EBENX INC, S-1/A, 1999-12-09

EBENX INC
S-1/A, 1999-12-09
BUSINESS SERVICES, NEC

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<PAGE>

As filed with the Securities and Exchange Commission on December 9, 1999
Registration No. 333-87985

AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
under
The Securities Act of 1933
--------------------
eBenX, Inc.
(Exact name of registrant as specified in its charter)

Minnesota 7389 41-1758843
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification Code Number)
organization) Number)
--------------------
5500 Wayzata Boulevard, Suite 1450
Minneapolis, Minnesota 55416-1241
(612) 525-2700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

Scott P. Halstead
eBenX, Inc.
5500 Wayzata Boulevard, Suite 1450
Minneapolis, Minnesota 55416-1241
(612) 525-2700
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
--------------------

Copies to:

KENNETH L. CUTLER LELAND E. HUTCHINSON
SCOTT L. BARRINGTON GREGORY J. BYNAN
SCOTT A. NICHOLAS Winston & Strawn
Dorsey & Whitney LLP 35 West Wacker Drive
220 South Sixth Street Chicago, Illinois 60601
Minneapolis, Minnesota 55402-1498 (312) 558-5600
(612) 340-2600
--------------------

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earliest effective registration statement
for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earliest 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: [_]
--------------------

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.

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

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED DECEMBER 9, 1999

[eBenX LOGO]

5,000,000 Shares

Common Stock

This is our initial public offering and no public market currently exists for
our common stock. We expect that our common stock will trade on the Nasdaq
National Market under the symbol "EBNX." We anticipate that the initial public
offering price will be between $10.50 and $12.50 per share.

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

Investing in our common stock involves risks.
See "Risk Factors" beginning on page 4.

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

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price.......................................... $ $
Underwriting Discounts......................................... $ $
Proceeds to eBenX.............................................. $ $
</TABLE>

The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.

We have granted the underwriters a 30-day option to purchase up to an
additional 750,000 shares of our common stock to cover overallotments.
BancBoston Robertson Stephens Inc. expects to deliver the shares of our common
stock to purchasers on , 1999.

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

Robertson Stephens

Warburg Dillon Read LLC

Thomas Weisel Partners LLC

The date of this prospectus is , 1999.
<PAGE>

We are offering to sell, and seeking offers to buy, shares of our common
stock only in jurisdictions where offers and sales are permitted. You should
rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. Information on the eBenX and Network Management Services,
Inc. Web sites are not part of this prospectus.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 4
Forward-Looking Statements .............................................. 13
Use of Proceeds.......................................................... 13
Dividend Policy.......................................................... 13
Capitalization........................................................... 14
Dilution................................................................. 15
Selected Financial Data.................................................. 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 17
Business................................................................. 24
Management............................................................... 38
Certain Transactions..................................................... 46
Principal Shareholders................................................... 47
Description of Capital Stock............................................. 49
Shares Eligible for Future Sale.......................................... 50
Underwriting............................................................. 52
Legal Matters............................................................ 54
Experts.................................................................. 54
Additional Information................................................... 54
Index to Consolidated Financial Statements............................... F-1
</TABLE>

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

BEN-NET(R) is a registered trademark and WebElect(R) is a registered service
mark of eBenX. eBenX(TM), BenX(TM) and Benefit Exchange Network(TM) are also
our trademarks.
<PAGE>

This graphic depicts eBenx, Inc.'s relationship to various other
organizations. The top left corner of the graphic contains the following title:
"The eBenX group health insurance e-commerce exchange." The bottom left corner
of the graphic contains a list with the heading "BUYER CUSTOMERS." This list
contains the following names: American Medical Response, American Red Cross,
Bass Hotels & Resorts, Bell Atlantic, Chevron, Dayton Hudson, Georgia-Pacific,
GE Capital Services, KPMG, Northwest Airlines, PepsiCo, Promus Hotels, Reader's
Digest, R.R. Donnelley, W.W. Grainger, and White Consolidated. The top right
corner of the graphic contains a list with the heading "HEALTH PLAN
CONNECTIONS." This list contains the following names: Aetna, Inc. Plans, Blue
Cross Blue Shield Plans, CIGNA Health Plans, Inc., Delta Dental, Harvard Pilgrim
Health Care, Kaiser Foundation Health Plan, Merck-Medco, PacifiCare Health
Systems and UnitedHealth Group Corporation Plans. The bottom right corner of the
graphic contains the word "eBenX" in large bold font. The first "e" in the word
"eBenX" is italicized. The large "X" in "eBenX" is comprised of two slashes. The
slash that rises from left to right is in unbolded font. The slash that lowers
from left to right is thick and contains six thin white spaces running through
it, parallel with the text of the word "eBenX." Additionally, the slash that
lowers from left to right ends slightly below the bottom of the rest of the word
"eBenX." Below the word "eBenX" and beginning immediately after the "B" in
"eBenX" in smaller font is the italicized phrase "The Benefit Exchange Network."

There are a number of icons in this graphic. Next to the list of "Buyer
Customers," there is one building labeled "Employer"; underneath the title "The
eBenX group health insurance e-commerce exchange" there are a row of four
servers labeled "Procurement," "Enrollment and Eligibility Maintenance,"
"Customer Service," and "Financial Engine"; and between the building labeled
"Employer" and the set of servers there is a server labeled "Human Resource
Systems." To the left of the list of "Health Plan Connections" there is a row of
four buildings labeled "Health Plans"; to the left of the large word "eBenX,"
there is a block figure that casts a shadow labeled "Employee"; and between the
block figure and the row of buildings labeled "Health Plans," there is a
computer terminal labeled in bold "eBenX.com." Between the building labeled
"Employer" and the block figure, there is a set of three block figures labeled
"Broker." Between the computer terminal and the row of four buildings located at
the top left corner of the graphic there is a server labeled "Data and Rules."

The computer terminal is connected to the following icons with slightly
curved yellow arrows that point both ways: the block figure labeled "Employee,"
the set of block figures labeled "Broker," the building labeled "Employer," and
one arrow for each of the buildings in the row of four buildings entitled
"Health Plans." There are four straight blue arrows connecting the server
labeled "Data and Rules" with each of the four servers located at the top left
corner. Finally, there is a line simulating a computer cable connecting the
computer terminal with the server labeled "Data and Rules."

<PAGE>

SUMMARY

Because this is only a summary, it does not contain all the information that
may be important to you. You should read the entire prospectus, especially
"Risk Factors" and the consolidated financial statements and notes, before
deciding to invest in shares of our common stock.

eBenX, Inc.

We provide business-to-business e-commerce and connectivity solutions to
employers and health plans for the purchase, eligibility administration and
premium payment of group health insurance benefits. Through our proprietary and
licensed technology, we facilitate the flow of employee and dependent
eligibility and financial data between employer purchasers of group health
insurance benefits and health plan suppliers. The plan information, data and
financial exchange requirements in this $600 billion market are extremely
complex. Our proven Web-enabled services and high volume eligibility and
financial data transmission systems, or pipelines, provide the critical
connectivity necessary for employers and health plans to communicate
electronically. Today, we connect customers such as Bell Atlantic Corporation,
PepsiCo, Inc., Northwest Airlines Corporation, GE Capital Services Corporation,
Promus Hotels Corporation and R.R. Donnelley & Sons Company to their wide array
of health plan trading partners. In 1998, Bell Atlantic, Northwest Airlines and
PepsiCo accounted for approximately 50% of our revenue.

The widespread acceptance of the Internet as a business communications
platform has created a foundation for business-to-business e-commerce that
enables employers and health plans to streamline complex processes, lower costs
and improve productivity. The purchasing, eligibility administration and
premium payment process is encumbered by inefficient procedures for gathering
and transferring data and executing payment transactions. These inefficiencies,
along with other factors unique to the group health insurance benefits market,
create an environment which is conducive to e-commerce solutions. However,
unlike other e-commerce products and services, such as buying books or
individual insurance, the complexities of the group health insurance benefits
market require an extensive understanding of the purchasing and administration
of, and payment for, group health insurance benefits and advanced technology.
Currently, employers and health plans face the following challenges:

. fragmented marketplace: multi-site, multi-state employers must purchase
health insurance from multiple, locally-based health plans;

. increasing costs: employers face pressure to purchase benefits more
effectively due to the escalating costs of providing group health
insurance benefits to employees and retirees;

. complex data: employers and health plans must exchange complex, detailed
and dynamic data in multiple formats using various system platforms;

. complex pricing and payment reconciliation: employers and health plans
must establish price on a case-by-case basis and continually reconcile
complex billing and settlement transactions; and

. government regulation: federal, state and local laws and regulations
burden the process of purchasing group health insurance benefits through
additional reporting and coverage requirements.

We are pioneering the use of the Internet to automate the purchase,
eligibility administration and premium payment process for the group health
insurance benefits market. By using our proprietary and licensed technology we
enable employers to streamline the administrative process and make purchasing
decisions in a more competitively priced market. Based on our six years of
industry experience with Fortune 1000 companies, we have developed a technology
platform that automates the data exchange, payment and reconciliation process
in this market. In 1999, we extended this technology platform to enable
enrollment data collection and plan information distribution, thus creating an
integrated end-to-end e-commerce solution consisting of front-end and back-end
processing components for the group health insurance benefits market.

1
<PAGE>

Our technology platform enables us to introduce what we believe is the first
fully integrated end-to-end e-commerce solution for the procurement of group
health insurance benefits. We believe that with this technology platform and
our industry expertise we can fundamentally change the way group health
insurance benefits are purchased. Using this e-commerce solution, our near-term
strategy is to increase our penetration of, and service offerings to, the
Fortune 1000 market, to leverage our technology through relationships with
insurance brokers to penetrate the mid-size employer market and to establish
additional strategic relationships.

The Offering

<TABLE>
<C> <S>
Common stock offered................................ 5,000,000 shares
Common stock to be outstanding after this offering.. 15,054,068 shares
Use of proceeds..................................... We intend to use the net
proceeds of this offering
for general corporate
purposes, including
working capital, sales
and marketing
expenditures, development
of new products and
services, investment in
technology infrastructure
and possible
acquisitions. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.............. EBNX
</TABLE>

Common stock to be outstanding after this offering does not include:

. 3,346,353 shares issuable upon exercise of outstanding stock options
under existing stock option plans;

. 66,135 shares issuable upon exercise of outstanding warrants; and

. 3,964,422 shares available for future grant or issuance under our stock
option plans.

See "Management--Employee Benefit Plans," "Description of Capital Stock" and
Note 4 of "Notes to Consolidated Financial Statements" beginning on page F-9.

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

Our headquarters are located at 5500 Wayzata Boulevard, Suite 1450,
Minneapolis, Minnesota 55416-1241 and our telephone number is (612) 525-2700.
Our Web site addresses are www.ebenx.com and www.networkmanagementinc.com. In
September 1999, we changed our name from Network Management Services, Inc. to
eBenX, Inc.

Unless otherwise indicated, all information contained in this prospectus
assumes that the underwriters' overallotment option is not exercised, reflects
the conversion of all outstanding preferred stock into common stock immediately
prior to the commencement of this offering and a three-for-one split of our
common stock effective immediately prior to this offering.

2
<PAGE>

Summary Financial Data
(in thousands, except per share data)

<TABLE>
<CAPTION>
Nine Months
Ended September
Year Ended December 31, 30,
-------------------------------------- ----------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenue............. $ 904 $2,497 $4,360 $7,093 $10,122 $ 6,669 $11,746
(Loss) income from
operations............ (177) 31 (779) (713) (1,186) (1,125) (3,022)
Net (loss) income....... (166) 62 (581) (500) (1,042) (1,024) (2,702)
Basic and diluted net
(loss) income per
share................. $ (.05) $ .02 $ (.18) $ (.15) $ (.30) $ (.30) $ (.77)
Shares used in basic and
diluted net income
(loss) per share...... 3,234 3,298 3,313 3,376 3,463 3,457 3,517
Pro forma basic and
diluted net loss per
share................. (.16) (.33)
Shares used in pro forma
net loss
per share............. 6,485 8,103
</TABLE>

<TABLE>
<CAPTION>
September 30, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
---------- --------- -----------
(unaudited)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................... $7,290 $7,290 $60,015
Working capital.............................. 9,162 9,162 61,887
Total assets................................. 13,417 13,417 66,142
Long-term obligations, net of current
portion.................................... -- -- --
Total shareholders' equity (deficit)......... (4,694) 11,256 63,981
</TABLE>

The "Pro Forma As Adjusted" column in the Balance Sheet Data table gives
effect to the receipt and application of the estimated net proceeds from our
sale of the 5,000,000 shares of common stock offered by this prospectus at an
assumed initial public offering price of $11.50 per share, after deducting the
estimated underwriting discount and offering expenses that we will pay. See
"Use of Proceeds" and "Capitalization" for a further description of the
estimated proceeds of this offering.

See Note 1 of "Notes to Financial Statements," beginning on page F-7, for an
explanation of the methods used to compute basic and diluted net (loss) income
per share data and pro forma basic and diluted net loss per share data.

3
<PAGE>

RISK FACTORS

This offering involves a high degree of risk. You should carefully consider
the risks and uncertainties described below and the other information in this
prospectus before deciding whether to purchase shares of our common stock. If
any of the following risks actually occur, our business and operating results
could be harmed. This could cause the trading price of our common stock to
decline, and you may lose all or part of your investment.

Risks Related to Our Business

We have had net losses over the past several years and we may not be able to
achieve or maintain profitability in the future.

Our business strategy may be unsuccessful and we may never achieve or
maintain significant revenues or profitability. With the exception of fiscal
1995, we have incurred net losses each year since we began operations in 1993.
We had net losses of approximately $1.0 million for the year ended December 31,
1998 and $2.7 million for the nine month period ended September 30, 1999, and
an accumulated deficit of $4.9 million as of September 30, 1999. We expect to
continue to incur significant development, sales and marketing and other
operational expenses in connection with our business. We may also incur
expenses in connection with acquisitions or other strategic relationships. As a
result of these expenses, we will need to generate significant quarterly
revenue increases to achieve and maintain profitability. We expect that we will
incur net losses for the next several years.

We rely significantly on a limited number of customers and the loss of any
material customer could harm our business and operating results.

The loss of a material customer would significantly reduce our revenue and
harm our business and operating results. In 1998, three customers accounted for
approximately 50% of our total revenue. In 1999 to date, twelve customers have
accounted for approximately 90% of our total revenue. Further, because
increased employee participation from existing customers has contributed to our
revenue growth, the loss of any material customer would harm our prospects for
future growth. We may continue to depend upon a small number of customers for a
substantial percentage of our revenue in the future.

The failure of the industry to accept our products and services could limit our
revenue growth.

The failure of industry participants to accept our products and services as a
replacement for traditional methods of operation could limit our revenue
growth. Our success depends on our ability to provide products and services to
a large number of employers with a substantial base of participating employees
and to efficiently and accurately collect and process eligibility data and
execute payment transactions with numerous health plans. The acceptance by
employers of our products and services will require that all participants in
the group health insurance benefits market adopt new methods of administering
benefits, exchanging eligibility information and executing payment
transactions.

Further, our products and services facilitate competition among health plans
at the employer level by creating an infrastructure that allows multiple health
plans to service a single employer. Health plans have in the past resisted
servicing smaller companies on a non-exclusive basis. This resistance may
inhibit our growth, especially in the mid-size employer market.

We face intense competition in our industry and, if we are unable to compete
successfully, our business and operating results will be seriously harmed.

Increased competition in our industry could result in price reductions,
reduced gross margins or loss of market share which could seriously harm our
business and operating results. The group health insurance benefits industry is
intensely competitive, rapidly evolving and subject to sudden technological
change. We

4
<PAGE>

believe that the principal competitive factors in this market are health
and managed care expertise, data integration and transfer technology, benefits
processing technology, customer service and support and product and service
fees. We expect competition to increase in the future.

We compete with administrative service providers and benefits consultants
with administrative capabilities. We also compete with the human resource and
information systems departments of the Fortune 1000 companies that perform
their own health care administration services. In the mid-size employer market
we compete with health benefit brokers and regional brokers. In addition, many
human resource systems and service companies have the health care expertise and
financial strength to develop the technology necessary to compete with us. As
the market evolves we expect increased competition from Internet-based service
providers in both the health care connectivity market between suppliers and
providers (e.g., physicians, hospitals and pharmacies) and the online insurance
market.

Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, significantly greater name recognition and a larger installed base
of customers than we do. In addition, many of our competitors have well-
established relationships with our current and potential customers and have
extensive knowledge of our industry. Current and potential competitors have
established or may establish strategic relationships among themselves or with
third parties to increase the ability of their products and services to address
employer needs. Accordingly, it is possible that new competitors or alliances
among competitors may emerge and rapidly acquire significant market share.

Failure to manage our growth effectively could harm our business and operating
results.

Failure to manage our growth effectively could harm our business and
operating results. Continued rapid growth will place significant strain upon
our management and operational systems and resources. We will need to expand
our existing information systems or acquire new systems to meet the
requirements of our future operations. Any expansion or replacement of our
information systems may not be sufficient to meet our needs. In addition, we
may experience interruptions of service as we expand these systems.

We recently have hired a significant number of new employees, including key
executives. We will continue to add personnel to maintain our ability to grow
in the future. We must integrate our new employees and key executives into a
cohesive team and at the same time increase the total number of employees and
train and manage our employee work force in a timely and effective manner to
expand our business. We may not be able to do so successfully, which would
inhibit our ability to expand our business and harm our operating results.

Unsuccessful efforts or incurrence of unanticipated expenses in selling our
products and services could harm our business and operating results.

The time, expense and effort of securing customers may exceed our
expectations and may harm our business and operating results. The decision to
implement our products and services requires a substantial and technical
analysis of a customer's healthcare benefits offerings and requirements and
time-intensive education of the customer of the advantages of our products and
services. Due to the length of our sales cycle, which generally ranges from
three to twelve months, we often devote significant resources and incur costs
without any assurance that a prospective customer will purchase our products or
services. In the event that a prospective customer does not purchase our
products or services, we may have incurred substantial costs that cannot be
recovered and which will not result in future revenues.

Our failure to establish and maintain successful relationships with strategic
partners could limit our revenue growth.

We believe that our future revenue growth depends in part upon the successful
creation and maintenance of relationships with strategic partners such as
front-end healthcare information collection companies, human resources
information services firms, healthcare benefits consultants and brokers and
other industry participants. To date, we have established only a limited number
of strategic relationships. Strategic partners may offer

5
<PAGE>

products or services of several different companies, including products and
services that compete with our products or services. Strategic partners and
potential strategic partners may be influenced by our competitors to scale back
or end their relationships with us. We may not establish additional strategic
relationships and these relationships may not be ultimately successful. Our
strategic partners may not devote adequate resources to selling our products
and services.

If we are unable to establish and maintain successful strategic
relationships, we may have to devote substantially more resources to the sales
and marketing of our products and services, which will increase our costs and
harm our operating results.

Our quarterly results likely will fluctuate which could cause the value of our
common stock to rapidly decline.

Any quarterly fluctuations in our operating results could subject the market
price of our common stock to rapid and unpredictable change. Historically, we
obtain 75% of each year's new customer commitments during the months of
February through May because most employers have open enrollment periods for
the selection of health plans by their employees in the fall. We expect this
seasonality in our business to continue. Our expenses are relatively fixed in
the short term and are based in part on our expectations of future revenues,
which may vary significantly. If we do not achieve expected revenue targets, we
may be unable to adjust our spending quickly enough to offset any revenue
shortfall which could harm our business and operating results.

Factors, including those discussed elsewhere in these risk factors, that may
cause these quarterly fluctuations include:

. the number and size of new customers starting services;

. the decision of one or more customers to delay implementation or cancel
ongoing services;

. our ability to design, develop and introduce new services and features
for existing services on a timely basis;

. costs associated with strategic acquisitions and alliances or
investments in technology;

. expenses incurred for geographic and service expansion;

. a reduction in the number of employees of our customers; and

. acquisitions of our customers by other companies.

Further, our agreements with customers generally do not have penalties for
cancellation. As a result, any decision by a customer to cancel our services
may cause significant variations in operating results in a particular quarter
and could result in losses for that quarter. As we secure larger customers, any
cancellation of services by a larger customer likely would result in larger
fluctuations in operating results than historically experienced.

Failure to retain our key executives or attract and retain qualified technical
personnel could harm our business and operating results.

The loss of one or more of our executive officers could inhibit the
development of our business and, accordingly, harm our business and operating
results. While we generally enter into employment agreements with our key
executive officers, we may not be able to retain them.

Qualified personnel are in great demand throughout the Internet and
healthcare industries. Our future growth and our ability to achieve our
financial and operational objectives will depend in large part upon our ability
to attract and retain highly skilled technical, engineering, sales and
marketing and customer support personnel. Our failure to attract and retain
personnel may limit the rate at which we can expand our business, including the
development of new products and services and the retention of additional
customers, which could harm our business and operating results.

6
<PAGE>

We could be subject to potential liability claims related to our products and
services which could harm our financial condition and results of operations.

Any liability claim brought against us, even if not successful, would likely
be time consuming and costly and could seriously harm our business and
operating results. Errors in the performance of our products or services on
behalf of an employer could result in the delay of processing of healthcare
eligibility information or execution of payment transactions or could otherwise
result in financial or other damages to our customers. These errors also may
result in the improper denial of healthcare benefits to employees. A liability
claim brought against us by an employer or an employee could seriously harm our
business and reputation.

Our customer agreements generally require that we indemnify our customers for
various losses and liabilities incurred by them that are caused by us. Any
indemnification payments required under these agreements may harm our business
and operating results.

We also may become party to litigation brought by a participating employee
against an employer or health plan. We may not successfully avoid liability for
problems related to the provision of healthcare benefits even though we do not
make medical determinations or coverage decisions. Any claims or litigation
also could require expenditures in terms of management time and other resources
to defend ourselves. This could require us to implement measures to reduce our
exposure to this liability, which may require us, among other things, to expend
substantial resources or to discontinue product or service offerings or to take
other precautions. Liability of this type could harm our business and operating
results.

Failure to raise additional capital to fund our future operations and satisfy
working capital needs could harm our business and operating results.

We do not currently generate sufficient cash to fully fund operations. To
date, we have financed our operations principally through the issuance of
equity securities and, to a limited extent, through borrowings. We may need to
raise additional capital in the future to fund our ongoing operations and to
support expansion of our business. We may not be able to obtain additional
financing when needed or on terms favorable to us. Any difficulty in obtaining
additional financing may require us to limit our operations or may inhibit our
future growth.

The failure to successfully integrate any future acquisitions could harm our
business and operating results.

If we acquire businesses in the future and are unable to successfully
integrate these businesses into our own, it could harm our business and
operating results. In order to remain competitive or to expand our business, we
may find it necessary or desirable to acquire other businesses, products or
technologies. If we identify an appropriate acquisition candidate, we may not
be able to negotiate the terms of the acquisition successfully, to finance the
acquisition or to integrate the acquired businesses, products or technologies
into our existing business and operations. Further, completing a potential
acquisition and integrating an acquired business may strain our resources and
require significant management time. In addition, we may be required to
amortize significant amounts of goodwill and other intangible assets in
connection with future acquisitions which would harm our operating results.

Consolidation in the healthcare industry could harm our future operating
results and opportunities for growth.

Our products and services are, in large part, beneficial to employers because
we are able to coordinate the exchange of eligibility and financial data and
execute payment transactions between an employer and its numerous health plans.
Consolidation in the healthcare industry may require us to reconfigure our
products, services and systems to accommodate a change in data formats and
codes utilized by recently acquired or consolidated health plans. Further, the
consolidation of health plans operating in the same geographic market may
substantially reduce the number of competitive health plans in that market.
Existing and potential customers, especially mid-size market employers that
operate in only one geographic market, may not find our products and services
beneficial if there is only limited competition among health plans.

7
<PAGE>

Our revenues could decrease if the integrity of our systems is inadequate.

Any failure of our systems could harm our business and operating results. Our
systems process vast amounts of eligibility and financial data and execute
large numbers of payment transactions. Any delay or failure in our systems or
in our ability to communicate electronically with employers and health plans or
in our ability to collect, store, analyze or process accurate eligibility and
financial data may result in the denial of healthcare benefits, or in the delay
or failure to execute payment transactions accurately. This type of denial or
failure would harm our business and operating results.

The occurrence of a catastrophic event or other system failure at our
facilities could interrupt our operations or result in the loss or corruption
of stored data. In addition, we depend on the efficient operation of Internet
and network connections among our systems, employers and health plans. These
connections depend on the efficient operation of data exchange tools, Web
browsers, Internet service providers and Internet and network backbone service
providers. In the past, Internet users have occasionally experienced
difficulties with Internet and online services due to system failures. Any
disruption in Internet or network access provided by third parties could harm
our business and operating results. Further, we are dependent on hardware
suppliers for prompt delivery, installation and service of equipment used to
deliver our services. The failure of these suppliers to promptly deliver,
install or service equipment could harm our business and operating results.

Our costs could increase or our revenues could decrease if we or our business
partners experience Year 2000 compliance problems or related system failures.

Year 2000 compliance problems could harm our business and operating results.
We may experience Year 2000 compliance problems requiring substantial revisions
to our systems. In addition, third party software, hardware or other technology
incorporated into our information systems or upon which our business depends
may need to be revised or replaced as a result of Year 2000 compliance
problems. Any revision to our systems or revision or replacement of third-party
software, hardware or other technology could be time consuming and expensive.
In addition, a failure to identify, fix and/or replace these systems or third-
party software, hardware or other technology in a timely manner could disrupt
our business operations and result in lost revenue, increased operating costs,
the loss of customers and other business interruptions.

Our customers may also experience Year 2000 compliance problems or related
system failures. These problems and failures could result in our inability to
properly collect eligibility and financial data and process payments on behalf
of employers and could generally interrupt our delivery of products and
services. Any inability to perform, or interruption in the performance of,
services on behalf of any employer or health plan could harm our business and
operating results.

Furthermore, our business depends upon products, services and technology
provided by third parties, such as health care providers and insurers,
insurance and health care brokers, information technology consultants, network
support providers, telecommunication companies, Internet service and access
providers, third-party service providers, vendors, business partners and others
outside our control. These parties' information and non-information systems may
not be Year 2000 compliant. Any failure by these parties to be Year 2000
compliant could result in a disruption of our business, or could result in a
systemic failure beyond our control. A prolonged Internet or communications
failure could also prevent us from performing services on behalf of customers.
A failure of any of these parties to be Year 2000 compliant could harm our
business and operating results. Also, a systemic failure could require
potential customers to dedicate substantial resources towards fixing or
resolving Year 2000 compliance problems and may make the sales and marketing of
our services more difficult.

Based on our assessments to date, we believe we will not experience any
material disruption as a result of Year 2000 problems with respect to our
services and the third-party systems we use for our internal functions. But if
certain critical third-party suppliers, such as those supplying electricity,
water or telephone service, experience difficulties resulting in disruption of
service to us, a shutdown of our operations could occur for the duration of the
disruption.

8
<PAGE>

Our business and reputation may be harmed if we are unable to protect the
privacy of our customer information.

Our information systems and Internet communications may be vulnerable to
damage from physical break-ins, computer viruses, programming errors, attacks
by computer hackers or similar disruptive problems. A user who is able to
access our computer or communication systems could gain access to confidential
employer, employee or health plan information or our own confidential
information. A material security breach could harm our business and our
reputation or could result in liability to us. Therefore, it is critical that
our facilities and infrastructure remain secure. The occurrence of any of these
events could result in the interruption, delay or cessation of our services,
which could harm our business or operating results. Further, our reputation may
suffer if third parties were to obtain this information and we may be liable
for this disclosure. Any effect on our reputation or any liability for any
disclosure could harm our business and operating results.

If the demand for Internet and e-commerce solutions does not increase, it could
limit our revenue growth and profitability.

Rapid growth in the use of the Internet is a recent phenomenon. As a result,
its acceptance and use may not continue to develop at historical rates and a
sufficiently broad base of business customers may not adopt or continue to use
the Internet as a medium of commerce. Demand and market acceptance for recently
introduced products and services over the Internet are subject to a high level
of uncertainty, and there exist few proven products and services.

Our future revenue growth and profitability depend, in part, upon increased
employer demand for additional Internet and e-commerce solutions that we are in
the process of developing or may develop in the future. If the demand for
Internet and e-commerce solutions does not increase, it could limit our revenue
growth and profitability.

If we are unable to adequately protect our intellectual property rights or if
we infringe upon the intellectual property rights of third parties, our results
of operations may be harmed.

Our success depends in part upon our intellectual property rights to products
and services which we develop. We rely on a combination of contractual rights
including non-disclosure agreements, trade secrets, copyrights and trademarks
to establish and protect our intellectual property rights in our names,
products, services and related technology. Loss of intellectual property
protection or inability to secure intellectual property protection on any of
our names, confidential information or technology could harm our business and
operating results.

We currently have no registered patents or pending patent applications
covering any of our technology. We have received a U.S. trademark registration
for BEN-NET and a U.S. service mark registration for WebElect. These
registrations may not be enforceable or effective in protecting the BEN-NET or
WebElect marks.

We typically enter into non-disclosure and confidentiality agreements with
our employees and consultants with access to sensitive information. These
agreements may not be adequate to protect our intellectual property rights or
prevent misappropriation of our technology. Products and services with features
similar to our products and services may be independently developed.

Although we believe that our core technology has been independently developed
and that none of our technology or intellectual property infringes on the
rights of others, third parties may assert infringement claims against us in
the future. We may be required to modify our products, services, internal
systems or technologies or to obtain a license to permit our continued use of
those rights. We may not be able to do either in a timely manner or upon
reasonable terms and conditions. Failure to do so could harm our business and
operating

9
<PAGE>

results. In addition, future litigation relating to these matters could result
in substantial cost to, and diversion of resources by, us. Adverse
determinations in any litigation or proceedings of this type also could subject
us to significant liabilities to third parties and could prevent us from using
some of our products, services, internal systems or technologies.

Rapidly changing technology may impair our financial performance.

We may encounter difficulties responding to technological changes that could
delay our introduction of products and services and we may not be able to
respond to these changes in a timely and cost-effective manner. Our business
depends upon the use of software, hardware, networking and Internet technology
and systems. These technologies and systems are rapidly evolving and are
subject to rapid change and obsolescence. As these technologies mature, we must
be able to quickly and successfully modify our products and services to adapt
to this change. We may encounter difficulties that could delay or harm the
performance of our products or services. We may not be able to respond to
technological changes in a timely and cost-effective manner. In addition, our
competitors may develop technologically superior products and services.
Further, data formatting and eligibility rules within a particular employer or
health plan, or within the group health benefits industry as a whole, may
change and may require substantial and expensive re-engineering of eligibility
data and adjustment of the tools we use to process this eligibility data.

State, federal and local laws could harm our business and operating results.

State, federal or local laws could harm our business and operating results by
requiring us to change the way we provide services and increase our cost of
performing services. Further, these laws could restrict our ability to continue
to develop our business as currently planned. The healthcare industry is highly
regulated by federal, state and local laws. The application of existing laws,
or the implementation of new laws, applicable to our business could harm our
business and operating results. For example, the confidentiality of patient
records and the circumstances under which records may be released for inclusion
in our databases may be subject to substantial regulation by state governments.
These state laws govern both the disclosure and the use of confidential patient
medical records. Although compliance with these laws currently is principally
the responsibility of health care providers and health plans, these regulations
may be extended to cover our business and the eligibility data and other
information that we include in our databases. If these laws are extended to
cover our business, we may be required to expend additional resources in order
to comply with these laws, including changes to our security practices, and may
be exposed to greater liability in the event we fail to comply with these laws.

The Health Insurance Portability and Accountability Act of 1996 ("HIPAA")
mandates the use by health plans of standard transactions, identifiers,
security and other provisions by the year 2000. We have designed our products
and services to comply with HIPAA, but any change in federal standards would
require us to expend additional resources.

Further, our role in facilitating payments by employers to health plans may
subject us to the Employee Retirement Income Security Act. This act imposes
fiduciary duties on employers and health plans with respect to payments made on
behalf of participating employees and it is possible that these fiduciary
duties could be deemed to apply to us. In that event, we may become subject to
greater liability with respect to these payments and may experience higher
operating costs in order to comply with this regulation. These increases in
operating costs may harm our business and operating results.

State laws and regulations concerning the sale, marketing or distribution of
insurance over the Internet could harm our business and operating results.

Should our business activities require our licensing as an insurance agent,
we would incur increased costs and become subject to greater restrictions which
could harm our business and financial results. Further, because the application
of e-commerce to the insurance market is relatively new, the impact of current
or future insurance laws and regulations on our business is difficult to
anticipate. The insurance industry is subject to

10
<PAGE>

extensive regulation under state laws. Insurance laws and regulations cover all
aspects of the insurance process, including sales techniques, underwriting for
eligibility, rates, claim payments and record keeping by licensed insurance
companies and insurance agents. A company that does business as an insurance
agent is generally required to be licensed in each state in which it conducts
that business. In the future, our business or other activities may be
considered by insurance regulatory authorities to fall under their licensing
jurisdiction.

Risks Related to this Offering and Ownership of Our Common Stock

The price for our common stock could decline.

Prior to this offering, there has not been a public market for our common
stock. An active trading market for our common stock may not develop or be
sustained after completion of this offering. The initial public offering price
of our common stock may not be indicative of the prices that will prevail in
the public market after the offering, and the market price of our common stock
could fall below the initial public offering price. You may not be able to
resell your shares at or above the initial public offering price due to a
number of factors, including:

. actual or anticipated quarterly variations in our operating results;

. changes in expectations as to our future financial performance or
changes in financial estimates, if any, of securities analysts;

. announcements of new healthcare products, services or technological
innovations;

. announcements relating to strategic relationships and transactions;

. customer relationship developments;

. strategic alliance developments;

. regulatory changes;

. conditions generally affecting the group health insurance benefits
industry;

. success of our operating strategy;

. competition; and

. the operating and stock price performance of other comparable companies.

In addition, the stock market has experienced extreme price and volume
fluctuations, which have particularly affected the market prices of many
Internet and e-commerce companies and which have often been unrelated to the
operating performance of these companies.

Future sales of our common stock in the public market after the offering could
cause the price of our common stock to decline.

Our shareholders could sell substantial amounts of our common stock in the
public market following the offering. As a result, the aggregate number of
shares of our common stock available to the public would increase and,
consequently, the price of our common stock could fall. We cannot predict the
timing or amount of future sales of shares of our stock or the effect, if any,
that market sales of shares, or the availability of shares for sale, will have
on the prevailing market price of our common stock. Upon completion of the
offering, we will have 15,054,068 outstanding shares of common stock, assuming
no exercise of outstanding options or warrants. Of these shares, the 5,000,000
shares sold in this offering will be freely tradeable. This leaves 10,054,068
shares that will be eligible for sale in the public market as follows:

<TABLE>
<CAPTION>
Number of
Shares Date
--------- ----
<S> <C>
61,800 Available for immediate sale on the date of this prospectus
275,280 Available for sale 90 days after the date of this prospectus
9,716,988 Available for sale 180 days after the date of this prospectus
</TABLE>

11
<PAGE>

Shortly after the closing of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act to register a total of 7,800,000
shares of common stock issuable under the 1993 Stock Option Plan, the 1999
Stock Incentive Plan and the Stock Purchase Plan.

