAGE>

(a) List of Services. Landlord shall provide the following
----------------
services, and no others, on all days during the Term, except Sundays and
holidays, unless otherwise stated:

(i) Landlord shall provide heating between October 1 and
April 30, and air conditioning between May 1 and September 30, when
necessary for normal comfort in the Premises at levels similar to other
first class office buildings in downtown Chicago, Illinois (but Landlord
shall not be required to provide heating or air conditioning to any extent
in excess of that which is within the parameters of any federal, state or
local requirements or recommendations which may be applicable or with which
Landlord in good faith may decide to comply) from Monday through Friday,
during the period from 8 a.m. to 6 p.m. and on Saturday during the period
from 8 a.m. to 1 p.m., holidays excepted. Tenant, within ten days after its
receipt of each bill therefor, will pay for all heating and air
conditioning requested and furnished at other times or required due to heat
producing equipment, or equipment requiring a controlled climate, installed
by or for Tenant, at rates to be established from time to time by Landlord.
"Holidays" means: Thanksgiving Day, Christmas Day, New Year's Day, Memorial
Day, Independence Day, Labor Day and any other day recognized as a holiday
by the service unions representing workers providing services to the
Building or customarily designated as a holiday by landlords operating
first-class office buildings in the downtown area of the City of Chicago.
The current cost of after-hours or excess HVAC service is $90.00 and is
subject to increase from time to time by Landlord.

(ii) Subject to subparagraph 7(b) hereof, Landlord shall
provide to the Premises (but Tenant shall pay for) 400 amperes of
electrical energy as part of the Work for standard building lighting
fixtures provided by Landlord and for the operation of desk-top portable
office equipment, provided that (A) the connected electrical load of such
equipment does not exceed an average of one watt per square foot of the
Premises and (B) the electricity so furnished for equipment uses will be at
a nominal 120 volts and no electrical circuit for the supply of such use
need have a current capacity exceeding 20 amperes. If Tenant's requirements
for electricity are in excess of those set forth in the preceding sentence,
and if, in Landlord's sole judgment, Landlord's facilities are inadequate
for such additional requirements and if electrical energy for such
additional requirements is available to Landlord, Landlord upon written
request and at the sole cost and expense of Tenant will furnish and
install, or, at Landlord's sole discretion, permit Tenant to furnish and
install, such additional wires, risers, conduits,

<PAGE>

feeders and switchboards as reasonably may be required to supply such
additional requirements of Tenant provided (1) that the same shall be
permitted by applicable laws and insurance regulations (2) that, in
Landlord's sole judgment, the same are necessary and will not cause
permanent damage or injury to the Building or the Premises or cause or
create a dangerous or hazardous condition or entail excessive or
unreasonable alterations or repairs or interfere with or disturb other
tenants or occupants of the Building, (3) that, in Landlord's sole
judgment, the same will not in any way diminish or adversely affect the
electricity which Landlord deems should remain available for other tenants,
and (4) that Tenant, at Tenant's expense, shall, concurrently with the
making of such written request, execute and deliver to Landlord, Tenant's
written undertaking, in form and substance satisfactory to Landlord,
obligating Tenant to fully and promptly pay the entire cost and expense of
so furnishing and installing any additional wires, risers, conduits,
feeders and/or switchboards. Tenant shall bear the cost of replacement of
lamps, starters and ballasts for lighting fixtures, and shall reimburse
Landlord therefor within 15 days of Landlord's submission of each bill
therefor.

(iii) City water from the regular Building outlets for
drinking, lavatory and toilet purposes.

(iv) Janitorial services Monday through Friday in and about
the Premises (except holidays) in accordance with the specifications
attached hereto as Exhibit D. If any material use made of the Premises
after 6 p.m. shall by reason of work force scheduling or security,
overtime, union rules, general security or otherwise cause any increase in
Landlord's cost for providing janitorial services, Tenant shall, as
additional rent, pay all bills for reimbursement of Landlord for such
increase, within 10 days after Tenant's receipt of such bill.

(v) Automatic passenger elevator service at all times for
authorized building personnel.

(b) Billing for Electricity. Tenant's use of electric
-----------------------
service shall be separately metered and Tenant shall pay the costs of all
electricity used in the Premises directly to the utility company providing
the same.

(c) Interruption of Services. Tenant agrees that Landlord shall
------------------------
not be liable for damages (by abatement of rent or otherwise) for failure
to furnish or delay in furnishing any service, or for any diminution in the
quality or quantity thereof, when such failure or delay or diminution is
occasioned, in whole

<PAGE>

or in part, by repairs, renewals, or improvements, by any strike, lockout
or other labor trouble, by inability to secure electricity, gas, water, or
other fuel at the Building after reasonable effort so to do, by any
accident or casualty whatsoever, by act or default of Tenant or other
parties, or by any other cause beyond Landlord's reasonable control; and
such failures or delays or diminution shall never be deemed to constitute
an eviction or disturbance of the Tenant's use and possession of the
Premises or relieve the Tenant from paying Rent or performing any of its
obligations under this Lease. Notwithstanding the foregoing, if the entire
Premises cannot be used, and is not used for the normal conduct of Tenant's
business, as a result of the inability to obtain any service or utility and
such condition continues for a period of (i) three (3) consecutive business
days due to causes within the reasonable control of Landlord, or (ii)
twenty one (21) consecutive days due to causes not within Landlord's
reasonable control, then Base Rent shall abate beginning as of the date
such service or utility was interrupted and continuing until such service
or utility is restored. If the entire Premises cannot be used for ninety
(90) consecutive days for the normal conduct of Tenant's business as a
result of inability to obtain any service or utility, then Tenant shall
thereafter have the right to terminate this Lease upon written notice of
such election to Landlord.

8. Alterations.
-----------

(a) Tenant shall not, without the prior written consent of
Landlord, make any alterations, improvements or additions to the Premises.
Notwithstanding the foregoing, if Tenant's proposed alterations (i) do not
affect any systems or structural components of the Building and (ii) are
not visible from the exterior of the Premises, Landlord will not
unreasonably withhold its consent to Tenant's proposed alterations. If
Landlord consents to any alterations, improvements or additions, it may
impose such conditions with respect thereto as Landlord deems appropriate,
including, without limitation, Landlord's approval of the contractors to
perform the work, contractor's lien waivers, insurance against liabilities
which may arise out of such work, plans, specifications and permits
necessary for such work and as-built drawings upon completion of such work.
All work done by Tenant or its contractors pursuant to and in accordance
with this Paragraph 8, or otherwise shall be done in a first-class
workmanlike manner, using only good grades of materials and without
disturbing other tenants, shall be done in compliance with all insurance
requirements and all applicable laws or ordinances and rules and
regulations of governmental departments or agencies and shall be done by
responsible contractors and subcontractors

<PAGE>

approved by Landlord in advance whose engagement will not in Landlord's
reasonable opinion, and in fact does not, result in any labor dispute at
the Building, whether in connection with any construction at the Building,
the operation of the Building or otherwise.

(b) All alterations, additions or improvements made by Tenant and
all fixtures attached to the Premises shall become the property of Landlord
and remain at the Premises or, at Landlord's option (which option shall be
exercised at the time Tenant requests Landlord's approval of Tenant's
proposed alterations to the Premises), any or all of the foregoing shall be
removed at the cost of Tenant before the expiration or sooner termination
of this Lease and in such event Tenant shall repair all damage to the
Premises caused by the installation and/or removal thereof. Tenant shall
not permit or suffer any signs, advertisements or notices to be displayed,
inscribed upon or affixed on any part of the outside or inside of the
Premises, or in the Building, except on the directory board to be provided
by Landlord and on the entrance doors of the Premises, provided, however,
that Tenant shall not display, inscribe or affix any sign on such directory
board or on the entrance doors of the Premises without, in each instance,
obtaining the prior written approval from Landlord as to the size, color
and style of such sign. Landlord shall have the right to remove
unauthorized signs at Tenant's expense.

(c) Notwithstanding the foregoing provisions of Section 8, Tenant
shall not be required to remove any portion of the Work.

9. Liens. Tenant shall not permit there to be filed against the
-----
Property or Landlord's interest therein or any part of either, and shall
forthwith remove or have removed, any mechanics', or materialmen's or other
lien, or claim thereof, filed by reason of work, labor, services or
materials provided for or at the request of Tenant (other than work, labor,
services or materials provided by the Landlord) or any subtenant or
occupant or for any contractor or subcontractor employed by Tenant or any
subtenant or occupant, and shall exonerate, protect, defend and hold free
and harmless Landlord against and from any and all such claims or liens.
Without limitation of the foregoing, if any such claim or lien be filed,
Landlord may, but shall not be obligated to, discharge it either by paying
the amount claimed to be due in the claim or lien or by procuring the
discharge of such lien or claim by deposit or by bonding proceedings, and
in any such event, Landlord shall be entitled, if Landlord so elects, to
compel the prosecution of any action for the foreclosure of such lien by
the claimant or lienor and to pay the amount of any judgment in favor of
the lienor with interest, costs and allowances. Any amount so

<PAGE>

paid by Landlord and all costs and expenses, including, without limitation,
reasonable attorneys' fees, in connection therewith, together with interest
thereon at the Lease Interest Rate (hereinafter defined) from the
respective dates of Landlord's making of the payments and incurring of the
costs and expenses, shall constitute additional rent payable by Tenant
under this Lease and shall be paid by Tenant to Landlord on demand.

10. Insurance and Waiver of Subrogation.
-----------------------------------

(a) During the Term, Tenant at its sole cost shall maintain, with
responsible insurance companies reasonably acceptable to Landlord and
qualified to do business in the State of Illinois, general comprehensive
public liability insurance with the broad form commercial liability
endorsement including contractual liability insurance covering Tenant's
indemnity obligations hereunder, insuring against claims for personal
injury (including death) and property damage, with respect to Tenant's
activities and property in, on and about the Premises, and with respect to
occurrences arising out of or related to this Lease and/or Tenant's use or
occupancy of the Premises and the Property and the activities therein,
thereon and thereabout of Tenant and any subtenants and their respective
servants, employees, agents, invitees and licensees, with coverage on an
occurrence basis in all cases of not less than a combined single limit of
$1,000,000 per occurrence. Landlord, Landlord's beneficiary ("Beneficiary")
(if at any time Landlord is a trustee under a land trust), Amerimar Adams
Management Company, Inc. ("Manager"), or any other manager of the Building,
any Mortgagee (as hereinafter defined) and, if Landlord requires,
Landlord's architect or contractor who may perform services or work in, on,
about or in connection with the Premises, and the respective agents,
partners and employees of the foregoing, all as their interests may appear,
shall be designated named insured in the policies for such insurance. Said
policies shall contain endorsements providing that the naming of more than
one insured shall not operate to limit or void the coverage of any named
insured relating to claims by another named insured. Tenant shall, prior to
the commencement of the Term, and at least 30 days prior to the expiration
date of each policy which Tenant is required by this Lease to maintain,
furnish to Landlord certificates evidencing the coverage required
hereinabove in this Paragraph and the renewal thereof, which certificates
shall state that such insurance coverage may not be materially changed or
canceled without at least twenty (20) days prior written notice to
Landlord. The aforesaid amount of required insurance coverage shall, from
time to time, be increased, effective upon the 60th day after Landlord
shall have given Tenant notice specifying the new amount, to be that amount
which bears the same ratio to

<PAGE>

$1,000,000 as the Consumer Price Index (hereinabove defined) for the
calendar month next preceding the date of such notice bears to the Consumer
Price Index for the last month of the Measurement Year (hereinabove
defined). Such notice shall not be given sooner than the fifth anniversary
of the date of this Lease, nor more frequently than once every five years.
During the Term, Tenant, at its sole cost, shall maintain "all risk"
physical damage insurance including fire, sprinkler, leakage, vandalism and
extended coverage for the full replacement cost of all additions,
improvements and alterations to the Premises and of all office furniture,
trade fixtures, office equipment, merchandise and all other items of
Tenant's property on the Premises.

(b) Tenant shall not do or commit, or suffer or permit to be done
or committed, any act or thing as a result of which any policy of insurance
of any kind on or in connection with the Property shall become void or
suspended, or any insurance risk on or in connection with the Building or
any other portion of the Property shall (in the opinion of the insuring
companies or any insurance organization) be rendered more hazardous. Tenant
shall pay as additional rent the amount of any increase of premiums for
such insurance, resulting from any breach of this covenant. Tenant may
contest any such increase in insurance premiums and if Tenant is successful
in procuring a refund of insurance premiums the amount of such refund shall
be paid by Landlord to Tenant.

(c) As used in this Paragraph 10(c) and in Paragraph 12 hereof
only, "Landlord" shall mean Landlord, Beneficiary (if Landlord is a trustee
under a land trust), Manager, any other manager of the Building, any
Mortgagee, and the respective partners, shareholders, agents, employees,
officers and directors of the foregoing. Notwithstanding anything
herein to the contrary, and to the extent permitted by law, Tenant hereby
releases Landlord from any and all liability for any loss or damage which
may be inflicted upon the property of Tenant, notwithstanding that such
loss or damage shall have arisen out of the gross negligence of Landlord.
The policies of insurance which Tenant is required to maintain under this
Lease shall contain a clause to the effect that such release shall not
affect said policy or the right of the insured to recover thereunder and
that the insurer waives all rights of subrogation which such insurer may
have against Landlord. Whenever (i) any loss, costs, damage, or expense
resulting from fire, explosion, or any other casualty or occurrence is
incurred by either of the parties to this Lease or anyone claiming by,
through, or under it in connection with the Premises or the Building, and
(ii) that party is then either covered in whole or in pare by insurance
with respect to the loss, cost, damage, or expense or required under this
Lease to be so

<PAGE>

insured, then the party so insured (or so required) hereby releases the
other party from any liability the other party may have on account of such
loss, cost, damage, or expense to the extent of any amount recovered by
reason of such insurance (or which could have been recovered, had insurance
been carried as so required) and waives any right of subrogation which
might otherwise exist in or accrue to any person on account of the
casualty.

11. Fire or Casualty.
----------------

(a) If the Premises or the Building (including machinery or
equipment used in the operation of the Building) shall be damaged by fire
or other casualty and if such damage does not render all or a substantial
portion of the Premises (in the case of the Premises, substantial shall
mean 20% or more of the area of the Premises) or Building untenantable,
then Landlord shall repair and restore the Premises (including tenant
finishes and/or build-outs as shown on the Plans) or the core and shell of
the Building with reasonable promptness, subject to reasonable delays for
insurance adjustments and delays caused by matters beyond Landlord's
reasonable control. If any such damage renders all or a substantial portion
of the Premises or Building untenantable, Landlord shall, within sixty (60)
days after the occurrence of such damage, give written notice to Tenant of
(i) whether Landlord intends to rebuild the Building and Premises and (ii)
if Landlord intends to rebuild, the estimated date of completion of such
rebuilding. If Landlord (x) does not deliver the aforedescribed notice
within sixty (60) days after the damage, or (y) such written notice
discloses that Landlord does not intend to rebuild the Premises or the
Building, or (z) discloses that Landlord's estimate of the time to complete
the building is greater than one hundred fifty (150 days after the date the
aforedescribed notice is delivered to Tenant, then (1) in the case of sub-
section (y) being applicable, this Lease shall be deemed terminated as of
the date of the casualty, and (2) in the case of either (x) or (z) being
applicable, either Landlord or Tenant shall have the right to terminate
this Lease (with appropriate prorations of rent being made for Tenant's
possession subsequent to the date of such damage of those tenantable
portions of the Premises) upon giving written notice to the other party
within ten (10) days after the earlier of receipt of such notice or the
expiration of such sixty (60) day period, whether or not it desires to
terminate this Lease. Landlord shall have no liability to Tenant, and
Tenant shall not be entitled to terminate this Lease by virtue of any
delays in completion of such repairs and restoration. Rent, however, shall
abate on those portions of the Premises as are, from time to time,
untenantable as a result of

<PAGE>

such damage. Notwithstanding the foregoing, Tenant shall have the right to
terminate the Lease on sixty (60) days notice if any casualty occurs during
the last six (6) months of the Term.

(b) Notwithstanding anything to the contrary herein set forth,
Landlord shall have no duty pursuant to this Paragraph 11 to repair or
restore any portion of any alterations, additions or improvements in the
Premises or the decorations thereto except to the extent that such
alterations, additions, improvements and decorations were provided by
Landlord, at Landlord's cost, at the beginning of the Term.

12. Waiver of Claims - Indemnification. (a) To the extent not
----------------------------------
prohibited by law, Landlord shall not be liable for, and Landlord is hereby
released by Tenant from all liability for, any damage either to person or
property or resulting from the loss of use thereof sustained by Tenant or
by other persons claiming through Tenant due to the Property or any part
thereof or any appurtenances thereof becoming out of repair, or due to the
happening or any accident or event in, on or about the Property, or due to
any act or neglect of any tenant or occupant of the Building or of any
other person. This provision shall apply particularly, but not
exclusively, to damage caused by gas, electricity, snow, frost, steam,
sewage, sewer gas or odors, fire, water or by the bursting or leaking of
pipes, faucets, sprinklers, plumbing fixtures and windows, and shall apply
without distinction as to the person (whether Landlord or other) whose act
or neglect was responsible for the damage and whether or not such act or
neglect occurred before, at or after the execution of this Lease, and
whether the damage was due to any of the causes specifically enumerated
above or to some other cause of an entirely different kind. Tenant further
agrees that all personal property of Tenant upon the Premises, or upon
receiving and holding areas, or elsewhere in, on or about the Property,
shall be at the risk of Tenant only, and that Landlord shall not be liable
for any loss or damage thereto or theft thereof. Without limitation of any
other provisions hereof, Tenant agrees to defend, protect, indemnify and
save harmless Landlord from and against all liability to third parties
arising out of the acts of Tenant or any subtenant or the servants, agents,
employees, contractors, suppliers, workmen and invitees of Tenant or any
subtenant.

Notwithstanding the provisions of Section 10(c) above, Tenant agrees to
indemnify and save harmless (but only to the extent of the amount of
Tenant's insurance), and upon request defend, Landlord against and from any
and all claims by or on behalf of any person, arising out of or related to

<PAGE>

(i) Tenant's use or occupancy of the Premises or the conduct
of its business, or any activity, work, or thing, permitted or suffered by
Tenant, in, on or about the Premises or the Property,

(ii) any occurrence, in, on or about the Premises,

(iii) any breach or default on Tenant's part in the performance
or observance of, or compliance with, any term, covenant or condition on
Tenant's part to be performed pursuant to the terms of this Lease, or

(iv) any act or negligence of Tenant or any subtenant, or any
of their respective agents, contractors, servants, employees, invitees or
licensees,

whether or not the fault or negligence of Landlord, or of the agents,
contractors, servants, employees, invitees or licensees of Landlord
(whether or not occurring before or after the execution of this Lease),
contributed thereto or was the cause thereof, and from and against all
costs, reasonable counsel fees, expenses, penalties, fines and liabilities
which Landlord may suffer or incur in connection with any such claim and
any action or proceeding brought with respect thereto. In the event that
any action or proceeding shall be brought by reason of any such claim,
against any party to be indemnified hereunder, Tenant covenants that
Tenant, upon notice from such party and at Tenant's expense, shall resist
and defend such action or proceeding by counsel reasonably satisfactory to
such party. Without limiting the generality of the foregoing, Tenant
specifically acknowledges that the indemnity undertaking herein shall apply
to the transportation, use, storage, maintenance, generation,
manufacturing, handling, disposal, release or discharge by Tenant of any
Hazardous Material(as defined in Paragraph 28 below). All of Tenant's
obligations under this Paragraph 12, and any and all sums due from Tenant
hereunder shall survive the expiration or termination of this Lease.

(b) Landlord covenants and agrees that it will protect, indemnify,
defend and save and keep Tenant and Tenant's agents, employees, affiliates,
licensees, invitees and servants (hereinafter collectively referred to as
the "Tenant Indemnitees") forever harmless and indemnified against and from
all loss, cost, damage or expense, including attorneys' fees, arising out
of or from any accident or other occurrence on or about the Property (other
than the Premises) except to the extent caused by the Tenant Indemnitees or
any one claiming through or under them, causing injury to any person or
property whomsoever or whatsoever.

<PAGE>

Landlord's indemnification obligation hereunder (i) shall be limited to
those losses, costs, damages and expenses incurred by the Tenant
Indemnitees which are in excess of the limits of insurance policies
required to be maintained by Tenant and (ii) shall in no event exceed the
limits of any insurance policies carried by or on behalf of Landlord.

13. Nonwaiver. No waiver of any provision of this Lease shall be
---------
implied by any failure of Landlord to enforce any remedy on account of
the violation of such provision, even if such violation be continued or
repeated subsequently, and no express waiver shall affect any provision other
than the one specified in such waiver and that one only for the time and in
the manner specifically stated. No payment by Tenant or receipt by Landlord
of a lesser amount than the rent payment herein stipulated shall be deemed to
be other than on account of the rent, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment as rent be
deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rent or pursue any other remedy provided in this Lease. No receipt of moneys
by Landlord from Tenant after the termination of this Lease shall in any way
alter the length of the Term or of Tenant's right of possession hereunder or
after the giving of any notice shall reinstate, continue or extend the Term
or affect any notice given Tenant prior to the receipt of such moneys, it
being agreed that after the service of notice or the commencement of a suit
or after final judgment for possession of the Premises, Landlord may receive
and collect any rent due, and the payment of said rent shall not waive or
affect said notice, suit or judgment.

14. Condemnation. In the event that the whole of the Premises shall
------------
be lawfully condemned or taken for a public or quasi-public use, this Lease
shall terminate as of the date that possession is to be surrendered to the
condemnor or taking authority. In the event of a partial condemnation of
the Premises in which more than 1,000 square feet of space is condemned
(and if the remaining portion of the Premises cannot be reconfigured to
suit Tenant's needs), Tenant may terminate this Lease as of the date
possession is to be surrendered to the taking authority; provided, however,
that if Tenant elects to terminate this Lease in accordance with this
sentence, then Landlord shall have the option of providing other space in
the Building to Tenant (in accordance with the requirements of Section
26(h) below, provided such substitute space is ready for occupancy by
Tenant as of the date the possession of the Premises is to be surrendered
to the taking authority), in which event this Lease shall continue in full
force and effect. In the event that there shall be a lawful

<PAGE>

condemnation or taking for any public or quasi-public use of any part of
the Building, without there being condemned or taken all of the Premises,
then, at the option of Landlord, exercisable by notice given to Tenant not
later than 90 days after the date upon which Landlord receives notice of
the taking or condemnation, this Lease shall terminate as of the date that
possession of the Premises taken is required to be surrendered to the
condemnor or taking authority. In the event of any such taking or
condemnation, of all or any part of the Premises or of all or any part of
the Property, Tenant shall have no claim against Landlord and shall not
have any claim or right to any portion of the amount that may be awarded as
damages or paid as a result of such taking or condemnation; and all rights
of Tenant to damages therefore are hereby assigned by Tenant to Landlord
and Tenant shall have no claim against Landlord or the condemnor for the
value of the unexpired term of this Lease. However, the foregoing
provisions of this section shall not be construed to deprive Tenant of the
right to claim and receive payment from the condemnor or taking authority
for moving and related expenses as long as such claim or the payment
thereof does not reduce the award which Landlord would otherwise be
entitled to receive. In the event of any such taking or condemnation of
part of the Premises, the Base Rent, the Tax Adjustment and the Operating
Expense Adjustment shall be proportionately reduced from the date that
possession is required to be surrendered to the condemnor or taking
authority.