The holders of 6,248,922 shares of our preferred shares have registration
rights for the shares of common stock issuable upon conversion of these
preferred shares. All preferred shares will be converted into a total of
6,248,922 shares of common stock immediately prior to the offering. After the
offering, the holders of 6,248,922 shares of our common stock, which represent
approximately 41.5% of our outstanding common stock after this offering
assuming no exercise of outstanding options or warrants after October 31, 1999,
will be entitled to have the resale of their shares registered under the
Securities Act. If these holders cause a large number of securities to be
registered and sold in the public market, these sales could harm the market
price for our common stock. In addition, if we include in a company-initiated
registration statement shares held by these holders pursuant to the exercise of
their registration rights and there is limited demand to purchase our shares,
this inclusion may harm our ability to raise needed capital by effectively
reducing the number of newly-issued shares we can sell to the public.

Concentration of ownership may give some shareholders substantial influence and
may prevent or delay a change in control.

We anticipate that some shareholders, including officers and directors of the
company, will, in the aggregate, beneficially own approximately 60.5% of our
outstanding common stock following completion of this offering. These
shareholders may be able to exercise substantial influence over all matters
requiring shareholder approval, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
may also have the effect of discouraging third party offers to acquire our
company or of delaying or preventing a change in control of our company.

Our charter documents and Minnesota law may discourage unsolicited takeover
offers which could deprive our shareholders of opportunities to sell their
shares of common stock at prices higher than prevailing market prices.

Provisions of our articles of incorporation, bylaws and Minnesota law could
make it more difficult for a third party to acquire us, even if doing so would
be beneficial to our shareholders. For instance, our bylaws provide for a
classified board of directors with each class of directors subject to re-
election every three years. This will make it more difficult for third parties
to insert their representatives on our board of directors and gain control of
our company. These provisions could also discourage proxy contests and make it
more difficult for you and other shareholders to elect directors and take other
corporate actions. Further, the Minnesota Control Share Acquisition Act and the
Minnesota Business Combination Act may make it more difficult for third parties
to secure control of our company or to complete an acquisition. These acts may
discourage unsolicited takeover offers which could deprive our shareholders of
opportunities to sell their shares of common stock at prices higher than
prevailing market prices.

You will incur immediate and substantial dilution.

If you purchase shares of our common stock, you will incur immediate and
substantial dilution in pro forma net tangible book value of $7.25 per share,
assuming no exercise of any options or warrants after September 30, 1999. If
the holders of outstanding options or warrants exercise those options or
warrants, you will experience dilution of $7.89 per share.

We do not intend to pay dividends.

We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding the development and
growth of our business and, therefore, do not expect to pay any dividends in
the foreseeable future.

12
<PAGE>

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements based on our current
expectations and projections about future events. These statements are subject
to risks, uncertainties and assumptions about us, including, among other
things:

. uncertainty of our future operating results;

. delays or losses of sales due to long sales and implementation cycles for
our products and services;

. actions of our competitors; and

. other factors discussed under "Risk Factors."

USE OF PROCEEDS

We estimate our net proceeds from the sale of our common stock in this
offering will be approximately $52.7 million, or approximately $60.7 million if
the underwriters' overallotment option is exercised in full, based on an
assumed initial public offering price of $11.50 per share and after deducting
the estimated underwriting discounts and offering expenses.

We intend to use the net proceeds from this offering for general corporate
purposes, including working capital, sales and marketing expenditures,
development of new products and services and investment in technology
infrastructure. In addition, a portion of the net proceeds may be used for
acquisitions of businesses, products and technologies that are complementary to
ours. We currently have no agreements with respect to any material acquisitions
as of the date of this prospectus. Pending use of the net proceeds for the
above purposes, we intend to invest the net proceeds from this offering in
short-term, interest-bearing, investment-grade securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock and do
not anticipate paying any cash dividends in the foreseeable future. We
currently intend to retain future earnings to fund the development and growth
of our business.

13
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 1999
(a) on an actual basis, (b) on a pro forma basis to reflect the conversion of
all outstanding shares of preferred stock into shares of common stock
immediately prior to the commencement of this offering, and (c) on a pro forma,
as adjusted, basis to give effect to the receipt and application of the
estimated net proceeds from the sale of 5,000,000 shares of our common stock in
this offering at an assumed initial public offering price per share of $11.50
after deducting the estimated underwriting discounts and offering expenses.

<TABLE>
<CAPTION>
As of September 30, 1999
-----------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- -------------- -----------
(in thousands)
<S> <C> <C> <C>
Long-term debt and capitalized lease
obligations, non-current
portion.................................. $ -- $ -- $ --
Redeemable convertible preferred stock,
$.01 par value per share; 6,266,922
shares authorized, 6,248,922 shares
outstanding, actual; no shares issued and
outstanding, pro forma and pro forma as
adjusted................................. 15,950 -- --
Shareholders' equity:
Common stock, $.01 par value per share;
7,000,000 shares authorized, 3,797,346
shares outstanding, actual;
100,000,000 shares authorized,
10,046,268 shares outstanding, pro
forma; 100,000,000 shares authorized,
15,046,268 shares outstanding, pro
forma as adjusted...................... 38 100 150
Additional paid-in capital............... 4,319 20,207 72,882
Deferred stock based compensation........ (4,127) (4,127) (4,127)
Accumulated deficit...................... (4,924) (4,924) (4,924)
------- ------- -------
Total shareholders' equity (deficit).. (4,694) 11,256 63,981
------- ------- -------
Total capitalization................ $11,256 $11,256 $63,981
======= ======= =======
</TABLE>
- --------
The preceding table excludes:

. 3,388,953 shares issuable upon exercise of stock options outstanding
under our stock option plans as of September 30, 1999;

. 66,135 shares issuable upon exercise of warrants outstanding as of
September 30, 1999; and

. 3,927,222 shares available for future grant or issuance under our stock
option plans as of September 30, 1999.

14
<PAGE>

DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock in this offering and the pro forma net tangible book value per
share of our common stock immediately after this offering. Pro forma net
tangible book value dilution per share represents the difference between the
amount per share paid by purchasers of shares of common stock in this offering
and the pro forma net tangible book value per share of common stock immediately
after completion of this offering.

Our pro forma net tangible book value as of September 30, 1999 was $11.3
million, or $1.12 per share of common stock, assuming the conversion of all
outstanding shares of preferred stock into shares of common stock. Pro forma
net tangible book value per share represents the amount of our shareholders'
equity, less intangible assets, divided by the total number of shares of common
stock outstanding for the period immediately prior to this offering. After
giving effect to the sale of the 5,000,000 shares of common stock offered in
this prospectus at an assumed initial public offering price of $11.50 per share
and after deducting the estimated underwriting discounts and offering expenses,
our adjusted pro forma net tangible book value as of September 30, 1999 would
have been $64.0 million, or $4.25 per share of common stock. This represents an
immediate increase in net tangible book value of $3.13 per share to existing
shareholders and an immediate dilution of $7.25 per share to new investors
purchasing shares in this offering. The following table illustrates this per
share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $11.50
Pro forma net tangible book value per share as of September
30, 1999.................................................... $1.12
Increase per share attributable to new investors.............. 3.13
-----
Pro forma net tangible book value per share after this
offering.................................................... 4.25
------
Net tangible book value dilution per share to new investors... $ 7.25
======
</TABLE>

The following table summarizes as of September 30, 1999, on the pro forma
basis described above, the number of shares of common stock purchased from us,
the total consideration paid to us and the average price per share paid by
existing shareholders and by investors purchasing shares of common stock in
this offering and before deducting estimated underwriting discounts and
offering expenses:

<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price Per
Number Percent Amount Percent Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders......... 10,046,268 66.8% $16,069,000 21.8% $ 1.60
New investors................. 5,000,000 33.2 57,500,000 78.2 11.50
---------- ---- ----------- ----
Total....................... 15,046,268 100% $73,569,000 100%
========== ==== =========== ====
</TABLE>

The foregoing discussion and tables assume no exercise of any stock options
or warrants after September 30, 1999. As of September 30, 1999, there were
outstanding options and warrants to purchase a total of 3,455,088 shares of
common stock. To the extent that all of these options or warrants are
exercised, there will be dilution to new investors in the amount of $7.89 per
share. See "Capitalization," "Management--Employee Benefit Plans," "Description
of Capital Stock" and Note 4 of "Notes to Consolidated Financial Statements."

15
<PAGE>

SELECTED FINANCIAL DATA
(In thousands, except per share data)

The following selected financial data should be read together with the
financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this prospectus. The selected statement of operations data shown below for
the years ended December 31, 1996, 1997 and 1998 and the balance sheet data as
of December 31, 1997 and 1998 are derived from our audited financial statements
included elsewhere in this prospectus. The selected statement of operations
data shown below for the years ended December 31, 1994 and 1995 and the balance
sheet data as of December 31, 1994, 1995 and 1996 are derived from our audited
financial statements not included elsewhere in this prospectus. The selected
financial data for the nine months ended September 30, 1998 and 1999 has been
derived from our unaudited financial statements which, in the opinion of
management, include all adjustments, consisting solely of normal recurring
adjustments, necessary for a fair presentation of the financial information
shown in these statements. The results for the nine months ended September 30,
1999 are not necessarily indicative of the results to be expected for the full
year or for any future period.

<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
---------------------------------------- ------------------
1994 1995 1996 1997 1998 1998 1999
------ ------- ------ ------ -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues............ $ 904 $ 2,497 $4,360 $7,093 $ 10,122 $ 6,669 $ 11,746
Operating expenses
Cost of services....... 330 1,323 2,480 4,496 6,958 4,791 9,069
Selling, general &
administrative....... 358 538 1,796 2,068 2,831 1,986 3,338
Research and
development.......... 393 605 863 1,242 1,519 1,017 2,294
Amortization of stock-
based compensation... -- -- -- -- -- -- 67
------ ------- ------ ------ -------- -------- --------
Total operating
expenses............ 1,081 2,466 5,139 7,806 11,308 7,794 14,768
------ ------- ------ ------ -------- -------- --------
Operating income
(loss)................ (177) 31 (779) (713) (1,186) (1,125) (3,022)
Interest income......... 11 31 198 213 144 101 320
------ ------- ------ ------ -------- -------- --------
Net (loss) income....... $ (166) $ 62 $ (581) $ (500) $ (1,042) $ (1,024) $ (2,702)
====== ======= ====== ====== ======== ======== ========
Basic and diluted net
(loss) income per
share................. $ (.05) $ .02 $ (.18) $ (.15) $ (.30) $ (.30) $ (.77)
====== ======= ====== ====== ======== ======== ========
Shares used in basic and
diluted net income
(loss) per share...... 3,234 3,294 3,313 3,376 3,463 3,457 3,517
====== ======= ====== ====== ======== ======== ========
Pro forma basic and
diluted net loss per
share................. (.16) (.33)
======== ========
Shares used in pro forma
net loss per share.... 6,485 8,103
======== ========
</TABLE>

<TABLE>
<CAPTION>
September 30,
December 31, 1999
---------------------------------------- ------------------
1994 1995 1996 1997 1998 Actual Pro Forma
------ ------ ------- ------- ------- ------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents........... $ 690 $ 472 $ 1,614 $ 1,009 $ 1,681 $ 7,290 $ 7,290
Working capital......... 482 411 3,981 3,102 1,782 9,162 9,162
Total assets............ 1,177 1,253 5,179 5,084 5,596 13,417 13,417
Long-term obligations,
net of current
portion............... -- -- -- -- -- -- --
Total shareholders'
equity (deficit)........ (109) 13 (564) (1,045) (2,077) (4,694) 11,256
</TABLE>

16
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We were co-founded in 1993 by Mark Tierney, Michael Bingham and Barbara
Seykora, all of whom remain active with us today. From inception until June
1999, our activities principally involved providing back-office administration
and payment services, or what we refer to as back-end exchange services, for
large, multi-site employers such as Bell Atlantic, PepsiCo, Northwest Airlines,
GE Capital, Promus Hotels and R.R. Donnelley. In the second quarter of 1999, we
initiated activities to leverage our success in the large employer market to
also serve the mid-size employer market segment. From inception until September
1999, we were incorporated under the name Network Management Services, Inc. In
September 1999, we changed our name to eBenX, Inc.

Our principal source of revenue is derived from providing ongoing group
health eligibility and financial data exchange services. Exchange services
revenue is typically priced on a per employee per month basis with adjustments
made to accommodate the number of health plan communication and computer
connections, or interfaces, that the customer requires. In many cases, we allow
fixed and variable fee structures to permit volume-adjusted pricing. We
recognize revenue for exchange services as the services are performed. In
addition, we earn revenue from health benefit plan procurement fees as services
are performed. We typically enter into contracts with our large employer
customers that are three years in length. Customers may purchase some or all of
our services and the customer relationship may evolve from utilizing
procurement services to utilizing implementation services and per employee-
based exchange services. A significant percentage of our revenues are earned
from a few customers, most notably Bell Atlantic, PepsiCo and Northwest
Airlines.

The establishment of new customer relationships involves lengthy and
extensive sales and implementation processes. The sales process typically takes
four to six months, and the implementation process takes an additional two to
four months. The sales process is accounted for under the selling, general and
administrative expense category. The implementation process affects cost of
services but may also impact research and development expense to the extent new
customer relationships require new or enhanced service offerings.

Cost of services consists primarily of personnel costs for account
management, operations, production and procurement and information technology
costs for both ongoing procurement and exchange services and for customer
implementation expense. The information technology costs relate to personnel
costs for implementing and maintaining customer and health plan computer
interfaces and computer hardware and software expenses related to computer
processing. A significant portion of cost of services consists of new customer
implementation expenses. Therefore, increasing numbers of new customers will
cause the cost of services as a percentage of net revenue to increase.

Selling, general and administrative expenses consist primarily of payroll and
payroll-related expenses associated with sales and marketing, executive
management and corporate administrative personnel, as well as professional fees
and expenditures for advertising, public relations and promotional efforts. We
intend to significantly increase our sales and marketing expenses over the next
several years. We intend to invest substantially in an integrated marketing
program, including the expansion and enhancement of our penetration into the
mid-size employer market through broker partners. At the same time, we intend
to devote additional resources to develop partnerships and relationships with
human resource services and systems organizations. We expect that, in support
of the continued growth and operation of our business, selling, general and
administrative expenses will continue to increase for the foreseeable future.

Research and development expenses consist primarily of development personnel
and external contractor costs related to the development of new products and
services, enhancement of existing products and services, quality assurance and
testing. To date, we have not capitalized any of our software development
costs. Because the timing of the commercial release of our services has
substantially coincided with technological feasibility, all research and
development costs have been expensed as incurred. We intend to continue to
expand our

17
<PAGE>

product offerings by adding additional services. We expect these activities
will require additional personnel. Accordingly, we expect our research and
development expenses will continue to increase for the foreseeable future.

Since our inception, we have incurred losses. As of September 30, 1999, we
had an accumulated deficit of $4.9 million. These losses and this accumulated
deficit have resulted from the significant costs incurred in the development of
our technology platform, the establishment of relationships with our customers,
and the development and maintenance of our customer and health plan interfaces.
We intend to continue to invest heavily in research and development, sales and
marketing and in our computer and administrative infrastructure. As a result,
we believe that we will incur substantial operating losses for the foreseeable
future. Although we have experienced significant revenue growth in recent
periods, our operating results for future periods are subject to numerous
uncertainties. In view of the rapidly evolving nature of our business and our
limited operating history, we believe that period-to-period comparisons of our
operating results are not necessarily meaningful and should not be relied upon
as an indication of future performance.

Results of Operations

The following table sets forth for the periods indicated selected statement
of operations data expressed as a percentage of net revenues.

<TABLE>
<CAPTION>
Year Ended Nine Months
December 31, Ended September 30,
--------------------- --------------------
1996 1997 1998 1998 1999
----- ----- ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues................. 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of services........... 56.9 63.4 68.7 71.9 77.2
Selling, general and
administrative........... 41.2 29.2 28.0 29.8 28.4
Research and development... 19.8 17.5 15.0 15.2 19.5
Amortization of stock-
based compensation....... -- -- -- -- 0.6
----- ----- ----- ---------- ----------
Total operating costs
and expenses.......... 117.9 110.1 111.7 116.9 125.7
----- ----- ----- ---------- ----------
Loss from operations......... (17.9) (10.1) (11.7) (16.9) (25.7)
Interest income (expense),
net........................ 4.5 3.0 1.4 1.5 2.7
----- ----- ----- ---------- ----------
Net loss..................... (13.4)% (7.1)% (10.3)% (15.4)% (23.0)%
===== ===== ===== ========== ==========
</TABLE>

Nine Months Ended September 30, 1999 Compared to Nine Months Ended September
30, 1998

Net revenues. Net revenues increased from $6.7 million for the nine months
ended September 30, 1998 to $11.7 million for the same period in 1999,
representing an increase of $5.0 million, or 76.1%. This increase primarily was
due to a new contract with Bell Atlantic, the expansion of our relationship
with PepsiCo and new client implementations in the third quarter of 1999.

Cost of services. Cost of services increased from $4.8 million for the nine
months ended September 30, 1998 to $9.1 million for the same period in 1999,
representing an increase of $4.3 million, or 89.3%. This increase primarily was
due to increased personnel and computer-related infrastructure costs necessary
to support the increased demand for our services. Cost of services, as a
percentage of net revenues, increased from 71.9% for the nine months ended
September 30, 1998 to 77.2% for the same period in 1999 because of new customer
implementation expenses.

Selling, general and administrative. Selling, general and administrative
expenses increased from $2.0 million for the nine months ended September 30,
1998 to $3.3 million for the same period in 1999, representing an increase of
$1.3 million, or 68.1%. This increase primarily was due to the establishment of
a sales team in late 1998 and additions to management. We anticipate that sales
and marketing expenses will increase substantially in future periods as we
expand our sales and marketing efforts.

Research and development. Research and development expenses increased from
$1.0 million for the nine months ended September 30, 1998 to $2.3 million for
the same period in 1999, representing an increase of

18
<PAGE>

$1.3 million, or 125.6%. This increase primarily was due to additions to our
research and development staff. We anticipate that we will continue to devote
substantial resources to our research and development efforts and that research
and development expenses will increase for the foreseeable future.

Interest income (expense), net. Net interest income includes income earned
from our invested cash, income earned from facilitating our customers' payments
to their health plans and expenses related to outstanding debt obligations
under our bank credit facility. Net interest income increased from $101,000 for
the nine months ended September 30, 1998 to $320,000 for the same period in
1999. In the first nine months of 1999, interest expense was incurred for bank
borrowings. There were no borrowings in the first nine months of 1998.

Amortization of stock-based compensation. In connection with the granting of
stock options to employees, we recorded stock-based compensation totaling
approximately $67,000 in the quarter ended September 30, 1999. This amount
represents the difference between the exercise price and the deemed fair value
of our common stock for accounting purposes on the date these stock options
were granted. The amortization of additional deferred compensation will result
in $4.1 million of charges to operations through 2003.

Years Ended December 31, 1996, 1997 and 1998

Net revenues. Net revenues increased from $7.1 million in 1997 to $10.1
million in 1998, or 42.7%. Net revenues in 1997 represented a 62.7% increase
over 1996 net revenues of $4.4 million. The increase in 1998 primarily was due
to a new contract with Bell Atlantic and servicing additional divisions of
PepsiCo. The increase in 1997 primarily was due to new contracts with The Blue
Cross/Blue Shield Association and R.R. Donnelley & Sons and the sale of
additional services to PepsiCo and General Electric.

Cost of services. Cost of services increased from $4.5 million in 1997 to
$7.0 million in 1998, or 54.8%. Cost of services in 1997 represented an 81.3%
increase over 1996 cost of services of $2.5 million. The increase in 1998
primarily was due to increases in personnel and investments in computer
hardware and software infrastructure. The increase in 1997 primarily was due to
additions in personnel. Cost of services, as a percentage of net revenues,
increased from 56.9% in 1996 to 63.4% in 1997 and to 68.7% in 1998. A
significant portion of cost of services consists of new customer implementation
expenses. Therefore, increasing numbers of new customers will cause the cost of
services as a percentage of net revenue to increase.

Selling, general and administrative. Selling, general and administrative
expenses increased from $2.1 million in 1997 to $2.8 million in 1998, or 36.9%.
Selling, general and administrative expenses in 1997 represented a 15.1%
increase over 1996 selling, general and administrative expenses of $1.8
million. The 1998 increase primarily was due to the establishment of a sales
team. The 1997 increase primarily was due to additions to management. Selling,
general and administrative expenses, as a percentage of net revenues, decreased
from 41.2% in 1996 to 29.2% in 1997 and to 28.0% in 1998.

Research and development. Research and development expenses increased from
$1.2 million in 1997 to $1.5 million in 1998, or 22.3%. Research and
development expenses in 1997 represented a 43.9% increase over 1996 R&D
expenses of $0.9 million. These increases primarily were due to the hiring of
additional personnel.

Interest income (expense), net. Net interest income decreased from $213,000
in 1997 to $144,000 in 1998, or 32.4%. Net interest income in 1997 represented
a 7.6% increase over 1996 net interest income of $198,000. The decrease from
1997 to 1998 primarily was due to decreased cash reserves resulting from the
losses incurred in 1998. The increase from 1996 to 1997 primarily was due to
increased cash reserves resulting from the sale of preferred stock in mid-1996.

Income taxes. As of December 31, 1998, we had unused federal and state
research and development tax credit carryforwards of approximately $100,000
which expire at various times through 2011. In addition, we had unused federal
net operating loss carryforwards at December 31, 1998 of approximately $1.8
million which expire at various times through 2013. The utilization of these
carryforwards is dependent upon our ability to generate sufficient taxable
income during carryforward periods.

19
<PAGE>

Selected Quarterly Operating Results

The following table shows unaudited statement of operations data expressed in
dollars (in thousands) and as a percentage of net revenues for the last two
quarters in our fiscal year ended December 31, 1998 and for the first three
quarters in our fiscal year ending December 31, 1999. In management's opinion,
this unaudited quarterly information has been prepared on the same basis as the
audited financial statements and related notes and includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the information for the quarters presented, when read in
conjunction with the audited financial statements and related notes included
elsewhere in this prospectus. We believe that quarter-to-quarter comparisons of
our financial results are not necessarily meaningful and should not be relied
upon as an indication of future performance.

<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------
September 30, December 31, March 31, June 30, September 30,
1998 1998 1999 1999 1999
------------- ------------ --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues............ $2,740 $3,454 $3,342 $3,766 $ 4,638
Operating expenses:
Cost of services...... 1,856 2,166 2,355 2,878 3,836
Selling, general and
administrative...... 667 845 859 1.151 1,328
Research and
development......... 345 502 545 582 1,167
Amortization of
stock-based
compensation........ -- -- -- -- 67
------ ------ ------ ------ -------
Total operating
expenses......... 2,808 3,513 3,759 4,611 6,398
------ ------ ------ ------ -------
Loss from operations.... (128) (59) (417) (845) (1,760)
Interest income
(expense), net........ 20 42 45 105 170
------ ------ ------ ------ -------
Net loss................ $ (108) $ (17) $ (372) $ (740) $(1,590)
====== ====== ====== ====== =======
<CAPTION>
Three Months Ended
-------------------------------------------------------------
September 30, December 31, March 31, June 30, September 30,
1998 1998 1999 1999 1999
------------- ------------ --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues............ 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Costs of revenues..... 67.8 62.7 70.5 76.4 82.7
Selling, general and
administrative...... 24.3 24.5 25.7 30.6 28.6
Research and
development......... 12.6 14.5 16.3 15.5 25.2
Amortization of
stock-based
compensation........ -- -- -- -- 1.4
------ ------ ------ ------ -------
Total operating
expenses......... 104.7 101.7 112.5 122.5 137.9
------ ------ ------ ------ -------
Loss from operations.... (4.7) (1.7) (12.5) (22.5) (37.9)
Interest income
(expense), net........ 0.7 1.2 1.3 2.8 3.6
------ ------ ------ ------ -------
Net (loss) income....... (4.0)% (0.5)% (11.2)% (19.7)% (34.3)%
====== ====== ====== ====== =======
</TABLE>

Our business is characterized by seasonality. As a result, our revenue may be
subject to seasonal fluctuations, with the largest percentage of annual revenue
typically being realized in the fourth quarter. This is primarily due to
implementation of services to new customers in the third and fourth quarters
and providing open enrollment services to new and existing customers in the
fourth quarter. Further, our operating expenses typically increase in the
second and third quarters as we add personnel in anticipation of acquiring new
customers and implementing and providing services to these new customers, most
of which begin using our services in the third and fourth quarters. In
addition, cost of services typically increases as a percentage of net revenues
as we implement services for new customers.

20
<PAGE>

Our quarterly operating results have in the past, and will in the future,
vary significantly depending on a variety of factors, including:

.the number and size of new customers starting services;

.the decision of one or more customers to delay implementation or cancel
ongoing services;

.seasonality;

. our ability to design, develop and introduce new services and features
for existing services on a timely basis;

. costs associated with strategic acquisitions and alliances or
investments in technology;

. the success of any strategic acquisition, alliance or investment;

. costs to transition to new technologies;

. expenses incurred for geographic and service expansion;

. price competition;

. a reduction in the number of employees of our customers; and

. acquisitions of our customers by other companies.

A substantial majority of our operating expenses, particularly personnel and
related costs, depreciation and rent, are relatively fixed in advance of each
quarter. Our agreements with our customers generally do not have penalties for
cancellation. As a result, any decision by a customer to delay or cancel
implementation of our services or our underutilization of personnel may cause
significant variations in operating results in a particular quarter and could
result in losses for that quarter. It is possible that in some future quarter
our results of operations will be below the expectations of public market
analysts and investors. In either case, the market price of our common stock
could be materially adversely affected.

Liquidity and Capital Resources

Historically, we have funded operations primarily through the private sales
of preferred stock, with net proceeds of approximately $16.0 million, limited
bank borrowings and equipment leases. All shares of our preferred stock will
be converted automatically into common stock immediately prior to the closing
of this offering. As of September 30, 1999, we had $7.3 million in cash and
cash equivalents and a secured revolving line of credit of $1.5 million, which
bears a variable interest rate of 1% above the lender's base rate and expires
in December 1999. At September 30, 1999, there were no borrowings under the
line of credit.

Our operating activities used cash of $0.8 million in 1996, provided cash of
$67,000 in 1997 and used cash of $1.3 million in 1998. Our operating
activities used cash of approximately $3.2 million in the nine months ended
September 30, 1999. The use of cash from operations in 1998 and for the first
nine months of 1999 primarily was due to our net loss and an increase in
accounts receivable, partially offset by an increase in depreciation and
accrued expenses.

Our investing activities used cash of $2.5 million in 1996 and $0.7 million
in 1997, provided cash of $1.2 million in 1998 and used cash of $0.9 million
for the first nine months of 1999. In 1996, $0.5 million of the cash used for
investing activities was for additions to equipment and $2.0 million was for
the purchase of U.S. Treasury Notes using proceeds from the sale of preferred
stock. In 1997, our investing activities used cash for additions to equipment.
In 1998, our investing activities used cash of $0.8 million for additions to
equipment and we received proceeds of $2.0 million from the sale of U.S.
Treasury Notes. For the first nine months of 1999, our investing activities
used cash for additions to equipment.

Our financing activities provided cash of $4.5 million in 1996, $19,000 in
1997, $0.8 million in 1998 and $9.8 million in the first nine months of 1999.
For 1996, financing activities provided cash principally from the sale of
preferred stock. In 1997, financing activities provided cash from the exercise
of common stock options. In 1998, financing activities provided cash
principally from bank borrowings in December 1998 of $0.75 million. For the
first nine months of 1999, financing activities provided cash from the sale of
$10.5 million in preferred stock, partially offset by the repayment of bank
borrowings.

21
<PAGE>

Our equipment additions consist primarily of computer hardware and software,
office furniture and equipment and leasehold improvements. We expect that our
equipment additions will continue to increase in the future. Since inception,
we have generally funded equipment additions either through the use of working
capital or with operating leases. We expect to continue to add computer
hardware and software and to use operating leases to finance these additions.
In connection with the planned relocation of our headquarters on May 1, 2000,
we expect to make approximately $3.0 million in leasehold improvements and also
need to purchase additional office furniture. We intend to enter into a real
estate lease agreement that will finance the leasehold improvements over the
term of the lease. We intend to enter into a loan agreement to finance the
office furniture. To the extent we are unable to secure this financing, we may
be required to apply a portion of the proceeds from this offering toward these
expenditures.

We expect to experience significant growth in our operating expenses,
particularly research and development and sales and marketing expenses, for the
foreseeable future in order to execute our business plan. As a result, we
anticipate that these operating expenses, as well as planned capital
expenditures, will constitute a material use of our cash resources. In
addition, we may utilize cash resources to fund acquisitions or investments in
complementary businesses, technologies or service lines. We believe that the
net proceeds from the sale of the common stock in this offering and cash from
operations will be sufficient to meet our working capital and operating
resource expenditure requirements for the foreseeable future. Thereafter, we
may find it necessary to obtain additional equity or debt financing. In the
event additional financing is required, we may not be able to raise it on
acceptable terms or at all.

Year 2000 Issue

Many currently installed computer systems and software are coded to accept
only two-digit entries in the date code fields. These date code fields will
need to accept four-digit entries to distinguish 21st century dates from 20th
century dates. This problem could result in system failures or miscalculations
causing disruptions of business operations, including, among other things, a
temporary inability to process transactions, send invoices or engage in other
similar business activities. As a result, many companies' computer systems and
software will need to be upgraded or replaced in order to comply with Year 2000
requirements. The potential global impact of the Year 2000 problem is not
known, and, if not corrected in a timely manner, could affect us and the United
States and world economies generally.

We have analyzed the potential effect of the Year 2000 issue on both the
system software included in our services and our word processing, billing and
other internal systems software, including information technology ("IT") and
non-IT systems (which systems contain embedded technology in manufacturing or
process control equipment containing microprocessors or other similar
circuitry). Our Year 2000 compliance program includes the following phases:
identifying systems that need to be modified or replaced; carrying out
remediation work to modify existing systems or convert to new systems; and
conducting validation testing of systems and applications to ensure compliance.
We are currently in the final stages of the validation phase of this program
with respect to software purchased or licensed from software vendors by us and
used internally and have completed the validation phase of this program with
respect to our own products.

The amount of remediation work required to address Year 2000 problems is not
expected to be extensive. We have tested all of the system software included in
our services and determined that they are Year 2000 compliant. We also have
requested and received documentation from vendors supplying software for our
primary business applications addressing Year 2000 compliance. In all cases,
vendors' responses indicated that their applications were either currently Year
2000 compliant or that they would be compliant by the end of 1999. Therefore,
we will be required to modify some of our existing software applications in
order for our internal computer systems to function properly in the year 2000
and thereafter. We estimate that we will complete our Year 2000 compliance
program for all of our significant internal systems no later than December 31,
1999. We also have had numerous discussions with each of our major customers
regarding our Year 2000 compliance and whether their ability to transmit data
to us would be affected. Similarly, we have had discussions with all of the
health plans to which we connect electronically regarding their efforts to
address

22
<PAGE>

the Year 2000 problem. All of our major customers and these health plans have
indicated that they are Year 2000 compliant or will be Year 2000 compliant by
December 31, 1999. These actions are intended to help mitigate the possible
external impact of the Year 2000 problem. However, it is impossible to fully
assess the potential consequences in the event service interruptions occur or
in the event that there are disruptions in such infrastructure areas as
utilities, communications, transportation, banking and government.

Because essentially all of our services and internal systems were created in
the last few years, our products and internal systems were designed to avoid
the year 2000 problem. As a result, the total cost for resolving our Year 2000
issues is expected to be less than $50,000. The total cost estimate includes
the cost of replacing or upgrading non-compliant systems that were otherwise
planned or which have significant improvements and benefits unrelated to Year
2000 issues. Estimates of Year 2000 costs are based on numerous assumptions,
and there can be no assurance that the estimates are correct or that actual
costs will not be materially greater than anticipated.

We are finalizing a contingency plan to provide for continuity of processing
in the event of various problem scenarios based on the outcome of the
validation phase of all of our systems and any additional results from surveys
of our major customers and their health plans with respect to their Year 2000
compliance. We expect to complete this plan by December 15, 1999.

Based on our assessments to date, we believe we will not experience any
material disruption as a result of Year 2000 problems with respect to our
services and the third-party systems we use for our internal functions, and, in
any event, we do not anticipate the Year 2000 issues we will encounter will be
significantly different from those encountered by other computer-related
service providers. For example, if critical third-party suppliers, such as
those supplying electricity, water or telephone service, experience
difficulties resulting in disruption of service to us, a shutdown of our
operations could occur for the duration of the disruption. Assuming no major
disruption in service from utility companies or other critical third-party
suppliers, we believe that we will be able to manage our total Year 2000
transition without any material effect on our results of operations or
financial condition.

Recent Accounting Pronouncements

In March 1998, the Accounting Standards Committee issued AICPA Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." This statement provides guidance on accounting for
the costs of computer software developed or obtained for internal use and
identifies characteristics of internal use software as well as assists in
determining when computer software is for internal use. SOP 98-1 is effective
for fiscal years beginning after December 15, 1998, with earlier application
permitted. We do not expect the adoption of this SOP to have a material impact
on our financial statements.

In March 1998, the Accounting Standards Committee issued AICPA Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities." This statement
provides guidance on the financial reporting of start-up costs and organization
costs. It requires that the cost of start-up activities and organization costs
be expensed as incurred. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998, with earlier application permitted. We do not expect the
adoption of this SOP to have a material impact on our financial statements.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
changes the previous accounting definition of derivatives which focused on
freestanding contracts, including, for example, options and forwards, futures
and swaps, expanding it to include embedded derivatives and many commodity
contracts. Under the statement, every derivative is recorded on the balance
sheet as either an asset or liability measured at its fair value. The statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. SFAS 133 is
effective for fiscal years beginning after June 15, 1999. We do not anticipate
that the adoption of SFAS 133 will have a material impact on our financial
position or results of operations. We currently do not hold derivative
instruments or engage in hedging activities.

23
<PAGE>

BUSINESS

Overview

[Diagram]
This graphic depicts the group health insurance marketplace. There is a set
of three three-dimensional buildings labeled "Employers" located at the bottom
left corner of the graphic and a set of four three dimensional buildings set in
a row labeled "Health Plans" located at the top right corner. There is a thick
black arrow running from the bottom left corner to the top right corner of the
graphic labeled with white text "$600 Billion." The arrow points from the set
of buildings labeled "Employers" to the set of buildings labeled "Health
Plans." There are ten non-denominational bills suspended above, and set
parallel to, the arrow that cast shadows which tend to form a line
perpendicular to the arrow. Between the two sets of buildings and underneath
the suspended bills, there is a slightly skewed oval background which is
partially cut-off at the bottom right corner.