15. Assignment And Subletting.
-------------------------

(a) Tenant shall not, without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed, (i) assign,
transfer, convey or mortgage this Lease or any interest hereunder; (ii)
suffer to occur or permit to exist any assignment of this Lease, or any
lien or charge upon Tenant's interest, involuntarily or by operation of
law; (iii) sublet the Premises or any part thereof, or (iv) permit the use
of the Premises or any part thereof by any parties other than Tenant and
its employees. Any such action on the part of Tenant shall be void and of
no effect. Landlord's consent to any assignment, subletting or transfer
or Landlord's election to accept any assignee, subtenant or transferee as
the tenant hereunder and to collect rent from such assignee, subtenant or
transferee shall be at Landlord's sole and exclusive discretion and shall
not release Tenant or any subsequent tenant from any covenant or obligation
under this Lease. Landlord shall not be deemed to have unreasonably
withheld its consent to any requested assignment or sub-letting if
Landlord's consent is withheld because (1) there is Default under the
Lease; (2) the Premises, including the means of ingress and egress thereto
and the proposed use of the Premises

<PAGE>

will violate any city, state or federal law, ordinance or regulation,
including, without limitation, any applicable building code or zoning
ordinance; (3) the proposed use of the Premises does not conform with the
use permitted under Section 5 of this Lease; (4) in the reasonable judgment
of Landlord, the proposed sub-tenant or assignee does not have a tangible
net worth sufficient to comply with or perform all of the obligations of
Tenant under this Lease; (5) the proposed sub-tenant or assignee is of a
character or is engaged in a business which would be detrimental to the
reputation of the Building; (6) the proposed sub-tenant or assignee is a
governmental agency; (7) the proposed use of the Premises is in conflict
with any exclusive use rights of an other tenant in the Building; or (8)
the proposed sub-tenant or assignee is a tenant in the Building; provided,
however, that the foregoing are examples of reasons for which Landlord may
withhold its consent and shall not be deemed exclusive of any permitted
reasons for withholding consent. Landlord's consent to any assignment,
subletting or transfer shall not constitute a waiver of Landlord's right to
withhold its consent to any future assignment, subletting, or transfer. In
no event shall this Lease be assigned or assignable by voluntary or
involuntary bankruptcy proceedings or otherwise, and in no event shall this
Lease or any rights or privileges hereunder be an asset of Tenant under any
bankruptcy, insolvency or reorganization proceedings, except as provided by
law.

(b) At least 30 days prior to any proposed subletting or assignment,
Tenant shall submit to Landlord a statement seeking Landlord's consent and
containing the name and address of the proposed subtenant or assignee, the
terms of the proposed sublease or assignment and such financial and
other information with respect to the proposed subtenant as Landlord
reasonably may request. Landlord shall indicate its consent or non-
consent within 10 days of its receipt of said statement.

(c) In addition to withholding its consent, if Tenant proposes to sub-
lease more than 49% of the Premises or proposes to assign its interest
under this Lease, Landlord shall have the additional right to terminate
this Lease as to that portion of the Premises which Tenant seeks to assign
or sublet, whether by requesting Landlord's consent thereto or otherwise.
Landlord may exercise such right to terminate by giving written notice to
Tenant at any time prior to Landlord's written consent to such assignment
or sublease. In the event that Landlord exercises such right to terminate,
Landlord shall be entitled to recover possession of such portion of the
Premises on the later of (i) the proposed date for possession by such
assignee or subtenant, or

<PAGE>

(ii) 90 days after the date of Landlord's notice of termination to TENANT.

(d) In the event that Landlord fails to exercise its termination right
and its right to withhold its consent as set forth in the preceding
paragraph, and in the event that Landlord consents to any assignment or
sublease of any portion of the Premises, as a condition of Landlord's
consent, if Landlord so elects to consent, Tenant shall pay to Landlord 80%
of all profit derived by Tenant from such assignment or sublease. Tenant
shall furnish Landlord with a sworn statement, certified by an independent
certified public accountant, setting forth in detail the computation of
profit (which computation shall be based upon generally accepted accounting
principles), and Landlord, or its representatives, shall have access to the
books, records and papers of Tenant in relation thereto, and to make copies
thereof. Any rent in excess of that paid by Tenant hereunder realized by
reason of such assignment or sub-lease shall be deemed an item of such
profit. If a part of the consideration for such assignment shall be payable
other than in cash, the payment to Landlord shall be payable in accordance
with the foregoing percentage of the cash and other non-cash considerations
in such form as is satisfactory to Landlord. Such percentage of Tenant's
profits shall be paid to Landlord promptly by Tenant upon Tenant's receipt
from time to time of periodic payments from such assignee or subtenant or
at such other earlier time as Tenant shall realize its profits from such
assignment or sublease.

(e) if Tenant shall assign this Lease as permitted herein, the assignee
shall expressly assume all of the obligations of Tenant hereunder in a
written instrument satisfactory to Landlord and furnished to Landlord not
later than fifteen (15) days prior to the effective date of the assignment.
If Tenant shall sublease the Premises as permitted herein, Tenant shall
obtain and furnish to Landlord, not later than fifteen (15) days prior to
the effective date of such sublease and in form satisfactory to Landlord,
the written agreement of such subtenant to the effect that the subtenant
will attorn to Landlord, at Landlord's option and written request, in the
event this Lease terminates before the expiration of the sublease.

(f) If Tenant is a corporation, a change or series of changes in
ownership of stock which would result in direct or indirect change in
ownership by the stockholders or an affiliated group of stockholders of
more than forty nine percent (49%) of the outstanding stock as of the date
of the execution and delivery of this Lease shall be deemed to be a
transfer of this Lease for the purpose of Paragraph 15(a); provided,
however, that any change in

<PAGE>

ownership of stock resulting from an offering of stock in the Tenant to the
public, shall not be deemed to be a transfer of this Lease for purposes of
Paragraph 15(a). If Tenant is a partnership, joint venture, or a limited
liability company, any transaction or series of transactions (including,
without limitation, any withdrawal or admittance of a partner, or a member,
as the case may be, or any change in any partner's or member's interest, as
the case may be, in Tenant, whether voluntary, involuntary or by operation
of law, or any combination of any of the foregoing transactions) resulting
in the transfer of control of Tenant, shall be deemed to be a transfer of
Tenant's interest under this Lease for the purposes of Paragraph 15(a). The
term "control" as used in this Paragraph 15(f) means the power to directly
or indirectly direct or cause the direction of the management or policies
of Tenant.

(g) Notwithstanding anything to the contrary in this Section 15,
including the provisions of the preceding paragraph, the original named
Tenant hereunder may, so long as said original named Tenant remains
primarily liable hereunder, assign this lease or sublet the Premises or any
portion thereof upon prior notice to Landlord but without Landlord's
consent to any of the following: (i) any corporation or other entity which
controls or is controlled by or under the control of Tenant; (ii) any
corporation resulting from a merger or consolidation with Tenant; or (iii)
any corporation or other entity which acquires all or substantially all of
the assets of Tenant as a going concern of the business that is being
conducted on the Premises; provided that, in each case, the assignee has
sufficient net worth immediately following such transaction or assignment
to perform the obligations of the Tenant under this lease; and provided
further that, in each case, any such assignee assumes in full the
obligations of Tenant under this lease. Any such entity to which this lease
is assigned or which so sublets is herein sometimes referred to as a
"Tenant Affiliate". For purposes of clause (i) above, control of an entity
shall mean the power (x) to vote more than 10% of the securities having
ordinary voting power for the election of directors or, if applicable, more
than ten percent (10%) of any other beneficial interests of such entity and
(ii) to direct or cause the direction of the management and policies of
such entity whether by contract or otherwise.

16. Holdover. If the Tenant or any person claiming through the Tenant
--------
shall retain possession of the Premises or any part thereof after the
expiration or earlier termination of the Term and if Landlord shall have
consented to such continuation of possession, such possession shall be
(unless the parties hereto shall otherwise have agreed in writing) deemed
to be under a

<PAGE>

month-to-month tenancy which shall continue until either party shall notify
the other in writing, at least 30 days prior to the end of any calendar
month, that the party giving such notice elects to terminate such tenancy
at the end of such calendar month, in which event such tenancy shall so
terminate. Anything contained in the foregoing provisions of this paragraph
to the contrary notwithstanding, the rental payable with respect to each
such monthly period shall be equal to 150% of the per annum Base Rent
applicable at the end of the Term and 100% of the Tax Adjustment Amount and
of the Expense Adjustment Amount (both calculated in accordance with the
provisions of Paragraph 4 hereof) which would have been payable had this
Lease been renewed until the end of the calendar year which includes such
month on the terms and conditions in effect immediately prior to the
expiration or termination of the Term; and such month-to-month tenancy with
Landlord's consent shall be upon the same terms and subject to the same
conditions as those which are set forth in this Lease except as aforesaid.
If Tenant or any person claiming through Tenant shall retain possession of
the Premises or any part thereof, after the expiration or earlier
termination of the term or of Tenant's right of possession, and if such
retention shall be without Landlord's consent, Tenant shall pay Landlord
(a) for each month or portion thereof during which such possession
continues, an amount equal to. the rental to be paid for each month
pursuant to the foregoing provisions of this Paragraph when such possession
is with Landlord's consent, plus all other sums which would have been
payable hereunder had the term continued during such retention of
possession and (b) all other damages sustained by Landlord, whether direct
or consequential, by reason of such retention of possession. During any
such retention of possession without Landlord's consent, all of Tenant's
obligations with respect to the use, occupancy and maintenance of the
Premises shall continue. The provisions of this Paragraph shall not be
deemed to limit or constitute a waiver of any other rights or remedies of
Landlord provided herein or at law or in equity and applicable to unlawful
retention of possession or otherwise.

17. Estoppel Certificate. (a) Tenant shall from time to time,
--------------------
within fifteen (15) days after Tenant's receipt of Landlord's request
therefor, execute, enseal, acknowledge and deliver to Landlord, or as
Landlord may direct, a written instrument in recordable form (a) certifying
(i) that this Lease is in full force and effect and has not been modified,
supplemented or amended in any way (or, if there have been modifications,
supplements or amendments thereto, that it is in full force and effect as
modified, supplemented or amended, and stating such modifications,
supplements and amendments) and that this Lease (as modified, supplemented
or amended, as aforesaid)

<PAGE>

represents the entire agreement among Landlord and Tenant as to the
Premises and the leasehold; (ii) the dates to which the Base Rent,
additional rent and other charges arising hereunder have been paid, (iii)
the amount of any prepaid rents or credits due to Tenant, if any; and (iv)
that if applicable, Tenant has entered into occupancy of the Premises; (v)
the date on which the Term shall have commenced and the corresponding
expiration date; and (b) stating, to the best knowledge of Tenant, whether
or not all conditions under the Lease to be performed by Landlord prior the
date of such certificate have been satisfied and whether or not Landlord is
then in default in the performance of any covenant, agreement or condition
contained in this Lease and specifying, if any, each such unsatisfied
condition and each such default; and (c) stating any other fact or
certifying any other condition reasonably requested by Landlord or by any
mortgagee or prospective mortgagee or purchaser of the Property or of any
interest therein. In the event that Tenant shall fail to complete,
execute and deliver any such instrument within fifteen (15) days after
Landlord's request therefor, in addition to committing a default hereunder,
Tenant shall be deemed to have irrevocably appoint Landlord or Beneficiary
(if Landlord is a trustee of a land trust) as Tenant's attorney-in-fact to
execute and deliver any such instrument or instruments in Tenant's name.

(b) Landlord shall from time to time, within ten days after Landlord's
receipt of Tenant's request therefor, execute, enseal, acknowledge and
deliver to Tenant, or as Tenant may direct, a written instrument in
recordable form (a) certifying (i) that this Lease is in full force and
effect and has not been modified, supplemented or amended in any way (or,
if there have been modifications, supplements or amendments thereto, that
it is in full force and effect as modified, supplemented or amended, and
stating such modifications, supplements and amendments) and that this Lease
(as modified, supplemented or amended, as aforesaid) represents the entire
agreement among Landlord and Tenant as to the Premises and the leasehold~
(ii) the dates to which the Base Rent, additional rent and other charges
arising hereunder have been paid, (iii) the amount of any prepaid rents or
credits due to Tenant, if any; and (iv) that if applicable, Tenant has
entered into occupancy of the Premises; (v) the date on which the Term
shall have commenced and the corresponding expiration date; and (b)
stating, to the best knowledge of Landlord, whether or not all conditions
under the Lease to be performed by Tenant prior the date of such
certificate have been satisfied and whether or not Tenant is then in
default in the performance of any covenant, agreement or condition
contained in this Lease and specifying, if any, each such unsatisfied
condition and each such default; and

<PAGE>

18. Subordination.
-------------

(a) This Lease shall be subject and subordinate at all times to
the lien of any mortgage or deed of trust, heretofore or hereafter placed
by Landlord upon any or all of the Premises or the Building, the Land, the
Property, or any interest therein and of all renewals, modifications,
consolidations, replacements and extensions thereof (all of which are
hereinafter referred to collectively as a "Mortgage"), all automatically
and without the necessity of any further act on the part of Tenant to
effectuate such subordination. Tenant shall, at the request of the holder
of a Mortgage (the "Mortgagee"), upon foreclosure thereof attorn to the
Mortgagee. Tenant shall also execute, enseal, acknowledge and deliver,
within 15 days after Tenant's receipt of demand from Landlord or the
Mortgagee such further instrument or instruments evidencing such
subordination of Tenant's right, title and interest under this Lease to the
lien of the Mortgage, and such further instrument or instruments of
attornment, as shall be desired by the Mortgagee. In the event that Tenant
shall fail to complete, execute and deliver any such instrument within ten
(10) days after Landlord's request therefor, in addition to committing a
default hereunder, Tenant shall be deemed to have irrevocably appoint
Landlord or Beneficiary (if Landlord is a trustee of a land trust) as
Tenant's attorney-in-fact to execute and deliver any such instrument or
instruments in Tenant's name. Notwithstanding the foregoing, Tenant's
rights hereunder shall not be subordinate to any current Mortgagee unless
such Mortgagee agrees not to disturb Tenant's possession of the Premises so
long as there is no Default hereunder; and with respect to any future
Mortgagee, Tenant's rights hereunder shall not be subordinate to such
Mortgagee's rights unless such Mortgagee delivers to Tenant such
Mortgagee's standard form of subordination, non-disturbance and attornment
agreement.

(b) Anything contained in the foregoing provisions of this
Paragraph to the contrary notwithstanding, any Mortgagee may at any time
subordinate its Mortgage to this Lease, without the necessity of obtaining
Tenant's consent, by giving notice of the same in writing to Tenant, and
thereupon this Lease shall be deemed to be prior to such mortgage without
regard to their respective dates of execution, delivery or recordation
and/or the date of commencement of Tenant's possession, and in that event
the Mortgagee shall have the same rights with respect to this Lease as
though this Lease shall have been executed, delivered and recorded prior to
the execution and delivery of the Mortgage.

<PAGE>

(c) If Landlord is or becomes lessee of premises of which the
Premises are a part, Tenant agrees that, automatically and without the
necessity of any further act, Tenant's possession shall be as a subtenant
and shall be subordinate to the interest of Landlord's lessor, its heirs,
personal representatives, successors and assigns (which lessor, its heirs,
personal representatives, successors and assigns, or any of them, is
hereinafter called "Paramount Lessor"), but notwithstanding the foregoing,
if Landlord's tenancy shall terminate by expiration, by forfeiture or
otherwise, then Tenant hereby agrees, upon request of Paramount Lessor, to
attorn to Paramount Lessor, and to recognize such lessor as Tenant's
landlord for the balance of the term of this Lease and any extensions or
renewals hereof. Tenant shall execute, enseal, acknowledge and deliver,
upon demand by Landlord or Paramount Lessor, such further instrument or
instruments evidencing such subordination of Tenant's right, title and
interest under this Lease to the interest of such lessor, and such further
instrument or instruments of attornment, as shall be prescribed by the
Paramount Lessor.

(d) It is further agreed that if any Mortgage shall be
foreclosed, or if the lease of the Paramount Lessor be terminated, (A) the
Mortgagee, or Paramount Lessor, or such subsequent owner, as the case may
be, and their respective successors or assigns that succeed to the interest
of the Landlord in the Building or the Land, or acquires the right to
possession of the Property, or any portion thereof, shall not be (1) liable
for any act or omission of the party named above as the Landlord under this
Lease; (2) liable for the performance of Landlord's covenants pursuant to
the provisions of this Lease which arise and accrue prior to such entity
succeeding to the interest of Landlord under this Lease or acquiring such
right to possession; (3) subject to any offsets or defenses which Tenant
may have at any time against Landlord; and (4) bound by any rent which
Tenant may have paid previously for more than one month; and (B) upon
request of the Mortgagee, if the Mortgage shall be foreclosed, Tenant will
attorn, as Tenant under this Lease, to the purchaser at any foreclosure
sale under any Mortgage. The provisions of Section 18(d)(A) shall not be
applicable or have any force or effect until the first (lst) day of the
tenth (10th) month of the Term.

19. Certain Rights Reserved By Landlord. Landlord shall have the
-----------------------------------
following rights (which shall in all material respects and to the extent
reasonably possible, be exercised uniformly against all tenants in the
Building), each of which Landlord may exercise without notice to Tenant and
without liability to Tenant for damage or injury to property, person or
business on account of

<PAGE>

the exercise thereof, and the exercise of any such rights shall not be
deemed to constitute an eviction or disturbance of Tenant's use or
possession of the Premises and shall not give rise to any claim for set-off
or abatement of rent or any other claim:

(a) To change the Building's name or street address; provided Landlord
gives Tenant sixty (60) days prior notice of such change.

(b) To install, affix and maintain any and all signs on the exterior
and on the interior of the Building; provided that such signs do not
materially interfere with the view from the Premises.

(c) To decorate or to make repairs, alterations, additions, or
improvements, whether structural or otherwise (including alterations in the
configuration of the common area), in and about the Building, or any part
thereof, and for such purposes to enter upon the Premises, and during the
continuance of any of said work, to temporarily close doors, entryways,
public space and corridors in the Building and to interrupt or temporarily
suspend services or use of facilities.

(d) To furnish door keys for the entry door(s) in the Premises at the
commencement of the Lease and to retain at all times, and to use in
appropriate instances, keys to all doors within and into the Premises.
Tenant agrees to purchase only from Landlord or Landlord's designee,
additional duplicate keys as required, to change no locks, and to affix no
locks on doors without the prior written consent of the Landlord. Upon the
expiration of the Term or of Lessee's right to possession, Tenant shall
return all keys to Landlord and shall disclose to Landlord the combination
of any safes, cabinets or vaults left in the Premises.

(e) To designate and approve all window coverings used in the Building.

(f) To approve the weight, size and location of safes, vaults and other
heavy equipment and articles in and about the Premises and the Building so
as not to exceed the live load per square foot designated by the structural
engineers for the Building, and to require all such items and furniture and
similar items to be moved into or out of the Building and Premises only at
such times and in such manner as Landlord shall direct in writing. Tenant
shall not install or operate machinery or any mechanical devices of a
nature not directly related to Tenant's ordinary use of the Premises
without the prior written consent of Landlord.

<PAGE>

Tenant's movements of property into or out of the Building or Premises and
within the Building are entirely at the risk and responsibility of Tenant,
and Landlord reserves the right to require permits before allowing any
property to be moved into or out of the Building or Premises.

(g) To establish controls for the purpose of regulating all property
and packages, both personal and otherwise, to be moved into or out of the
Building and Premises and all persons using the Building after normal
office hours.

(h) To regulate delivery and service of supplies in order to insure the
cleanliness and security of the Premises and to avoid congestion of
receiving areas and freight elevators.

(i) To show the Premises to (A) prospective lenders, purchasers and
investors at reasonable hours at all times during the term and (B)
prospective tenants, at reasonable hours during the last nine (9) months of
the Term and, if vacated or abandoned, to show the Premises at any time and
to prepare the Premises for re-occupancy.

(j) To erect, use and maintain pipes, ducts, wiring and conduits, and
appurtenances thereto, in and through the Premises at reasonable locations.

(k) To enter the Premises at any reasonable time to inspect the
Premises.

(1) To grant to any person or to reserve unto itself the exclusive
right to conduct any business or render any service in the Building. If
Landlord elects to make available to tenants in the Building any services
or supplies, or arranges a master contract therefor, Tenant agrees to
obtain its requirements, if any, therefore from Landlord or under any such
contact, provided that the charges therefor are reasonable.

(m) To prescribe the location and style of the suite number and
identification sign or lettering for the Premises.

(n) To grant to anyone the right to conduct any business or render any
service in the Building, whether or not it is the same as or similar to the
use expressly permitted to Tenant by Paragraph 5 hereof.

(o) To require all persons entering or leaving the Building during such
hours as Landlord may from time to time reasonably determine to identify
themselves to security personnel

<PAGE>

by registration or otherwise in accordance with Building security controls,
and to establish their right to enter or leave in accordance with Exhibit C
attached to this Lease.

20. Rules and Regulations. Tenant shall, and shall cause all of its
---------------------
subtenants and occupants, its and their agents, employees, invitees and
licensees to, observe faithfully, and comply strictly with, the rules and
regulations attached to this Lease as Exhibit "C" (the "Rules"), as they
may be supplemented and revised by Landlord from time to time, and such
other rules and regulations promulgated from time to time by Landlord, as
in the Landlord's judgment may be desirable for the safety, care and
cleanliness of the Building and the Premises, or for the preservation of
good order therein. Landlord shall not be liable to Tenant for violation of
such rules and regulations by, or for Landlord's failure to enforce the
same against, any other tenant, its subtenants and occupants and its and
their agents, employees, invitees or licensees, nor shall any such
violation or failure constitute, or be treated as contributing to, an
eviction, actual or constructive, or affect Tenant's covenants and
obligations hereunder, or allow Tenant to reduce, abate or offset the
payment of any rent under this Lease. The Rules shall, to the extent
reasonably possible, in all material respects be uniformly enforced against
all tenants in the Building.