24
<PAGE>

Group Health Insurance Benefits

General Industry Background

Health care expenditures in the United States totaled more than $1.1 trillion
in 1997 and are expected to nearly double by 2007. Employers are a significant
purchaser of group health insurance benefits for their employees, retirees and
their dependents. Currently, more than half of the U.S. population receives
group health insurance benefits through their employers. In 1998, the group
health insurance benefits market generated more than $600 billion in services
and payments between the two trading partners, employers and health plans.

Employers can be segmented into three categories:

. large employers, such as Fortune 1000 companies and federal, state and
local governments;

. mid-size employers with 50 to 5,000 employees; and

. small employers with less than 50 employees.

In 1998, the average cost of providing coverage for active and retired
workers was approximately $4,168 per employee. We expect this average cost to
increase by 7% this year. In 1998, on average, each active employee contributed
approximately 25% of this amount through payroll deductions and co-payments. We
believe that this percentage will increase.

Broadly characterized, health plans consist of any organization that
reimburses physicians, hospitals, pharmacies and other direct providers of
health care. These organizations include:

. health maintenance organizations;

. preferred provider organizations;

. point of service plans;

. indemnity carriers;

. third party administrators; and

. pharmacy benefit managers.

Prior to the 1980s, employers typically purchased health benefits through a
single third-party administrator or national indemnity insurance carrier.
However, with the growth of managed care in the 1980s and 1990s, employers
began to purchase coverage through an increasing number of health plans because
the managed care system is comprised of numerous provider networks that have
limited geographic locations. Among HMOs alone, there are over 700 licensed
local health plans in the United States. Reflecting this proliferation of new
types of plans and payers, we estimate that each Fortune 500 employer today
contracts with an average of 30 different plans.

Purchasing, Eligibility Administration and Premium Payment Process

The purchasing, eligibility administration and premium payment process that
connects employers and health plans is complex, cumbersome, expensive and
highly inefficient. In particular, the financing arrangements are extremely
variable and complicated, making administration difficult. In general, health
plans either charge employers based on the number of projected enrolled
employees and their projected actuarial risk or, alternatively, pay providers
on behalf of the employer and then are reimbursed from the employer's account.
Therefore, depending on the financing arrangements, an individual employer is
subject to multiple administrative arrangements from multiple health plans.

The purchasing, eligibility administration and premium payment process
consists of two basic components commonly referred to as the "front-end" and
"back-end" processes.

25
<PAGE>

Front-end

The front-end process refers to the selection of various health plans by an
employer, the communication of health plan information to employees and the
collection and ongoing maintenance of enrollment and eligibility data.

Health plan selection. Employers annually solicit rate quotes from health
plans and select which plans will be made available to their employees.
Employers may choose as few as one health plan or as many as 150 or more health
plans depending on the employers' geographic locations and the employers'
desire to offer health plan choices. Large and mid-size employers usually offer
multiple health plans to provide greater choice, geographic coverage and access
to specialized services for their employees. Employers choose various financing
mechanisms depending on the level of risk they wish to retain. These include
self funded, fully insured, partially insured, or a combination of all three
financing mechanisms. To make these decisions, benefit managers of large
employers usually are supported by consultants while benefit managers of mid-
size employers generally use brokers.

Communication of health plan information to employees. Employers annually
provide information to employees regarding which health plans are available and
the material features of each plan. The process entails distribution of printed
materials, mailings and other manual, paper-based communications. On average,
this distribution costs $8 to $12 per employee. Due to the continuous changes
in the list of providers utilized by health plans, printed materials usually
are outdated by the time of delivery.

Collection of enrollment and eligibility information. Employees enroll in one
of the available health plans during an annual open enrollment period.
Employers collect enrollment and eligibility data using a wide variety of
methods, including paper forms, telephone-based systems and Web-based self-
service enrollment systems. Enrollment data includes information on the
employee's health plan choice and primary care provider. Eligibility
information is basic information about the employee and his or her
dependent(s), such as name, address, date of birth, social security number,
employment code, benefit status, coverage level and eligibility period.

Ongoing member management. In addition to collecting annual enrollment and
eligibility information, employers need to obtain and communicate daily life
event changes that affect coverage status. These changes include employee
marriages, divorces, child births and address changes, as well as career events
such as new hires, terminations and movements from hourly to salaried status.
No other benefit offered by employers requires as high a level of information
collection and continuous monitoring and modification because group health
insurance is the only benefit that must maintain and store precise family
history.

Back-end

While the front-end process focuses on communication of information between
employers and employees, the back-end process focuses on managing and storing
eligibility and financial data for communication with health plans and using
this data to reconcile payments.

Enrollment and eligibility data management. Once enrollment and eligibility
data is collected, employers undertake a cumbersome process to authenticate,
edit, categorize and organize the data. This process also requires the ongoing
classification of employees by employment status, such as active, retired,
surviving spouse, student and eligible to receive benefits under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), in order to
accommodate diverse collection and payment processes for each category. This
data management is critical to accurate billing and reconciling of payments
between an employer and its health plans.

Eligibility data distribution. Eligibility data should be transferred on a
daily or weekly basis from employers to health plans and in a manner that
assures it will be correctly recorded. Today, however, this data is transferred
far less frequently and with little assurance that it will be correctly
interpreted. It is communicated electronically between legacy systems at best
and, at worst, via hard copy data entry. Ultimately, this eligibility data is
required when employees and dependents present themselves to physicians

26
<PAGE>

and other providers for health care services. Providers obtain patient
eligibility information via telephone or computer from patients' health plans
prior to rendering services.

Billing, reconciliation and settlement. Health plans bill employers on a
weekly or monthly basis based on either enrollment numbers and quoted rates or
on claims paid. It is our belief, based on our experience, that employers
initially pay these multiple paper bills without auditing these bills. They
then manually reconcile the number of enrolled employees and their eligibility
status using their own internal data. Because of data discrepancies and delays
in transfer and billing cycles, the health plans' data and the employers' data
are rarely the same and thus ongoing payment disputes are common.

Factors influencing the marketplace and related issues

The purchasing, eligibility administration and premium payment process is
encumbered by inefficient procedures for rate setting, gathering and
transferring data and executing payment transactions. These inefficiencies,
together with other factors unique to health care delivery, result in the
following significant challenges:

Fragmented employers and health plans. There are more than 30,000 large and
mid-sized employers in the United States, many of which have a broadly
dispersed employee base frequently located in multiple sites across the United
States. In contrast, there are over 700 independent HMOs in the United States
today, which generally operate in a single or limited geographic area. As a
result, employers contract with multiple health plans to provide complete
geographic coverage for all of their employees.

Increasing group health insurance benefit costs. The average cost of employee
and retiree health care will increase by approximately 7% this year. As these
costs rise, we believe employers will seek more cost-effective health insurance
benefits solutions, will be more critical in their selection of health plans
and will demand a more competitive bidding process. In addition, we believe
they will need to be able to switch health plans when necessary, and they will
shift more costs to employees.

Complex data management. Health plans collect complex, detailed and dynamic
data in varying formats from multiple employers. Conversely, employers must
distribute this data in varying formats to multiple health plans. A failure to
accurately update eligibility and financial data in a timely fashion may result
in additional administrative costs and financial reconciliation problems and
can lead to employees and their dependents being wrongfully denied healthcare
services.

Varied data formats. Eligibility and financial data formats vary considerably
throughout the health care industry and typically are unique to each particular
employer and health plan. The collection, storage and transmission of this data
remains a labor-intensive, paper-based and error-prone process. As a result,
most health plans are unable to frequently update this data. Some efforts have
been made to develop a common standard. However, these standards do not meet
the complex needs of multiple purchasers and have not been widely accepted.

Varied systems platforms. Most employers use their own unique human resources
information systems and other benefit and payroll related systems to
communicate with multiple health plans. These health plans in turn rely on
their own unique legacy systems. Often, within a single employer or health
plan, there are several systems in place for collecting and storing this data
that are unable to communicate with one another. Each system has its own code
data rules, syntax and semantics, requiring substantial information technology
resources to interface.

Inefficient pricing, billing, reconciliation and settlement
processes. Employers must obtain rate quotes from health plans based on the
estimated risk of the employers' employee population. Rates are difficult to
compare because of differing plan designs and underwriting methodologies.
Employers receive bills from each of their health plans in different formats
and in some cases for different coverage periods. These bills are

27
<PAGE>

calculated using data provided by health plans. If a plan is late in
recognizing an employee's termination, the employer must perform an audit to
determine this. Depending on the number of health plans and the diversity of
the payment arrangements, this can be an arduous task. Inaccurate payments
require significant manual intervention by employers and health plans to
reconcile accounts.

Brokers have limited transaction processing capability. In the mid-size
employer market, employers and health plans trade primarily through brokers. As
a result, brokers have been positioned to administer the processes required to
facilitate this trading. However, brokers generally do not have access to the
capital needed to develop e-commerce systems. Consequently, this process
essentially remains a labor-intensive, paper-based and highly inefficient
process. Because of increasing demand for business-to-business e-commerce
solutions, we believe brokers must either embrace new technology or risk being
disintermediated.

Added complexity caused by government regulation. Numerous federal, state and
local laws and regulations govern the healthcare industry. These laws and
regulations change frequently. In recent years, the responsibilities of
employers to provide their employees with access to health care have increased
significantly. In particular, COBRA and HIPAA have added substantial burdens to
employers administering employee health insurance benefits. The proposed
legislation covering patients' bill of rights includes a provision that may put
health plans and employers at more risk of litigation. We believe this may have
the effect of pushing employers toward a defined contribution and voucher-based
approach to their employees' healthcare insurance benefits.

Opportunity for Business-to-Business E-Commerce Solutions for Group Health
Insurance Benefits

The ubiquitous nature, low cost and scalability of the Internet have created
new opportunities for conducting commerce. Recently, the widespread adoption of
intranets and the acceptance of the Internet as a business communications
platform has created a foundation for business-to-business e-commerce that
enables organizations to streamline complex processes, lower costs and improve
productivity. It is projected that e-commerce will grow from $50 billion in
revenue in 1998 to $1.3 trillion in 2003, and business-to-business e-commerce
will account for more than 74% of the value of e-commerce in the United States
in 2003.

Group health insurance benefits purchasing, eligibility administration and
premium payment transactions lend themselves to Internet processing since most
of these transactions are information-based and do not require delivery of
durable goods at the point of payment. However, unlike other e-commerce
opportunities, such as purchasing books or individual insurance, group health
insurance benefits transactions involve complex group insurance pricing,
complex product presentation, and ongoing data management between multiple
organizations.

We believe that business-to-business e-commerce technology solutions in this
market will require the following Internet-enabled components:

Front-end quote and enrollment:

. quote systems that provide quick rate information from multiple plans;
and

. annual and ongoing enrollment update tools that accommodate enrollment
in numerous health plans, and content engines that provide plan
descriptions, provider networks and rate information.

Back-end eligibility and financial exchange:

. exchange systems that transfer eligibility and financial data files
between trading partners and execute payment transactions with all
applicable parties.

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<PAGE>

[Diagram]
This graphic depicts eBenx, Inc.'s relationship to various other organizations.
The top left corner of the graphic contains the following title: "The eBenX
group health insurance e-commerce exchange." There are a number of three-
dimensional icons in this graphic with each one casting a shadow. In the bottom
left corner of the graphic, there is one large building labeled "Employer";
underneath the title "The eBenX group health insurance e-commerce exchange"
there are a row of four servers labeled "Benefits Procurement Tool,"
"Enrollment and Eligibility Maintenance Tool," "Customer Service Tool," and
"Billing and Payment Tool"; and between these two sets of icons there is a
server labeled "Employer or Third-Party Human Resource Systems." In the top
right corner of the graphic, there is a row of four buildings entitled "Health
Plans"; in the bottom right corner of the graphic, there is a block figure
labeled "Employee"; and between the block figure and the row of buildings,
there is a computer terminal labeled in bold "eBenX.com." Between the building
labeled "Employer" and the block figure, there is a set of three block figures
labeled "Broker." Between the computer terminal and the row of four servers at
the top left corner of the graphic there is a server labeled "Data Editor and
Rules Translater."

The Computer terminal is connected to a number of icons with slightly curved
yellow arrows that point both ways. There is one labeled "Enrollment (through
Employer)" connecting the block figure labeled "Employee." There is one
unlabeled arrow connecting the set of block figures labeled "Broker." There is
one labeled "Eligibility Data, Invoice" connecting the server labeled
"Employer." There is one arrow for each of the buildings in the row of four
buildings entitled "Health Plans." Three of these arrows are labeled "Mapped
Eligibility Data," "Financial Payment and Reconciliation," and "Rate
Information," with the fourth arrow being unlabeled. There are four straight
unlabeled, blue arrows connecting the server labeled "Data Editor and Rules
Translater" with each of the four servers located underneath the title "The
eBenX group health insurance e-commerce exchange." Finally, there is a line
simulating a computer cable connecting the computer terminal with the server
labeled "Data and Rules."

Currently, there are numerous front-end Internet-based solutions that support
enrollment. However, we believe true e-commerce can only exist if there is
seamless end-to-end integration of the front- and back-end processes. We have
focused our efforts on developing our proprietary back-end eligibility and
financial data exchange platform, which we now are coupling with front-end
applications. As a result, we now are able to provide a fully integrated end-
to-end solution for group health insurance benefits e-commerce in addition to
our back-end exchange services. We currently do not plan to offer front-end
services on a stand alone basis.

Our Solution

We provide the business-to-business e-commerce and connectivity solutions for
the purchase, eligibility administration and premium payment of group health
insurance benefits. Our Internet-based enrollment, eligibility and financial
exchange addresses requirements of both front- and back-end processes. During
the first six years of our operations, we focused on data and financial
management systems and on building custom and electronic connections between
customers, such as PepsiCo, Bell Atlantic, Northwest Airlines, GE Capital,
Promus Hotels and R.R. Donnelley and the United States' largest regional and
local health plans. This effort has resulted in connectivity to health plans
that collectively serve approximately 85% of the managed care enrollment in the
United States.

In 1999, we began attaching this proprietary technology to multiple front-end
enrollment applications, including those offered by Healtheon,
PricewaterhouseCoopers and Watson Wyatt. It is this front-end/back-end
continuity that delivers the end-to-end business-to-business e-commerce
solutions for group health insurance benefits.

29
<PAGE>

Value Proposition to Trading Partners

Our solution provides value to the trading partners through the collection,
management and storage of employee enrollment, eligibility and financial data
and the ongoing transmission of this data to health plans. Additionally, we
manage and execute the reconciling of payments between trading partners.

For employers, our e-commerce solution:

. streamlines the enrollment process by moving it from paper or
telephone voice response systems to self-service Internet
applications;

. reduces administrative costs associated with disseminating basic
health plan information to employees, the enrollment transaction,
and the management and transfer of data among parties;

. shifts the employer's responsibility to us for transmitting accurate
enrollment and eligibility information to a variety of health plans
and gives all trading partners access to real time eligibility via
Web-enabled tools;

. eliminates the traditional paper-based and labor-intensive payment
reconciling process used by both trading partners and delivers
automated, accurate and retroactively adjusted payments to health
plans;

. allows more choice of plans by lowering the barriers to entry for
health plans thereby significantly reducing the cost of switching
between competing health plans;

. reduces the cost of procuring health benefits by increasing health
plan competition in the bidding process; and

. increases the ability to attract and retain employees through more
diverse benefit offerings.

For health plans, our e-commerce solution:

. improves timeliness and accuracy and lowers the cost of receiving
eligibility and financial data;

. reduces the administrative burden associated with receiving
eligibility and financial data;

. provides improved customer service and provider claims adjudication
through twenty-four hour, seven day a week Web-enabled access to
employers' eligibility and financial data;

. reduces distribution costs for the delivery of health plan
information to employees; and

. opens new channels for them to distribute products and services over
the Web.

For group health insurance brokers, our e-commerce solution:

. allows access to technology without significant capital expense;

. moves services from a paper process to a more efficient Web-based
solution;

. allows them to more easily offer multiple health plans to employer
clients;

. provides significant differentiation from competing brokers; and

. allows them to retain a service position in a disintermediating
marketplace by increasing customer retention and market share.

For employees, our e-commerce solution:

. provides more opportunity for choice of plans and, through more
competitive pricing, lower costs;

. provides Web-based enrollment and plan information; and

. improves quality of services by reducing eligibility data errors
through the more timely and accurate transmission of eligibility
data to health plans which in turn transmit the data to doctors and
other health care providers.

Products and Services

Since 1993, we have been servicing the back-end processing requirements of
our Fortune 1000 customers using our proprietary BEN-NET technology platform.
This platform provides a connective infrastructure and neutral eligibility and
financial data exchange mechanism. Because we represent Fortune 1000 customers,
health plans have supported our efforts to build electronic connections to
their legacy systems.

30
<PAGE>

We are able to receive complex and dynamic data from employers and transmit
this data to fragmented health plans. Our core eligibility data and financial
exchange technology incorporates the business rules of each of the relevant
trading partners, as well as the format translations needed to automatically
reconcile and pay bills. Our solution creates a standard for group health
connectivity without causing employers or health plans to make major changes to
their disparate systems. These changes, if required, usually consist only of
changes to their Internet and modem capabilities. Our technology enables the
employer to send data in whatever format and via whatever media the employer
chooses. Once received, our system edits and translates the data into a
standard format. To facilitate connectivity to the health plans, our systems
then translate that data into the format that is compatible with each of the
computer systems of the individual health plans utilized by our employer
customer. This translated information is then transmitted in whatever medium is
acceptable to the health plan. Our BEN-NET system electronically stores more
current eligibility data than the data held by the health plans to which we are
connected, which allows us to accurately bill the parties concerned.

In 1999, we extended our suite of product offerings to support the data
management, communications and online transaction requirements for successful
group health insurance benefits e-commerce. We have done this by partnering
with other front-end application developers and through internal development
efforts. We will provide end-to-end processing for employers, brokers, health
plans and employees through which they will exchange information and transact
business. Revenues generated from our exchange services were $3,467,000,
$5,432,000, $7,742,000, $4,828,000 and $9,193,000 for the years ended December
31, 1996, 1997 and 1998 and the nine months ended September 30, 1998 and 1999,
respectively.

This Internet-based solution will bring together the components necessary for
full transaction group health e-commerce: proposal requests, rate quotes,
online enrollment, eligibility management and financial exchange services.

Our Products and Services
<TABLE>
<CAPTION>
Process Front or
Product/Service solution Status Back-end
--------------- -------- ------ --------
<C> <S> <C> <C>
eBenX Import Export Two sets of In service Back-end
(BEN-NET platform) data
pipelines: one
to front-end
applications
and employer's
human resource
information
systems and
the other to
health plans
and payroll
companies
- --------------------------------------------------------------------------------
eBenX Financial eBenX In service Back-end
(BEN-NET platform) generated bill
to health
plans and
consolidated
invoice to
employer
supports full
financial
distribution;
self-insured
management;
automatic
payment
reconciliation
and
consolidated
premium
management
- --------------------------------------------------------------------------------
eBenX Inquiry Internet-based In service Back-end
(BEN-NET platform) real time,
enrollment
eligibility
database
access tool
- --------------------------------------------------------------------------------
eBenX Data Access Internet- In development: Back-end
(BEN-NET platform) based, real .Prototype scheduled for 12/1/99
time .Partial production planned for pilot
reporting; groups early-2000
standard .Full production planned to begin thereafter
consolidated
reports;
online
financial
reports
- --------------------------------------------------------------------------------
eBenX Enroll and Internet-based In service via license from Healtheon (initial Front-end
Member Maintenance employee and term of license is through 1/31/03).
human resource Proprietary tool also in development:
self-service .Proprietary tool currently is used by one
benefit of our clients
election; .Redesign of this tool is in process and
Internet-based is focused on mid-market
online daily .Prototype scheduled for mid-2000
manager of .Production planned for late-2000
employee adds,
deletes and
coverage
changes from
life events
- --------------------------------------------------------------------------------
eBenX RFP Internet-based In development: Front-end
census .Concept and design has been completed
acquisition .Prototype available
and proposal .Coding commenced on 11/1/99
request tools .Production planned for mid-2000
to support the
competitive
bidding
process
</TABLE>

We sell our products and services in selected packages designed to meet the
needs of each customer.

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<PAGE>

Health Benefit Plan Procurement Services

We provide health benefit plan procurement services to a number of our
Fortune 1000 customers. We undertake these services on a project basis. We
assist and advise our customers on selection of potential suppliers,
preparation of requests for proposals, evaluation of proposals, and rate
negotiations. Approximately 20 of our employees engage in delivering these
services. Our principal customers for these services are General Electric,
Eastman Kodak and Bell Atlantic. We view these activities as a complement to
exchange services. In addition, we gain valuable knowledge regarding market
conditions and processes from providing these services. Revenues generated from
our procurement services were $893,000, $1,661,000, $2,380,000, $1,841,000 and
$2,553,000 for the years ended December 31, 1996, 1997 and 1998 and the nine
month periods ended September 30, 1998 and 1999, respectively.

Our Strategy

Our objective is to be the leading provider of Internet-based business-to-
business e-commerce for the purchase, eligibility administration and premium
payment of group health insurance benefits. Key elements to our strategy
include the following:

Offer end-to-end e-commerce solution. We will continue to offer an end-to-end
e-commerce solution by connecting with front-end applications and developing
our own front-end applications where appropriate. In the Fortune 1000 and mid-
size employer markets, front-end applications are being deployed by human
resources information systems platforms, by human resources record keeping
service companies, and enrollment software companies. We will aggressively
pursue front-end application providers to together offer a complete solution to
employers by linking our back-end eligibility and financial exchange services
with their front-end applications. In addition, through licensed technology
from Healtheon and our internal development efforts, we are deploying our own
front-end applications.

Increase penetration of the Fortune 1000 market. We will continue to focus on
marketing our services to Fortune 1000 companies. We demonstrate to these
companies the administrative efficiencies, cost savings and participant
satisfaction that we provide. We now provide services to 20 of the
approximately 1,500 U.S. companies that have more than 5,000 employees,
including PepsiCo, Bell Atlantic, Northwest Airlines, General Electric, Eastman
Kodak, Chevron, Dayton Hudson, Georgia-Pacific and Reader's Digest. The
remaining companies provide us with substantial growth opportunities.

Expand service offerings to existing Fortune 1000 customers. We intend to
continue to aggressively expand our service offerings to our existing Fortune
1000 customers. We have been successful in increasing our revenues from most of
our current Fortune 1000 clients through an expanded level of services provided
to additional divisions, subsidiaries and locations of those clients.

Expand to the mid-size employer market. We intend to leverage our technology
through relationships with insurance brokers to penetrate the mid-size employer
market. Mid-size employers typically purchase group health insurance benefits
using insurance brokers.

Pursue key strategic relationships to further enhance our service offering
and client base. We intend to pursue key strategic relationships, including
partnerships and acquisitions. These partnership and acquisitions candidates
could include companies that provide payroll, front-end enrollment, voluntary
benefits and similar services. We believe that making strategic acquisitions
and developing strategic relationships will enable us to enhance our service
offerings and expand our client base.

Develop new products. We intend to use our market knowledge and experience to
develop new products to fully leverage the market channels opened by the
implementation of our technology. For example, we are in the prototype stage of
development of Preferred Plans.com, a prepackaged group health insurance
solution for multi-site, multi-state employers that will provide mid-size
employers with rate quotes and access to best-practice, best-value health plans
throughout the United States. This will give the health plan supplier access to
the purchaser via the Internet for the first time. We already have identified
several health plans that we believe

32
<PAGE>

may be interested in forming strategic partnerships with us for this
development-stage product. In addition, we are designing our technology to
support the sophisticated data and financial reconciling requirements implicit
in the post-enrollment risk-adjusted payments to health plans that would result
from defined contribution and voucher systems that may constitute the future of
the health care benefit system.

Customers

The following is a list of our customers who provided 10% or more of our
revenue during 1998.

Bell Atlantic Corporation
Northwest Airlines Corporation
PepsiCo, Inc.

The following is a representative list of our other major customers.

American Medical Response, Inc. GE Capital Services Corporation
American Red Cross General Electric Company
Bass Hotels & Resorts, Inc. Georgia-Pacific Corporation
Benefits Alliance, LLC KPMG LLP
Blue Cross Blue Shield Association Promus Hotel Corporation
Chevron Corporation R.R. Donnelley & Sons Company
Dayton Hudson Corporation Reader's Digest Association, Inc.
Eastman Kodak Company W.W. Grainger, Inc.
Federated Department Stores, Inc. White Consolidated Industries Inc.

In 1999 to date, twelve customers have accounted for approximately 90% of our
revenue. In 1996, Northwest Airlines and Johnson Controls, Inc. accounted for
22.6% and 17.7%, respectively, of our revenue. In 1997, Northwest Airlines,
PepsiCo, Johnson Controls and General Electric Company accounted for 14.5%,
16.1%, 12.8% and 10.4%, respectively, of our revenue. In 1998, Northwest
Airlines, PepsiCo and Bell Atlantic accounted for 14.0%, 19.1% and 17.1%,
respectively, of our revenue. From January 1, 1999 through September 30, 1999,
Bell Atlantic and PepsiCo accounted for 27.2% and 20.5%, respectively, of our
revenue.

Connected Health Plans

The following is a representative list of the health plans to which we have
built customized eligibility and financial data pipelines.

Aetna, Inc. Plans Kaiser Foundation Health Plan
Blue Cross Blue Shield Plans Merck-Medco
CIGNA Health Plans, Inc. PacifiCare Health Systems
Delta Dental UnitedHealth Group Corporation Plans
Harvard Pilgrim Health Care More than 25 Blue Cross/Blue Shield
Plans

Sales and Marketing

Our sales and marketing staff is organized according to our three key
targeted customer segments: Fortune 1000, brokers for mid-size employers, and
human resource service and systems companies. Our sales force targets
significant potential customers in the Fortune 1000 and mid-size employer
segments. Senior management plays an active role in our sales and marketing
efforts.

Due to the technical nature of our products and services, our typical sales
cycle in the Fortune 1000 market is four to six months and usually involves a
competitive bidding process, which starts with a request for proposal from the
employer. The employer often indicates that this request for proposal has been
sent to other benefits administration service companies, which may or may not
submit a proposal to the employer. Our sales process also is somewhat seasonal
because most large employers undergo the open enrollment process in the

33
<PAGE>

fall of each year. We obtain approximately 75% of our customer commitments
during the months of February through May. The mutual intent is that our
systems will be integrated with the customer's system and become operational
prior to the open enrollment period later that year.

Fortune 1000. We sell directly to the Fortune 1000 market. As of October 31,
1999, we employed one senior vice president in charge of sales and marketing to
this market. He is supported by three sales people. We expect to hire two
additional sales personnel in the next several months. In addition, this senior
vice president is supported by two marketing assistants who assist him with
trade shows and developing prospective clients, and by a vice president and
four strategic procurement consultants who spend a portion of their time cross-
selling administrative services to the Fortune 1000 market.

Brokers for Mid-size Employers. We utilize existing brokerage distribution
systems to penetrate the market of mid-size employers. As of October 31, 1999,
we employed three senior staff members who are specifically focused on
developing our sales and marketing efforts to brokers. We intend to hire two
additional marketing employees to assist them and to further develop our broker
distribution network. We believe that emphasizing our collection and payment
capabilities to interface with numerous health plans will be a critical factor
in winning acceptance in this market.

Human Resource Service and Systems Companies. We partner with human resource
service and systems companies to re-sell our products and services as a
component of the products and services that they offer to employers. This
effort is being led by one of our co-founders. We expect to add personnel to
this area as our partnership efforts develop.

Customer Support

We believe a high level of customer support is necessary to broaden the
acceptance of our products and services. We provide a wide range of customer
support services through our call service center, our account managers, our
customer service staff and an e-mail help desk. By providing consolidated
customer service through our service center, we eliminate the need for our
customers to maintain numerous contact lists across benefit vendors in order to
resolve enrollment, eligibility and billing issues. We provide each customer
with a telephone number for it and its participants to use regarding enrollment
choices, grievances and benefit clarification. Our service center is open from
7:00 a.m. to 7:00 p.m. Central Time, Monday through Friday. When the service
center is closed, calls for existing clients are forwarded to our voice mail
system. We also offer Internet-based support services that are available 24
hours a day, 7 days a week. Finally, we use proprietary automated tracking
systems to ensure resolution of all inquiries. As of October 31, 1999, we had
38 employees in customer support functions.

Competition

The market for health care administration services is intensely competitive,
rapidly evolving and subject to sudden technological change. Many of our actual
and potential competitors have announced or introduced solutions that compete,
at least in part, with our products and services. We believe that the principal
competitive factors in this market are health and managed care expertise, data
integration and transfer technology, health insurance benefits processing
technology, customer service and support and price. We believe, based on our
experience, our products and services are competitive with respect to these
factors and that no other competitor has the Internet-based technology
capabilities combined with managed care expertise that we have. Further, we
believe we are currently the only participant in this market with both the
connectivity link between employers and health plans and our range of services.
However competitors may develop similar products or we may not be able to
successfully market our products or successfully develop and introduce products
that are less costly than or superior to those of our competitors.

We compete with administrative service providers and benefits consultants
with administrative capabilities. We also compete with the internal information
systems departments of the Fortune 1000 companies that perform their own health
care administration services. In the mid-size employer market, we compete with
other

34
<PAGE>

technology solutions that serve the automation and administration needs of
health benefit brokers. In addition, many human resource service and systems
companies have the healthcare expertise and financial strength to develop the
technology necessary to compete with us. As the market evolves we expect
increasing competition from Internet-based service providers in both the health
care connectivity market and the online insurance market. We believe that our
established and proven technology and our knowledge of the healthcare market
provide us with the necessary capabilities to adapt to the evolving market and
to increasing competition.

Systems and Technology

Primary Systems Information

Historically, our services have been delivered using our proprietary BEN-NET
technology as the core eligibility and financial exchange engine. BEN-NET was
originally designed and implemented in 1994 to serve two distinct customer
bases: Fortune 1000 employers and health insurance purchasing coalitions.
Though the latter market never fully developed, the business requirements and
attendant system capabilities such as our ability to update, transmit and
permanently store eligibility data at both the employee and dependent level
have provided additional benefit to our Fortune 1000 clients. We have
incorporated a number of enhancements to BEN-NET in three subsequent major
releases.

BEN-NET and its fully integrated attendant applications are delivered using a
multi-tier information system comprised of multiple midrange servers, PCs and
workstations. The midrange servers, Sun Enterprise Servers running Sun's
Solaris Unix operating system, are used to provide middle-tier application
component logic and as a platform for eBenX's relational database management
system. Batch and end-user local and Internet applications employ a number of
different languages, primarily PowerBuilder, C, and Java.

Our production processing environment, maintained at our Minneapolis
facility, is composed of multiple servers, permitting maximum flexibility in
organizing and protecting client data. The environment in which our database
runs, UNIX, is a highly scalable platform. Given this platform, we are able to
add capacity relatively easily, we can also physically organize our databases
on different servers to optimize the processing performed on each server. For
example, an entire production server can be dedicated to a single large client
if this client has extensive processing requirements. Within this processing
environment, we establish separate physical production databases for each of
our Fortune 1000 customers to ensure that customer data remains confidential
and secure. This also ensures that it maintains its integrity. In so doing, we
are able to provide customer data access to customer specified user groups.
Secure, real time Internet-based customer and health plan access to source data
brings trading partners into alignment and reduces support costs.

We believe our proprietary data import and export management application is a
key differentiator for our services. Electronic Vendor Interface Management
(EVIM) delivers the ability and flexibility to receive and transmit data
between trading partners. This application incorporates not only a library of
health plan data maps, but also a deep knowledge of the business rules that
must be incorporated in the complex managed care market.

Electronic imports and exports (an average of 1,000 files per week with each
file ranging from 500-50,000 records) are managed via EVIM, ensuring automated,
timely distribution of data, payments, and reports to clients and vendors. This
precise management of the flow of data also supports a key function of BEN-NET,
which is the dynamic application of customer-related business rules to
customer-delivered eligibility data, streamlining both health plan delivery of
service and payment.

Redundancy, System Backup, Security and Disaster Recovery

We believe our facilities and operations include sufficient redundancy, back-
up and security to ensure minimal exposure to systems failure or unauthorized
access. A disaster recovery plan has been prepared and will be put in place
should the need arise. Incremental backups of both software and databases are
performed on a daily basis and a full system backup is performed weekly. Backup
tapes are stored at an offsite location

35
<PAGE>

along with copies of schedules/production control procedures, procedures for
recovery using an off-site data center, documentation and other critical
information necessary for recovery and continued operation. Our current
facility has two separate power feeds to provide a level of redundancy should a
power outage occur.

We employ rigorous physical and electronic security to protect customer data.
Our data center is isolated within our corporate offices with restricted card
key access, and appropriate additional physical security measures. Electronic
protections include encryption, firewalls, multi-level access controls and
separate customer databases.

Proprietary Rights

We rely upon a combination of contractual rights, trade secrets, copyrights,
technical measures, non-disclosure agreements and trademarks to establish and
protect proprietary rights in our products and technologies. However, we
believe that intellectual property protection is less important than our
ability to continue to develop new applications and services that meet the
requirements of our industry. As a result, we have invested heavily in the
research and development of our products and services, spending approximately
$863,000, $1,242,000 and $1,519,000 in 1996, 1997 and 1998, respectively. We
typically enter into non-disclosure and confidentiality agreements with our
employees and distributors with access to sensitive information. These
agreements may be breached and we may not have adequate remedies for any
breach. Others may acquire substantially equivalent proprietary technologies or
otherwise gain access to our proprietary technologies. In addition, any
particular technology may not be regarded as a trade secret under applicable
law. As a result of the reliance that we place on our trade secrets, loss of
our trade secret protection could harm our business and results of operations.
We have no registered patents or pending patent applications. The steps taken
by us to protect our proprietary rights may not be adequate to prevent
misappropriation of our technology or independent development or sale by others
of software products with features based upon, or otherwise similar to, our
products.

Although we believe that our technology has been independently developed and
that none of our technology or intellectual property infringes on the rights of
others, third parties may assert infringement claims against us in the future.
If infringement were established, we might be required to modify our products
or technologies or obtain a license to permit our continued use of those
rights. We may not be able to do either in a timely manner or upon acceptable
terms and conditions, and any failure to do so could harm our business and
results of operations. In addition, any future litigation necessary to protect
our trade secrets, know-how or other proprietary rights, to defend ourselves
against claimed infringement of the rights of others or to determine the scope
and validity of the proprietary rights of others could result in substantial
cost to us and diversion of our resources. Adverse determinations in any
litigation or proceedings also could subject us to significant liabilities to
third parties and could prevent us from producing, selling or using our
products or technologies. We may not have the resources to defend or prosecute
a proprietary rights infringement claim or other action.

Government Regulation

The healthcare industry is highly regulated by state, federal and local laws
and regulations, which are subject to change. Currently, few of these laws and
regulations apply directly to our business but rather apply primarily to health
plans or employers. For example, the confidentiality of patient records and the
circumstances under which records may be released for inclusion in our
databases may be subject to substantial regulation by state governments. These
state laws and regulations govern both the disclosure and the use of
confidential patient medical records. Although compliance with these laws and
regulations currently is principally the responsibility of health care
providers and we typically do not include confidential patient medical
information in our databases, these regulations may be extended to cover our
business and the eligibility and other data that we do include in our
databases. Additional legislation governing the dissemination of medical
records has been proposed at both the state and federal level. This legislation
may require holders of these records to implement security measures that may
require substantial expenditures by us. Changes to federal, state or local laws
may materially restrict employers' and health plans' ability to store and
transmit medical records using our products and services.

36
<PAGE>

Laws and regulations may be adopted with respect to the Internet or other on-
line services covering issues such as user privacy, pricing, content,
copyrights, distribution and characteristics and quality of products and
services. The adoption of any additional laws or regulations may impede the
growth of the Internet or other on-line services. This could decrease the
demand for our products and services and increase our cost of doing business.
Moreover, the applicability to the Internet of existing laws in various
jurisdictions governing property ownership, sales taxes and other forms of
taxation, libel and personal privacy is uncertain and may remain uncertain for
a considerable length of time.

HIPAA mandates the use of standard transactions, identifiers, security and
other provisions by the year 2000. We have designed our products and services
to comply with HIPAA. However, any change in federal standards would require us
to expend additional resources.

Finally, our function as a conduit for payment by employers to health plans
may subject us to the ERISA. ERISA imposes fiduciary duties on employers and
health plans with respect to payments made on behalf of participants. Although
we believe our role in the payment process is a purely mechanical one, it is
possible that these fiduciary duties could be deemed to apply to us. In that
event, we may become subject to greater liability with respect to these
payments and may experience higher operating costs in order to comply with
these regulation.

Properties

Our offices are located in Minneapolis, Minnesota where we lease or sublease
approximately 37,100 square feet of office space. Our lease for 29,630 square
feet of this space expires on April 30, 2000 and the lease for the remainder
expires on February 28, 2003. We believe our existing facilities are adequate
to meet our needs until the expiration of our principal lease. Any future
growth during this period can be accommodated through the leasing of additional
or alternative space near our current facilities. Due to our current sales and
marketing plan, we anticipate the need for additional office space in the year
2000 and we currently are negotiating to lease approximately 70,000 square feet
of office space located in the Minneapolis metropolitan area upon the
expiration of our principal lease on April 30, 2000.

Employees

As of October 31, 1999, we had 263 full-time employees, including 90 in
information technology, 89 in operations, 33 in account management, 10 in sales
and marketing, 24 in consulting and 17 in administration and executive
management. We have never had a work stoppage and none of our employees
currently are represented under collective bargaining agreements. We consider
our relations with our employees to be good. We believe that our future success
will depend in part on the continued service of our senior management and key
technical personnel and our ability to attract, integrate, retain and motivate
highly qualified technical and managerial personnel. This is particularly true
for sales and marketing personnel because of our plans to significantly expand
our sales and marketing groups. Competition for qualified personnel in our
industry and geographical location is intense. We may not continue to be
successful in attracting and retaining a sufficient number of qualified
personnel to conduct our business in the future.

37
<PAGE>

MANAGEMENT

Executive Officers and Directors

The following table provides information as of October 31, 1999 regarding our
executive officers and directors:

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Mark W. Tierney... 51 Chairman and Director
John J. Davis..... 40 Chief Executive Officer and Director
Michael C.
Bingham......... 37 Senior Vice President, Business Development and Director
Scott P.
Halstead........ 36 Chief Financial Officer and Secretary
Paul V. Barber.... 38 Director
James P. Bradley.. 48 Director
Daniel M. Cain.... 54 Director
William J. Geary.. 40 Director
John M. Nehra..... 51 Director
</TABLE>

Mr. Tierney is one of our co-founders. He has been our Chairman since
September 1993 and a member of our board of directors since September 1993.
Prior to founding our company, Mr. Tierney founded a joint venture company with
UnitedHealth Group Corporation which specializes in patient demand management,
patient advocacy and case management services to Fortune 500 companies and
served as its President and Chief Executive Officer from July 1985 to August
1993. From July 1983 to July 1985, Mr. Tierney served as Senior Vice President
of Medical Services for Allina Health System, the largest HMO in the
Minneapolis-St. Paul metropolitan area. Prior to July 1983, he held management
positions with CIGNA Health Plans, Inc. and Kaiser Permenente Southern
California. Mr. Tierney holds a master's degree in Hospital and Health Care
Administration from the University of Minnesota and today serves on their
clinical faculty.

Mr. Davis has been our Chief Executive Officer since April 1999 and a member
of our board of directors since June 1999. From 1996 to 1999, Mr. Davis served
as President and Chief Executive Officer of MedManagement, L.L.C., a national
and leading provider of pharmacy management and medication use consulting
services to hospitals and health systems. Prior to his work with MedManagement,
L.L.C., Mr. Davis served for ten years in a number of operations and executive
management positions at UnitedHealth Group Corporation. Most recently, from
1994 to 1996, Mr. Davis served as President of Healthmarc, a UnitedHealth Group
Corporation specialty company providing innovative managed care services to
employers with populations resident outside health plan service areas. Mr.
Davis holds a bachelor's degree from St. John's University, Collegeville,
Minnesota.

Mr. Bingham is one of our co-founders. He has been our Senior Vice President,
Business Development since August 1999 and a member of our board of directors
since September 1993. In addition, Mr. Bingham has held leadership roles in
many aspects of our company since its inception. Prior to founding our company,
Mr. Bingham held various management positions at UnitedHealth Group
Corporation, McKinsey & Company and Maxicare Health Plans. Mr. Bingham holds an
M.B.A. degree from the Wharton School at the University of Pennsylvania and a
bachelor's degree in economics from Claremont McKenna College.

Mr. Halstead has been our Chief Financial Officer since February 1997. Prior
to joining our company, he spent six years with The Dun & Bradstreet
Corporation in various financial management positions in North America, Europe
and Asia. Most recently he was Chief Financial Officer of an operating division
of The Dun & Bradstreet Corporation. Mr. Halstead holds an M.B.A. degree from
the Wharton School at the University of Pennsylvania and a bachelor's degree in
Industrial Engineering from Northwestern University.

Mr. Barber has been a director since June 1999. Mr. Barber is a Managing
Member of JMI Associates III, LLC, the general partner of JMI Equity Fund III,
L.P., a venture capital limited partnership. From 1990 to 1998, he was Managing
Director and head of the software investment banking practice of Deutsche Bank
Alex.

38
<PAGE>

Brown, an investment banking firm. Mr. Barber serves on the board of directors
of several privately held companies. Mr. Barber holds an M.B.A. from Harvard
Business School and a bachelor's degree in Economics from Stanford University.

Mr. Bradley has been a director since 1997. Mr. Bradley has been Chairman and
Chief Executive Officer of Abaton.com, Inc., a Web-based healthcare information
company, since January 1997. From 1989 to October 1995, Mr. Bradley was Chief
Information Officer of UnitedHealth Group Corporation. From October 1995 to
January 1997, Mr. Bradley was President of Health Systems Integration, Inc., a
healthcare software information company. Mr. Bradley holds an M.S. degree in
Bio Statistics and Data Processing and a bachelor's degree in Genetics and
Statistics from the University of Illinois.

Mr. Cain has been one of our directors since March 1999. Mr. Cain is
President and Chief Executive Officer of Cain Brothers, LLC, a healthcare
investment bank which has served the financial and capital needs of the health
and medical industry since 1982, and a Manager of CB Health Ventures, L.L.C.
Mr. Cain is a director of New England Funds, a family of mutual funds and
Universal Health Realty Income Trust, a health care REIT. Mr. Cain is a trustee
of the Norman Rockwell Museum and Sharon Hospital and the National Committee
for Quality Health Care. Mr. Cain holds an M.B.A. degree from Columbia
University and a bachelor's degree in American Civilization from Brown
University.

Mr. Geary has been a director since June 1998. Mr. Geary has been a Principal
of North Bridge Venture Partners, L.P. since its inception in March 1994 and a
General Partner of North Bridge Venture Partners II, L.P., North Bridge Venture
Partners III, L.P. and North Bridge Venture Partners IV, L.P. since their
inceptions in September 1996, August 1998 and October 1999, respectively. Mr.
Geary also is a director of several private technology companies. Mr. Geary
holds a bachelor's degree from Boston College and is a C.P.A.

Mr. Nehra has been a director since 1996. Since 1989, Mr. Nehra has been the
managing general partner of Catalyst Ventures, Limited Partnership, a venture
capital limited partnership. Since December 1993, Mr. Nehra has also been a
general partner of New Enterprise Associates VI, VII, and VIII Limited
Partnerships, venture capital limited partnerships. Mr. Nehra has served as
Chairman of the Board of Directors of Celeris Corporation, a biomedical
contract research service company since July 1997 and as a director of Celeris
since November 1992. Mr. Nehra also has served as Chairman of the Board of
Iridex Corporation, a medical device company, since 1994, and as a director
since 1989. Mr. Nehra is also a director of several privately held companies.
Mr. Nehra holds a bachelor's degree from the University of Michigan.

Board Composition

Following this offering, our board of directors will consist of eight
directors divided into three classes with each class serving for a term of
three years. At each annual meeting of shareholders, directors will be elected
by the holders of common stock to succeed those directors whose terms are
expiring. Messrs. Geary and Nehra will be Class I directors whose terms will
expire in 2000; Messrs. Barber, Bradley and Cain will be Class II directors
whose terms will expire in 2001; and Messrs. Bingham, Davis and Tierney will be
Class III directors whose terms will expire in 2002. We intend to replace one
or two current directors with outside directors after this offering as soon as
we identify suitable candidates.

Board Committees

Our board of directors has established a compensation committee and an audit
committee.

Messrs. Bradley, Cain and Nehra are members of our compensation committee and
Mr. Nehra is its chairman. Our compensation committee makes recommendations to
the board of directors concerning executive compensation and administers our
stock option plans and our Employee Stock Purchase Plan.

Messrs. Barber, Geary and Nehra are members of our audit committee and Mr.
Geary is its chairman. Our audit committee reviews the results and scope of the
audit and other accounting related services and reviews our accounting
practices and systems of internal accounting controls.

39
<PAGE>

Director Compensation

We currently do not pay any compensation to directors for serving in that
capacity. We reimburse directors for out-of-pocket expenses incurred in
attending board meetings. Our board of directors has the discretion to grant
options to non-employee directors pursuant to our stock option plans. Mr.
Bradley currently holds options to purchase 46,695 shares of our common stock.

Compensation Committee Interlocks and Insider Participation

Messrs. Bradley, Cain and Nehra currently serve on the compensation
committee. None of these individuals has at any time been an officer or
employee of ours. Prior to formation of the compensation committee, all
decisions regarding executive compensation were made by the full board of
directors. No interlocking relationship exists between the board of directors
or the compensation committee and the board of directors or compensation
committee of any other company, nor has any interlocking relationship existed
in the past.

On March 19, 1996, we sold a total of 636,945 shares of our Series B
Preferred Stock at a purchase price of $7.065 per share, including 424,630
shares to New Enterprise Associates VI, Limited Partnership. On May 3, 1999, we
sold a total of 563,525 shares of our Series C Preferred Stock at a purchase
price of $9.76 per share, including 307,377 shares to CB Healthcare Fund, L.P.
and 102,459 shares to New Enterprise Associates VI, Limited Partnership. On
June 9, 1999, we sold a total of 512,295 shares of our Series C Preferred Stock
at a purchase price of $9.76 per share, including 102,459 shares to CB
Healthcare Fund, L.P. These share issuances do not reflect the three-for-one
stock split effective immediately prior to this offering.

Mr. Nehra is a general partner of NEA Partners VI, Limited Partnership, which
is the general partner of New Enterprise Associates VI, Limited Partnership.
Mr. Cain is a Manager of CB Health Ventures, L.L.C. which is the general
partner of CB Healthcare Fund, L.P. We believe that the shares issued in the
transactions described above were sold at the then fair market value of the
shares and that the terms of these transactions were no less favorable than we
could have obtained from unaffiliated third parties.

Indemnification Matters and Limitation of Liability

Minnesota law and our bylaws provide that we will, subject to limitations,
indemnify any person made or threatened to be made a party to a proceeding by
reason of that person's former or present official capacity with us. We will
indemnify that person against judgments, penalties, fines, settlements and
reasonable expenses, and, subject to limitations, we will pay or reimburse
reasonable expenses before the final disposition of the proceeding.

As permitted by Minnesota law, our articles of incorporation provide that our
directors will not be personally liable to us or our shareholders for monetary
damages for a breach of fiduciary duty as a director, subject to the following
exceptions:

. any breach of the director's duty of loyalty to us or our shareholders;

. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

. liability for illegal distributions under section 302A.559 of the
Minnesota Business Corporation Act or for civil liabilities for state
securities law violations under section 80A.23 of the Minnesota
statutes;

. any transaction from which the director derived an improper personal
benefit; and

. any act or omission occurring prior to the effective date of Article
VIII of our articles of incorporation.

In addition, the employment agreements with our officers that are described
in this prospectus require us, to the extent permitted by law, to indemnify
each of these officers and to obtain directors' and officers' liability
insurance coverage in the amount that our board of directors determines to be
appropriate.

40
<PAGE>

Presently, there is no pending litigation or proceeding involving any of our
directors, officers, employees or agents where indemnification will be required
or permitted. We are not aware of any threatened litigation or proceeding that
might result in a claim for indemnification.

Employment Agreements

We entered into employment agreements with Mark Tierney, John Davis and Scott
Halstead in April 1999 that govern their employment with us. The agreements set
forth their compensation levels and eligibility for salary increases, bonuses,
benefits and option grants under our stock option plans. The initial employment
term is five years. During the term of their employment agreements, either
party may terminate the agreement by providing at least 30 days written notice
to the other party.

Mr. Tierney's employment agreement provides for a payment of one year's base
salary and an immediate vesting of 100% of any remaining unvested stock options
in the event of termination of employment by mutual agreement or due to Mr.
Tierney's death or disability. Also, if we terminate his employment other than
for cause, other than as set forth in the preceding sentence, or Mr. Tierney
terminates his employment agreement because of a material reduction in his
duties or compensation or because we require him to relocate, then the
agreement provides for a payment of two years' base salary and an immediate
vesting of 100% of any remaining unvested stock options. If a change in control
occurs prior to April 22, 2001, his employment agreement provides for an
immediate vesting of 100% of any remaining unvested stock options.

Mr. Davis' employment agreement provides for a payment of one year's base
salary and an immediate vesting of 50% of any remaining unvested stock options
in the event of termination of employment other than for cause. If, however,
the termination of employment occurs within two years of a change in control,
the employment agreements provide for severance pay of one year's base salary
and an immediate vesting of 100% of any remaining unvested stock options.

Mr. Halstead's employment agreement provides for a payment of six months'
base salary and an immediate vesting of 50% of any remaining unvested stock
options in the event of termination of employment other than for cause. If,
however, the termination of employment occurs within one year of a change in
control, his employment agreement provides for severance pay of six months'
base salary and an immediate vesting of 100% of any remaining unvested stock
options.

Executive Compensation

The following table provides information concerning compensation paid or
accrued by us to or on behalf of our chief executive officer and each of our
two other most highly compensated executive officers whose salary and bonus
during the fiscal year ended December 31, 1998 was more than $100,000:

Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
---------------- ------------
Shares
Name and Principal Underlying
Position Salary Bonus Options
- ------------------ -------- ------- ------------
<S> <C> <C> <C>
Mark W. Tierney
Chairman and
Director.............. $152,000 $42,040 31,200
Michael C. Bingham
Senior Vice President,
Business Development.. $104,000 $28,580 23,400
Scott P. Halstead
Chief Financial
Officer and
Secretary............. $120,000 $12,000 11,700
</TABLE>
- --------
. The aggregate amount of perquisites and other personal benefits, securities
or property received by each named executive officer was less than either
$50,000 or 10% of the total annual salary and bonus reported for each
respective named executive officer.
. John Davis became Chief Executive Officer in April 1999. During the fiscal
year ended December 31, 1998, Mark Tierney was Chairman and Chief Executive
Officer. Michael Bingham has been Senior Vice President, Business
Development since August 1999. During the fiscal year ended December 31,
1998, Mr. Bingham was President.

41
<PAGE>

The following table provides information concerning the stock option grants
made to each of our named executive officers during the fiscal year ended
December 31, 1998.

Option Grants in Fiscal 1998

<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------
Number of
Securities Percentage of Total
Underlying Options Granted to
Options Employees in Fiscal Exercise Price Expiration
Name Granted 1998 ($/Share) Date
- ---- ---------- ------------------- -------------- ----------
<S> <C> <C> <C> <C>
Mark W. Tierney....... 31,200 5.01% $0.75 6/10/2008
Michael C. Bingham.... 23,400 3.76% $0.75 6/10/2008
Scott P. Halstead..... 11,700 1.88% $0.75 6/10/2008
</TABLE>
- --------
. The above options have a 10-year term from the grant date, and were fully
vested and exerciseable as of the grant date. All stock options were granted
with an exercise price equal to the fair market value of the common stock as
determined by our board of directors on the date of grant.
. The data presented in the Percentage of Total Options Granted to Employees
in Fiscal 1998 column based on an aggregate of 622,950 shares of common
stock subject to options granted to our employees during fiscal 1998.

The following table provides information concerning the exercise of options
to purchase common stock by our named executive officers during fiscal 1998 and
the number and value of unexercised stock options held by these executive
officers as of December 31, 1998.

Aggregated Option Exercises in Fiscal 1998 and
Fiscal Year-End Option Values

<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End at Fiscal Year-End
----------------------- -------------------------
Shares
Acquired on
Name Exercise Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Mark W. Tierney......... -- 75,630 -- $33,174 $ --
Michael C. Bingham...... -- 27,105 -- $ 2,766 $ --
Scott P. Halstead....... -- 36,450 65,250 $ 3,713 $9,788
</TABLE>
- --------
. The value of unexercised in-the-money options is based on a value of $0.75,
the fair market value of our common stock as of December 31, 1998 as
determined by our board of directors, less the applicable per share exercise
price multiplied by the number of shares issued upon exercise of the option.

Benefit Plans

1993 Stock Option Plan

Our 1993 Stock Option Plan provides for the grant of options to purchase
shares of common stock and other long-term incentive awards to any of our full
or part-time employees, officers, directors, consultants and independent
contractors. Options granted under the 1993 Stock Option Plan may qualify as
incentive stock options under the Internal Revenue Code of 1986, or may be
options that do not qualify as incentive stock

42
<PAGE>

options. Other long-term incentive awards that may be granted under the 1993
Stock Option Plan include stock appreciation rights, or SARs, restricted stock
and performance awards. We have reserved 3,900,000 shares of common stock for
issuance under the 1993 Stock Option Plan. The 1993 Stock Option Plan is
administered by our compensation committee. The committee has the discretion to
select the people to whom options are granted and to establish the terms and
conditions of each stock option, subject to the provisions of the 1993 Stock
Option Plan and to any special provisions approved by our board of directors.
The exercise price of an incentive stock option granted under the 1993 Stock
Option Plan must not be less than 100% of the fair market value of the common
stock on the date the option is granted. In the event that a proposed optionee
owns more than 10% of our common stock, any incentive stock option granted to
that optionee must have an exercise price not less than 110% of the fair market
value of our common stock on the grant date. The term of each option is
determined by the compensation committee. However, the term of an incentive
stock option may not exceed 10 years from the date of grant and the term of a
non-qualified stock option may not exceed 15 years from the date of grant. In
the case of an incentive option granted to an owner of more than 10% of our
common stock, the term may not exceed five years from the date of grant. The
1993 Stock Option Plan is subject to amendment by our board of directors,
except that the board may not increase the number of shares which may be issued
under the 1993 Stock Option Plan or decrease the minimum exercise price of
options granted under the 1993 Stock Option Plan without the approval of our
shareholders.

As of December 31, 1998, options to purchase an aggregate of 1,661,790 shares
of common stock, at a weighted average exercise price of $0.45 per share, were
outstanding under the 1993 Stock Option Plan and a total of 341,883 shares were
available for future option grants.

1999 Stock Incentive Plan

Our 1999 Stock Incentive Plan was approved by our board of directors and
shareholders in September 1999. The 1999 Stock Incentive Plan provides for the
granting of:

. stock options, including incentive stock options and non-qualified stock
options;

. stock appreciation rights, or SARs;

. restricted stock and restricted stock units;

. performance awards; and

. other stock-based awards.

We have reserved 3,000,000 shares of common stock for issuance under the 1999
Stock Incentive Plan. The 1999 Stock Incentive Plan is administered by our
compensation committee. The compensation committee has the authority

. to establish rules for the administration of the 1999 Incentive Plan;

. to select the persons to whom awards are granted;

. to determine the types of awards to be granted and the number of shares
of common stock covered by awards; and

. to set the terms and conditions of awards.

The compensation committee may also determine whether the payment of any
amounts received under any award shall be deferred. Awards may provide that
upon the grant or exercise, the holder will receive shares of common stock,
cash or any combination, as the compensation committee shall determine.

In order to meet the requirements of Section 162(m) of the Internal Revenue
Code, the 1999 Incentive Plan contains a limitation on the number of options
that may be granted to any single person in any one calendar year.

The exercise price per share under any incentive stock option or the grant
price of any SAR cannot be less than 100% of the fair market value of our
common stock on the date of the grant of that incentive stock option

43
<PAGE>

or SAR. In the event that a proposed optionee owns more than 10% of our common
stock, any incentive stock option granted to that optionee must have an
exercise price not less than 110% of the fair market value of our common stock
on the grant date and may not have a term longer than five years. Options may
be exercised by payment in full of the exercise price, either in cash or, at
the discretion of the compensation committee, in whole or in part by the
tendering of shares of common stock or other consideration having a fair market
value on the date the option is exercised equal to the exercise price.
Determinations of fair market value under the 1999 Stock Incentive Plan are
made in accordance with methods and procedures established by the compensation
committee.

The holder of an SAR is entitled to receive the excess of the fair market
value of a specified number of shares over the grant price of the SAR.

The holder of restricted stock may have all of the rights of a shareholder of
our company, including the right to vote the shares subject to the restricted
stock award and to receive any dividends, or these rights may be restricted.
Restricted stock may not be transferred by the holder until the restrictions
established by the compensation committee lapse. Holders of restricted stock
units have the right, subject to any restrictions imposed by the compensation
committee, to receive shares of common stock, or a cash payment equal to the
fair market value of such shares, at some future date. Upon termination of the
holder's employment during the restriction period, restricted stock and
restricted stock units shall be forfeited, unless the compensation committee
determines otherwise.

If any shares of common stock subject to any award or to which an award
relates are not purchased or are forfeited, or if any award terminates without
the delivery of shares or other consideration, the shares previously used for
these awards become available for future awards under the 1999 Stock Incentive
Plan. Except as otherwise provided under procedures adopted by the compensation
committee to avoid double counting with respect to awards granted in tandem
with or in substitution for other awards, all shares relating to awards granted
are counted against the aggregate number of shares available for granting
awards under the 1999 Stock Incentive Plan.

Our board of directors may amend, alter or discontinue the 1999 Stock
Incentive Plan at any time, provided that shareholder approval must be obtained
for any change that absent shareholder approval:

. would cause Rule 16b-3 of the Exchange Act or section 162(m) of the
Internal Revenue Code to become unavailable with respect to the 1999
Stock Incentive Plan;

. would violate any rules or regulations of the National Association of
Securities Dealers, Inc., the Nasdaq National Market or any securities
exchange applicable to us; or

. would cause us to be unable under the Internal Revenue Code to grant
incentive stock options under the 1999 Stock Incentive Plan.

Under the 1999 Stock Incentive Plan, the compensation committee may permit
participants receiving or exercising awards to surrender shares of common stock
to us to satisfy federal and state withholding tax obligations. In addition,
the compensation committee may grant a bonus to a participant in order to
provide funds to pay all or a portion of federal and state taxes due as a
result of the receipt, exercise or lapse of restrictions relating to an award.

Employee Stock Purchase Plan

Our employee stock purchase plan will become effective upon consummation of
this offering and is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Code. The stock purchase plan covers
an aggregate of 900,000 shares of common stock. In order to participate in the
stock purchase plan, employees must meet eligibility requirements.
Participating employees will be able to direct us to make payroll deductions of
up to 15% of their compensation during a purchase period for the purchase of
shares of common stock. Each purchase period, with the exception of the initial
offering period, will be six

44
<PAGE>

months. The stock purchase plan will provide participating employees with the
right, subject to specific limitations, to purchase our common stock at a price
equal to 85% of the lesser of the fair market value of our common stock on the
first day or the last day of the applicable purchase period. The price on the
first day of the initial purchase period will be the initial public offering
price of the shares of the common stock in this offering. The stock purchase
plan will terminate on the date our board of directors determines, or
automatically as of the date on which all of the shares of common stock
reserved for purchase under the stock purchase plan have been sold.

401(k) Plan

We have established a tax-qualified employee savings and retirement plan for
all of our employees who satisfy eligibility requirements, including
requirements relating to age and length of service. Pursuant to the 401(k)
plan, employees may elect to reduce their current compensation by up to the
lower of 20% or the statutory limit and have the amount of this reduction
contributed to the 401(k) plan. The 401(k) plan is intended to qualify under
Section 401 of the Code so that contributions by employees or by us to the
401(k) plan, and income earned on plan contributions, are not taxable to
employees until withdrawn from the 401(k) plan. Our contributions, if any, will
be deductible by us when made.

45
<PAGE>

CERTAIN TRANSACTIONS

On March 19, 1996, we sold a total of 636,945 shares of our Series B
Preferred Stock at a purchase price of $7.065 per share as follows:

. 212,315 shares to North Bridge Venture Partners, L.P.; and

. 424,630 shares to New Enterprise Associates VI, Limited Partnership.

On May 3, 1999, we sold a total of 563,525 shares of our Series C Preferred
Stock at a purchase price of $9.76 per share, including:

. 307,377 shares to CB Healthcare Fund, L.P.;

. 102,459 shares to North Bridge Venture Partners, L.P.; and

. 102,459 shares to New Enterprise Associates VI, Limited Partnership.

On June 9, 1999, we sold a total of 512,295 shares of our Series C Preferred
Stock at a purchase price of $9.76 per shares as follows:

. 102,459 shares to CB Healthcare Fund, L.P.;

. 364,754 shares to JMI Equity Fund III, L.P.; and

. 45,082 shares to JMI Equity Side Fund, L.P.

The share issuances discussed above do not reflect the three-for-one stock
split effective immediately prior to this offering.

William J. Geary, who is one of our directors, is a principal of North Bridge
Venture Management, L.P. North Bridge Venture Management is a general partner
of North Bridge Venture Partners, L.P.

John M. Nehra, who is one of our directors, is a general partner of NEA
Partners VI, Limited Partnership. NEA Partners VI, Limited Partnership is the
general partner of New Enterprise Associates VI, Limited Partnership.

Daniel M. Cain, who is one of our directors, is a manager of CB Health
Ventures, L.L.C. CB Health Ventures, L.L.C. is the general partner of CB
Healthcare Fund, L.P.

Paul V. Barber, who is one of our directors, is a managing member of JMI
Associates III, LLC. JMI Associates III, LLC, is the general partner of JMI
Equity Fund III, L.P. JMI Equity Side Fund, L.P. is affiliated with JMI Equity
Fund III, L.P. Mr. Barber has no beneficial ownership interest in JMI Equity
Side Fund, L.P.

We believe that the shares issued in the transactions described above were
sold at the then fair market value of the shares and that the terms of these
transactions were no less favorable than we could have obtained from
unaffiliated third parties.

46
<PAGE>

PRINCIPAL SHAREHOLDERS

The following table provides information concerning beneficial ownership of
our common stock as of October 31, 1999 by:

. each shareholder that we know owns more than 5% of our outstanding common
stock;

. each of our named executive officers;

. each of our directors; and

. all of our directors and named executive officers as a group.

The following table lists the applicable percentage of beneficial ownership
based on approximately 10,054,068 shares of common stock outstanding as of
October 31, 1999, as adjusted to reflect the conversion of the outstanding
shares of preferred stock immediately prior to this offering. The table also
lists the applicable percentage beneficial ownership based on 15,054,068 shares
of common stock outstanding upon completion of this offering, assuming no
exercise of the underwriters' overallotment option. Except where noted, the
persons or entities named have sole voting and investment power with respect to
all shares shown as beneficially owned by them. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect to
securities. Shares of common stock subject to options, warrants or issuable on
the conversion of preferred stock which are currently exercisable or
convertible or may be exercised or converted within 60 days of October 31, 1999
are deemed to be outstanding and to be beneficially owned by the person holding
these options, warrants or shares of convertible preferred stock for the
purpose of computing the number of shares beneficially owned and the percentage
ownership of the person or entity holding these securities but are not
outstanding for the purpose of computing the percentage ownership of any other
person or entity.

Unless otherwise indicated, the principal address of each listed 5%
shareholder is c/o eBenX, Inc., 5500 Wayzata Boulevard, Suite 1450,
Minneapolis, Minnesota 55416-1241.

<TABLE>
<CAPTION>
Percentage of
Shares Beneficially
Number of Owned
Shares --------------------
Beneficially Before the After the
Beneficial Owners Owned Offering Offering
- ----------------- ------------ ---------- ---------
<S> <C> <C> <C>
North Bridge Venture Partners, L.P.
950 Winter Street, Suite 4600
Waltham, MA 02451.......................... 2,054,949 20.4% 13.7%
New Enterprise Associates VI, Limited
Partnership
1119 St. Paul Street
Baltimore, MD 21202........................ 1,581,267 15.7% 10.5%
Entities associated with
JMI Equity Fund III, L.P. (1)
12680 High Bluff Drive
San Diego, CA 92130........................ 1,229,508 12.2% 8.2%
CB Healthcare Fund, L.P.
452 Fifth Avenue, 25th Floor
New York, NY............................... 1,229,508 12.2% 8.2%
Barbara J. Seykora (2)....................... 611,466 6.0% 4.0%
Mark W. Tierney (3).......................... 1,920,630 18.9% 12.7%
John J. Davis (4)............................ 148,827 1.5% 1.0%
Michael C. Bingham (5)....................... 1,227,105 12.2% 8.1%
Scott P. Halstead (6)........................ 70,200 * *
Paul V. Barber (7)........................... 1,094,262 10.9% 7.3%
James P. Bradley (8)......................... 25,017 * *
Daniel M. Cain (9)........................... 1,229,508 12.2% 8.2%
William J. Geary (10)........................ 2,054,949 20.4% 13.7%
John M. Nehra (11)........................... 1,581,267 15.7% 10.5%
All directors and executive officers as a
group (9 persons) (12)..................... 9,351,765 89.5% 60.5%
</TABLE>

47
<PAGE>

- --------
* Represents beneficial ownership of less than 1% of the outstanding shares
of our common stock.
(1) Includes 1,094,262 shares held by JMI Equity Fund III, L.P. and 135,246
shares held by JMI Equity Side Fund, L.P. JMI Equity Side Fund, L.P. is
affiliated with JMI Equity Fund III, L.P.
(2) Includes 143,400 shares issuable upon exercise of stock options
exercisable within 60 days of October 31, 1999.
(3) Includes 76,200 shares issuable upon exercise of stock options
exerciseable within 60 days of October 31, 1999 and 44,430 shares issuable
upon exercise of immediately exerciseable warrants.
(4) Includes 148,827 shares issuable upon exercise of stock options
exerciseable within 60 days of October 31, 1999.
(5) Includes 23,400 shares issuable upon exercise of stock options
exerciseable within 60 days of October 31, 1999 and 3,705 shares issuable
upon exercise of immediately exerciseable warrants.
(6) Includes 70,200 shares issuable upon exercise of stock options
exerciseable within 60 days of October 31, 1999.
(7) Includes 1,094,262 shares held by JMI Equity Fund III, L.P. Mr. Barber,
one of our directors, is a Managing Member of JMI Associates III, LLC,
which is the general partner of JMI Equity Fund III, L.P. JMI Equity Side
Fund, L.P. is affiliated with JMI Equity Fund III, L.P. Mr. Barber
disclaims beneficial ownership of shares held by JMI Equity Fund III, L.P.
Mr. Barber has no beneficial ownership interest in JMI Equity Side Fund,
L.P.
(8) Includes 25,017 shares issuable upon exercise of stock options
exerciseable within 60 days of October 31, 1999.
(9) Includes 1,229,508 shares held by CB Healthcare Fund, L.P. Mr. Cain, one
of our directors, is a Manager of CB Health Ventures, L.L.C., which is the
general partner of CB Healthcare Fund, L.P. Mr. Cain disclaims beneficial
ownership of shares held by CB Healthcare Fund, L.P.
(10) Includes 2,054,949 shares held by North Bridge Venture Partners, L.P. Mr.
Geary, one of our directors, is a principal of North Bridge Venture
Management, L.P., which is a general partner of North Bridge Venture
Partners, L.P. Mr. Geary disclaims beneficial ownership of shares held by
North Bridge Venture Partners, L.P.
(11) Includes 1,581,267 shares held by New Enterprise Associates VI, Limited
Partnership. Mr. Nehra, one of our directors, is a general partner of NEA
Partners VI, Limited Partnership, which is the general partner of New
Enterprise Associates VI, Limited Partnership. Mr. Nehra disclaims
beneficial ownership of shares held by New Enterprise Associates VI.
(12) Includes 391,779 shares issuable upon exercise of stock options
exerciseable within 60 days of October 31, 1999 and 48,135 shares issuable
upon exercise of immediately exerciseable warrants. Includes 1,094,262
shares held by JMI Equity Fund III, L.P., 1,229,508 shares held by CB
Healthcare Fund, L.P., 2,054,949 shares held by North Bridge Venture
Partners, L.P. and 1,581,267 shares held by New Enterprise Associates VI,
Limited Partnership. Does not include shares beneficially owned by Barbara
J. Seykora, who is not an executive officer of our company.

48
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Effective upon the filing of our amended and restated articles of
incorporation immediately prior to the closing of this offering, our authorized
capital stock will consist of 100,000,000 shares of capital stock, par value
$.01 per share. Unless otherwise designated by our board of directors, all
issued shares shall be deemed common stock with equal rights and preferences.

Common Stock

As of October 31, 1999, there were 10,054,068 shares of our common stock
outstanding.

Holders of our common stock do not have cumulative voting rights and are
entitled to one vote for each share held of record on all matters submitted to
a vote of the shareholders, including the election of directors. Holders of our
common stock are entitled to receive ratably the dividends, if any, as may be
declared by the board of directors out of legally available funds. These rights
are subject to the prior rights of any preferred stock then outstanding. See
"Dividend Policy" for a further description of dividend rights.