21. Landlord's Remedies. (a) The occurrence of any one or more of the
-------------------
following events shall constitute a "Default" by Tenant, which if not cured
within any applicable time permitted for cure below, shall give rise to
Landlord's remedies set forth in Paragraph (b), below: (i) failure by
Tenant to make when due any payment of rent, unless such failure is cured
within five (5) days after notice; provided, however, that once Landlord
has given Tenant two (2) such notices during any twelve (12)-month period,
Landlord shall not be required to give further written notice, and
thereafter the failure or refusal by Tenant to timely make any payment of
rent when due within the following twelve (12) months shall be a Default
without further notice; (ii) failure by Tenant to observe or perform any of
the terms or conditions of this Lease to be observed or performed by Tenant
other than the payment of rent, or as provided below, unless such failure
is cured within thirty (30) days after notice, or such shorter period
expressly provided elsewhere in this Lease (provided, if the nature of
Tenant's failure is such that more time is reasonably required in order to
cure, Tenant shall not be in Default if Tenant commences to cure within
such period and thereafter reasonably seeks to cure such failure to
completion); (iii) failure by Tenant to immediately remove any hazardous
condition which Tenant has created or permitted; (iv) failure by Tenant to
comply with the

<PAGE>

Rules, unless such failure is cured within five (5) days after notice
(provided, if the nature of Tenant's failure is such that more time is
reasonably required in order to cure, Tenant shall not be in Default if
Tenant commences to cure within such period and thereafter reasonably seeks
to cure such failure to completion); (v) vacation of all or a substantial
portion of the Premises for more than forty-five (45) consecutive days, or
the failure to take possession of the Premises within sixty (60) days after
the Commencement Date; (vi) (a) making by Tenant or any guarantor of this
Lease ("Guarantor") if any, of any general assignment for the benefit of
creditors; (b) filing by or against Tenant or any Guarantor of a petition
to have Tenant or such Guarantor adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless,
in the case of a petition filed against Tenant or such Guarantor, the same
is dismissed within sixty (60) days), (c) appointment of a trustee or
receiver to take possession of substantially all of Tenant's assets located
on the Premises or of Tenant's interest in this Lease, where possession is
not restored to Tenant within thirty (30) days, (d) attachment, execution
or other judicial seizure of substantially all of Tenant's assets located
on the Premises or of Tenant's interest in this Lease, (e) Tenant's or any
Guarantor's convening of a meeting of its creditors or any class thereof
for the purpose of effecting a moratorium upon or composition of its debts,
or (f) Tenant's or any Guarantor's insolvency or admission of an inability
to pay its debts as they mature; (vii) any material misrepresentation
herein, or material misrepresentation or omission in any financial
statements or other materials provided by Tenant or any Guarantor in
connection with negotiating or entering this Lease or in connection with
any assignment or sub-letting under Paragraph 15; (viii) cancellation of
any guaranty of this Lease by any Guarantor; or (ix) failure by Tenant to
cure within any applicable time permitted thereunder any default under any
other lease for space at the Property or any other buildings owned or
managed by Landlord or its affiliates, now or hereafter entered by Tenant
(and any Default hereunder not cured within the times permitted for cure
herein shall, at Landlord's election, constitute a default under any such
other lease or leases). Failure by Tenant to comply with the same term or
condition of this Lease on three occasions during any twelve month period
shall cause any failure to comply with such term or condition during the
succeeding twelve month period, at Landlord's option, to constitute an
incurable Default, if Landlord has given Tenant notice of each such failure
within ten (10) days after each such failure occurs. The notice and cure
periods provided herein are in lieu of, and not in addition to, any notice
and cure periods provided by Law.

<PAGE>

(b) If a Default occurs and is not cured within any applicable time
permitted under Paragraph (a), Landlord shall have the rights and remedies
hereinafter set forth, which shall be distinct, separate and cumulative
with and in addition to any other right or remedy allowed under any law or,
other provisions of this Lease:

(i) Landlord may terminate this Lease, in which event the Term of this
Lease shall end, and repossess the Premises by detainer suit, summary
proceedings or other lawful means, and recover from Tenant all the fixed
dollar amounts of rent accrued and unpaid for the period up to and
including such termination date, as well as all other additional sums
payable by Tenant, or for which Tenant is liable or in respect of which
Tenant has agreed to indemnify Landlord under any of the provisions of this
Lease, which may be then owing or unpaid, and all costs and expenses,
including without limitation court costs and reasonable attorney's fees
incurred by Landlord in the enforcement of its rights and remedies
hereunder, and, in addition, Landlord shall be entitled to recover as
damages for loss of the bargain and not as a penalty (i) the unamortized
cost (assuming level amortization at 10% interest over the Term) Of
leasehold improvements, additions, and alterations, if any, made by or paid
for by Landlord and/or construction allowance made pursuant to this Lease
and the Work Letter, (ii) the aggregate sum which at the time of such
termination represents the excess, if any, of the present value on the
aggregate rents at the same annual rate for the remainder of the Term
pursuant to the applicable provisions of Paragraph 2 and Paragraph 3 of
this Lease, over the then present value of the then aggregate fair rental
value of the Premises for the balance of the Term (taking into account any
period required to re-lease the Premises and prepare the Premises for
occupancy for a new tenant), such present value to be computed in each case
on the basis of a six percent (6%) per annum discount from the respective
dates upon which such rentals would have been payable hereunder had this
Lease not been terminated, and (iii) any damages in addition thereto,
including the costs of re-letting (as defined below), reasonable attorneys'
fees and court costs, which Landlord shall have sustained by reason of the
breach of any of the covenants of this lease other than for the payment of
rent. For purposes of computing such damages, Tenant's Proportionate Share
of Taxes and Operating Expenses shall be projected, based upon the average
rate of increase, if any in such items from the Commencement Date through
the time of termination.

(ii) If applicable law permits, Landlord may terminate Tenant's right
of possession and repossess the Premises by detainer suit, summary
proceedings or other lawful means, without

<PAGE>

terminating this Lease (and if such Law permits, and Landlord shall not
have expressly terminated the Lease in writing, any termination shall be
deemed a termination of Tenant's right of possession only). In such event,
Landlord may recover: (a) any unpaid rent as of the date possession is
terminated, including interest at the Default Rate, (b) any unpaid rent
which accrues during the Term from the date possession is terminated
through the time of award (or which may have accrued from the time of any
earlier award obtained by Landlord through the time of award), including
interest at the Default Rate, less any Net Re-Letting Proceeds (as defined
in Paragraph (g) received by Landlord during such period, and less such
loss of rent that Tenant proves could have been reasonably avoided, and (c)
any other amounts necessary to compensate Landlord for all damages
proximately caused by Tenant's failure to perform its obligations under
this Lease, including without limitation, all Costs of Reletting (as
defined in Paragraph (g)). Landlord may bring suits for such amounts or
portions thereof, at any time or times as the same accrue or after the same
have accrued, and no suit or recovery of any portion due hereunder shall be
deemed a waiver of Landlord's right to collect all amounts to which
Landlord is entitled hereunder, nor shall the same serve as any defense to
any subsequent suit brought for any amount not theretofore reduced to
judgment.

(iii) Remove from the Premises any furniture, fixtures, equipment or
personal property of Tenant, without liability for trespass or conversion,
and store such items either in the Building or elsewhere at the sole cost
of Tenant and without liability to Landlord. Any of such furniture,
fixtures, equipment and personal property not claimed within thirty (30)
days from the date of removal shall be deemed abandoned.

(c) If Landlord terminates this Lease or Tenant's right to possession,
Landlord shall use reasonable efforts to mitigate Landlord's damages, and
Tenant shall be entitled to submit proof of such failure to mitigate as a
defense to Landlord's claims hereunder, if mitigation of damages by
Landlord is required by applicable Law. Landlord shall not unreasonably
withhold its consent to any tenant offered by Tenant or to observe any
instructions given by Tenant relative to such reletting. Landlord shall not
be deemed to have unreasonably withheld its consent to any proposed
replacement tenant if Landlord's consent is withheld because (1) the
Premises, including the means of ingress and egress thereto and the
proposed use of the Premises will violate any city, state or federal law,
ordinance or regulation, including, without limitation, any applicable
building code or zoning ordinance; (2) the proposed use of the Premises
does not conform with the use permitted under Section 5 of this Lease; (3)

<PAGE>

in the reasonable judgment of Landlord, the proposed replacement tenant
does not have a tangible net worth sufficient to comply with or perform all
of the obligations of Tenant under this Lease; (4) the proposed replacement
tenant is of a character or is engaged in a business which would be
detrimental to the reputation of the Building; (5) the proposed replacement
tenant is a governmental agency; (6) the proposed use of the Premises is in
conflict with any exclusive use rights of an other tenant in the Building;
or (7) the proposed replacement tenant is a tenant in the Building;
provided, however, that the foregoing are examples of reasons for which
Landlord may withhold its consent and shall not be deemed exclusive of any
permitted reasons for withholding consent. Landlord may give priority over
leasing the Premises to any other space Landlord desires to lease in the
Building and shall not be required in any case to offer rent, length of
term or other term for the Premises which are or would be less favorable to
Landlord than being offered for comparable space of Landlord in the
Building. If Landlord has not terminated this Lease or Tenant's right to
possession, Landlord shall have no obligation to mitigate, and may permit
the Premises to remain vacant or abandoned; in such case, Tenant may seek
to mitigate damages by attempting to sublease the Premises or assign this
Lease (subject to Paragraph 15).

(d) Landlord shall at all times have the rights and remedies (which
shall be cumulative with each other and cumulative and in addition to those
rights and remedies available under Paragraph (b), above or any Law or
other provision of this Lease), without prior demand or notice except as
required by applicable law: (i) to seek any declaratory, injunctive or
other equitable relief, and specifically enforce this Lease, or restrain or
enjoin a violation or breach of any provision hereof, and (ii) to sue for
and collect any unpaid rent which has accrued. Notwithstanding anything to
the contrary contained in this Lease, to the extent not expressly
prohibited by applicable law, in the event of any Default by Tenant not
cured within any applicable time for cure hereunder, Landlord may terminate
this Lease or Tenant's right to possession and accelerate and declare that
all rent reserved for the remainder of the Term shall be immediately due
and payable (in which event, Tenant's Proportionate Share of Taxes and
Operating Expenses for the remainder of the Term shall be projected based
upon the average rate of increase, if any, in such items from the
Commencement Date through the date of such declarations) provided, Landlord
shall, after receiving payment of the same from Tenant, be obligated to
turn over to Tenant any actual Net Re-Letting Proceeds thereafter received
during the remainder of the Term, up to the amount so received from Tenant
pursuant to this provision.

<PAGE>

(e) Tenant expressly waives, except as required by applicable law, the
service of any notice of intention to terminate this Lease or to reenter
the Premises and waives the service of any demand for payment of rent or
for possession and waives the service of any and every other notice or
demand prescribed by any ordinance, statute or other law (except as
expressly otherwise provided in this Lease) and agrees that the breach of
any covenants or agreements provided in this Lease shall, in and of itself,
without the service of any notice or demand whatever (except as expressly
otherwise provided in this Lease), constitute a forcible detained by Tenant
of the Premisses.

(f) Tenant shall pay, as additional rent, a service charge of Two
Hundred Dollars ($200.00) for bookkeeping and administrative expenses, if
rent is not received within five (5), days after its due date. In addition
any rent paid more than five (5) business days after due shall accrue
interest from the due date at an annual rate equal to two percent in
excess of the rate of interest announced from time to time by the First
National Bank of Chicago (or by any other bank selected by Landlord), as
its prime, reference or corporate base rate, changing as and when said
rate changes as announced by such bank, or the highest rate permitted by
law, whichever is less, until payment is received by Landlord.
Landlord's acceptance of such service charge and interest payments shall
not be deemed consent by Landlord to late payments, nor a waiver of
Landlord's right to insist upon timely payments at any time, nor a waiver
of any remedies to which Landlord is entitled as a result of the late
payment of rent.

(g) "Net Re-Letting Proceeds" shall mean the total amount of rent
and other consideration paid by any Replacement Tenants, less all Costs of
Re-Letting, during a given period of time. "Costs of Re-Letting" shall
include without limitation, all reasonable costs and expenses incurred by
Landlord for any repairs, maintenance, changes, alterations and
improvements to the Premises, brokerage commissions, advertising costs,
attorneys' fees, any customary free rent periods or credits, tenant
improvement allowances, take-over lease obligations and other customary,
necessary or appropriate economic incentives required to enter leases with
Replacement Tenants, and costs of collecting rent from Replacement Tenants.
"Replacement Tenants" shall mean any persons to whom Landlord relets the
Premises or any portion thereof pursuant to this Paragraph.

(h) No re-entry or repossession, repairs, changes, alterations and
additions, reletting, acceptance of keys from Tenant, or any other action
or omission by Landlord shall be construed as an election by Landlord to
terminate this Lease or

<PAGE>

Tenant's right to possession, or accept a surrender of the Premises, nor
shall the same operate to release the Tenant in whole or in part from any
of Tenant's obligations hereunder, unless express written notice of such
intention is sent by Landlord or its agent to Tenant. To the fullest extent
permitted by Law, all rent and other consideration paid by any Replacement
Tenants shall be applied: first, to the Costs of Re-Letting, second, to the
payment of any rent theretofore accrued, and the residue, if any, shall be
held by Landlord and applied to the payment of other obligations of Tenant
to Landlord as the same become due (with any remaining residue to be
retained by Landlord). Rent shall be paid without any prior demand or
notice therefor (except as expressly provided herein) and without any
deduction, set-off or counterclaim, or relief from any valuation or
appraisement laws. Landlord may apply payments received from Tenant to any
obligations of Tenant then accrued, without regard to such obligations as
may be designated by Tenant. Landlord shall be under no obligation to
observe or perform any provision of this Lease on its part to be observed
or performed which accrues after the date of any Default by Tenant
hereunder not cured within the times permitted hereunder. The times set
forth herein for the curing of Defaults by Tenant are of the essence of
this Lease. Tenant hereby irrevocably waives any right otherwise available
under any law to redeem or reinstate this Lease.