Upon our liquidation, dissolution or winding up, the holders of our common
stock will be entitled to share ratably in the net assets legally available for
distribution to shareholders after the payment of our debts and other
liabilities. These rights are subject to the prior rights of any preferred
stock then outstanding. Holders of our common stock have no preemptive or
conversion rights or other subscription rights and there are no redemption or
sinking funds provisions applicable to the common stock. All outstanding shares
of common stock are, and the common stock outstanding upon completion of this
offering will be, fully paid and nonassessable.

Preferred Stock

Effective upon the closing of this offering, our board of directors will have
the authority, without further action by the shareholders, to issue shares of
preferred stock in one or more series and to fix the number of shares,
designations and preferences, powers and relative, participating, optional or
other special rights and the qualifications or restrictions on those shares.
The preferences, powers, rights and restrictions of different series of
preferred stock may differ with respect to dividend rates, amounts payable on
liquidation, voting rights, conversion rights, redemption provisions, sinking
fund provisions and purchase funds and other matters.

The issuance of preferred stock could decrease the amount of earnings and
assets available for distribution to holders of common stock or adversely
affect the rights and powers, including voting rights, of the holders of common
stock. It may have the effect of delaying, deferring or preventing a change in
control our company. We currently do not plan to issue any shares of preferred
stock.

Registration Rights

After this offering, the holders of 6,248,922 shares of common stock will be
entitled to rights with respect to the registration of these shares under the
Securities Act as follows:

. Demand Registration Rights: At any time beginning six months following
our initial public offering, the holders of at least 30% of these shares
of common stock can request that we register all or a portion of their
shares. Upon this request, we must, subject to specific restrictions and
limitations, use our best efforts to cause a registration statement
covering the number of shares of common stock that are subject to the
request to become effective. The holders may only require us to file
three registration statements in response to their demand registration
rights.

. Piggyback Registration Rights: If we propose to register additional
shares of our common stock under the Securities Act, subject to specific
exceptions, the holders of the 6,248,922 shares can request that we
register their shares in connection with our registration. However, the
underwriter of the registration, if any, would have the right to limit
the number of the 6,248,922 shares that may be included in the
registration. These registration opportunities are unlimited.

49
<PAGE>

These registration rights terminate when all of these shares may be sold
during any 90-day period under Rule 144 under the Securities Act.

Provisions of our Restated Articles and Bylaws and State Law Provisions with
Potential Antitakeover Effects

The existence of authorized but unissued preferred stock, described above,
and specific provisions of Minnesota law, described below, could have an anti-
takeover effect. These provisions are intended to provide management with
flexibility, to enhance the likelihood of continuity and stability in the
composition of our board of directors and the policies of our board and to
discourage an unsolicited takeover of our company if our board of directors
determines that the takeover is not in the best interests of our company and
our shareholders. However, these provisions could have the effect of
discouraging attempts to acquire us, which could deprive our shareholders of
opportunities to sell their shares of common stock at prices higher than
prevailing market prices.

Upon the closing of this offering, our board of directors will be divided
into three classes serving staggered three-year terms. As a result of this
division, generally at least two shareholders' meetings will be required for
shareholders to effect a change in control of the board of directors. In
addition, our bylaws will contain provisions that establish specific procedures
for calling meetings of shareholders and appointing and removing members of the
board of directors.

Section 302A.671 of the Minnesota Business Corporation Act applies, with
exceptions, to any acquisition of our voting stock from a person other than us,
and other than in connection with specific types of mergers and exchanges to
which we are a party, that results in the beneficial ownership of 20% or more
of the voting stock then outstanding. Section 302A.671 requires approval of
these acquisitions by a majority vote of our shareholders to accord full voting
rights to the acquired shares. In general, shares acquired in the absence of
this approval are denied voting rights and are redeemable at their then fair
market value by us within 30 days after the acquiring person has failed to give
a timely information statement to us or the date the shareholders voted not to
grant voting rights to the acquiring person's shares.

Section 302A.673 of the Minnesota Business Corporation Act generally
prohibits any business combination by us, or by any of our subsidiaries, with
any shareholder that purchases 10 percent or more of our voting shares within
four years following this interested shareholder's share acquisition date. The
business combination may be permitted if it is approved by a committee of all
of the disinterested members of our board of directors before the interested
shareholder's share acquisition date.

Listing

We have applied for quotation of our common stock on the Nasdaq National
Market under the symbol "EBNX."

Transfer Agent and Registrar

The transfer agent and registrar for our common stock will be Continental
Stock Transfer and Trust Company. Its address is 2 Broadway, New York, NY
10004, and its telephone number is (212) 509-4000.

SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of this offering, we will have 15,054,068 shares of common
stock outstanding, assuming no exercise of the underwriters' overallotment
option and no exercise of outstanding options to purchase common stock. All of
our directors and executive officers and 1% shareholders, holding in the
aggregate in excess of 64.6% of the outstanding shares of our common stock,
have agreed that they will not, without the prior written consent of the
representatives of the underwriters, sell or otherwise dispose of any shares of
common stock or options to acquire shares of common stock during the 180-day
period following the closing of this offering. See "Underwriting."

50
<PAGE>

The 5,000,000 shares of common stock being sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act, except for shares held by our affiliates which may generally
only be sold in compliance with the limitations of Rule 144 described below.
The remaining 10,054,068 shares were issued and sold by us in private
transactions and are deemed restricted securities under Rule 144. These shares
may be sold in the public market only if registered under the Securities Act
or if exempt from registration under Rules 144, 144(k) or 701 under the
Securities Act, which rules are summarized below. Subject to the agreements
between our shareholders and the underwriters, described above, and the
provisions of Rules 144, 144(k) and 701, additional shares will be available
for sale in the public market, subject in the case of shares held by
affiliates to compliance with volume restrictions, as follows:

. 61,800 shares will be available for immediate sale in the public market
on the date of this prospectus;

. 275,280 shares will be available for sale 90 days after the date of this
prospectus; and

. 9,716,988 shares will be available for sale under Rules 144 and 701 upon
the expiration of agreements between our shareholders and the
underwriters 180 days after the date of this prospectus.

In general, under Rule 144, beginning 90 days after the date of this
prospectus, a person or persons whose shares are aggregated, including an
affiliate, who has beneficially owned restricted shares for at least one year,
is entitled to sell within any three-month period a number of shares that does
not exceed the greater of 1% of the then outstanding shares of common stock,
or approximately 150,540 shares immediately after this offering, or the
average weekly trading volume of our common stock on the Nasdaq National
Market during the four calendar weeks preceding the date of the sale. Sales
under Rule 144 also are subject to requirements pertaining to the manner and
notice of the sales and the availability of current public information
concerning our company.

Under Rule 144(k), a person who is not deemed to have been an affiliate of
our company at any time during the 90 days before a sale and who has
beneficially owned the shares proposed to be sold for at least two years would
be entitled to sell these shares without regard to the requirements described
above. To the extent that shares were acquired from an affiliate of our
company, the transferee's holding period for the purpose of effecting a sale
under Rule 144(k) commences on the date of transfer from the affiliate.

Rule 701 provides that, beginning 90 days after the date of this prospectus,
persons other than affiliates may sell shares of common stock acquired from us
in connection with written compensatory benefit plans, including our 1993
Stock Option Plans, subject only to the manner of sale provisions of Rule 144.
Beginning 90 days after the date of this prospectus, affiliates may sell these
shares of common stock subject to all provisions of Rule 144 except the one-
year minimum holding period.

Shortly after the closing of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act to register all shares of
common stock issuable under the 1993 Stock Option Plan, the 1999 Stock
Incentive Plan and the Stock Purchase Plan. See "Management--Benefit Plans"
for a further discussion of these plans. This Form S-8 registration statement
is expected to become effective immediately upon filing and shares covered by
that registration statement will then be eligible for sale in the public
markets, subject to the Rule 144 limitations applicable to affiliates.

Prior to this offering there has been no public market for our common stock,
and no predictions can be made regarding the effect, if any, that sales of
shares in the open market or the availability of shares for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of our common stock in the public market could adversely
affect the prevailing market price.

After the closing of this offering, the holders of 6,248,922 shares of our
common stock will be entitled to rights with respect to the registration of
their shares under the Securities Act. Registration of these shares under the
Securities Act would result in these shares becoming freely tradeable without
restriction under the Securities Act, except for shares purchased by
affiliates, immediately upon the effectiveness of registration. For a
discussion of these rights, see "Description of Capital Stock--Registration
Rights."

51
<PAGE>

UNDERWRITING

The underwriters, through their representatives, BancBoston Robertson
Stephens Inc., Warburg Dillon Read LLC and Thomas Weisel Partners LLC, have
severally agreed to purchase from us the number of shares of common stock next
to their respective names below. The underwriters are committed to purchase and
pay for all the shares if any are purchased.

<TABLE>
<CAPTION>
Number of
Underwriters Shares
- ------------ ---------
<S> <C>
BancBoston Robertson Stephens Inc......................................
Warburg Dillon Read LLC................................................
Thomas Weisel Partners LLC.............................................
<CAPTION>
International Underwriters
- --------------------------
<S> <C>
BancBoston Robertson Stephens International Ltd........................
UBS AG, acting through its division Warburg Dillon Read................
Thomas Weisel Partners LLC.............................................
---------
Total................................................................ 5,000,000
=========
</TABLE>

The underwriters propose to offer the shares of common stock to the public at
the public offering price set forth on the cover page of this prospectus and to
specific dealers at that price less a concession of $ per share, of which
$ may be reallowed to other dealers. After this offering, the public
offering price, concession and reallowance to dealers may be reduced by the
representatives. However, no reduction will change the amount of proceeds to be
received by us as set forth on the cover page of this prospectus. The common
stock is offered by the underwriters subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part.

The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.

No Prior Public Market. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price
for the common stock will be determined by negotiation among us and the
representatives. Among the factors to be considered in determining the initial
public offering price are prevailing market and economic conditions, our
revenues and earnings, market valuations of other companies engaged in
activities similar to us, estimates of our business potential and prospects and
the present state of our business operations.

Overallotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 750,000 additional shares of our common stock at the same price
per share as we will receive for the 5,000,000 shares that the underwriters
have agreed to purchase. If the underwriters exercise this option, each of the
underwriters will have a firm commitment, subject to limited conditions, to
purchase approximately the same percentage of these additional shares that the
number of shares of common stock to be purchased by it shown in the above table
represents as a percentage of the total shares offered in this offering. If
purchased, these additional shares will be sold by the underwriters on the same
terms as those on which the shares offered hereby are being sold. We will be
obligated to sell shares to the underwriters to the extent the option is
exercised. The underwriters may exercise this option only to cover over
allotments made in connection with the sale of the shares of common stock
offered in this offering.

The following table summarizes the compensation to be paid to the
underwriters by eBenX:

<TABLE>
<CAPTION>
Total
------------------- -------
Without With
Per Over- Over-
Share allotment allotment
----- --------- ---------
<S> <C> <C> <C> <C> <C>
Underwriting discounts and commissions
payable by eBenX.......................... $-- $-- $--
</TABLE>

52
<PAGE>

We estimate expenses payable by us in connection with this offering, other
than the underwriting discounts and commissions referred to above, will be
approximately $750,000.

Indemnity. The underwriting agreement among us and the underwriters contains
covenants of indemnity among the underwriters and us against identified civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
underwriting agreement.

Lock-up Agreements. Each of our executive officers and directors and some of
our shareholders have agreed, during the period of 180 days after the date of
this prospectus, not to offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to, any shares of
common stock, or any securities convertible into or exchangeable for shares of
common stock, owned as of the date of this prospectus or thereafter acquired
directly by these holders or with respect to which they have the power of
disposition, without the prior written consent of BancBoston Robertson
Stephens, Inc. However, BancBoston Robertson Stephens, Inc. may, in its sole
discretion and at any time or from time to time, without notice, release all
or any portion of the securities subject to these lock-up agreements. There
are no agreements between the representatives and any of our shareholders
providing consent by the representatives to the sale of shares prior to the
expiration of the 180-day lock-up period. BancBoston Robertson Stephens, Inc.
has indicated that some of the factors it will consider in deciding to release
all or a portion of the securities subject to these lock-up agreements include
the nature of the request, the individual or entity making such request,
number of shares requested to be released and general market conditions at the
time of the request. At this time, it is not believed that its own position in
the securities would be a factor.

In addition, we have agreed that during the lock-up period, we will not,
subject to specified exceptions, without the prior written consent of
BancBoston Robertson Stephens, Inc.:

. consent to the disposition of any shares held by shareholders prior to
the expiration of the lock-up period; or

. issue, sell, contract to sell or otherwise dispose of any shares of
common stock, any options or warrants to purchase any shares of common
stock, or any securities convertible into, exercisable for or
exchangeable for shares of common stock, other than the sale of shares
in this offering, the issuance of common stock upon the exercise of
outstanding options or warrants or our issuance of options or shares
under our 1993 Stock Option Plan.

[Listing. The common stock has been approved for quotation on the Nasdaq
National Market under the symbol "EBNX."]

Stabilization. The representatives have advised us that, pursuant to
Regulation M under the Securities Act, some persons participating in this
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the open market. A
stabilizing bid is a bid for or the purchase of common stock by the
underwriters for the purpose of fixing or maintaining the price of the common
stock. A syndicate covering transaction is the bid for or the purchase of
common stock by the underwriters to reduce a short position incurred by the
underwriters in connection with this offering. A penalty bid is an arrangement
permitting the representatives to reclaim the selling concession otherwise
accruing to an underwriter or syndicate member in connection with this
offering if the common stock originally sold by the underwriter or syndicate
member is purchased by the representatives in a syndicate covering transaction
and has therefore not been effectively placed by the underwriter or syndicate
member. The representatives have advised us that these types of transactions
may be effected on the Nasdaq National Market or otherwise and if commenced
may be discontinued at any time.

Directed Share Program. The underwriters have reserved up to five percent
(5%) of the common stock to be issued by us, at the initial public offering
price, to our directors, officers, employees, business associates and other
persons related to us. The number of shares of our common stock available for
sale to the general

53
<PAGE>

public will be reduced to the extent these individuals purchase these reserved
shares. Any reserved shares that are not purchased will be offered to the
general public on the same basis as the other shares offered in the offering.

Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners LLC has been named as a lead or co-
manager on 85 filed public offerings of equity securities, of which 58 have
been completed, and has acted as a syndicate member in an additional 41 public
offerings of equity securities. Thomas Weisel Partners LLC does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with
us pursuant to the underwriting agreement entered into in connection with this
offering.

LEGAL MATTERS

The validity of the issuance of shares of common stock offered by us in this
offering will be passed upon for us by Dorsey & Whitney LLP, Minneapolis,
Minnesota. Legal matters related to the offering will be passed upon for the
underwriters by Winston & Strawn, Chicago, Illinois.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our financial
statements as of December 31, 1997 and 1998 and for each of the three years in
the period ended December 31, 1998, as set forth in their report. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the common stock offered by this
prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the
registration statement or the exhibits and schedules which are part of the
registration statement. For further information about us and our common stock,
you should review the registration statement and exhibits and schedules
thereto. You may read and copy any document we file at the Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the Commission at 1-800-SEC-0330 for further information on the public
reference room. Our filings are also available to the public from the
Commission's Web site at http://www.sec.gov.

Upon completion of this offering, we will be required to file periodic
reports, proxy statements and other information with the Commission. These
periodic reports, proxy statements and other information will be available for
inspection and copying at the Commission's public reference room and the Web
site of the Commission referred to above.

54
<PAGE>

EBENX, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Auditors......................................... F-2
Consolidated Balance Sheets............................................ F-3
Consolidated Statements of Operations.................................. F-4
Consolidated Statement of Changes in Shareholders' Equity (Deficit).... F-5
Consolidated Statements of Cash Flows.................................. F-6
Notes to Consolidated Financial Statements............................. F-7
</TABLE>

F-1
<PAGE>

Report of Independent Auditors

Board of Directors and Shareholders
eBenX, Inc.

We have audited the accompanying consolidated balance sheets of eBenX, Inc.
(formerly known as Network Management Services, Inc.) as of December 31, 1998
and 1997, and the related consolidated statements of operations, changes in
shareholders' equity (deficit), and cash flows for each of the three years in
the period ended December 31, 1998. 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 consolidated financial position of eBenX, Inc. at
December 31, 1998 and 1997, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP

Minneapolis, Minnesota
March 22, 1999

F-2
<PAGE>

EBENX, INC.

CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)

<TABLE>
<CAPTION>
December 31 Pro forma
---------------- September 30, September 30,
1997 1998 1999 1999
------- ------- ------------- -------------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...... $ 1,009 $ 1,681 $ 7,290 $ 7,290
Investments.................... 2,005 -- -- --
Accounts receivable, less
allowance of $51 at
December 31, 1997 and 1998
and September 30, 1999....... 573 1,964 3,321 3,321
Prepaid expenses............... 143 324 712 712
Other.......................... 33 18 -- --
------- ------- ------- -------
Total current assets........ 3,763 3,987 11,323 11,323
Property and equipment, net.... 1,288 1,568 2,032 2,032
Deposits....................... 33 41 62 62
------- ------- ------- -------
Total assets................ $ 5,084 $ 5,596 $13,417 $13,417
======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable............... $ 181 $ 837 $ 724 $ 724
Accrued payroll................ 333 493 804 804
Accrued expenses............... 83 115 473 473
Deferred revenue............... 64 10 160 160
Note payable................... -- 750 -- --
------- ------- ------- -------
Total current liabilities... 661 2,205 2,161 2,161
Redeemable Convertible Preferred
Stock:
Series A, $.01 par value:
Authorized shares--1,128,627
Issued and outstanding
shares--1,110,627;
Liquidation value--$1,000.... 978 978 978 --
Series B, $.01 par value:
Authorized shares--1,910,835
Issued and outstanding
shares--1,910,835;
Liquidation value--$500...... 4,490 4,490 4,490 --
Series C, $.01 par value:
Authorized shares--3,227,460
Issued and outstanding
shares--3,227,460;
Liquidation value--$10,500... -- -- 10,482 --
Shareholders' equity (deficit):
Common Stock, $.01 par value:
Authorized shares--
7,000,000; Issued and
outstanding shares--
3,445,521--1997;
3,480,321--1998;
3,797,346--1999........... 34 35 38 100
Pro forma authorized
shares--100,000,000;
Pro forma issued and
outstanding shares--
10,046,268................
Additional paid-in capital..... 101 110 4,319 20,207
Deferred stock based
compensation................. -- -- (4,127) (4,127)
Retained deficit............... (1,180) (2,222) (4,924) (4,924)
------- ------- ------- -------
Total shareholders' equity
(deficit)...................... (1,045) (2,077) (4,694) 11,256
------- ------- ------- -------
Total liabilities and
shareholders' equity
(deficit)...................... $ 5,084 $ 5,596 $13,417 $13,417
======= ======= ======= =======
</TABLE>

See accompanying notes.

F-3
<PAGE>

EBENX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)

<TABLE>
<CAPTION>
Nine months ended
Year ended December 31 September 30,
---------------------------------- ----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net revenue............. $ 4,360 $ 7,093 $ 10,122 $ 6,669 $ 11,746
Costs and expenses:
Cost of services...... 2,480 4,496 6,958 4,791 9,069
Selling, general and
administrative...... 1,796 2,068 2,831 1,986 3,338
Research and
development......... 863 1,242 1,519 1,017 2,294
Amortization of stock
based
compensation........ -- -- -- -- 67
---------- ---------- ---------- ---------- ----------
Total costs and
expenses......... 5,139 7,806 11,308 7,794 14,768
---------- ---------- ---------- ---------- ----------
Loss from operations.... (779) (713) (1,186) (1,125) (3,022)
Interest income......... 198 213 144 101 320
---------- ---------- ---------- ---------- ----------
Net loss................ $ (581) $ (500) $ (1,042) $ (1,024) $ (2,702)
========== ========== ========== ========== ==========
Net loss per share:
Basic and diluted..... $ (.18) $ (.15) $ (.30) $ (.30) $ (.77)
========== ========== ========== ========== ==========
Shares used in
calculation of net
loss per share:
Basic and diluted..... 3,312,981 3,375,732 3,463,116 3,457,455 3,516,747
========== ========== ========== ========== ==========
Pro forma net loss per
share:
Basic and diluted..... $ (.16) $ (.33)
========== ==========
Shares used in
calculation of pro
forma net loss per
share:
Basic and diluted..... 6,484,578 8,103,243
========== ==========
</TABLE>

See accompanying notes.

F-4
<PAGE>

EBENX, INC.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(dollars in thousands)

<TABLE>
<CAPTION>
Common Stock Additional Deferred
---------------- Paid-In Stock Based Retained
Shares Amount Capital Compensation Deficit Total
--------- ------ ---------- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995.................. 3,294,741 $33 $ 79 $ -- $ (99) $ 13
Exercise of stock
options.............. 31,680 -- 3 -- -- 3
Exercise of stock
warrants............. 4,800 -- 1 -- -- 1
Net loss............... -- -- -- -- (581) (581)
--------- --- ------ ------- ------- -------
Balance at December 31,
1996.................. 3,331,221 33 83 -- (680) (564)
Exercise of stock
options.............. 114,300 1 18 -- -- 19
Net loss............... -- -- -- -- (500) (500)
--------- --- ------ ------- ------- -------
Balance at December 31,
1997.................. 3,445,521 34 101 -- (1,180) (1,045)
Exercise of stock
options.............. 34,800 1 9 -- -- 10
Net loss............... -- -- -- -- (1,042) (1,042)
--------- --- ------ ------- ------- -------
Balance at December 31,
1998.................. 3,480,321 35 110 -- (2,222) (2,077)
Exercise of stock
options.............. 317,025 3 15 -- -- 18
Deferred stock-based
compensation......... -- -- 4,194 (4,194) -- --
Amortization of stock-
based compensation... -- -- -- 67 -- 67
Net loss............... -- -- -- -- (2,702) (2,702)
--------- --- ------ ------- ------- -------
Balance at September 30,
1999 (unaudited)...... 3,797,346 $38 $4,319 $(4,127) $(4,924) $(4,694)
========= === ====== ======= ======= =======
</TABLE>

See accompanying notes.

F-5
<PAGE>

EBENX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)

<TABLE>
<CAPTION>
Nine months
ended
Year ended December 31 September 30
------------------------ ----------------
1996 1997 1998 1998 1999
------- ------ ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net loss........................... $ (581) $ (500) $(1,042) $(1,024) $(2,702)
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities:
Depreciation of property and
equipment....................... 192 327 481 347 475
Amortization of stock-based
compensation.................... -- -- -- -- 67
Noncash expense relating to
common stock issued............. 3 -- -- -- --
Changes in operating assets and
liabilities:
Accounts receivable.............. (440) 27 (1,391) (1,156) (1,357)
Other current assets............. 6 (151) (166) (232) (370)
Accounts payable................. (11) 84 656 14 (113)
Accrued expenses................. 62 238 192 92 669
Deferred revenue................. (50) 65 (55) 360 150
Deposits......................... -- (23) (6) -- (21)
------- ------ ------- ------- -------
Net cash (used in) provided by
operating activities.......... (819) 67 (1,331) (1,599) (3,202)
Investing activities:
Additions to property and
equipment........................ (523) (692) (761) (609) (939)
Purchase of investments............ (2,006) -- -- -- --
Sale of investments................ -- 1 2,005 2,005 --
------- ------ ------- ------- -------
Net cash (used in) provided by
investing activities............ (2,529) (691) 1,244 (1,396) (939)
Financing activities:
Proceeds from note payable......... -- -- 750 -- --
Payment of note payable............ -- -- -- -- (750)
Stock options and warrants
exercised........................ 1 19 9 8 18
Proceeds from issuance of preferred
stock............................ 4,490 -- -- -- 10,482
------- ------ ------- ------- -------
Net cash provided by financing
activities...................... 4,491 19 759 8 9,750
------- ------ ------- ------- -------
Net increase (decrease) in cash and
cash equivalents.................. 1,143 (605) 672 (195) 5,609
Cash and cash equivalents at
beginning of year................. 471 1,614 1,009 1,009 1,681
------- ------ ------- ------- -------
Cash and cash equivalents at end of
year.............................. $ 1,614 $1,009 $ 1,681 $ 814 $ 7,290
======= ====== ======= ======= =======
</TABLE>

See accompanying notes.

F-6
<PAGE>

EBENX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998

1. Business Description and Summary of Significant Accounting Policies

Business Description

EBenX, Inc. (formerly known as Network Management Services, Inc.), a
Minnesota corporation incorporated in September 1993 (the Company), provides
business-to-business e-commerce and connectivity solutions to employers and
health plans for the purchase, eligibility administration and premium payment
of group health insurance benefits. The Company's customers are located
throughout the United States.

Principles of Consolidation

The consolidated financial statements include the Company and Managed Care
Buyer's Group, Inc., its wholly owned subsidiary. All intercompany accounts
and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents are considered to be available for sale. The carrying value of
cash equivalents approximates fair value at December 31, 1998 and 1997.

Investments

Investments at December 31, 1997 consist of United States Treasury notes
which are classified as available for sale. The cost of investments
approximates fair value.

Property and Equipment

Property and equipment, including purchased software, is stated at cost for
items purchased and at estimated fair value for items contributed by the
founding shareholders. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets of five to seven years.
Leasehold improvements are amortized over the estimated life of the assets or
the related lease term, whichever is less, on a straight-line basis.

Income Taxes

Income taxes are accounted for under the liability method. Deferred income
taxes are provided for temporary differences between financial reporting and
tax bases of assets and liabilities.

Revenue Recognition

The Company generates revenue from providing data exchange and procurement
services. Data exchange services represent business-to-business e-commerce and
connectivity solutions to employers and health plans for the purchase,
eligibility administration and premium payment of group health insurance
benefits by utilizing proprietary and licensed technology. Fees related to
these services are billed on a per employee per month basis. Revenue is
recognized as services are performed. The Company also records revenue related
to implementation fees associated with its data exchange services. These fees
are recognized as revenue over the period of time the implementation services
are being provided. Procurement services consist of the Company assisting and
advising customers on the selection of potential suppliers, preparation of
requests for proposals, evaluation of proposals, and rate negotiations. The
Company's ongoing data exchange contracts range in duration from one to three
years. Procurement services agreements do not exceed five years in duration.
The Company earns revenue under the contracts and agreements as services are
performed. Revenues generated from data exchange services for the years ended
December 31, 1996, 1997 and 1998, and the nine months ended September 30, 1998
and 1999 were $3,467,000, $5,432,000, $7,742,000, $4,828,000, and $9,193,000,
respectively. Revenues generated from procurement services for the years ended
December 31, 1996, 1997 and 1998, and the nine months ended September 30, 1998
and 1999 were $893,000, $1,661,000, $2,380,000, $1,841,000, and $2,553,000,
respectively.

Research and Development and Software Development

Research and development costs are expensed when incurred. Software
development costs are expensed as incurred. Such costs are required to be
expensed until the point that technological feasibility and proven
marketability of the product are established.

F-7
<PAGE>

EBENX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Business Description and 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 amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.

Advertising Costs

The Company expenses advertising costs as incurred. The amount of advertising
expensed during 1996, 1997 and 1998 was $15,006, $24,148 and $73,326,
respectively.

Impairment of Long-Lived Assets

The Company will record impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.

Stock-Based Compensation

The Company follows Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25), and related interpretations in
accounting for its employee stock options because the alternative fair value
accounting provided for under FASB Statement No. 123, "Accounting for Stock-
Based Compensation," requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.

Stock Split

The Company intends to effect a three-for-one stock split immediately prior
to the offering. Accordingly, all share, per share, weighted average share
information, and redeemable convertible preferred stock have been restated to
reflect the split.

Net Loss Per Share

Basic earnings per share is based on the weighted average shares outstanding
during the period. Diluted earnings per share increases the shares used in the
per share calculation by the dilutive effects of options, warrants, and
convertible securities. The Company's common stock equivalent shares
outstanding from stock options and warrants are excluded from the diluted
earnings per share computation as their effect is antidilutive.

Pro Forma Shareholders' Equity

Upon the closing of the Company's planned initial public offering, all
outstanding shares of Series A, B and C preferred stock will automatically
convert into 6,248,922 shares of common stock. The pro forma effects of these
transactions are unaudited and have been reflected in the accompanying pro
forma balance sheet at September 30, 1999.

Pro Forma Net Loss Per Share

Pro forma net loss per share for the year ended December 31, 1998 and the
nine months ended September 30, 1999 is computed using the weighted average
number of common shares outstanding, including the pro forma effects of the
automatic conversion of the Company's Series A, B and C preferred stock into
shares of the Company's common stock as if such conversion occurred on January
1, 1998, or at the date of original issuance, if later. The resulting pro forma
adjustment includes an increase in the weighted average shares used to compute
basic and diluted net loss per share of 3,021,462 shares for the year ended
December 31, 1998 and 4,586,496 shares for the nine months ended September 30,
1999. The pro forma effects of these transactions are unaudited.

F-8
<PAGE>

EBENX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Business Description and Summary of Significant Accounting Policies
(Continued)

Interim Financial Statements

The interim financial statements for the nine months ended September 30,
1998 and 1999, are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles. In the opinion of the Company's management,
the unaudited interim financial statements contain all adjustments, consisting
of normal recurring adjustments, considered necessary for a fair presentation.
The results of operations for the interim periods are not necessarily
indicative of the results of the entire year.

Reclassification

Certain prior year items have been reclassified to conform to the current year
presentation.

2. Property and Equipment, Net

Property and equipment as of December 31 are as follows:

<TABLE>
<CAPTION>
1997 1998
---------- -----------
<S> <C> <C>
Office equipment.................................... $1,198,887 $ 1,455,009
Purchased software.................................. 363,612 563,532
Furniture and fixtures.............................. 241,763 474,085
Leasehold improvements.............................. 154,488 227,321
---------- -----------
1,958,750 2,719,947
Less accumulated depreciation....................... (670,642) (1,151,684)
---------- -----------
$1,288,108 $ 1,568,263
========== ===========
</TABLE>

3. Note Payable

The Company has a $1,500,000 revolving promissory note with a bank with
interest at 1% over the bank's base rate (8.75% at December 31, 1998). The
promissory note is secured by all business assets of the Company and matures
on December 31, 1999. The loan is guaranteed by the Company's wholly owned
subsidiary. At December 31, 1998, the outstanding balance was $750,000. The
promissory note was repaid during 1999.

4. Shareholders' Equity

Common Stock

The Company had agreements with two founding shareholders which entitled the
Company to repurchase one-half of the shares held by these shareholders for
$.01 per share if the shareholders' employment was terminated with cause or in
the event that the employee terminated employment under certain circumstances.
These agreements expired in August 1997 and no shares were repurchased under
the agreements.

Convertible Preferred Stock

Under provisions of stock purchase agreements, the holders of the Company's
preferred stock are entitled to:

. liquidation preference of $.90 and $2.355 for each Series A and Series B
preferred share, respectively, plus unpaid accumulated dividends. After
payment of this preference amount, remaining distributable assets, if
any, will be distributed on a pro rata basis between the preferred and
common shareholders.

. Annual preferential noncumulative dividends of $.09 (Series A) and $.236
(Series B) for each share payable only if declared by the Board of
Directors.

F-9
<PAGE>

EBENX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Shareholder's Equity--(Continued)

. Voting rights similar to common shareholders.

. One director each, to the Company's Board of Directors for Series A and
Series B.

Each preferred share may be converted to common shares at the option of the
holder. In addition, the preferred shares shall be automatically converted to
common shares if (i) the Company closes the issuance and sale of common shares
in a public offering in which the gross proceeds equal or exceed $10,000,000,
or (ii) 80% of the preferred stock has been converted. The number of shares
issuable in exchange for each preferred share upon either optional or automatic
conversion shall be equal to $.90 (Series A) and $2.355 (Series B) divided by
the conversion price then in effect, as defined. The initial conversion price
of $.90 (Series A) and $7.065 (Series B) will be adjusted as necessary to
prevent dilution resulting from, among other things, issuance of additional
common stock, options or convertible securities.

On April 30, 2004, and on each of the first and second anniversaries thereof,
the Company shall offer to redeem 33 1/3%, 50% and 100%, respectively, of the
Series A preferred shares for $.90 and Series B preferred shares for $2.355,
respectively, per share plus accrued but unpaid dividends.

The preferred stock purchase agreements contain certain restrictive covenants
which prohibit, among other things, the Company from authorizing additional
shares of Series A and Series B preferred stock or new classes of capital stock
with preferences greater than those given to the Series A and Series B
preferred shareholder, merging or consolidating with another corporation, or
effecting a change in control of the Company. In addition, capital expenditures
in excess of $100,000 for any item or related items require the approval of the
director elected by the preferred shareholders.

5. Income Taxes

At December 31, 1997 and 1998, the Company's deferred taxes are as follows:

<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................... $ 409,000 $ 665,000
Bonus and vacation................................. 127,000 188,000
Accounts receivable allowance...................... 19,000 19,000
--------- ---------
555,000 872,000
Deferred tax liabilities:
Depreciation....................................... (96,000) (93,000)
--------- ---------
(96,000) (93,000)
--------- ---------
Net deferred tax assets before valuation allowance... 459,000 779,000
Less valuation allowance............................. (459,000) (779,000)
--------- ---------
Net deferred tax assets.............................. $ -- $ --
========= =========
</TABLE>

The Company has established a valuation allowance to fully reserve for the net
deferred tax assets at December 31, 1997 and 1998, respectively. The valuation
allowance was established due to the available evidence indicating that it is
not more than likely that the deferred tax assets will be realized.

As of December 31, 1998, the Company has unused federal and state research and
development tax credit carryforwards of approximately $100,000 which expire at
various times through 2011. In addition, the Company has unused federal net
operating loss carryforwards at December 31, 1998 of approximately $1,751,000,
which expire at various times through 2013. The utilization of these
carryforwards is dependent upon the Company's ability to generate sufficient
taxable income during the carryforward periods.

F-10
<PAGE>

EBENX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Operating Leases

The Company leases or subleases its office space and certain equipment under
terms of noncancelable operating lease agreements which expire through February
2003. Future lease payments for all operating leases, excluding executory
costs, such as management and maintenance fees are as follows:

<TABLE>
<S> <C>
Year ending December 31:
1999............................................................ $1,100,020
2000............................................................ 863,391
2001............................................................ 530,439
2002............................................................ 118,730
2003............................................................ 19,840
----------
$2,632,420
==========
</TABLE>

Rent expense, including the Company's pro rata share of certain operating
costs, was $239,042, $560,281 and $975,731 in 1996, 1997 and 1998,
respectively.

7. Significant Customers

Significant customer activity as a percent of the Company's net revenue in
1996, 1997 and 1998 is as follows:

<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Customer A................................................. 22.6% 14.5% 14.0%
Customer B................................................. -- 16.1% 19.1%
Customer C................................................. 17.7% 12.8% --
Customer D................................................. 9.7% 10.4% 8.6%
Customer E................................................. -- -- 17.1%
</TABLE>

8. Stock Options and Warrants

In 1993, the Company adopted the 1993 Stock Option Plan (the Plan) to encourage
stock ownership by employees, directors and other individuals as determined by
the Board of Directors. The Plan provides that options granted thereunder may
be either incentive stock options (ISOs), as defined by the Internal Revenue
Code, or nonqualified stock options.

The Board of Directors determines who will receive options under the Plan and
sets the terms, including vesting dates. Options may have a maximum term of no
more than ten years except in the case of a shareholder possessing more than
10% of the total voting power of all classes of stock (a 10% shareholder) in
which case the maximum term is five years. The exercise price of ISOs granted
under the Plan must be at least equal to the fair market value (or in the case
of a 10% shareholder, 110% of the fair market value) of the common stock on the
date of grant. The exercise price of nonqualified options is determined by the
Board of Directors.

The exercise price may be paid in cash, shares of previously owned common
stock, or by issuance of a promissory note. In addition, the Plan also contains
a provision allowing the Company to permit option holders to pay their
withholding obligation through share redirection. If an option expires,
terminates or is canceled, the shares not purchased thereunder may become
available for additional option awards under the Plan. The Plan expires in
2003.

F-11
<PAGE>

EBENX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Stock Options and Warrants--(Continued)

In connection with the granting of stock options to employees, the Company
recorded stock-based compensation totaling approximately $67,000 in the quarter
ended September 30, 1999. This amount represents the difference between the
exercise price and the deemed fair value of the Company's common stock for
accounting purposes on the date these stock options were granted. Deferred
stock-based compensation of $4.1 million is included as a component of
stockholders' equity and is being amortized over the vesting period of the
options. The amortization of the remaining deferred stock-based compensation
will result in additional charges to operations through fiscal 2003. The
amortization of stock-based compensation is classified as a separate component
of operating expenses in the consolidated statement of operations.

Option activity is summarized as follows:

<TABLE>
<CAPTION>
Shares Shares Weighted
Available for Outstanding Average Price
Grant Under the Plan Per Share
------------- -------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31,
1996..................... 683,028 1,169,745 $ .18
Granted.................. (613,845) 613,845 $ .60
Exercised................ -- (114,300) $ .16
Canceled................. 301,200 (301,200) $ .32
-------- --------- ----- ---
Balance at December 31,
1997..................... 370,383 1,368,090 $ .34
Additional shares
reserved for issuance.. 300,000 -- --
Granted.................. (622,950) 622,950 $ .71
Exercised................ -- (34,800) $ .27
Canceled................. 294,450 (294,450) $ .17
-------- --------- ----- ---
Balance at December 31,
1998..................... 341,883 1,661,790 $ .45
======== ========= ===== ===
</TABLE>

The weighted average fair value of options granted in 1997 and 1998 was $.14
and $.15 per share, respectively. The exercise prices are equal to the
estimated fair value of the common stock as determined by the Board of
Directors on the grant dates. The options are exercisable over a four-year to
five-year vesting period and expire at various dates through 2003. At December
31, 1997 and 1998, options to purchase 290,604 and 447,078 shares of common
stock are exercisable, respectively, at weighted average exercise prices of
$.13 and $.23, respectively. Exercise prices for options outstanding as of
December 31, 1997 and 1998, ranged from $.10 to $.75 and $.10 to $.60,
respectively. The weighted average remaining contractual life of those options
at December 31, 1997 and 1998 is 4.5 and 4.4 years, respectively.

Pro forma information regarding net loss and loss per share is required by
Statement 123, an has been determined as if the Company had accounted for its
employee stock options under the fair value method of Statement 123. The fair
value for these options was estimated at the date of grant using the minimum
value option pricing model with the following weighted average assumptions for
1996, 1997 and 1998: risk free interest rate of 5.50%, dividend yield of 0%,
and a weighted average expected life of the option of five years.

Had the Company recorded compensation cost in accordance with Statement 123,
the net loss and loss per share would have been:

<TABLE>
<CAPTION>
December 31,
---------------------------------
1996 1997 1998
--------- --------- -----------
<S> <C> <C> <C>
Net Loss:
As reported............................ $(580,857) $(500,453) $(1,041,632)
Pro forma.............................. $(584,915) $(518,244) $(1,078,880)
Basic and diluted net loss per share:
As reported............................ $(.18) $(.15) $(.30)
Pro forma.............................. $(.18) $(.15) $(.31)
</TABLE>

F-12
<PAGE>

EBENX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Stock Options and Warrants--(Continued)

During September 1995, the Company entered into a line of credit agreement to
borrow up to $550,000, which expired in August 1996. In connection with the
agreement, the Company issued a warrant to purchase 18,000 shares of the
Company's Series A Convertible Preferred Stock at $.90 per share. The warrants
are exercisable over ten years.

During 1995, the Company granted three employees warrants to purchase 65,415
shares of common stock at $.01 per share. The warrants, which are immediately
exercisable and expire at various times between June 30, 2000 and August 31,
2000, were granted in lieu of cash compensation.

9. Employee Benefit Plans

The Company has a 401(k) plan covering substantially all employees. Under the
terms of the plan, participants may contribute 2% to 20% of their salary to the
plan. Employees are eligible after one day of service and upon attainment of
age 21. The Company may make matching contributions based on a discretionary
formula or may contribute a discretionary amount. The Company did not make any
contributions in 1996, 1997 or 1998.

10. Subsequent Event (Unaudited)

In May and June 1999, the Company sold a total of 3,227,460 shares of Series C
preferred stock resulting in net proceeds to the Company of $10,482,000. The
Series C shareholders have liquidation preference of $3.25 per share, plus
accumulated dividends. Annual preferential cumulative dividends of $.16 per
share are payable only if declared by the Board. The Series C preferred
shareholders are able to elect two members on the Company's Board of Directors.
The Series C preferred shares have voting rights similar to common
shareholders. The Series C preferred shares are convertible into common shares
at a conversion rate of $3.25 per share.

F-13
<PAGE>

[eBenX Logo]
<PAGE>

Until , 1999 (25 days after the date of this prospectus), all dealers that
buy, sell or trade our common stock, whether or not participating in this
offering, may be required to deliver a prospectus. This requirement 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.

[eBenX LOGO]
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

Except as set forth below the following fees and expenses will be paid by
eBenX in connection with the issuance and distribution of the securities
registered hereby and do not include underwriting commissions and discounts.
All such expenses, except for the SEC registration, NASD filing and Nasdaq
listing fees, are estimated.

<TABLE>
<S> <C>
SEC registration fee............................................... $ 19,982
NASD filing fee.................................................... $ 7,400
Nasdaq National Market listing fee................................. $ 85,500
Legal fees and expenses............................................ $275,000
Accounting fees and expenses....................................... $125,000
Transfer Agent's and Registrar's fees.............................. $ 10,000
Printing and engraving expenses.................................... $125,000
Miscellaneous...................................................... $102,118
--------
Total............................................................ $750,000
========
</TABLE>

Item 14. Indemnification of Directors and Officers

Section 302A.521 of the Minnesota Statutes provides that a corporation shall
indemnify any person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of such person against
judgments, penalties, fines (including, without limitation, excise taxes
assessed against such person with respect to any employee benefit plan),
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan for the same judgments, penalties or
fines; (2) acted in good faith; (3) received no improper personal benefit and
Section 302A.255 (with respect to director conflicts of interest), if
applicable, has been satisfied; (4) in the case of a criminal proceeding, had
no reasonable cause to believe the conduct was unlawful; and (5) in the case of
acts or omissions in such person's official capacity for the corporation,
reasonably believed that the conduct was in the best interests of the
corporation, or in the case of acts or omissions in such person's official
capacity for other affiliated organizations, reasonably believed that the
conduct was not opposed to the best interests of the corporation. Section
302A.521 also requires payment by a corporation, upon written request, of
reasonable expenses in advance of final disposition of the proceeding in
certain instances. A decision as to required indemnification is made by a
disinterested majority of the Board of Directors present at a meeting at which
a disinterested quorum is present, or by a designated committee of the Board,
by special legal counsel, by the shareholders or by a court.

Provisions regarding indemnification of officers and directors of eBenX to
the extent permitted by Section 302A.521 are contained in eBenX's Bylaws.

In addition, the employment agreements with officers of eBenX that are
described in this prospectus require eBenX, to the extent permitted by law, to
indemnify each of these officers and to obtain directors' and officers'
liability insurance coverage in such amount as the board of directors of eBenX
determines to be appropriate.

Item 15. Recent Sales of Unregistered Securities

During the three years prior to the date of this Registration Statement, we
have sold and issued the following securities:

(1) In December 1997, pursuant to Rule 701 of the Securities Act, we
issued and sold 38,100 shares of common stock to employees for aggregate
consideration of $18,670 upon the exercise of stock options issued
pursuant to our 1993 Stock Option Plan.

II-1
<PAGE>

(2) From May until August 1998, pursuant to Rule 701 of the Securities
Act, we issued and sold 11,100 shares of common stock to employees for
aggregate consideration of $8,415 upon the exercise of stock options
issued pursuant to our 1993 Stock Option Plan.

(3) From March until September 1999, pursuant to Rule 701 of the
Securities Act, we issued and sold 19,450 shares of common stock to
employees for aggregate consideration of $16,200 upon the exercise of
stock options issued pursuant to our 1993 Stock Option Plan.

(4) In May and June 1999, we issued and sold 1,075,820 shares of
Series C Convertible Preferred Stock to certain accredited investors for
aggregate consideration of $10,500,003.20 pursuant to Rule 506 of
Regulation D of the Securities Act.

The recipients of securities in each such transaction represented their
intentions to acquire the securities for investment only and not with a view
to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates issued in such transactions.
All recipients had adequate access, through their relationships with us, to
information about us. No placement agents were used in any of the foregoing
transactions.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits

II-2
<PAGE>

(a) Exhibits (continued)

<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.17** Amendment No. 1 to Lease Agreement by and between the Company and ND
Properties, Inc., dated October 1, 1997.
10.18** Amendment No. 2 to Lease Agreement by and between the Company and ND
Properties, Inc., dated December 23, 1997.
10.19** Amendment No. 3 to Lease Agreement by and between the Company and
Teachers Insurance and Annuity Association of America (successor to
ND Properties, Inc.), dated January 19, 1999.
10.20+ Healtheon Service Employer Group Distribution Agreement by and
between the Company and Healtheon Corporation, dated September 30,
1999.
10.21** Second Amended and Restated Investors' Rights Agreement, dated June
9, 1999 (relating to the registration rights relating to Series A,
Series B and Series C Preferred Stock).
21.1** Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1).
24.1** Powers of Attorney (included on signature page).
27.1** Financial Data Schedule.
</TABLE>
- --------
**Previously filed.

+ Confidential information has been omitted from these exhibits and filed
separately with the Securities and Exchange Commission accompanied by a
confidential treatment request pursuant to Rule 406 under the Securities Act
of 1933, as amended.

(b) Financial Statement Schedules

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.

Item 17. Undertakings

The undersigned 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
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, 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 the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the 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 the Act and will be governed by
the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a 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 of 1933, 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-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 4 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis, State of Minnesota, on December 9, 1999.

EBENX, INC.

/s/ John J. Davis
By: _________________________________
John J. Davis,
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the Registration Statement has been signed on December 9, 1999 by the
following persons in the capacities indicated.

<TABLE>
<CAPTION>
Signature Title
--------- -----

<S> <C> <C>
/s/ Mark W. Tierney Chairman and Director
____________________________________ (principal executive
Mark W. Tierney officer)

/s/ John J. Davis President, Chief Executive
____________________________________ Officer and Director
John J. Davis (principal executive
officer)

/s/ Scott P. Halstead Chief Financial Officer and
____________________________________ Secretary (principal
Scott P. Halstead financial officer and
principal accounting
officer)

* Senior Vice President,
____________________________________ Business Development and
Michael C. Bingham Director

* Director
____________________________________
Paul V. Barber

* Director
____________________________________
James P. Bradley

* Director
____________________________________
Daniel M. Cain

* Director
____________________________________
William J. Geary

* Director
____________________________________
John Nehra
</TABLE>

/s/ Scott P. Halstead
*By: __________________________
Attorney-in-Fact

II-4
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1** Fifth Amended and Restated Articles of Incorporation of the Company
(proposed to be effective immediately prior to the offering).
3.2** Amended and Restated Bylaws of the Company (proposed to be effective
immediately prior to the offering).
3.3 Fourth Amended and Restated Articles of Incorporation of the Company,
as amended (effective until immediately prior to the offering).
4.1** Form of Certificate of Common Stock of the Company.
5.1** Opinion of Dorsey & Whitney LLP.
10.1** 1993 Stock Option Plan.
10.2** 1999 Stock Incentive Plan.
10.3** 1999 Employee Stock Purchase Plan.
10.4+ Services Agreement by and between the Company and PepsiCo, Inc.,
dated June 1, 1997.
10.5+ Services Agreement by and between the Company and Bell Atlantic
Corporation, dated July 1, 1998.
10.6+ Administrative Services Agreement by and between the Company and The
Blue Cross Blue Shield Association, dated May 6, 1999.
10.7+ Administrative Services Agreement by and between the Company and GE
Capital Services Corporation, dated January 1, 1996.
10.8+ Services Agreement by and between the Company and General Electric
Company, dated January 1, 1997.
10.9** Employment Agreement by and between the Company and Mark Tierney,
dated as of April 22, 1999, and amended and restated on September 28,
1999.
10.10** Employment Agreement by and between the Company and John Davis, dated
as of April 12, 1999.
10.11** Employment Agreement by and between the Company and Scott Halstead,
dated as of April 22, 1999.
10.12** Standard Office Lease by and between Minnesota CC Properties, Inc.
and The Prudential Insurance Company of America, dated December 31,
1993.
10.13** Office Sublease by and between the Company and The Prudential
Insurance Company of America, dated March 19, 1997.
10.14** First Amendment of Sublease, by and between the Company and The
Prudential Insurance Company of America, dated August 10, 1999.
10.15** Consent of Landlord, by and among the Company, Teachers Insurance and
Annuity Association (successor to Minnesota CC Properties, Inc.), and
The Prudential Insurance Company of America, dated August 30, 1999.
10.16** Standard Office Lease by and between the Company and ND Properties,
Inc., dated March 12, 1997.
10.17** Amendment No. 1 to Lease Agreement by and between the Company and ND
Properties, Inc., dated October 1, 1997.
10.18** Amendment No. 2 to Lease Agreement by and between the Company and ND
Properties, Inc., dated December 23, 1997.
10.19** Amendment No. 3 to Lease Agreement by and between the Company and
Teachers Insurance and Annuity Association of America (successor to
ND Properties, Inc.), dated January 19, 1999.
10.20+ Healtheon Service Employer Group Distribution Agreement by and
between the Company and Healtheon Corporation, dated September 30,
1999.
10.21** Second Amended and Restated Investors' Rights Agreement, dated June
9, 1999 (relating to the registration rights relating to Series A,
Series B and Series C Preferred Stock).
21.1** Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1).
24.1** Powers of Attorney (included on signature page).
27.1** Financial Data Schedule.
</TABLE>
- --------
**Previously filed.

+Confidential information has been omitted from these exhibits and filed
separately with the Securities and Exchange Commission accompanied by a
confidential treatment request pursuant to Rule 406 under the Securities Act
of 1933, as amended.

<PAGE>

Exhibit 10.4

SERVICES AGREEMENT ***

THIS SERVICES AGREEMENT (the "Agreement") is entered into as of June 1, 1997 by
and between PepsiCo, Inc. with an address of 700 Anderson Hill Rd. Purchase, NY
10577, ("PepsiCo" or "Company"), and Network Management Services, Inc., with an
address of 5500 Wayzata Boulevard, Suite 1450, Minneapolis, MN 55416-1241
("NMS").

RECITALS

WHEREAS, PepsiCo desires to retain NMS to provide certain administrative
services for certain Participant benefit Plans maintained by PepsiCo; and

WHEREAS, NMS desires to provide such services on the terms and conditions set
forth in this agreement;

NOW THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, and subject to the terms and conditions set forth below, NMS
and PepsiCo hereby agree as follow:

ARTICLE 1. CERTAIN DEFINITIONS
- -------------------------------

As used in the Agreement, the following terms shall have the following meanings:

"BEN-NET(TM)" shall mean NMS' proprietary technology services software program
providing services including but not limited to group set-up, Vendor set-up,
enrollment management, enrollment data edits, eligibility distribution to
Vendors, retroactive enrollment adjustments, payments to Vendors, COBRA and
other direct individual billing administration.

"Company and PepsiCo" shall refer to the corporate offices of PepsiCo and not
the individual PepsiCo divisions.

"Enrollment Form" shall mean the application a Participant completes to obtain
covered benefits from a Vendor.

"Participant" shall mean an individual identified by PepsiCo eligible to
participate in one or more or PepsiCo's Plans as specified by PepsiCo. A
participant includes both primary subscribers and their eligible dependents.

"Plan" or "Plans" shall mean any of the Participant benefit plans of PepsiCo
with respect to which NMS provides services, as defined in Appendix A to this
Agreement.

"Vendor" shall mean an organization authorized to provide or arrange for health
care or other Participant financial /welfare benefits and shall include but not
be limited to health maintenance organizations, preferred provider
organizations, pharmacy benefits managers, indemnity insurance organizations,
third party administrators, mental health/substance abuse service organizations,
short and long term disability managers, life insurance organizations, retiree
plan administrators, flexible benefit administrators, and employee assistance
program administrators, that has contracted with PepsiCo.

"Vim-in" shall mean those data feeds from PepsiCo or its Vendors to NMS which
are needed by NMS to perform the obligations of this service Agreement. Vim-ins
are categorized into three levels of complexity. The categories serve as a
pricing guide for set up and ongoing cost for any Vim-ins beyond those
identified in this initial contract.

"Vim-out" those data feeds from NMS to PepsiCo vendors which are needed by NMS
to perform the obligations of this service Agreement. Vim-outs are categorized
into three levels of complexity. The categories serve as a pricing guide for set
up and ongoing cost for any Vim-outs beyond those identified in this initial
contract.

***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.4 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

ARTICLE 2. NMS RESPONSIBILITIES
- ---------------------------------

NMS shall be responsible for PepsiCo benefit Vendor eligibility and financial
data management including, data receipt from PepsiCo divisions, warehousing and
data distribution and financial reconciling between Corporate and all benefit
Vendors. NMS is further responsible for generating standard accounting reports
associated with these functions. NMS shall produce a thirteen (13) month billing
report to be used by Corporate for purposes of divisional allocation. It is
further understood that the Vendors will be paid based on a separate twelve (12)
month data base and that the two data bases will not fully reconcile at any
point in time.

Specific contracted responsibilities are expressed in the Service and Pricing
document attached as Appendix A. Specific performance requirements are expressed
in the Performance Guarantee document attached as Appendix B.

ARTICLE 3. COMPANY RESPONSIBILITIES
- --------------------------------------

1. Company shall supply to NMS, according to a mutually agreed to schedule,
regular electronic files relating to Participant's selection of Vendors.
If Company does not transmit data in a timely fashion or sends incomplete
or inaccurate data, Company shall recognize that NMS may not be able to
administer its services in complete conformity to the standards and content
contained in this Agreement.

2. Company shall respond to inquiries from NMS, relating to administering the
services contained in this Agreement, in a timely and complete fashion
which allows NMS to fulfill its obligations contained herein.

3. Company shall reasonably communicate to Participants instructions for
completing enrollment information and otherwise communicating with NMS.
Company shall comply with reasonable NMS requests to improve Company's
communication and general human resource policies relating to
administrative services provided by NMS.

4. Company shall execute all requests for fund transfers from NMS to Vendors
and NMS according to Appendix C unless, in Company's opinion, the request
is inaccurate, incomplete or otherwise does not meet reasonable standards
for completeness and documentation.

5. Company, not NMS, shall be responsible for any late payment or
reinstatement fees levied by Vendors relating to improper or late payment
of premiums, service fees or claims funding request. If late fee is
assessed due to NMS negligence (as mutually agreed upon by NMS and
PepsiCo), NMS will be responsible for payment of said late fee to the
appropriate vendor.

6. Company shall reimburse NMS according to Appendix A of this Agreement and
also subject to the following:

a. Fees for routine administrative services, including but not limited to
the Global Fee, 13 period billing, ad hoc reporting and retiree base fee
shall be immediately and fully payable to NMS on a monthly basis at the
time PepsiCo reimburses Vendors.

b. Fees, services, and expenses not reimbursed to NMS on a regular monthly
basis, including but not limited to Consulting Services and special
projects, are due to NMS thirty (30) days after the invoice receipt
date.

c. PepsiCo shall reimburse NMS for all approved travel related expenses
including but not limited to airfare, ground transportation, hotel and
meal expenses. Expense reimbursements are due to NMS thirty (30) days
after the invoice receipt date.
<PAGE>

d. Any costs for printing, mailing and overnight delivery charges relating
to the distribution of information to Company, Participants or Vendors
are the sole responsibility of Company unless otherwise described in
Appendix A.

ARTICLE 4. INDEMNIFICATION, INSURANCE AND FIDUCIARY STATUS
- -----------------------------------------------------------

Indemnity. Each party (the "Indemnifying Party") shall indemnify and hold
harmless the other party (the "Indemnified Party") from and against any costs,
claims, damages, liabilities, or losses (including costs and expenses and
attorney fees incurred in connection therewith) ("Claims") arising from the
negligence or willful misconduct of the indemnifying Party. The Indemnified
Party shall notify the Indemnifying Party promptly of any Claim. The
Indemnifying Party may, but shall not be required to, assume the defenses of any
such Claims. The Indemnified Party shall cooperate with the Indemnifying Party
in the defense of any such claim, and shall not settle or compromise such Claim
without the prior written consent of the Indemnifying Party.

Insurance. During the term of this Agreement, NMS shall maintain in force the
following insurance coverage:

1. Workers' Compensation and related insurance as prescribed by the law of the
state(s) in which the work is to be performed

2. General comprehensive liability coverage, with limits of *** per occurrence
and *** in the aggregate

3. Property damage coverage in the amount of *** per occurrence

4. E&O data processing insurance with limits of ***

Upon PepsiCo's request, NMS shall provide certificates of insurance evidencing
the aforementioned coverages.

Fiduciary Status. PepsiCo and NMS understand and intend that NMS shall not be a
fiduciary within the meaning of the Employee Retirement Income Security Act of
1974 as amended, or any state law with respect to any Plan. NMS shall not have
any discretion with respect to the management or administration of any Plan or
with respect to determining or changing the rules or policies pertaining to
eligibility or entitlement of any participant in any Plan to benefits under such
Plan. NMS also shall not have any control or authority with respect to any
assets of any Plan, including the investment or disposition thereof. All
discretion and control with respect to the terms, administration or assets of
any Plan shall remain with PepsiCo or with the named fiduciaries under such
Plan.

ARTICLE 5. TERM AND TERMINATION
- --------------------------------

1. The term of this Agreement will be four years (4) commencing on January
1/st/ 1997 and will thereafter by automatically renewed for successive
terms of one (1) year each.

2. In the event that a party materially breaches in the performance of any of
its requirements under this Agreement, the other party may, at its sole
discretion, provide notice to the breaching party of its intent to
terminate this Agreement.

*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.4 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
<PAGE>

3. The breaching party shall have thirty (30) days to cure the default and
avoid termination. If the default is not cured within thirty (30) days of
the notice, the other party may execute its termination notice to be
effective thirty (30) days after the end of the expiration of the default
cure period.

4. For the purposes of this Agreement and without limiting the foregoing
generally, a material breach shall include but not be limited to the
following:

a. Failure by NMS to substantially provide the services outlined in
Appendix A;

b. Failure by Company to reimburse NMS according to the terms of this
Agreement;

c. A Party's filing a petition in bankruptcy or for reorganization or for
the adoption of an arrangement under the Bankruptcy Act (or similar law
of the United States or any other jurisdiction, which law relates to the
liquidation or reorganization of companies or the modification or
alteration of the rights of creditors) or an answer or other pleading
admitting or failing to deny the material allegations of such a petition
or seeking, consenting to or acquiescing in the relief therein provided;

d. A party's making an assignment, or so called trust mortgage or the like,
for the benefit of its creditors or by its making a proposal to its
creditors under any bankruptcy act;

e. A party's consenting to the appointment of a receiver or a trustee (or
other person performing a similar function) for all or a substantial
part of its property;

f. A party's being adjudicated bankrupt;

g. The entry of a court order which has not been vacated, set aside or
stayed within thirty (30) days from the date of entry, either (i)
appointing a receiver or a trustee for all or a substantial part of its
property or (ii) approving a petition filed or application made against
it for, or effecting an arrangement in, bankruptcy or made against it
for, or effecting an arrangement in, bankruptcy or for a reorganization
or other relief pursuant to any bankruptcy act or for any other judicial
modification or alteration of the rights of creditors;

h. The assumption of custody or sequestration by a court of competent
jurisdiction of all or substantially all of a party's property, which
custody or sequestration has not been suspended or terminated within
thirty (30) days from its inception; and/or

i. A party's insolvency, as defined by law.

5. Obligations Upon Termination. Upon any termination or non-renewal of this
Agreement, either party shall deliver to the other party any and all data
or information (in whatever form or media) that is owned or developed by or
licensed to the other party and that is supplied hereunder. Furthermore,
NMS shall cooperate with PepsiCo in the transfer of NMS' obligations
hereunder to a replacement service provider.

ARTICLE 6. CONFIDENTIALITY AND PROPERTY RIGHTS
- -----------------------------------------------

Confidential Information. Confidential Information shall include all information
relating to the design and data storage components of the NMS BEN-NET(TM) system
and any additional information disclosed by one party (the "Discloser") to the
other (the "Recipient") in writing and marked "Confidential" or disclosed
visually or orally and subsequently confirmed in writing to be confidential
within 20 days after the first disclosure. Confidential Information shall not,
however, include the following:
<PAGE>

1. Information which is now or hereafter comes into the public domain
through no fault of the Recipient;

2. Information learned by the Recipient from third parties;

3. Information known to the Recipient or developed by the Recipient
independently of information disclosed by the Discloser; or

4. Information required to be disclosed by Recipient pursuant to requirements
of law.

Confidential Treatment. The Recipient shall treat the Confidential Information
as confidential, using the same standard of care that it uses to protect its own
proprietary or confidential information (but not less than a reasonable standard
of care), and shall use reasonable measure to prevent disclosure of the
Confidential Information to any third party without the Recipient's consent. The
Recipient shall disclose the Confidential Information only to those of its
Participants, agents or subcontractors who have a reasonable need for access
thereto for.

Return of Information. All Confidential Information shall remain the property of
the Discloser. Upon the Discloser's request, the Recipient shall promptly return
the Confidential Information, provided, however, that the Recipient may retain
copies solely for archival purposes only.

NMS Intellectual Property. Nothing contained in this Agreement shall confer to
PepsiCo any property rights, proprietary interest or licenses in the software,
written materials, techniques, or know how used by NMS and its BEN-NET(TM)
System.

Non-Solicitation. For the term of this Agreement and a period of two (2) years
thereafter, neither party shall, in any way, solicit or employee directly or
indirectly an employee of the other party without the written consent of the
other party.

ARTICLE 7. ARBITRATION OF DISPUTES
- -----------------------------------

Any dispute, controversy or claim that cannot be resolved by the parties arising
out of or relating to this engagement letter or the services covered by this
letter shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"), and judgment
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. The arbitration shall be held in Minneapolis, MN, or in
such other location as the parties may mutually agree upon. The arbitration will
be conducted before a panel of three arbitrators, with one arbitrator named by
each party and the third named by the two party-appointed arbitrators, or (if
they should fail to agree on the third) by the AAA. The arbitrators may not
award non-monetary or equitable relief of any sort. They shall have no power to
award punitive damages or any other damages not measured by the prevailing
party's actual damages. All aspects of the arbitration shall be treated as
confidential. Neither the parties nor the arbitrators may disclose the
existence, content or results of the arbitration, except as necessary to comply
with legal or regulatory requirements. Before making any such disclosure, a
party shall give written notice to all other parties and shall afford such
parties a reasonable opportunity to protect their interests.

ARTICLE 8. BOOKS AND RECORDS
- -----------------------------

1. PepsiCo shall have the right, but not the obligation, to audit the books
and records of NMS pertaining to NMS' services rendered hereunder no more
than once every twelve (12) months, upon reasonable notice to NMS. Such
right to audit shall survive the termination of this Agreement by six (6)
months. All audits shall be at PepsiCo's expense.

2. NMS will make available for audit by either PepsiCo or its designee
("Auditor") its files, books, procedures and records (including computer
terminal access to same) pertaining to the services provided by
<PAGE>

NMS under this Agreement during the hours of 8 a.m. to 6 p.m. Monday
through Friday, but excluding holidays. NMS shall fully cooperate with such
audit and shall make available for interview with the Auditor those
personnel with material involvement or responsibility with respect to the
services provided by NMS under this Agreement. PepsiCo will give NMS
reasonable notice of each audit prior to commencement of the audit. The
audit shall be conducted at NMS' offices.

3. Notwithstanding anything herein to the contrary, in the event that the
Auditor is to be a designee of PepsiCo, PepsiCo must first obtain the
consent of NMS with respect to such designee, which consent shall not be
unreasonably withheld.

4. NMS shall have the opportunity, prior to the release of the audit report,
to review the draft and to include in the report its responses to issues
raised by the report.

ARTICLE 9. NOTICES
- -------------------

General. All notices, requests, demands and other communications required to be
given hereunder shall be in writing and shall be deemed to have been duly given
one day after delivery by hand or via a nationally recognized overnight courier
or five days after mailing, certified or registered mail, return receipt
requested to the party for whom intended at the address specified in this
Article. Either party may designate an alternated address for notices by given
written notice thereof in accordance with the provisions of this Article.

Notices to Supplier. All notices to NMS shall be directed as follows:

Network Management Services
5500 Wayzata Blvd., Suite 1275
Minneapolis, MN 55416-1241
Attn.: Chief Financial Officer

Notices to PepsiCo. All notices to client shall be directed as follows:

PepsiCo
700 Anderson Hill Road
Purchase, NY 10577
Attn.: Burkett W. Huey

ARTICLE 10. GENERAL PROVISIONS
- ------------------------------

Control of Work. NMS shall be solely responsible for the conduct and control of
the work to be performed under this Agreement by NMS and its agents or
employees.

Applicable Law. This Agreement shall be governed and construed in accordance
with the laws of the State of Minnesota.

Publicity. Each party shall obtain the prior written consent of the other party
concerning the content and plan of distribution of any public announcement,
press release or advertisement concerning this Agreement, provided that NMS may
include references to PepsiCo in client lists, general press releases not
specifically pertaining to Company, proposals, and other non-public
communications concerning NMS or its services. No prior consent shall be
required regarding the inclusion of the other party's name in notices,
disclosure documents, or other filing or publications required by law or
regulations.
<PAGE>

Paragraph Headings. Section headings are for convenience only and shall not be
considered part of the terms and conditions of this Agreement.

Modification. No modification, waiver or amendment of any term or condition of
this Agreement shall be effective unless and until it shall be reduced to
writing and signed on behalf of NMS and PepsiCo.

Waiver. Failure by either party at any time to require full performance by the
other party or to claim a breach of any term of this Agreement will not (a) be
construed as a waiver of any right under this Agreement, (b) affect any
subsequent breach, or (c) affect the validity of this Agreement or any part
thereof.

Severability. If any term or provision of this Agreement should be declared
invalid by a court of competent jurisdiction, the remaining terms and conditions
of this Agreement shall be unimpaired.

Complete Agreement. The Agreement, including the Exhibits, constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior proposals, negotiations, conversations, discussions and
agreements between the parties. This Agreement may be modified only by a written
instrument executed on behalf of both of the parties hereto.

Assignment. Neither party may assign any of its rights under this Agreement
without the prior written consent of the other party. Subject to the foregoing,
all of the terms and provisions of this Agreement shall be binding upon and
insure to the benefit of and be enforceable by the successors and permitted
assigns of PepsiCo and NMS.

Survival. The respective obligations of each party that would be their nature
continue after the termination or expiration of this Agreement, including
without limitation those contained in Confidentiality, Indemnification, and
Intellectual Property Indemnification, and shall survive the termination or
expiration of this Agreement.

Counterparts. This Agreement may be executed in one or more counterparts each of
which shall be deemed to be an original and all of which, taken together, shall
constitute a single instrument.

Benefit of the Parties. This Agreement is for the sole and exclusive benefit of
the parties hereto and is not intended to, nor does it, confer any benefit upon
any third party.
<PAGE>

IN WITNESS WHEREOF, the parties hereto, through their duly authorized
representatives, have executed this Agreement effective as of the day and year
first set forth above.

NETWORK MANAGEMENT SERVICES, INC.

BY: /s/ Scott P. Halstead
-------------------------
Name: Scott P. Halstead
Title: Chief Financial Officer

PEPSICO, INC

BY: /s/ Jacqui Demeter
-------------------------
Name: Jacqui Demeter
Title: Manager Health & Welfare Benefits Delivery
<PAGE>

PepsiCo Contract - Appendix A
- --------------------------------------------------------------------------------

Pricing Schedule

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
VIMIN/VIMOUT SETUP Fees
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Set-Up Environmental analysis ***
Description: Project Planning, Management, and coordination with client divisions and
vendors to initialize consolidated administration services. plus travel expenses
- ---------------------------------------------------------------------------------------------------------------------
2 . VIMIN - Set-up 5 Imports
Description: Analysis of group reporting, rate and benefit structure required by
client. Data mapping imports from client's payroll/benefit system, database ***
enhancements for customized data capture. Pre-import edit logic and reports ***
development. ***
***
***
***

Note: pricing corresponds
to list in comments

Assumption: Current VIMIN specification requires minimal modifications.

Estimated Total
*** *

*Does not include VIM-Ins
from Vendors
- ---------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ----------------------------------------------------------
Comments
- ----------------------------------------------------------
<S>
Phase I completed prior to separation of divisions.