(i) If Landlord shall fail:

(i) to make payment of any sum required to be paid by Landlord
under this Lease and such failure shall continue for ten (10) days after
written notice from Tenant to Landlord; or

(ii) to observe or perform any material covenant, agreement or
obligation to be performed by Landlord under this Lease relating to
Landlord's repairs and Landlord's services and if such failure cannot be
cured, or, if curable, shall continue for more than thirty (30) days after
notice thereof from Tenant to Landlord (unless such failure requires work
to be performed, acts to be done, or conditions to be removed, that, by
their nature, cannot be reasonably performed, done or removed, as the case
may be, within such period, in which event, if Landlord shall have
commenced correcting the same within such period and shall have diligently
prosecuted such cure, or correction, such thirty (30) day period shall be
extended by such additional time period as may be required for Landlord to
cure or correct such failure),

then Tenant shall have and may exercise such rights and remedies to which
it may be entitled at law or in equity upon such default

<PAGE>

of Landlord, including the right to offset against Rent as set forth in the
following paragraph.

Upon the occurrence of any default by Landlord as set forth in the
previous paragraph, and the expiration of all applicable grace and cure
periods with respect to such default, Tenant shall upon prior notice to
Landlord, be permitted to undertake the cure of such default. Upon the
entry of a judgment or decree (with all rights of appeal having been waived
or having expired) ("Final Judgment") by a court of competent jurisdiction
finding that Landlord has breached its obligations under this Lease, Tenant
shall be entitled to set-off against Rent payable to Landlord hereunder all
reasonable sums paid by Tenant or due from Landlord by reason of such
adjudicated default, including reasonable attorney's fees and court costs
incurred by Tenant in securing such judgment, and interest on said judgment
from the date such costs were incurred.

22. Expenses of Enforcement. The losing party shall pay upon demand all
-----------------------
of the prevailing party's costs, charges and expenses including the fees
and out-of-pocket expenses of counsel, agents and others retained by the
prevailing party, incurred in enforcing the losing party's obligations
hereunder. Each party shall pay all of such costs and expenses incurred by
the other party in any litigation, negotiation or transaction in which the
one party causes the other party, without fault of the other party, to
become involved or concerned.

23. Covenant of Quiet Enjoyment. Landlord covenants that Tenant, on
---------------------------
paying the rent, charges for services and other payments herein reserved or
required and on keeping, observing and performing all the other material
terms, covenants, conditions, provisions and agreements herein contained on
the part of the Tenant to be kept, observed and performed, shall, during
the Term, peaceably and quietly have, hold and enjoy the Premises subject
to the terms, covenants, conditions, provisions and agreements hereof.

24. Security Deposit. Tenant hereby deposits with Landlord the sum of
----------------
$15,053.64, (hereinafter referred to as "Collateral"), as security for the
prompt, full and faithful performance by Tenant of each and every provision
of this Lease and of all obligations of Tenant hereunder. No interest shall
be paid to Tenant on the Collateral, and Landlord shall have the right to
commingle the Collateral with Landlord's other funds.

If Tenant fails to perform any of its obligations hereunder, Landlord
may use, apply or retain the whole or any part of the

<PAGE>

Collateral for the payment of (a) any rent or other sums of money which
Tenant may not have paid when due, (b) any sum expended by Landlord on
Tenant's behalf in accordance with the provisions of this Lease, and/or (c)
any sum which Landlord may expend or be required to expend by reason of
Tenant's default, including, without limitation, any damage or deficiency
in or from the reletting of the Premises as provided in Paragraph 21. The
use, application or retention of the Collateral, or any portion thereof, by
Landlord shall not prevent Landlord from exercising any other right or
remedy provided by this Lease or by law (it being intended that Landlord
shall not first be required to proceed against the Collateral) and shall
not operate as a limitation on any recovery to which Landlord may otherwise
be entitled. If any portion of the Collateral is used, applied or retained
by Landlord for the purposes set forth above, Tenant agrees, within ten
days after the written demand therefor is made by Landlord, to deposit cash
with the Landlord in an amount sufficient to restore the Collateral to its
original amount.

If Tenant shall fully and faithfully comply with all of the provisions
of this Lease, the Collateral, or any balance thereof, shall be returned to
Tenant without interest after the expiration of the Term or upon any later
date after which Tenant has vacated the Premises. In the absence of
evidence satisfactory to Landlord of any permitted assignment of the right
to receive the Collateral, or of the remaining balance thereof, Landlord
may return the same to the original Tenant, regardless of one or more
assignments of Tenant's interest in this Lease or the Collateral. In such
event, upon the return of the Collateral, or the remaining balance thereof
to the original Tenant, Landlord shall be completely relieved of liability
under this Paragraph 24 or otherwise with respect to the Collateral.

Tenant acknowledges that Landlord has the right to transfer or mortgage
its interest in the Land and the Building and in this Lease and Tenant
agrees that in the event of any such transfer or mortgage, Landlord shall
have the right to transfer or assign the Collateral to the transferee or
mortgagee. Upon written acknowledgement of transferee's or mortgagee's
receipt of such Collateral, Landlord shall thereby be released by Tenant
from all liability or obligation for the return of such Collateral and
Tenant shall look solely to such transferee or mortgagee for the return of
the Collateral.

The Collateral shall not be mortgaged, assigned or encumbered in any
manner whatsoever by Tenant without the prior written consent of Landlord.

<PAGE>

25. Real Estate Broker. Tenant represents that Tenant has dealt with
------------------
(and only with) MRG Unlimited, Inc. and Amerimar Adams Management Company,
Inc. as broker in connection with this Lease, and that insofar as Tenant
knows, no other broker negotiated this Lease or is entitled to any
commission in connection therewith. Tenant agrees to indemnify, defend and
hold Landlord harmless from and against any claims, for a commission or
other compensation in connection with this Lease, made by any broker or
finder other than the broker named above who claims to have dealt with or
communicated to Tenant in connection with this Lease, provided that
Landlord has not in fact retained such broker or finder.

26. Miscellaneous.
-------------

(a) Rights Cumulative. All rights and remedies of Landlord
-----------------
under this Lease shall be cumulative and none shall exclude any other
rights or remedies allowed by law, in equity or otherwise.

(b) Captions and Usage. The titles appearing in connection with
------------------
the various sections and paragraphs of this lease are for convenience only;
they are not intended to indicate all of the subject matter in the text and
they are not to be used in interpreting this Lease nor for any other
purpose in the event of any controversy. As used herein (i) the term
"person" shall be deemed to include a natural person, a trustee, a
corporation, a joint venture, a partnership, a limited liability company, a
governmental unit and any other form of legal entity; (ii) all usages in
the singular or plural number shall be deemed to have been made,
respectively, in the plural or singular number as well; the use of any
gender includes all genders.

(c) Binding Effect. Each of the provisions of this Lease shall
--------------
extend to and shall, as the case may require, bind or inure to the benefit
not only of the Landlord and of Tenant, but also of their respective
successors or assigns, provided this clause shall not permit any assignment
by Tenant contrary to the provisions of Paragraph 15 hereof.

(d) Lease Contains All Terms. All of the representations
------------------------
and obligations of Landlord and Tenant are contained herein, and no
modification, waiver or amendment of this Lease or of any of its
conditions or provisions shall be binding upon the Landlord or Tenant
unless in writing signed by Landlord and Tenant or by a duly authorized
agent of Landlord or Tenant empowered by a written authority signed by
Landlord or Tenant.

<PAGE>

(e) Delivery for Examination. Submission of the form of the Lease
------------------------
for examination shall not bind Landlord in any manner, and no Lease or
obligations of the Landlord shall arise until this instrument is signed by
both Landlord and Tenant and delivery is made to each; provided, however,
the execution and delivery by Tenant of this Lease to Landlord or Manager,
or the leasing agent of the Building shall constitute an irrevocable offer
by Tenant to lease the Premises on the terms and conditions herein
contained, which offer may not be revoked for seven (7) business days after
such delivery.

(f) No Air Rights. No rights to any view or to light or air over
-------------
any property, whether belonging to Landlord or any other person, are
granted to Tenant by this Lease.

(g) Modification of Lease. If any prospective Mortgagee or
---------------------
Paramount Lessor requires that certain modifications be made to this Lease,
which modifications will not require Tenant to pay any additional amounts
or otherwise change materially the rights or obligations of Tenant
hereunder, Tenant shall, within ten (10) days following Landlord's request,
execute and deliver appropriate instruments effecting such modifications.
Tenant's failure to complete, execute and deliver any such modifications
within ten (10) days after Landlord's request therefor shall be deemed a
material default under Paragraph 21 hereof, or, at Landlord's sole option,
Tenant shall be deemed to have irrevocably appointed Landlord or
Beneficiary (if Landlord is a trustee of a land trust) as Tenant's
attorney-in-fact to execute and deliver such modifications in Tenant's
name.

(h) Substitution of Other Premises.
------------------------------

(i) At any time hereafter, Landlord shall have the right to
substitute for the Premises then being leased or to be leased hereunder
(the "Existing Premises") other premises within the Building (the "New
Premises") provided that the New Premises shall be of at least the same
size and substantially the same view and shall either have substantially
the same perimeter configuration or a perimeter configuration substantially
as usable for the purposes for which the Existing Premises were being used
by Tenant or, if possession of the Existing Premises had not yet been
received by Tenant, then for the purposes for which the Existing Premises
were to be used by Tenant. In addition, the New Premises shall not be below
the sixth (6th) floor of the Building and there shall be space adjacent to
the New Premises substantially similar to the First Offer Space (as defined
in Section 31 below), unless Tenant's rights under Section 31 have
theretofore expired or been exercised in accordance with the terms

<PAGE>

of Section 31. Base Rent shall be adjusted to reflect the actual size of
the New Premises. Landlord shall make provisions, as part of any such
substitution, that Tenant shall, for a reasonable period of time (not to
exceed five (5) business days), have an operating computer room in both the
Existing Premises and the New Premises.

(ii) If Tenant shall not have received possession of the
Existing Premises, then, as of the date Landlord gives notice of a
substitution, such substitution shall be effective, the New Premises shall
be the Premises hereunder and the Existing Premises shall cease to be the
Premises hereunder.

(iii) The provisions of this subparagraph (iii) shall apply
if Tenant shall have already received possession of the Existing Premises
as of the date Landlord gives notice of substitution. Tenant shall vacate
and surrender the Existing Premises on or before the date (the "Relocation
Date") which is the later of (i) the thirtieth (30th) day after the date
that Landlord gives Tenant written notice of Landlord's intent to
substitute the New Premises for the Existing Premises, and (ii) the
fifteenth (15th) day after Landlord gives Tenant written notice that the
New Premises have been substantially completed so that they conform to the
requirements of subparagraph (i) above. As of the Relocation Date, the New
Premises shall be deemed to be the Premises leased under this Lease and the
Existing Premises shall cease to be the "Premises" leased under this Lease.
At such time as Tenant vacates the Existing Premises and relocates to the
New Premises, and provided Tenant is not in default under the Lease,
Landlord shall (a) pay the actual and reasonable out-of-pocket expenses of
Tenant's moving of its property from the Existing Premises to the New
Premises, and (b) promptly reimburse Tenant for its actual and reasonable
out-of-pocket costs in connection with the relocation of any telephone or
other communications equipment from the Existing Premises to the New
Premises. However, instead of only paying the expenses of Tenant's
moving of its property, Landlord may elect to either move Tenant's property
or provide personnel to do so under Tenant's direction, in which event such
move may not be made except during evenings, weekends or holidays, so as to
incur the least inconvenience to Tenant.

(iv) Tenant shall not be entitled to any compensation for any
inconvenience or interference with Tenant's business, nor to any abatement
or reduction in rent, nor shall Tenant's obligations under this Lease be
otherwise affected, as a result of the substitution except as otherwise
provided in this subparagraph (h). Tenant agrees to cooperate with Landlord
so as

<PAGE>

to facilitate the prompt completion by Landlord of its obligations under
this subparagraph (h). Without limiting the generality of the preceding
sentence, Tenant agrees to provide to Landlord promptly such approvals,
instructions, plans, specifications or other information, as may be
reasonably requested by Landlord.

(i) Transfer of Landlord's Interest. Notwithstanding anything
-------------------------------
contained herein to the contrary, Tenant agrees that neither Landlord nor
any partner in Landlord or Beneficiary, as the case may be, nor any other
person having any interest, direct or indirect, immediate or more removed
than immediate, in Landlord or Beneficiary, as the case may be, shall have
any personal liability with respect to any of the provisions of this Lease
and Tenant shall look solely to the estate and property of Landlord in the
Land and the Building for the satisfaction of Tenant's remedies, including
without limitation, the collection of any judgment or the enforcement of
other judicial process requiring the payment or expenditure of money by
Landlord, subject, however, to the prior rights of any Mortgagee, and no
other assets of Landlord and Beneficiary (if Landlord is a trustee of a
land trust) or its partners, or of any other aforesaid person having an
interest in Landlord or Beneficiary, as the case may be, shall be subject
to levy, execution or other judicial process for the satisfaction of
Tenant's claims. Without limitation of the foregoing, upon each transfer
of the Land and the Building and the landlord's interest in this Lease, the
transferor shall automatically be released from all liability under this
Lease provided the transferee assumes all of Landlord's obligations under
the Lease. Tenant further acknowledges that Landlord may assign its
interest in this Lease to a mortgage lender as additional security and
agrees that such an assignment shall not release Landlord from its
obligations hereunder and that, subject to the other provisions of this
Section, Tenant shall continue to look to Landlord for the performance of
its obligations hereunder.

(j) Prohibition Against Recording. Neither this Lease, nor
-----------------------------
any memorandum, affidavit or other writing with respect thereto, shall be
recorded by Tenant or by anyone acting through, under or on behalf of
Tenant, and the recording thereof in violation of this provision shall make
this Lease null and void at Landlord's election.

(k) Covenants and Conditions. All of the covenants of Tenant
------------------------
hereunder shall be deemed and construed to also be "conditions", if
Landlord so elects, as well as "covenants" as though the words specifically
expressing or importing covenants and conditions were used in each separate
instance.

<PAGE>

(1) RelationshiP Of Parties. Nothing contained in this Lease
-----------------------
shall be deemed or construed by the parties hereto or by any third party to
create the relationship of principal and agent, partnership, joint venturer
or any association between Landlord and Tenant, it being expressly
understood and agreed that neither the method of computation of rent nor
any act of the parties hereto shall be deemed to create any relationship
between Landlord and Tenant other than the relationship of landlord and
tenant.

(m) Application of Payments. Landlord shall have the right to
-----------------------
apply payments received from Tenant pursuant to this Lease (regardless of
Tenant's designation of such payments) to satisfy any obligations of Tenant
hereunder, in such order and amounts, as Landlord in its sole discretion,
may elect.

(n) Partial Invalidity. If any term, provision or condition
------------------
contained in this Lease shall, to any extent, be invalid or unenforceable,
the remainder of this Lease (or the application of such term, provision or
condition to persons or circumstances other than those in respect of which
it is invalid or unenforceable) shall not be affected thereby, and each and
every other term, provision and condition of this Lease shall be valid and
enforceable to the fullest extent possible permitted by law.

(O) WAIVER OF TRIAL BY JURY. LANDLORD AND TENANT HEREBY
-----------------------
DO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT
BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON ANY MATTER WHATSOEVER
ARISING OUT OF, OR IN ANY WAY CONNECTED WITH, THIS LEASE, THE RELATIONSHIP
OF LANDLORD AND TENANT, TENANT'S USE OF OR OCCUPANCY OF THE PREMISES, OR
ANY CLAIM OF INJURY OR DAMAGE IN ANY EMERGENCY STATUTORY OR ANY OTHER
STATUTORY REMEDY. IF LANDLORD COMMENCES ANY SUMMARY PROCEEDING FOR NON-
PAYMENT OF RENT, TENANT WILL NOT INTERPOSE ANY COUNTERCLAIM OF WHATEVER
NATURE OR DESCRIPTION IN ANY SUCH PROCEEDING.

(p) Tenant's Authority. Tenant hereby represents that Tenant
------------------
is a corporation, duly organized pursuant to the laws of the State of
Delaware, and is authorized to conduct business in the State of Illinois.
Upon the execution of this Lease, Tenant shall furnish Landlord with a
certified copy of resolutions, certified by Tenant's secretary as being a
true and correct copy of such resolution. The persons executing this Lease
on behalf of Tenant further represent and warrant that they are duly
authorized to do so, and that they occupy the positions with Tenant as
delineated on the signature page(s) of this Lease.

<PAGE>

27. Notices. All notices to be given under this Lease shall be in
-------
writing and delivered personally or deposited in the United States mail,
certified or registered mail with return receipt requested, postage
prepaid, addressed as follows:

If to Landlord:

c/o Amerimar Adams Management Company, Inc.
200 West Adams Street, Suite 1201
Chicago, Illinois 60606
Attention: General Manager

with a copy to:

Levenfeld, Eisenberg, Janger &
Glassberg
33 West Monroe, 21st Floor
Chicago, Illinois 60603
Attention: Abraham Trieger, Esq.

or to such other person or such other address designated by notice sent by
Landlord or Tenant.

If to Tenant:

At the address set forth at the
beginning of this Lease,

with a copy to:

Gary D. Cowen, Esq.
Bronson & Kahn
300 W. Washington St., Suite 1600
Chicago, Illinois 60606

And after occupancy of the Premises by Tenant, at the Premises, or to such
other address as is designated by Tenant in a notice to Landlord.

Notice by mail shall be deemed to have been given when deposited in the
United States mail as aforesaid. Notice from the building or property
manger shall be deemed to be notice from Landlord. If Tenant vacates the
Premises, then notices may be served on the Tenant's registered agent, or
if there be no agent, then notices may be by publication.

28. Hazardous Materials. (a) Tenant shall not transport, use, store,
-------------------
maintain, generate, manufacture, handle, dispose,

<PAGE>

release or discharge any "Hazardous Material" (as defined below) upon or
about the Property, nor permit Tenant's employees, agents, contractors, and
other occupants of the Premises to engage in such activities upon or about
the Property. However, the foregoing provisions shall not prohibit the
transportation to and from, and use, storage, maintenance and handling
within, the Premises of substances customarily used in offices (or such
other business or activity expressly permitted to be undertaken in the
Premises under Paragraph 5); provided that such substances shall be used
and maintained only in such quantities as are reasonably necessary for such
permitted use of the Premises, strictly in accordance with applicable law
and the manufacturers' instructions thereto, and any remaining such
substances shall be completely, properly and lawfully removed from the
Property upon expiration or earlier termination of this Lease.

(b) Tenant shall promptly notify Landlord of: (i) any enforcement,
cleanup or other regulatory action taken or threatened by any governmental
or regulatory authority with respect to the presence of any Hazardous
Material on the Premises or the migration thereof from or to other
property, (ii) any demands or claims made or threatened by any party
against Tenant or the Premises relating to any loss or injury resulting
from any Hazardous Material, (iii) any release, discharge or nonroutine,
improper or unlawful disposal or transportation of any Hazardous Material
on or from the Premises, and (iv) any matters where Tenant is required by
law to give a notice to any governmental regulatory authority respecting
any Hazardous Materials on the Premises. Landlord shall have the right (but
not the obligation) to join and participate, as a party, in any legal
proceedings or actions affecting the Premises initiated in connection with
any environmental, health or safety law. At such times as Landlord may
reasonably request, Tenant shall provide Landlord with a written list
identifying any Hazardous Material then used, stored, or maintained upon
the Premises, the use and approximate quantity of each such material, a
copy of any material safety data sheet ("MSDS") issued by the manufacturer
therefor, written information concerning the removal, transportation and
disposal of the same, and such other information as Landlord may reasonably
require or as may be required by law. The term "Hazardous Material" for
purposes hereof shall mean any chemical, substance, material or waste or
component thereof which is now or hereafter listed, defined or regulated as
a hazardous toxic chemical, substance, material or waste or component
thereof by any federal, state or local governing or regulatory body having
jurisdiction, or which would trigger any employee or community "right-to-
know" requirements adopted by any such body, for which any such body has

<PAGE>

adopted any requirements for the preparation or distribution of an MSDS.

(c) If any Hazardous Material is released, discharged or disposed of by
Tenant or any other occupant of the Premises, or their employees, agents or
contractors, on or about the Property in violation of the foregoing
provisions, Tenant shall immediately, properly and in compliance with
applicable laws clean up and remove the Hazardous Material from the
Property and any other affected property and clean or replace any affected
personal property (whether or not owned by Landlord), at Tenant's expense.
Such clean up and removal work shall be subject to Landlord's prior written
approval (except in emergencies), and shall include, without limitation,
any testing, investigation, and the preparation and implementation of any
remedial action plan required by any governmental body having jurisdiction
or reasonably required by Landlord. If Tenant shall fail to comply with the
provisions of this Paragraph within five (5) days after written notice by
Landlord, or such shorter time as may be required by law or in order to
minimize any hazard to persons or property, Landlord may (but shall not be
obligated to) arrange for such compliance directly or as Tenant's agent
through contractors or other parties selected by Landlord, at Tenant's
expense (without limiting Landlord's other remedies under this Lease or
applicable law).

(d) Landlord hereby represents to Tenant that, as of the date of this
Lease, to the best of its knowledge:

(i) no Hazardous Material has been installed, incorporated,
spilled, leaked, pumped, poured, emitted, emptied, discharged, injected,
dumped or disposed in, on, upon or into the Premises or the Building;

(ii) no underground storage tanks, either active or abandoned, are
beneath the Premises or the Building; and

(iii) no investigation, administrative order, settlement, consent
order or agreement, or litigation with respect to Hazardous Material is
proposed, threatened, anticipated or in existence with respect to the
Premises or the Building. No notice, demand, claim, citation, complaint,
summons, request for information or other communication has been received
by Landlord from any governmental body claiming any violation of any
Hazardous Material Laws or any administrative or court order.

Landlord will not, and will not knowingly permit any of its tenants to
use the Building, or any portion thereof, for the

<PAGE>

manufacturing, treatment, storage or disposal of Hazardous Material.

Landlord shall at all times and at its own expense (and not as an
Operating Expense) comply with all federal, state and local environmental
protection laws, rules, regulations, or ordinances, including, without
limitation, Hazardous Material laws and administrative and court orders
relating to Hazardous Material in effect as of the date of this Lease.
In the event that the Premises or the Building or any part thereof is
determined to be in violation of any Hazardous Material laws after the
Commencement Date, and such determination addresses a condition or the
presence (or absence) of a substance or substances, which at the
Commencement Date was not a violation of Hazardous Material laws, Landlord
shall undertake to comply with such Hazardous Material laws and
administrative and court orders relating to Hazardous Material. The cost
of said compliance shall be deemed an Operating Expense, subject to the
other provisions of this Lease relating to same.