- ----------------------------------------------------------
*Assume Corporate will supply 1 file versus two
* Assume PVN Import specification

PepsiCo VIM-INS:
. KFC Stress Test
. Frito/Caremark Import
. Frito-Lay PVN Import
. Pepsi-Cola PVN Import
. PepsiCo Corporate PVN Import
. International

Any additional requested VIM-Ins will be priced
separately.
- ----------------------------------------------------------
</TABLE>

________________________________________________________________________________
J:\PepsiCo\PRICING\1997Pricing\pricing97.doc
Last Print Date: 11/09/98
Last Revision Date: 10/29/98

PepsiCo Contract - Appendix A

<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
3.VIMOUT- Set-Up
Level I
Description: Interface with program vendors to deliver consolidated
electronic data feeds. Assumes comprehensive data, multiple Level I - Level I Vendors:
coverage's, translating into or converting from complex existing Assumes 14 . Aetna H&W (52)
group structures. charge range of . United/Met (52)
*** each *Assume PNP is included
. Mercer Pension Val (6)
. Merck/Medco (52)
Estimated Total . SSB (401k/CSPP/RDC) (52)
*** . John Hancock (52)
. Corporate Adhoc (52) - 4 files*
. PVN Export
Additional VIM-OUT . PVN Financials (2 files)
set up @ *** each . PVN Data Edits
* Note: Pricing is separate as
identified as 4 deliverables later in
the process instead of 1 deliverable.
. KPMG (52)
. Merrill Demo (52)
. Merrill Grant (4)
. Merrill Mini (52)
Level II . Benefacts Mini (12)
Description: Interface with program vendors to deliver consolidated Level II - Assume 5 . Benefacts SP (3)
electronic data feeds. Assumes fewer data elements, single line of @ *** each . Benefacts TCPS (6)
coverage, new data structure (no translation).
Estimated Total
***
Level II Vendors:
Additional VIM-OUT . MetLife Dental (52)
set up @ *** each . CIGNA Dental (26)
. Aetna FSA (52)
. UHC FSA (52)
. MHN (26)
. Health International (52)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Last Print Date: 11/09/98
Last Revision Date: 03/15/97

*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.4 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

2
<PAGE>

PepsiCo Contract - Appendix A

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
VIMIN/VIMOUT SETUP Fees Comments
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Level III Level III - Assume Level III Vendors:
Description: Interface with program vendors to deliver 10 plus HMOs (137) . Lenscrafters (26)
consolidated electronic or hard copy paper data feeds. If @ *** each . Mercer 401k Discrim Test (4)
electronic, assumes minimal data elements, single line of . Hyatt Group Legal (26)
coverage, new data structure (no translation). . ECPA (12)
. Mercer Pension Info Line (12)
Estimated Total . Work Comp (52)
*** and . Work Comp Frito (12)
*** * . Dep care Connect (26)
Free & Clear (26)
* Assumes 110 * Assumes part of Merck/Medco
Pepsi-Cola HMOs *Assumes part of UHC feed
with no change . Human Affairs (26) - this was eliminated

Additional VIM-OUT . HMOs - 137 (1644)
set up @ *** each

- ----------------------------------------------------------------------------------------------------------------------------
TOTAL SET-UP FEE (estimated) *** Due 2nd quarter 1997
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

Last Print Date: 11/09/98
Last Revision Date: 03/15/97

*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.4 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

3
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------- ----------------------------- ---------------------------------------------------------
VIMIN/VIMOUT ONGOING Fees Comments
- -------------------------------------------- ----------------------------- ---------------------------------------------------------
<S> <C> <C>
Global Fee of Assumptions:
***/month . Services for global fee are outlined below. All
Previous Pricing Schedule Fees: other services not in scope are subject to time &
VIM-IN Set Up: materials charge @ ***/hour.
- ------------- Phase 2 Interim Fee is . Fee does not include COBRA - see separate fees.
*** ***/month . Phase 2 interim fee is effective one month
prior to live date for Frito or Pepsi-Cola
VIM-IN Ongoing: . If there is a change in number of VIM In or Out
- -------------- feeds (regardless of frequency), fee will increase
*** per VIMIN per month incrementally based on old pricing schedule for
Assumes 65,000 employees both development and ongoing.
VIM-OUT Set Up: (This number includes . Current Pepsi-Cola revenue for HMOs included in
- -------------- Frito-Lay retirees who have fee.
Level 1: *** per VIMOUT H&W benefits) . Retiree Medical not included.
Level 2: *** per VIMOUT . Travel & Expense not included and billed
Level 3: *** per VIMOUT separately. Except; (4) account manager trips per
year are NMS expense.
VIM-OUT Ongoing: . Does not include development costs.
- --------------- . T1 connection & implementation not included
Level 1: *** per VIMOUT per month . Annual increase for 1/1/99 subject to CPI + 3%
Level 2: *** per VIMOUT per month if scope & effort are equal. Increase for Year
Level 3: *** per VIMOUT per month 2,000 will be waived assuming PVN is in
maintenance mode, and NMS IS-related salary
increases do not necessitate increasing fees in
order to adequately support PVN.
. Assumes 65,000 ee's; an adjustment of ***/year
will be applied with every increase/decrease of
5,000 ee's
- -------------------------------------------- ----------------------------- ---------------------------------------------------------
</TABLE>

Last Print Date: 11/09/98
Last Revision Date: 03/15/97

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
VIMIN VIMOUT ONGOING Fees Comments
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. VIMIN - On-Going Fee includes 4 ongoing Corporate PVN Import
Description: Receipt and processing of enrollment adds, changes, VIM-Ins Pepsi-Cola PVN Import
and termination records via electronic import from client's Frito PVN Import
payroll/benefit system. Additional VIM-Ins @ International PVN Import
***/mo.
- ------------------------------------------------------------------------------------------------------------------------------------
2. VIMOUT- On-Going Fee includes the following
Description: Distribution of enrollment adds, changes, and vendors outlined in set up Note: NMS will accept exchange for
termination records via electronic export or paper on a only. vendors in same level at no
weekly or as appropriate basis. additional cost to PepsiCo as long
as the net change equals zero.
This provision applies to ongoing
charge only - not the set up fees.

(14) Level 1
Level I additional VIMOUT
@ ***

(5) Level II
Level II additional VIMOUT
@ ***

(10) Level III
plus
Level III 137 HMOs
additional VIMOUT
@ ***
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

________________________________________________________________________________
Last Print Date: 11/09/98
Last Revision Date: 03/15/97

5
<PAGE>

PepsiCo Contract - Appendix A

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER ADMINISTRATIVE SERVICES Fees COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. PCP Management No PEPM applied.
Description: Gather PCP elections, load into BEN-NET(TM) during Service included in the
open enrollment and fornew hires, validate against vendor global fee
directory in support of the enrollment process.

- ------------------------------------------------------------------------------------------------------------------------------------
2. Customer Service No PEPM applied.
Description: Receive and respond to inquiries from division Service included in the
HR/Benefits reps and Health Plans for inquiries regarding global fee
enrollment, eligibility, and reconciliation.

- ------------------------------------------------------------------------------------------------------------------------------------
3. Eligibility Verification No PEPM applied
Description: Application of edits against eligibility Service included in the
rules, student status verification, and file maintenance. global fee

- ------------------------------------------------------------------------------------------------------------------------------------
4. Premium Billing, Reconciliation No PEPM applied. Client will fund vendors
Description: Calculation and distribution of consolidated Service included in the direct using NMS-reported data,
monthly "self-bill" to client using NMS standard invoice global fee therefore, no collection effort
format, with fully adjudicated retroactive and no funds transfer and cash
adjustment processing and reconciliation. balancing required.
Assumes 13th month period billing, however not
at member level.
- ------------------------------------------------------------------------------------------------------------------------------------
5. BEN-NET(TM) Application Not Included.
Description: Internet access for inquiry Priced separately.
by division HR reps. NMS provides Help Desk
support and End-User training.
Description: Internet access for interactive web site
-----------
enrollment with personalized enrollment worksheets.

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

________________________________________________________________________________
Last Print Date: 11/09/98
Last Revision Date: 03/15/97

6
<PAGE>

PepsiCo Contract - Appendix A
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
OTHER ADMINISTRATIVE SERVICES Fees
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
6.COBRA Administration Ongoing
Description: Provide continuation notification to qualified beneficiary or retiree,
process enrollment and eligibility, bill and collect Cobra recipient premium, ***/month
provide enrollment data to health plans and enrollment/premium data to client. per
Cobra Participant*
If NMS retains responsibility for renewal/open enrollment solicitation and
notification. Price assumes; a) passive enrollment, b) Client responsible for
development & production of enrollment materials, c) NMS responsible for cobra cover
letter and updated rate information and mailing of packets.
* Refers to entire family
unit covered
If NMS provides initial notification to employee following qualifying event only
which is incorporate into the general cobra participant fee.

If NMS does not retain 2% premium surcharge for COBRA participants, an additional fee
per participant applies and this is incorporated in the fee.

- ----------------------------------------------------------------------------------------------------------------------
7. COBRA Implementation- Set Up ***
Description: Project Planning, Management, and coordination with client divisions and one time fee
vendors to initialize consolidated administration services. plus
travel expense

- ----------------------------------------------------------------------------------------------------------------------
8. HIPAA Certificate Production & Mailing *** per Certificate
Weekly production and mailing of HIPAA certificates for PepsiCo, Pepsi-Cola, Frito-Lay, Produced
and International employees who's medical coverage is terminated. HIPAA
certificates will not be produced for employees transferring from one division
to another where no lapse in coverage occurs.

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

<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER ADMINISTRATIVE SERVICES COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
6.COBRA Administration Ongoing
Description: Provide continuation notification to qualified beneficiary or retiree, Note: CORBA administration was not
process enrollment and eligibility, bill and collect Cobra recipient premium, included in original proposal and has
provide enrollment data to health plans and enrollment/premium data to client. been added as a result of the completion
of environmental analysis
Estimates:
----------
QB's/month
1200 - PepsiCo
If NMS retains responsibility for renewal/open enrollment solicitation and 800 - Restaurants
notification. Price assumes; a) passive enrollment, b) Client responsible for
development & production of enrollment materials, c) NMS responsible for cobra cover
letter and updated rate information and mailing of packets. Participants/year
800 - PepsiCo
300 - Restaurants

If NMS provides initial notification to employee following qualifying event only . Assumes client retains responsibility
which is incorporate into the general cobra participant fee. for funding vendors for COBRA and
Retiree fees
. Assumption of enrollment materials to
be developed by client
If NMS does not retain 2% premium surcharge for COBRA participants, an additional fee . Assume Cobra benefits and process
per participant applies and this is incorporated in the fee. similar across divisions & benefits
- ------------------------------------------------------------------------------------------------------------------------------------
7. COBRA Implementation- Set Up Note: COBRA administration was not
Description: Project Planning, Management, and coordination with client divisions and included in original proposal and has
vendors to initialize consolidated administration services. been added as a result of the completion
of environmental analysis
Assumes transition of Individual
administration from multiple divisions
- ------------------------------------------------------------------------------------------------------------------------------------
8. HIPAA Certificate Production & Mailing
Weekly production and mailing of HIPAA certificates for PepsiCo, Pepsi-Cola, Frito-Lay,
and International employees who's medical coverage is terminated. HIPAA
certificates will not be produced for employees transferring from one division
to another where no lapse in coverage occurs.

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Last Print Date: 11/09/99
Last Revision Date: 03/15/97

7
<PAGE>

PepsiCo Contract - Appendix A
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Optional Services Fees
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Ad Hoc Reporting No Charge - Standard
Description: Analysis and programming of custom reports to support data Report Package
management and decision making outside of the standard reporting package (Y-T-D
Enrollment, Monthly Enrollment and Payment summary). ***/hour

<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Optional Services Comments
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Ad Hoc Reporting "Standard" reporting package provided at
Description: Analysis and programming of custom reports to support data no charge includes monthly enrollment
management and decision making outside of the standard reporting package (Y-T-D detail and summary, monthly cash flow
Enrollment, Monthly Enrollment and Payment summary). report, consolidated self-bill and
consolidated transfer of funds request.

Monthly charge of *** a month will be
billed to PepsiCo, beginning 4/1/98, and
continuing until such time that PepsiCo
determines that the ad hoc reporting
allocation should be increased or
decreased. In 1998, the allocation for
reporting is 400 hours. NMS will provide
a quarterly reconciliation of actual
hours compared to allocated hours.

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Last Print Date: 11/09/98
Last Revision Date: 03/15/97

8
<PAGE>

PepsiCo Contract - Appendix A

<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
2. 13 Billing Reporting Export form primary
Description: NMS will provide PepsiCo a report which reflects database Cost and charges associated with the 13
payables on a 13 period accounting cycle. The report "13 *** set up fee period payable report are not included
Period Payable Report" will be produced from a separate in the base contract and are to Import
database used exclusively for this reporting purpose. Import to secondary to secondary be billed to PepsiCo on a
database time and materials basis.
*** set up fee

Development costs; One third of the 500 hours (@***/hr)
*** required to program for 13 period
process. NMS assumes the other two thirds
of development costs.

Ongoing Maintenance Costs; Assumes 65,000 employees
***/month An adjustment of *** will be applied to
any increase/decrease of 5,000 employees.

Annual increase for 1/1/99 subject to
CPI + 3% if scope & effort are equal.
Increase for Year 2,000 will be waived
assuming PVN is in maintenance mode, and
NMS IS-related salary increases do not
necessitate increasing fees in order to
adequately support PVN.
- ------------------------------------------------------------------------------------------------------------------------------------
3. Confirmation Statements Available, but not
Description: Generation and distribution of personalized requested
employee letters identifying enrollment election, No pricing offered
dependent information, and PCP selection.
- ------------------------------------------------------------------------------------------------------------------------------------
4. Customer Service: Level II
Description: Receive and respond to inquiries from division Service included in
HR/Benefits reps, Health Plans, and Continuants for Global Fee.
inquiries regarding enrollment, eligibility, billing and
payment.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------
Last Print Date: 11/09/97
Last Revision Date: 03/15/97

*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.4 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

9
<PAGE>

PepsiCo Contract - Appendix A

<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
5. Retiree Administration
. Level II Customer Service (Inactives are supplied with *** monthly fee plus ***
NMS phone number for a first point of contact. per non-billed retiree,
. Billing, collection and reconciliation (Periodic *** per billed retiree
billing and collection for those inactives where NMS
is notified that their pensions does not cover their
premiums)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------
Last Print Date: 11/09/99
Last Revision Date: 03/15/97

*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.4 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

10
<PAGE>

PepsiCo Contract - Appendix C
- --------------------------------------------------------------------------------

PepsiCo Vendor Network 12 (PVN12) consolidated invoice is due to PepsiCo from
NMS on the 18/th/ of each coverage month (calendar month). If the 18/th/ falls
on a non-business day, the business date closest to the 18/th/ will be the due
date of the invoice (for example, if the 18/th/ is on a Saturday, the due date
is the 17/th/; if the 18/th/ is on a Sunday, the due date is the 19/th/).

PepsiCo will make payment by the 25/th/ of each month. If the 25/th/ falls on a
Saturday or Sunday, PepsiCo will make payment by the Friday preceeding the
25/th/. Payment should be made to the PepsiCo established account.

NMS will distribute payments to each vendor, including itself, within 2 business
days following receipt. The payments will be made via ACH, unless a PepsiCo
vendor does not accept ACH. This two day turn around results in actual vendor
receipt of the distribution on the 3/rd/ business day.

Note: Payment must be received by 3 p.m. central time to be considered received
on that specific business day. If received after 3 p.m. central time, the
payment will be considered received the following business day.

L:\PepsiCo\PRICING\1997 PRICING\Appendix C.doc
Last Print Date: 11/09/98
Last Revision Date: 10/29/98

<PAGE>

EXHIBIT 10.5

SERVICES AGREEMENT ***

THIS SERVICES AGREEMENT (the "Agreement") is entered into as of July 1, 1998 by
and between Bell Atlantic Corporation, with an address of 240 East 38th Street,
New York, NY 10016, ("Bell Atlantic"), and Network Management Services, Inc.,
with an address of 5500 Wayzata Boulevard, Suite 1450, Minneapolis, MN 55416-
1241 ("NMS").

RECITALS

WHEREAS, Bell Atlantic desires to retain NMS to provide certain administrative
and other services for certain Participant benefit plans maintained by Bell
Atlantic; and

WHEREAS, NMS desires to provide such services on the terms and conditions set
forth in this Agreement;

NOW THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, and subject to the terms and conditions set forth below, NMS
and Bell Atlantic hereby agree as follows:

ARTICLE 1. CERTAIN DEFINITIONS
- -------------------------------

As used in this Agreement, the following terms shall have the following
meanings:

"BEN-NET(TM)" shall mean NMS' proprietary technology services software program,
which provides certain benefit plan services and includes the following
features: group set-up, Vendor set-up, enrollment management, enrollment data
edits, eligibility distribution to Vendors, retroactive enrollment adjustments,
payments to Vendors, and COBRA and other direct individual billing
administration.

"Participant" shall mean an individual identified by Bell Atlantic as being
eligible to participate in one or more of Bell Atlantic's Plans. A Participant
includes both primary subscribers and their eligible dependents.

"Plan" or "Plans" shall mean any of the Participant benefit plans of Bell
Atlantic with respect to which NMS provides services, as described in Appendix A
to this Agreement or any amendment or supplement thereto.

"Vendor" shall mean a licensed organization authorized to provide or arrange for
health care or other welfare services for Participants that has contracted with
Bell Atlantic, including health maintenance organizations, preferred provider
organizations, pharmacy benefits managers, indemnity insurance organizations,
third-party administrators, mental health/substance abuse service
organizations, short- and long-term disability managers, life insurance
organizations, retiree plan administrators, flexible benefit administrators and
employee assistance program administrators.

ARTICLE 2. NMS RESPONSIBILITIES
- ---------------------------------

During the term of this Agreement:

2.1. NMS will be responsible for ensuring that all services are rendered as
described in Appendix A to this Agreement.

2.2. NMS will be responsible for the performance standards as described in
Appendix B to this Agreement.

2.3. NMS will maintain all appropriate regulatory approvals necessary to
provide the services specified in this Agreement. NMS will promptly
notify Bell Atlantic of the commencement of any disciplinary proceeding
against it or any of its principal officers relating to any state or
federal health care regulation.

2.4. NMS will be responsible for the overall management of Bell Atlantic's
Vendors relating to communicating eligibility, enrollment, financial and
performance data between Bell Atlantic and the Vendors.

***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.5 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

2.5. NMS will provide to the Vendors summaries and detailed enrollment and
premium payment information on an agreed upon basis, including full
retroactivity data according to Bell Atlantic and Vendor payment rules.

2.6. NMS will provide a customer service telephone number for use by Bell
Atlantic, the Vendors and Participants between 7:00 a.m. and 4:00 p.m.
(Central Time) each business day and between 7:00 a.m. and 7:00 p.m.
(Central Time) on Thursday during open enrollment. The number will be
staffed with personnel trained to answer eligibility, premium and
service fee payment, invoice and status questions relating to Plans.

2.7. NMS will promptly respond to all inquiries from Bell Atlantic and the
Vendors regarding eligibility, premium, service fees, invoice and status
questions. NMS will promptly refer inquiries not related to its duties
under this Agreement (e.g., coverage issues) to the appropriate Vendor
or to Bell Atlantic and Bell Atlantic will direct Participants to call
such Vendor or Bell Atlantic regarding all such inquiries.

2.8. NMS will be the primary contact for most Vendor issues and will promptly
respond to all inquiries from Vendors, whether directly from the Vendor
or Bell Atlantic, regarding the status of enrollees, billing, receipt
and disbursement of premiums, and reconciliation issues. NMS shall
promptly notify Bell Atlantic of any concerns or problems identified by
a Vendor.

2.9. NMS will send to Bell Atlantic (via facsimile or other means) an invoice
that provides a detailed account of the payments to be made to the
Vendors and NMS. Bell Atlantic shall review the invoice and contact NMS
to resolve questions with respect thereto. NMS will endeavor to respond
to such inquiries within one business day. Based on such invoice, Bell
Atlantic will then notify NMS of the amounts to be withdrawn from the
fiduciary account(s) for transmission to the following parties: (a) the
Vendors for premiums or ASO fees or claims payments due, and (b) NMS for
administrative fees due. Payments to Vendors and NMS shall be made via
electronic transfer to the account designated by each party. Premiums
and other service fees shall be billed monthly, while claims funding
requests submitted by Vendors shall be billed weekly.

2.10. NMS will utilize the BEN-NET(TM) system for performing its obligations
under this Agreement. NMS hereby represents that such system will be
fully capable of performing all systems functions necessary to fulfill
NMS' responsibilities under this Agreement. NMS shall be solely
responsible for the upkeep and maintenance of the BEN-NET(TM) system.

2.11 NMS will release system enhancements that can be used as a standard
feature of BEN-NET(TM) across clients at no charge. Bell Atlantic will
be fully responsible for the cost, if approved in advance by Bell
Atlantic, of enhancements that are made to accommodate the unique
requirements of Bell Atlantic operations and that are generally not to
be incorporated into BEN-NET(TM) as standard features to be used by
other clients of NMS

ARTICLE 3. BELL ATLANTIC RESPONSIBILITIES
- --------------------------------------------

During the term of this Agreement:

3.1. Bell Atlantic, or its designee, will supply to NMS, according to a
mutually agreed to schedule, regular updates relating to Participant's
selection of Vendors and other information required to perform services
as described in Appendix A. If Bell Atlantic does not transmit data in a
timely fashion or sends incomplete or inaccurate data, Bell Atlantic
agrees and acknowledges that NMS may not be able to administer its
services in complete conformity to the terms of this Agreement.

3.2. Bell Atlantic will respond to inquiries from NMS, relating to
administering the services described in this Agreement, in a timely and
complete fashion that will allow NMS to fulfill its obligations
contained herein.

3.3. Bell Atlantic shall reasonably communicate to Participants instructions
for completing enrollment forms and otherwise communicating with NMS.
Bell Atlantic shall comply with reasonable NMS requests to

2
<PAGE>

improve Bell Atlantic's communication with its Participants and its
general human resource policies that affect the administrative services
provided by NMS hereunder.

3.4. Bell Atlantic will execute all requests for fund transfers from NMS to
Vendors and NMS within 24 hours unless, in the Bell Atlantic's
reasonable opinion, the request is materially inaccurate or incomplete.

3.5. Bell Atlantic, not NMS, will pay any late payment or reinstatement fees
levied by Vendors against Bell Atlantic or NMS relating to improper or
late payment of premiums, service fees or claims funding requests.

3.6 Bell Atlantic shall reimburse NMS for services rendered hereunder
according to the fees set forth in Appendix A of this Agreement and also
subject to the following:

A. Fees and expenses for routine administrative services, including
Participant enrollment, distribution of enrollment data to
Vendors, payment of fees and reconciliation of payment to
Vendors, and customer service and general program management,
will be immediately and fully payable to NMS on a monthly basis
at the time Bell Atlantic reimburses Vendors.

B. Fees and expenses not reimbursed to NMS on a regular monthly
basis, including consulting services and special projects, are
due to NMS 30 days after the invoice date.

C. Bell Atlantic will reimburse NMS for all approved travel related
expense, including airfare, ground transportation and hotel and
meal expenses. Expense reimbursements are due to NMS 30 days
after the invoice date.

D. All bank charges imposed in connection with the establishment and
maintenance of bank accounts in connection with this Agreement
shall be paid by Bell Atlantic.

E. All costs for printing, mailing or overnight delivery relating to
the distribution of information to Bell Atlantic, Participants or
Vendors are the sole responsibility of Bell Atlantic unless
otherwise described in Appendix A.

ARTICLE 4. INDEMNIFICATION, INSURANCE AND FIDUCIARY STATUS
- -----------------------------------------------------------

4.1 Indemnification by NMS. NMS agrees to indemnify and hold harmless Bell
Atlantic and its officers, agents, directors and employees, against any
and all claims, actions, proceedings, penalties, expenses, damages,
liabilities and losses (including any governmental investigations,
complaints and actions) and reasonable attorneys' fees with respect
thereto, arising out of or in connection with (1) any breach of this
Agreement by NMS, including its representations, warranties and
covenants, (2) any claim or action involving product liability claims
arising from or relating to the design or use of BEN-NET(TM) or other
software or intellectual property provided by NMS to Participants, Plans
or Vendors, including any enhancements, upgrades or supplements to BEN-
NET(TM), such other software or such other intellectual property, (3)
any claim or action arising from or relating to the gross negligence or
wilful misconduct of NMS and (4) any use of NMS's software, written
material or other intellectual property by Bell Atlantic as permitted
herein.

3
<PAGE>

4.2 Indemnification by Bell Atlantic. Bell Atlantic agrees to indemnify and
hold harmless NMS, including its officers, agents, directors and
employees, against any and all claims, actions, proceedings, penalties,
expenses, damages, liabilities and losses (including any governmental
investigations, complaints and actions) and reasonable attorneys' fees
with respect thereto, resulting solely, directly and independent of all
other causes from (1) any material breach of this Agreement by Bell
Atlantic, including its representations, warranties and covenants, (2)
the improper payment or late payment of premiums, service fees or claims
funding requests, (3) the gross negligence or wilful misconduct of Bell
Atlantic and (4) any use of Bell Atlantic's software, written material
or other intellectual property by NMS as permitted herein.

4.3 Insurance. During the term of this Agreement, NMS shall maintain in
force the following insurance coverage:

A. Workers' Compensation insurance as required by the State(s) in
which the service is to be performed.

B. Employer's Liability insurance with limits of not less than ***
per occurrence.

C. Commercial General Liability Insurance, on an occurrence basis,
including but not limited to (premises-operations, broad form
property damage, contractual liability, independent contractors,
personal injury) with limits of at *** combined single limit for
each occurrence.

D. Commercial Automobile Liability, on an occurrence basis with
limits not less than ***

E. Crime and Fidelity Coverage on an occurrence basis, with limits of
at least *** per occurrence.

F. Professional Liability, Errors and Omissions, with limits of not
less than *** per occurrence.

Upon Bell Atlantic's request, NMS shall provide certificates of
insurance evidencing the aforementioned coverages.

4.4 Fiduciary Status. Bell Atlantic and NMS acknowledge and agree that NMS
shall not be a fiduciary within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, or any state or federal law
with respect to any Plan. NMS shall not have any discretion with respect
to the management or administration of any Plan or with respect to
determining or changing the rules or policies pertaining to eligibility
or entitlement of any Participant in any Plan to benefits under such
Plan. NMS also shall not have any control or authority with respect to
any assets of any Plan, including the investment or disposition thereof.
All discretion and control with respect to the terms, administration or
assets of any Plan shall remain with Bell Atlantic or with the named
fiduciaries under such Plan.

NMS shall not be responsible or liable for any claims decisions made by
Vendors based on eligibility information provided to Vendors by NMS. The
determination as to whether claims shall be paid under the Plan shall be
the responsibility of Bell Atlantic and Vendor in accordance with each
applicable Plan.

ARTICLE 5. TERM AND TERMINATION
- --------------------------------

5.1. The term of this Agreement will be five years commencing on the
effective date hereof and thereafter Bell Atlantic may extend the term
for an additional twelve (12) month period by providing NMS with 120
days written notice of its intention to renew this Agreement.

5.2. In the event that NMS materially breaches the performance of any of its
obligations under this Agreement, Bell Atlantic shall provide notice to
NMS of such breach. NMS shall have 30 days to cure the breach. If the
breach is not cured within 30 days of the notice, Bell Atlantic may
immediately terminate this Agreement.

***Pursuant to Rule 406 of the Securities Act of 1933,as amended, confidential
portions of Exhibit 10.5 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

4
<PAGE>

5.3. In the event that Bell Atlantic fails to perform its payment obligations
hereunder, NMS shall provide notice to Bell Atlantic of such failure.
Bell Atlantic shall have 30 days to cure the failure. If the failure is
not cured within 30 days of the notice, NMS may immediately terminate
this Agreement.

5.4. Notwithstanding the foregoing, either party may terminate this Agreement
at any time by giving notice in writing to the other party, which notice
shall be effective upon dispatch, should the other party file a petition
of any type as to its bankruptcy, be declared bankrupt, become
insolvent, make an assignment for the benefit of creditors, go into
liquidation or receivership, or otherwise lose legal control of its
business.

5.5. Termination without Cause. Bell Atlantic may, at its convenience and
without cause, at any time, terminate all or part of this Agreement by
giving NMS 180 calendar days prior written notice. NMS may terminate
this Agreement without cause by giving Bell Atlantic 180 calendar days
prior written notice. RESERVED -- In the event of termination without
cause of this Agreement prior to its expiration by Bell Atlantic under
this provision, Bell Atlantic shall pay to NMS, in addition to all other
amounts currently due to NMS for services performed and accepted by Bell
Atlantic hereunder, the remaining balance of all set-up, conversion and
implementation fees set forth below.

The total amount for set-up, conversion, and implementation fees which
is being absorbed by NMS, as an investment in this business, as part of
this Agreement is fixed at ***. This amount will be amortized by NMS on
a monthly basis over the sixty (60) months of the Agreement. Each month,
or part thereof, during which NMS continues to perform services under
this Agreement, NMS will decrease by 1.67% for each month or *** for
each month the amount of the set-up, conversion, and implementation fees
owed by Bell Atlantic upon termination of this Agreement (without
cause). In the event Bell Atlantic requests to terminate without cause,
Bell Atlantic agrees to pay the remaining unamortized balance as
immediately due and payable.

In the event NMS gives notice of early termination without cause the
remaining unamortized balance will be forfeited by NMS and is not
payable by Bell Atlantic. Furthermore, no such set-up, conversion, and
implementation fees shall be owed by Bell Atlantic in the event Bell
Atlantic terminates this Agreement for cause.

5.6. Obligations Upon Termination. Upon any termination or non-renewal of
this Agreement, each party shall deliver to the other party all data or
information (in whatever form or media decided by the delivering party)
that is owned or licensed to or was developed by the other and that was
supplied hereunder. Each party shall reimburse the other party for its
reasonable costs associated with such transfer. Furthermore, NMS shall
provide reasonable assistance to Bell Atlantic in the transfer of NMS'
obligations hereunder to a replacement service provider.

ARTICLE 6. CONFIDENTIALTY AND PROPERTY RIGHTS
- ----------------------------------------------

6.1. Confidential Information.

A. Bell Atlantic Information
--------------------------
Confidential. Any Bell Atlantic information furnished to NMS under
------------
this Agreement or that NMS comes in contact with on Bell Atlantic
premises or under Bell Atlantic control shall remain Bell Atlantic
property. All copies of such information in written, graphic or
other tangible form, and all Work Product derived from or
reflecting such information, shall be returned to Bell Atlantic at
its request, and in any event within thirty (30) days after the
expiration or termination of this Agreement. No copies shall be
made of any documents or other media provided by Bell Atlantic
without the prior written consent of Bell Atlantic. Unless such
information was previously known to NMS free of any obligation to
keep it confidential, or has been or is subsequently made public
by Bell Atlantic or a third party without breach of any agreement,
it shall be kept strictly confidential and shall be used only in
performing services under this Agreement, and may not be used for
other purposes except upon such terms as may be agreed upon
between NMS and Bell Atlantic in writing. NMS shall require all
parties accessing Bell Atlantic information including its
employees, agents and representatives to sign a separate written
agreement protecting Bell Atlantic information substantially in
the form of this provision .

***Pursaunt to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.5 have been deleted and filed separately with the
Securities and Exchn Exchange Commission pursuant to a request for confidential
treatment

5
<PAGE>

B. NMS Information

Confidential. NMS Confidential Information shall include all
------------
information relating to the design and data storage components of BEN-
NET(TM) and any additional information disclosed by NMS (the
"Discloser") to Bell Atlantic (the "Recipient") in writing and marked
"Confidential" or disclosed visually or orally and confirmed in
writing to be confidential within 20 days after the first disclosure.
Confidential Information shall not, however, include the following:

i. Information which is now or hereafter comes into the public
domain through no fault of the Recipient;

ii. Information learned by the Recipient from third parties;

iii. Information previously known to the Recipient or developed by
the Recipient independently of information disclosed by the
Discloser; or

iv. Information required to be disclosed by Recipient pursuant to
requirements of law.

Confidential Treatment. The Recipient shall treat the NMS
----------------------
Confidential Information as confidential, using the same standard of
care that it uses to protect its own proprietary or confidential
information (but not less than a reasonable standard of care), and
shall use reasonable measures to prevent disclosure of the NMS
Confidential Information to any third party without the Discloser's
consent. The Recipient shall disclose the NMS Confidential
Information only to those of its Participants, agents or
subcontractors who have a reasonable need for access thereto.

Return of Information. All NMS Confidential Information shall remain
----------------------
the property of the Discloser. Upon the Discloser's request, the
Recipient shall promptly return the NMS Confidential Information,
provided, however, that the Recipient may retain copies solely for
archival purposes only.

6.2. NMS Intellectual Property. Nothing contained in this Agreement shall
confer to Bell Atlantic any property rights, proprietary interest or
licenses in the software, written materials, techniques or know-how used
by NMS and its BEN-NET(TM) system.

6.3. Non-Solicitation. For the term of this Agreement (including any renewal
term) and a period of one year thereafter, neither party shall in any way
solicit or employ directly or indirectly an employee of the other party
without the written consent of the other party.

ARTICLE 7. DISPUTE RESOLUTION
- -----------------------------

7.1. Informal Management Mediation. Should any disagreement, dispute or claim
-----------------------------
of breach, nonperformance, or repudiation arise from, or in connection
with, this Agreement or any of the terms and conditions hereof
("Dispute") between Bell Atlantic and NMS either during this Agreement or
after termination of this Agreement, either party may give to the other
notice of the Dispute, specifically referencing this provision and
request resolution of the Dispute. At the expiration of ten (10) business
days, unless it shall have been settled, such Dispute may be referred by
either party to the Bell Atlantic Sourcing Director and Supplier
[Supplier's Contact] for resolution. The parties agree to exchange
relevant information and cooperate in good faith to resolve the Dispute
under this provision. If within an additional ten (10) business days,
such dispute shall not have been settled the parties shall have the right
to proceed under provision 7.3 below. The parties may also seek
injunctive relief to preserve the status quo pending resolution under
this provision or provision 7.3.

7.1. Settlement Purposes. ALL DISCUSSIONS AND DOCUMENTS PREPARED PURSUANT TO
-------------------
ANY ATTEMPT TO RESOLVE A DISPUTE THROUGH INFROMAL MANAGEMENT ESCALATION
ARE CONFIDENTIAL AND FOR SETTLEMENT PURPOSES ONLY AND SHALL NOT BE
ADMITTED IN ANY COURT OR OTHER FORUM AS AN ADMISSION OR

6
<PAGE>

OTHERWISE AGAINST A PARTY FOR ANY PURPOSE INCLUDING THE APPLICABILITY OF
FEDERAL AND STATE COURT RULES.

7.3. Before either party may proceed under this provision 7.3, the parties
must in good faith attempt to resolve their dispute through Informal
Management Mediation described above. Any dispute that cannot be resolved
through Informal Management Mediation shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"), and judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction
thereof. The arbitration shall be held in New York, NY. The arbitration
will be conducted before a panel of three arbitrators, with one
arbitrator named by each party and the third named by the two party-
appointed arbitrators, or (if they should fail to agree on the third) by
the AAA. The arbitrators may not award non-monetary or equitable relief
of any sort. They shall have no power to award punitive damages or any
other damages not measured by the prevailing party's actual damages. All
aspects of the arbitration shall be treated as confidential. Neither the
parties nor the arbitrators may disclose the existence, content or
results of the arbitration, except as necessary to comply with legal or
regulatory requirements. Before making any such disclosure, a party shall
give written notice to all other parties and shall afford such parties a
reasonable opportunity to protect their interests.