29. ADA. The parties acknowledge that the Americans With Disabilities
---
Act of 1990 (42 U.S.C. Sec.12101 et seq.) and regulations and guidelines
promulgated thereunder, as amended and supplemented from time to time
(collectively referred to herein as the "ADA") establish requirements under
Title III of the ADA ("Title III") pertaining to business operations,
accessibility and barrier removal, and that such requirements may be
unclear and may or may not apply to the Premises and the Building. The
parties acknowledge and agree that Tenant has been provided an opportunity
to inspect the Premises sufficient to determine whether or not the Premises
in their condition as of the date hereof deviate in any manner from the ADA
Accessibility Guidelines ("ADAAG") or any other requirements under the ADA
pertaining to the accessibility of the Premises or the Building. Tenant
further acknowledges and agrees that except as may otherwise be
specifically provided herein, Tenant accepts the Premises and the Building
in "as-is" condition and agrees that Landlord makes no representation or
warranty as to whether the Premises or the Building conform to the
requirements of the ADAAG or any other requirements under the ADA
pertaining to the accessibility of the Premises or the Building. Tenant has
prepared or reviewed the plans and specifications for the Work and has
independently determined that such plans and specifications are in
conformance with the ADAAG and any other requirements of the ADA. Tenant
further acknowledges and agrees that to the extent that Landlord prepared,
reviewed or approved any of those plans and specifications, such action
shall in no event be deemed any representation or warranty that the same

<PAGE>

comply with any requirements of the ADA. Notwithstanding anything to the
contrary in this Lease, the parties hereby agree to allocate responsibility
for Title III compliance as follows: (a) Tenant shall be responsible for
all Title III compliance and costs in connection with the Premises,
including structural work, if any, and including any leasehold improvements
or other work to be performed in the Premises under or in connection with
this Lease, and (b) Landlord shall perform, and Tenant shall be responsible
for the cost of, any so-called Title III "path of travel" requirements
triggered by any construction activities or alterations in the Premises.
Except as set forth above with respect to Landlord's Title III obligations,
Tenant shall be solely responsible for all other requirements under the ADA
relating to the Tenant or any affiliates or persons or entities related to
the Tenant (collectively, "Affiliates"), operations of the Tenant or
Affiliates, or the Premises, including, without limitation, requirements
under Title I of the ADA pertaining to Tenant's employees.

30. Early Termination. Provided no Default exists hereunder and no
-----------------
event or circumstance exists which, but for the giving of notice or passage
of time or both would constitute a default, Tenant shall have the right to
terminate this Lease, such termination to be effective, at the election of
Tenant, either as of March 31, 1999 or March 31, 2000 (as elected by
Tenant, the "Effective Date"), upon compliance with all of the following
conditions and provisions:

(a) Not later than October 1, 1998 (with respect to an Effective Date
of March 31, 1999) or October 1, 1999 (with respect to an Effective Date of
March 31, 2000) Tenant shall, by written notice to Landlord (the
"Termination Notice"), advise Landlord of Tenant's desire to terminate this
Lease and the intended Effective Date; and

(b) The Termination Notice shall be accompanied by a non-refundable
termination fee (the "Termination Fee") payable by Tenant to Landlord in an
amount equal to (i) $150,100.00, if the Effective Date is to be March 31,
1999 or (ii) $85,800.00 if the Effective Date is to be March 31, 2000. The
Termination Notice shall not be effective or binding on Landlord unless (x)
delivered in accordance with this Section 30 (the parties hereby
acknowledging that time is of the essence) and (y) Tenant complies with all
of the terms, conditions and provisions of this Lease through and including
the Effective Date. Once given, the Termination Notice may not be rescinded
by Tenant and the Termination Fee shall not for any reason be refundable to
Tenant.

<PAGE>

31. Right of First Offer. Landlord grants to Tenant the option to
--------------------
lease, during the First Offer Period (as hereinafter defined) upon the
terms and conditions hereinafter set forth, approximately 3,750 square feet
of rentable area adjacent to the Premises and depicted on Exhibit A
attached hereto (the "First Offer Space"). Prior to Landlord's leasing any
portion of the First Offer Space, Landlord shall give Tenant a written
notice (the "Offer Notice") setting forth the terms upon which Landlord is
willing to lease to Tenant such portion of the First Offer Space.

Tenant's right to lease such portion of the First Offer Space on the
terms described in the Offer Notice shall be exercisable by written notice
(the "Acceptance Notice") from Tenant to Landlord given not later than
seven (7) days after the Offer Notice is delivered, time being of the
essence. If such right is not so exercised, Tenant's right of first offer
shall thereupon terminate as to such portion of the First Offer Space
described in the Offer Notice. Tenant may not elect to lease less than the
entire area of the First Offer Space described in the Offer Notice.

Tenant may only exercise its right to lease First Offer Space, and an
exercise thereof shall only be effective, if this Lease is in full force
and effect and no Default exists hereunder. No sublessee or assignee shall
be entitled to exercise any right hereunder and no exercise of any right
hereunder by the original Tenant named herein shall be effective in the
event said Tenant assigns this Lease or subleases all or part of the
Premises.

If Tenant has validly exercised its right to lease First Offer Space,
then such portion of the First Offer Space shall be included in the
Premises, subject to all of the terms, conditions and provisions of this
Lease, except that Tenant's Proportionate Share of Taxes and Tenant's
Proportionate Share of Operating Expenses owed on account of such First
Offer Space for the calendar year in which the First Offer Commencement
Date occurs shall be prorated based on that portion of the calendar year
which falls on and after the First Offer Space Commencement Date.

32. Option to Renew. Tenant shall have the right, to be exercised as
---------------
provided below, to extend the term of this Lease for one (1) additional
period of five (5) years, upon satisfaction of the following terms and
conditions:

(a) At the time of the exercise of such right and at the time the
extension term begins, no Default shall exist hereunder and no event or
circumstance shall exist which, but for the giving

<PAGE>

of notice or passage of time or both would constitute a Default hereunder;

(b) This Lease shall not have been terminated during the initial term
and shall be in full force and effect at the date of such exercise of the
right to renew and at the date the renewal term begins;

(c) Such extension shall not be effective as to any portions of the
Premises that are subleased at any time between the date of exercise of
such right and the date the extension term begins,except portions of the
Premises sub-leases pursuant to Section 15(g) hereof; and

(d) Such extension shall be upon the same terms, covenants, and
conditions contained in this Lease except that the Base Rent for the
extension term shall be equal to the then-current fair market base rental
for the Premises, as determined by Landlord in its business judgment, which
Landlord could obtain in an arm's-length transaction with a willing and
informed tenant for a term equal to the extension period.

Tenant shall exercise its rights of extension granted hereby only in the
following manner: at any time after the commencement of this Lease, but no
later than six (6) months prior to the end of the term, Tenant shall notify
Landlord in writing of its election to exercise the right to extend the
term of this Lease pursuant to the rights granted by this Section 32. This
notice of election shall be given in the manner in this Lease provided for
the giving of notices to Landlord.

33. Storage Space. Tenant shall have the right, subject to availability
-------------
as of the date of its request, to lease up to 500 square feet of storage
space in the Building. Annual rent for such storage space will be $1O.00
per square foot or such higher rate as Landlord may be charging to other
tenants in the Building as of the date Tenant request such storage space.

[THE NEXT PAGE IS THE SIGNATURE PAGE]

<PAGE>

IN WITNESS WHEREOF, Landlord and Tenant, intending to be legally bound
hereby, have executed this Agreement of Office Lease as of the day and year
first above written.

TENANT: LANDLORD:

ADVANCED HEALTH CORPORATION, a ADAMS FAMILY, L.L.C., a Delaware
Delaware corporation limited liability company, as
beneficiary of Cole Taylor Bank,
By: /s/ Jeffrey M. Sauerhoff not personally but solely as
---------------------- Trustee under Trust Agreement
NAME: Jeffrey M. Sauerhoff dated June 26, 1995 and known as
Title: Controller Trust No. 95-6300

By: Amerimar Adams Management Company,
Inc., as Agent

By: /s/ Keith Barker
----------------
Name: Keith Barker
Title: President

EXHIBIT 11.1

ADVANCED HEALTH CORPORATION AND SUBSIDIARIES
(FORMERLY MED-E-SYSTEMS CORPORATION)
SUPPLEMENTAL NET LOSS
PER COMMON SHARE COMPUTATION

<TABLE><CAPTION>
FOR THE THREE
MONTH PERIOD
ENDED MARCH 31, 1996
--------------------
<S> <C>
(UNAUDITED)
CALCULATION OF SUPPLEMENTAL SHARES OUTSTANDING:
Debt to be repaid by offering proceeds................................... $ 1,500,000
Proceeds per share....................................................... 13.00
--------------------
Additional shares assumed outstanding.................................... 115,385
--------------------
Additional weighted average common shares outstanding.................... 41,843
Weighted average common shares outstanding............................... 4,482,333
--------------------
Supplemental weighted average common shares outstanding.................. 4,524,176
--------------------
--------------------

SUPPLEMENTAL NET LOSS PER SHARE:
Net loss................................................................. $ (1,201,296)
Pro forma impact of use of proceeds on interest expense.................. 10,000
--------------------
Supplemental net income loss............................................. (1,191,296)
Supplemental weighted average common shares outstanding.................. 4,524,176
--------------------
Supplemental net income loss per common share............................ $ (.26)
--------------------
--------------------
</TABLE>

Exhibit 21

SUBSIDIARIES
- ------------

Advance Health Management Corporation, a Delaware corporation

Advance Health Heart Practices, Inc., a Delaware corporation

Advance Health Med-E-Systems Corporation, a Delaware corporation

Uptown Physician Management, Inc., a Delaware corporation

Physicians Capital Corporation, a Delaware corporation

Diamond Physician Management, Inc., a Delaware corporation

Cardiology First Management, Inc., a Delaware corporation

PCC Leasing, Inc., a Delaware corporation

Exhibit 23.2

After the conversion and reverse stock split transactions discussed in Note 14
to the consolidated financial statements of Advanced Health Corporation and
subsidiaries are effected, we expect to be in a position to render the following
consent.

ARTHUR ANDERSEN LLP

June 19, 1996

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
dated June 19, 1996 (except for the matters described in Note 14, as to which
the date is ), June 4, 1996 and June 5, 1996 and to all references to
our Firm included in or made a part of this registration statement.

New York, New York
, 1996

<ARTICLE> 5

<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1994 DEC-31-1995 DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1993 DEC-31-1994 DEC-31-1995 MAR-31-1996 MAR-31-1995
<CASH> 0 7 1,464 139 0
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 0 0 1,146 2,463 0
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 0 0 0 0 0
<CURRENT-ASSETS> 0 14 2,888 2,947 0
<PP&E> 0 921 2,084 2,290 0
<DEPRECIATION> 0 148 545 734 0
<TOTAL-ASSETS> 0 913 6,462 6,509 0
<CURRENT-LIABILITIES> 0 1,046 3,630 4,910 0
<BONDS> 0 192 157 125 0
0 0 0 0 0
0 0 0 0 0
<COMMON> 0 21 45 45 0
<OTHER-SE> 0 (345) (2,630) 1,428 0
<TOTAL-LIABILITY-AND-EQUITY> 0 913 6,462 6,509 0
<SALES> 0 379 1,054 3,692 0
<TOTAL-REVENUES> 0 379 1,054 3,692 0
<CGS> 0 12 340 1,931 0
<TOTAL-COSTS> 0 12 340 1,931 0
<OTHER-EXPENSES> 521 2,901 6,413 2,943 1,041
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 0 15 8 19 0
<INCOME-PRETAX> (521) (2,549) (5,707) (1,201) (1,039)
<INCOME-TAX> 0 0 0 0 0
<INCOME-CONTINUING> (521) (2,549) (5,707) (1,201) (1,039)
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> (521) (2,549) (5,707) (1,201) (1,039)
<EPS-PRIMARY> (0.30) (1.29) (1.68) (0.27) (0.45)
<EPS-DILUTED> (0.30) (1.29) (1.68) (0.27) (0.45)

</TABLE>