ARTICLE 8. BOOKS AND RECORDS
- -----------------------------

8.1. Bell Atlantic may audit the books and records of NMS pertaining to NMS'
services rendered hereunder no more than once every 18 months, upon
reasonable notice thereof to NMS. Such right to audit shall survive the
termination of this Agreement by six months. All audits shall be at Bell
Atlantic's expense.

8.2. NMS will make available for audit by either Bell Atlantic or its designee
("Auditor") its files, books, procedures and records (including computer
terminal access to same) pertaining to the services provided by NMS under
this Agreement during the hours of 9 a.m. to 5 p.m. (Central Time) ,
Monday through Friday, excluding holidays. NMS shall fully cooperate
with such audit and shall make available for interview with the Auditor
those personnel with material involvement or responsibility with respect
to the services provided by NMS under this Agreement. Bell Atlantic will
give NMS reasonable notice of each audit prior to commencement of the
audit. The audit shall be conducted at NMS' offices.

8.3. Notwithstanding anything herein to the contrary, in the event that the
Auditor is to be a designee of Bell Atlantic, Bell Atlantic must first
obtain the consent of NMS with respect to such designee, which consent
shall not be unreasonably withheld.

8.4. NMS shall have the opportunity, prior to the release of the audit report
resulting from the audit described above, to review the draft and to
include in the report its responses to issues raised by the report.

ARTICLE 9. NOTICES
- -------------------

9.1. General. All notices, requests, demands and other communications required
to be given hereunder shall be in writing and shall be deemed to have
been duly given one day after delivery by hand or via a nationally
recognized overnight courier or five days after mailing, certified or
registered mail, return receipt requested to the party for whom intended
at the address specified in this Article. Either party may designate an
alternate address for notices by given written notice thereof in
accordance with the provisions of this Article.

9.2. Notices to NMS. All notices to NMS shall be directed as follows:

Network Management Services
5500 Wayzata Blvd., Suite 1450
Minneapolis, MN 55416-1241
Attn: Chief Financial Officer

9.3. Notices to Bell Atlantic. All notices to client shall be directed as
follows:

7
<PAGE>

Bell Atlantic
240 East 38th Street
New York, NY 10016
Attn: Richard A. Fisher

ARTICLE 10. GENERAL PROVISIONS
- -------------------------------

10.1. Control of Work. NMS shall be solely responsible for the conduct and
control of the work to be performed under this Agreement by NMS and its
agents or employees.

10.2. Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without giving effect
to such State's choice of law rules.

10.3. Publicity. Each party shall obtain the prior written consent of the
other party concerning the content and plan of distribution of any
public announcement, press release or advertisement concerning this
Agreement, provided that NMS may include references to Bell Atlantic in
client lists, general press releases not specifically pertaining to Bell
Atlantic, proposals, and other non-public communications concerning NMS
or its services. No prior consent shall be required regarding the
inclusion of the other party's name in notices, disclosure documents, or
other filing or publications required by law or regulations.

10.4. Headings. Article and section headings are for convenience only and
shall not be considered part of the terms and conditions of this
Agreement.

10.5. Modification. No modification, waiver or amendment of any term or
condition of this Agreement shall be effective unless and until it shall
be reduced to writing and signed on behalf of NMS and Bell Atlantic.

10.6. Waiver. Failure by either party at any time to require full performance
by the other party or to claim a breach of any term of this Agreement
will not (1) be construed as a waiver of any right under this Agreement,
(2) affect any subsequent breach, or (3) affect the validity of this
Agreement or any part thereof.

10.7. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such a manner as to be effective and valid under
application law but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision as if such invalid,
illegal or unenforceable provision had never been contained herein.

10.8. Complete Agreement. The Agreement, including the appendices hereto,
constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior proposals, negotiations,
conversations, discussions and agreements between the parties. This
Agreement may be modified only by a written instrument executed on
behalf of both of the parties hereto.

10.9. Assignment. Neither party may assign any of its rights under this
Agreement without the prior written consent of the other party, however,
upon written notice to the other party, either party may assign this
Agreement to a successor in title to substantially all of its business
or assets. Subject to the foregoing, all of the terms and provisions of
this Agreement shall be binding upon and insure to the benefit of and be
enforceable by the successors and permitted assigns of Bell Atlantic and
NMS.

10.10 Survival. The respective obligations of each party that would by their
nature continue after the termination or expiration of this Agreement,
including without limitation those contained in Confidentiality,
Indemnification and Intellectual Property Indemnification sections and
shall survive the termination or expiration of this Agreement.

8
<PAGE>

10.11 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed to be an original and all of
which, taken together, shall constitute a single instrument.

10.12 Benefit of the Parties. This Agreement is for the sole and exclusive
benefit of the parties hereto and is not intended to, nor does it,
confer any benefit upon any third party.

10.13 Jurisdiction and Venue. This Agreement may be enforced in any federal
court or New York state court sitting in the County of New York in the
State of New York, and each party hereto consents to the jurisdiction
and venue of any such court and waives any argument that venue in such
forums in not convenient. If any party hereto commences any action
arising from this Agreement in another jurisdiction or venue, any other
party to this Agreement shall have the option of transferring the case
to the above-described venue or jurisdiction or if such transfer cannot
be accomplished, to have such case dismissed without prejudice.

IN WITNESS WHEREOF, the parties hereto, through their duly authorized
representatives, have executed this Agreement effective as of the day and year
first set forth above.

NETWORK MANAGEMENT SERVICES, INC.

BY: /s/ Scott P. Halstead
------------------------------
Name: Scott P. Halstead
------------------------
Title: Chief Financial Officer
-----------------------

BELL ATLANTIC CORPORATION

By: /s/ Richard A. Fisher
------------------------------
Name: Richard A. Fisher
------------------------
Title: SPL
-----------------------

9
<PAGE>

[LOGO OF NETWORK MANAGEMENT SERVICES]

APPENDIX A
Description of Services
Bell Atlantic

ADMINISTRATION
CONVERSION SERVICES AND FEES

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Conversion 1998 1999 2000 Comments
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Import - Set-up *** Assumes 1 BEN-IN (import) from
Description: Analysis of group reporting, rate and benefit Kwasha Lipton
structure required by client. Data mapping imports from
Kwasha's system, database enhancements for customized
data capture. Pre-import edit logic and reports
development.
- ---------------------------------------------------------------------------------------------------------------------------------
Data Export- Set-Up
Level I Level I Interfaces are *** per
Description: Interface with program vendors to deliver *** *** *** interface
consolidated electronic data feed where employee Assumed electronic interfaces
population is 1000+. Assumes comprehensive data (minimum)
elements, single line of coverage (medical), translating ***
into or converting from existing group structures.

Fee to set-up remaining,
Level II non-electronic interfaces in 1998.
Description: Interface with program vendors (with less Going forward, new Level II
than 1000 employees) to deliver hard copy "Smart" paper *** TBD TBD interfaces *** per interface
data feeds.
- ---------------------------------------------------------------------------------------------------------------------------------
MDElect Set-up NA for Not applicable for 1999 Plan Year,
1999 scope TBD for Plan Year 2000.
- ---------------------------------------------------------------------------------------------------------------------------------
PlanSelect Set-up *** This tool will mirror the
Description: Initialization of benefit communication tool information contained within the HMO
to be used by NMS Customer Service Call Center Fact Sheets provided to Bell
representatives Atlantic employees/retirees during
open enrollment.
- ---------------------------------------------------------------------------------------------------------------------------------
Fulfillment IVR Set-up *** This tool will offset the call
Description: Analysis, design and development of volumes to the Customer Service reps
Interactive Voice Response (IVR) system to handle Bell for routine fulfillment requests.
Atlantic retirees and actives requesting HMO Provider
Directories. System will off-load call volume from
Customer Service Call Center. Features include opt-out
to Customer Service. Will develop data file to send to
3rd party fulfillment provider.
- ---------------------------------------------------------------------------------------------------------------------------------
COBRA Administrative Services (CAS) Set-up ***
Description: Interface with CAS, Bell Atlantic's COBRA,
HIPAA and FSA Vendor.
- ---------------------------------------------------------------------------------------------------------------------------------
AIS Set-up (Kwasha's "Account Information System") *** Set-up includes the connections via
Description: Interface with Kwasha's system to enable NMS T1 line and necessary programming
customer service representatives to check enrollment and technical support to implement
options. set-up of AIS within NMS.
- ---------------------------------------------------------------------------------------------------------------------------------
Project Management *** ***
Description: Project Planning, Management, and
coordination with client and vendors to initialize
consolidated administration services, data Gathering,
Process Mapping, Implementation meetings, program
management, training.
- ---------------------------------------------------------------------------------------------------------------------------------
Total Implementation/Start-Up *** *** ***
- ---------------------------------------------------------------------------------------------------------------------------------
NMS Start-up Investment *** ***
- ---------------------------------------------------------------------------------------------------------------------------------
Bell Atlantic Start-up Investment ***
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.5 have been deleted and files separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
<PAGE>

[LOGO OF NETWORK MANAGEMENT SERVICES]

APPENDIX A
Description of Services
Bell Atlantic

ADMINISTRATION
ONGOING SERVICES AND FEES

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
On-Going Fee Basis Billing Projected Comments
Administration Basis Annual Fees

- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Import - On-Going N/A N/A N/A Assumes 1 weekly import file from ***.
Description: Receipt and Included in other fees
processing of enrollment Includes access and maintenance of
adds, changes, and connection. Special technical support
terminations via electronic will be billed at *** per hour as
import from Kwasha. needed.

Receipt and processing of *** per month Billed *** Assumes 1 import file from *** on a
COBRA, HIPAA and FSA adds, monthly weekly basis.
changes and terminations
via electronic import from
CAS.
- ----------------------------------------------------------------------------------------------------------------------------------
Customer Service Call Center Center Operation Fee Billed COF Center Operation Fee is charged on a
Description: Receive and (COF) monthly - Ongoing fixed monthly basis to operate the Call
respond to inquiries from - ***/month in *** Center including management,
active employees, retirees, ongoing plus advance - Open Enroll recruiting , coaching, development and
Bell Atlantic HR additional *** reporting.
representatives, and - ***/month
vendors. Respond to during Open
inquiries regarding Enrollment
enrollment, eligibility,
and plan benefits.

Staff Station Rate (SSR) Billed SSR Fees Staff Station Rate (SSR) is a charge per
- ***/hour monthly - Ongoing hour per representative or "workstation"
based on *** to Bell Atlantic. This rate includes
hours - Open Enroll salary, benefits, standard desktop
*** technology and space at standard
non-overtime hours. Estimate *** ongoing
hours plus *** during Open Enrollment.
Productivity improvements will be
reflected in fewer dedicated
representatives. The SSR will be adjusted
each year in July/August by ECI (see
notes at end of Description of Services)

System Access Rate (SAR) is a charge per
System Access Rate Billed SAR Fees hour per representative dedicated to
(SAR) monthly - Ongoing Bell Atlantic for access to unique
- AIS ***/hour based on *** system modules. Access to Microsoft
- Mcare ***/hour hours - Open Enroll Office or similar desktop tools is
*** included in SSR. Includes access to Core
BEN-NETTM Enrollment Module. Estimate ***
ongoing hours plus *** during Open
Enrollment

*** per year Fees to 1998 Costs for telephone, printing, postage
be billed *** will be passed back.
Includes: PlanSelect 1/12 per
Description: On-line month or 1999-2003 This tool will mirror the information
communication tool to be *** per *** contained within the HMO Fact Sheets
used by NMS customer month provided to Bell Atlantic
service representatives to employees/retirees during open
support Bell Atlantic enrollment.
employees and retirees
throughout open enrollment
and ongoing.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

[LOGO OF NETWORK MANAGEMENT SERVICES]

APPENDIX A
Description of Services
Bell Atlantic
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
On-Going Admin Fee Basis Billing Annual Comments
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Senior Source Center Center Operation Fee Billed COF ***
Description: Receive and *** per month Monthly - Enrollment
respond to inquiries from in ***
Medicare eligible retirees Advance
regarding enrollment,
eligibility, and plan Billed SSR Fees
benefits relating to Staff Station Rate (SSR) monthly - ***
Medicare HMO enrollment. ***/hour based on
Includes inbound and hours
outbound telemarketing System Access Rate SAR Fees
support. ***/hour for Meeting - ***
Management
- ----------------------------------------------------------------------------------------------------------------------------------
Fulfillment IVR *** per month when Monthly in Monthly Fee This tool will offset call volumes
Description: Ongoing Operational Advance *** to Customer Service reps for routine
support of Interactive fulfillment requests.
Voice Response (IVR) system plus
to handle Bell Atlantic Project that the application will be up
retirees and actives and running three months of the year
requesting HMO Provider ***/call Billed Call Charge
Directories. System will monthly ***
Customer Service. Features based on ***
include opt-out to customer hours
service and sending data
file to 3/rd/ party
fulfillment provider.
- -----------------------------------------------------------------------------------------------------------------------------------
Delivery of Enrollment Data Active Fees Billed Active Commercial Assumes 79,500 Active Commercial
to HMOs Commercial monthly in 1998 employees
Description: Distribution *** pepm conjunction ***
and confirmation of with Assumes 8,700 Medicare Risk retirees
enrollment adds, changes, "self-bill." 1999-2003
and terminations via *** Ongoing service to start in October
electronic export or paper 1998
on a weekly or as Medicare Risk Medicare Risk
appropriate basis. *** pepm 1998 Vendor Audit assumes ***% of vendors
*** participate (to be jointly determined)
Includes Vendor Audit: Above ***% participation will be
Confirmation of data priced upon request on a per vendor per
integrity using NMS Vendor 1999-2003 quarter basis with initial set-up fees
Audit: program in two parts *** per vendor. ***% membership. The
Enrollment Audit and Copy Copy Return component relies on vendor
Return Audit. Quarterly cooperation in meeting the file
performance summaries specifications and returning the file
provided. on a quarterly basis. Copy Return is
an electronic audit of ***% plan
membership on a quarterly basis.
- ------------------------------------------------------------------------------------------------------------------------------------
Medicare HMO Enrollment *** per HCFA form sent Billed 1998 *** during open enrollment
Support monthly ***
Description: NMS will based on
receive Medicare HMO forms
enrollment designations
from Kwasha on a regular
basis which will trigger
the distribution of HMO
specific HCFA enrollment
forms to enrollees. NMS
will generate an enrollee
letter, maintain stock and
coordinate mailings.
====================================================================================================================================
On-Going Admin Fee Basis Billing Annual Comments
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

[LOGO OF NETWORK MANAGEMENT SERVICES]

APPENDIX A
Description of Services
Bell Atlantic

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

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consolidated Premium Active Fees Active Assumes 79,500 Active Commercial
Remittance, Reconciliation, Commercial billed Commercial employees
and Distribution *** pepm monthly 1998
Description: Calculation and in *** Assumes 8,700 Medicare Risk retirees
distribution of conjunction
consolidated monthly with
"self-bill" to client using "self-bill." 1999-2003 Ongoing service to start in
NMS standard invoice *** December 1998.
format, with fully
adjudicated retroactive Assumes Bell Atlantic sets up and
adjustment processing and owns a bank account and gives NMS debit
reconciliation. Medicare Risk Medicare Risk authority and assumes NMS is not
Distribution of payments *** pepm 1998 responsible for bank account
with fully reconciled *** reconciliation or monthly service fees.
supporting backup via ACH
to vendors 1999-2003 NMS is responsible for initiating the
*** funding transaction on a monthly
basis.
- ----------------------------------------------------------------------------------------------------------------------------------
Claims Transfer of Funds Active and Medicare Risk Fees billed TBD based on Pricing based on assumption of
Request (CTFR) *** pepm monthly in volume and following breakdowns:
Definition: On a weekly for those enrolled in ASO conjunction number of Bell Atlantic North and South
basis, NMS coordinates all plan with self-funded 4 level group structure
claims funding requests and "self-bill." plans
provides a single Note that pepm applies only to those
consolidated invoice to employees/retirees in a Self-funded
Bell Atlantic. This (ASO) plan.
invoice identifies the
total funds that need to be
distributed to each
self-funded vendor.
- ------------------------------------------------------------------------------------------------------------------------------------
Consolidated Reporting Active Fees billed Active Assumes 79,500 Active Commercial
Standard Commercial monthly in Commercial employees
"Standard" reporting package *** pepm conjunction 1998 ***
includes monthly enrollment with Assumes 8,700 Medicare Risk retirees
detail and summary, monthly "self-bill." 1999-2003
cash flow report, *** Ongoing service to start in
consolidated self-bill, September 1998.
consolidated transfer of
funds request, and call Medicare Risk Medicare Risk
tracking reports. *** pepm 1998 ***

1999-2003
***

Ad Hoc
Description: Analysis and ***/hour Fees to be Ad Hoc Assumes 20 reports at 1.5 hours per
programming of custom billed 1/12 1998 *** report.
reports to support data per month or Requests beyond 30 hours annually to
management and decision *** per 1999-2003 be billed at ***/hour
making outside of the month ***
standard reporting package
(e.g. Y-T-D Enrollment,
Monthly Enrollment and
Payment summary).
- -----------------------------------------------------------------------------------------------------------------------------------
Routine Correspondence *** per year Fees to be 1998 Ongoing service to start in
Description: To include: billed 1/12 *** January 1, 1999.
direct member per month or
correspondence, electronic *** 1999-2003
mail, faxes and Bell ***
Atlantic Medicare HMO
Enrollment Forms (HCFA).

- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------
[LOGO OF NETWORK MANAGEMENT SERVICES]

APPENDIX A
Description of Services
Bell Atlantic
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
On-Going Admin Fee Basis Billing Annual Comments
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Produce Schedule As for Form *** per year Fees to be 1998 The following information will be
5500 billed 1/12 *** provided to Bell Atlantic within 60
Description: NMS shall per month or days after the completion of the
provide Bell Atlantic *** 1999-2003 contract year.
summary level data to ***
assist them in their . Vendor name
production of their Form . Vendor contract identifier
5500 Schedule A. . Contract year dates
. Type of benefit (i.e. medical)
. Enrollment at the end of the
contract for contract year
. Gross premiums paid for contract
year
. Total agent/broker commissions
paid act (including fees paid, if
any) for contract year, if
applicable
- -----------------------------------------------------------------------------------------------------------------------------------
Service Team Included in fees N/A N/A
Description: Client Team
Management, including
measuring and reporting of
performance standards, call
statistics, solving vendor
process issues,
recommending strategic
enhancements to system or
service, communication with
client and vendors.

5
<PAGE>

- --------------------------------------------------------------------------------
[LOGO OF NETWORK MANAGEMENT SERVICES]

APPENDIX A
Description of Services
Bell Atlantic
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE ADDED SERVICES
- ---------------------------------------------------------------------------------------------------------------------------------
Value added Service Fee Basis Billing Projected Comments
Basis Annual Fees
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fulfillment General Management fees for 1998
Description: NMS to "General 10% of pass *** to be NMS *** assumed at *** given forecasted 3rd
Manage" third party fulfillment through 3rd billed during party fees.
services for HMO Provider party printing/ Open 3/rd/ party fees
Directories for the Medicare HMO fulfillment Enrollment estimated at *** General management fee does not
and Commercial HMO population. costs Process annually include additional systems and
Provider Directories to be + + operational resources required for
offered on-demand only except for Pass through of Pass through execution.
the "age-in" populations for CWA 3/rd/ party costs as incurred
over age 65 retirees. NMS will NMS to subcontract fulfillment with
provide fulfillment general 3rd party vendor
management on an as requested
basis. NMS will pass through 3rd party
costs to Bell Atlantic
- ---------------------------------------------------------------------------------------------------------------------------------
ScoreCard ***
Description *** /plan/ Fees billed TBD
. Quarterly and Annual data month per month
collection and validation of
self-reported data elements from
vendors and markets where
appropriate for selected measures.
. Provider Access phone calls and
evaluations for targeted provider
clinics within the appropriate
health plans.
. Member services evaluation of
vendor's customer service
department(s)
. Member Satisfaction survey
administration on a semi-annual
basis.
. Evaluation and scoring of plan
performance on a quarterly basis.
. Reporting of results back to
Bell Atlantic and it's vendors on
a Quarterly basis.
. Facilitation of quarterly
conference calls with Bell
Atlantic and individual vendors
to discuss results, engage plans
in action plan development and
process improvement initiatives.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

[LOGO OF NETWORK MANAGEMENT SERVICES]

APPENDIX A
Description of Services
Bell Atlantic

STRATEGY AND RATE SOLICITATION
COMMERCIAL HMOs

[LOGO OF NETWORK MANAGEMENT SERVICES]

APPENDIX A
Description of Services
Bell Atlantic

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HMO rate solicitation and *** annually Fees to be 1999-2001 Monthly charges to start January 1999
negotiation billed 1/12 ***
Description: Customize and per month or Fees for 2002 and 2003 to be increased
implement selection and renewal *** per month by CPI adjustment over previous year
RFP packets. Services include (e.g. 2002 vs. 2001, 2003 vs. 2002)
. Coordinate renewals and
selections across multiple Key terms agreement refers to rates,
markets and vendors performance guarantees and services
. Conduct zip code, PCP and included in ASO arrangements.
facilities network matches
. Collect and analyze actuary and
underwriting data/assumptions for
rate negotiations
. Evaluate funding
appropriateness for claims targets
. Analyze and score HMO bids,
market by market
. Negotiate premiums and/or ASO
fees and claims targets
. Negotiate performance guarantees
. Conduct conference calls with
Bell Atlantic
. Finalize financial terms
. Secure key terms agreements
. Prepare final analysis binder
- ------------------------------------------------------------------------------------------------------------------------------------
Strategy and Rates Fee Basis Billing Annual Fees Comments
Commercial HMOs
- ------------------------------------------------------------------------------------------------------------------------------------
Financial analysis of Per market fees 1999-2001 ***
alternatively funded HMO *** per to be billed as ***
arrangements market percentage Fees for 2002 and 2003 to be increased
Description: NMS will conduct a completion per by CPI adjustment over previous year (e.g.
self-funding feasibility analysis market vs. 2002 2001, 2003 vs.2002)
to evaluate the relevant factors
and estimate a reasonable cost on
such factors. NMS will appraise
key factors like plan design,
stop-loss, group longevity and
predictability, employer's
financial condition, reserves,
plan administration, employee
communication, etc.
- ------------------------------------------------------------------------------------------------------------------------------------
Confirm benefit plan design for *** Fees to be 1999-2001 Bid for service was *** allocated 50% to
enrollment annually billed 1/12 *** Commercial HMOs and 50% to Medicare Risk
Description: NMS will collect and per month or HMOs
finalize all HMO benefit plan *** per month Monthly charges to start January 1999
design changes due to state
and/or federal mandates and/or Fees for 2002 and 2003 to be increased by
requested by Bell Atlantic. CPI adjustment over previous year (e.g.
2002 vs. 2001, 2003 vs. 2002)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

[LOGO OF NETWORK MANAGEMENT SERVICES]

APPENDIX A
Description of Services
Bell Atlantic
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Provide data for HMO report cards *** Fees to be 1999-2001 Bid for service was *** allocated 50% to
Description: NMS to gather HMO annually billed 1/12 *** Commercial HMOs and 50% to Medicare Risk HMOs
benefit plan detail annually, to per month or
assist in the completion of the *** per Monthly charges to start January 1999
HMO Report Card ("What You Told month
Us About Your HMO"). Fees for 2002 and 2003 to be increased by CPI
adjustment over previous year (e.g. 2002 vs.
2001, 2003 vs. 2002)
- ------------------------------------------------------------------------------------------------------------------------------------
Analysis, confirmation and *** Fees to be 1999-2003 Bid for service was *** allocated 50% to
clean-up of zip code data/service annually billed 1/12 *** Commercial HMOs and 50% to Medicare Risk HMOs
areas per month or
Description: NMS will collect and *** per Monthly charges to start January 1999
confirm health plan service area month
zip code ranges, annually. NMS
will confirm and document all
changes, with explanations. NMS
will feed updated zip code files
to Bell Atlantic and/or Kwasha.
- ------------------------------------------------------------------------------------------------------------------------------------
Coordination of Commercial *** per FTE Fees to be TBD 1998 Resources estimates for Commercial and
Enrollment Seminars for billed per Medicare HMOs
Description: NMS will manage and Management/ month at . ***
coordinate Commercial HMO Coordination *** per FTE
meetings including: per month Resources beyond 1998 to be determined during
. Meeting set-up Additional planning process
. Health Plan and Ambassador resources at
Training and Coordination for *** per hour
meeting attendance Number of Onsite meetings TBD
. "On the ground" meeting presence Onsite mtg
management
. Billing activities related to ***/day/ Fees to be increased each year by CPI
meeting management person (plus adjustment
. Collect refunds from HMOs T&E)
. Reporting and documentation
- ------------------------------------------------------------------------------------------------------------------------------------
Strategy and Rates Fee Basis Billing Annual Fees Comments
Commercial HMOs
- ------------------------------------------------------------------------------------------------------------------------------------
Manage contracts between HMO and Per hour fees 1999-2001 1998 activity: NMS is proposing Hewitt, on
Bell Atlantic *** per hour to be billed *** behalf of Bell Atlantic put in place contracts
Description: NMS will incorporate monthly based 1999 activity: NMS will assume
HMO contracting into the renewal on previous responsibility for contract development and
and selection process. NMS will month's hours negotiation
negotiate and prepare a legal
document that defines the terms ***
and conditions of Bell Atlantic's
relationship with its HMO Fees for 2002 and 2003 to be increased by CPI
vendors. NMS will facilitate adjustment over previous year (e.g. 2002 vs.
securing principle signatures 2001, 2003 vs. 2002)
from Bell Atlantic and its vendor
representatives.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.5 have been deleted and filed seperately with the
Securities Exchange Commission pursuant to a request for confidential treatment.
<PAGE>

[LOGO OF NETWORK MANAGEMENT SERVICES]

APPENDIX A
Description of Services
Bell Atlantic

STRATEGY AND RATE SOLICITATION
MEDICARE HMOs

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Strategy and Rate Solicitation Fee Basis Billing Projected Comments
Basis Annual Fees
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Strategic planning and analysis of Per hour fees 1999 Assumed hours by year
HMO offerings ***per hour to be billed *** . ***
Description: Collaborate with Bell monthly based
Atlantic staff to develop Bell on previous 2000 Fees for 2002 and 2003 to be increased
Atlantic's 2002 strategic vision month's hours *** by CPI adjustment over previous year
including: (e.g. 2002 vs.2001, 2003 vs. 2002)
. 2002 vision statement that 2001
addresses landscape, marketplace ***
pricing, migration strategies and
corporate sign-off
. Market by market definition and
HMO consolidation strategy
. Finalize standard plan design
. Finalize vendor performance
standards for scorecard
. Evaluate MCBG participation in
select markets (price quotes and
participation fees are extra)
- ------------------------------------------------------------------------------------------------------------------------------------
Communication Strategy and *** per hour for Initially part of Hewitt duties.
Execution technical Billed monthly Transferred to NMS.
Description: Work with Bell writing as incurred
Atlantic staff and external *** per hour for
consultants to develop and systems and
execute employee and retiree operational
communication documents including support
Open Enrollment materials and
other projects as requested
- ------------------------------------------------------------------------------------------------------------------------------------
HMO rate solicitation and *** annually Fees to be 1999-2001 Monthly charges to start January 1999
negotiation billed 1/12 ***
Description: Customize and per month or Fees for 2002 and 2003 to be increased
implement selection and renewal *** per by CPI adjustment over previous year
RFP packets. Services include month (e.g. 2002 vs. 2001, 2003 vs. 2002)
. Coordinate renewals and
selections across multiple Key terms agreement refers to rates,
markets and vendors performance guarantees and services
. Conduct zip code, PCP and included in ASO arrangements.
facilities network matches
. Collect and analyze actuary and
underwriting data/assumptions for
rate negotiations
. Evaluate funding
appropriateness for claims targets
. Analyze and score HMO bids,
market by market
. Negotiate premiums and/or ASO
fees and claims targets
. Negotiate performance guarantees
. Conduct conference calls with
Bell Atlantic
. Finalize financial terms
. Secure key terms agreements
. Prepare final analysis binder
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

[LOGO OF NETWORK MANAGEMENT SERVICES]

APPENDIX A
Description of Services
Bell Atlantic

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Strategy and Rates Fee Basis Billing Annual Fees Comments
Medicare HMOs
- ----------------------------------------------------------------------------------------------------------------------------------
Confirm benefit plan design for *** Fees to be 1999-2001 Bid for service was *** allocated 50%
enrollment annually billed 1/12 *** to Commercial HMOs and 50% to Medicare
Description: NMS will collect and per month or Risk HMOs
finalize all HMO benefit plan design *** per month
changes due to state and/or federal Monthly charges to start January 1999
mandates and/or requested by Bell
Atlantic. Fees for 2002 and 2003 to be increased
by CPI adjustment over previous year
(e.g. 2002 vs. 2001, 2003 vs. 2002)
- ----------------------------------------------------------------------------------------------------------------------------------
Provide data for HMO report cards *** Fees to be 1999-2001 Bid for service was *** allocated 50%
Description: NMS to gather annually billed 1/12 *** to Commercial HMOs and 50% to Medicare
self-reported HMO benefit and plan per month or Risk HMOs
performance details annually, to *** per month
assist in the completion of the HMO Monthly charges to start January 1999
Report Card ("What You Told Us About
Your HMO"). Fees for 2002 and 2003 to be increased
by CPI adjustment over previous year
(e.g. 2002 vs. 2001, 2003 vs. 2002)
- ----------------------------------------------------------------------------------------------------------------------------------
Analysis, confirmation and clean-up of *** Fees to be 1999-2003 Bid for service was *** allocated 50%
zip code data/service areas annually billed 1/12 *** to Commercial HMOs and 50% to Medicare
Description: NMS will collect and per month or Risk HMOs
confirm health plan service area zip *** per month
code ranges, annually. NMS will Monthly charges to start January 1999
confirm and document all changes, with
explanations. NMS will feed updated
zip code files to Bell Atlantic and/or
Kwasha.
- ----------------------------------------------------------------------------------------------------------------------------------
Coordination of Medicare HMO *** per FTE Fees to be TBD See notes above in Commercial HMO
Enrollment Seminars for billed per section.
Description: NMS will manage and Management/ month at
coordinate Medicare HMO meetings Coordination *** per FTE
including: per month
. Meeting set-up Additional
. Health Plan and Ambassador resources at
Training and Coordination for *** per hour
meeting attendance
. "On the ground" meeting Onsite mtg
presence management
. Billing activities related to ***/day/
mtg management person (plus
. Collect refunds from HMOs T&E)
. Reporting and documentation
- ----------------------------------------------------------------------------------------------------------------------------------
Manage contracts between HMO and Bell Per hour 1999-2001 ***
Atlantic *** per hour fees to be ***
Description: NMS will incorporate HMO billed Fees for 2002 and 2003 to be increased
contracting into the renewal and monthly by CPI adjustment over previous year
selection process. NMS will negotiate based on (e.g. 2002 vs. 2001, 2003 vs. 2002)
and prepare a legal document that previous
defines the terms and conditions of month's hours
Bell Atlantic's relationship with its
HMO vendors. NMS will facilitate
securing principle signatures from
Bell Atlantic and its vendor
representatives.

</TABLE>

[LOGO OF NETWORK MANAGEMENT SERVICES]

APPENDIX A
Description of Services
Bell Atlantic

Notes:

. NMS has included up to *** per calendar year without charge back to Bell
Atlantic. Additional travel expenses will be passed back to Bell Atlantic for
reimbursement.
. Set-Up fees may be billed throughout the contract period, with initial
invoicing commencing with implementation kick-off.
. On-Going fees are invoiced and collected on a monthly basis as a component of
the HMO premium distribution process.
. NMS reserves the right to charge client for expenses incurred relating to
overnight or express delivery if the method of delivery requested varies from
NMS standard distribution protocol.
. NMS reserves the right to charge client's vendors for expenses incurred
relating to failure to return 9 track tapes should this media be the vendor's
preferred transmission method.
. Ad Hoc consulting projects will be charged at an hourly rate of *** (i.e.
vendor performance guarantee review and analysis for 1999 open enrollment.
. NMS supports a five-year contract with Bell Atlantic for Administrative
Services commencing on 7/1/98. Certain rates escalated by CPI are identified
in the comments. Pricing for Administration is "protected" for 1999, 2000,
and 2001.
. Pepm is defined as "per employee per month" or per subscriber (either retiree
or employee) per month.
. The Staff Station Rate (SSR) will be adjusted each year in July/August when
the 2/nd/ quarter changes to the U.S. Bureau of Labor Statistics Employment
Cost Index (ECI) for all Workers in Private Industry Region IV - Chicago
(which includes Minneapolis) is published. As a reference point, the 1998
2/nd/ quarter versus 1997 2/nd/ quarter change was 4.0% [(134.9-
129.7)/129.7].

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

APPENDIX B

Network Management Services
Performance Objectives

1
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

The following is a statement of Performance Objectives, which Bell Atlantic will
require of NMSS:

Note: This section is subject to review by Bell Atlantic sourcing and may be
revised.

General

The performance standards described below (the "Performance Standards") shall
apply to the NMSS delivery of HMO Administration and Consulting Services during
the Service Period. The Performance Standards shall be subject to amendment by
mutual written agreement of the parties. As used in this Section, the Term NMSS
shall also refer to its subcontractors.

Penalties

The penalties described in this section shall be assessed at the discretion of
Bell Atlantic against NMS for failure of NMS to achieve its respective
Performance Standards. If penalty assessment is necessary, Bell Atlantic will
notify NMS of needed adjudication.

The amount of the penalty is noted throughout this document, subject to a
maximum penalty of 10% of the monthly administrative service charge for the last
month of the measuring period.

Reporting

The data necessary to determine whether the Performance Standards have been met
shall be reported to Bell Atlantic monthly as part of the performance reports to
be delivered pursuant to this Statement of Work. Within *** days following the
end of the fourth and all subsequent calendar months of the Service Period, NMS
shall determine whether the Performance Standards have been met during the
preceding month. NMS shall report its findings to Bell Atlantic and the parties
shall confer promptly to reconcile any discrepancies in NMS calculations. In the
event any penalties are due under this section, they shall be reflected as a
credit or charge on the next monthly invoice for Services (upon request from
Bell Atlantic).

The Performance Standards shall not apply and NMS shall not be subject to the
penalties provided for herein with respect to any failure to meet the
Performance Standards prior to the completion of the first three full calendar
months of the Service Period.

***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.5 have been deleted and filed separately with the
Securities Exchange Commission pursuant to a request for confidential treatment.

2
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

Relief from the Performance Standards

NMS and Bell Atlantic shall negotiate in good faith to provide prospective
relief from the foregoing penalties or to amend the Performance Standards in the
event NMS is taking all reasonable actions to promptly remedy the cause of the
failure to achieve the Performance Standards.

Performance Standards

The following lists the ongoing Performance Standards:

1) Telephone Answer Speed
2) Percentage of Calls Resolved During First Contact
3) Staff Availability
4) Customer Service Staff Responsiveness
5) Correspondence Responsiveness
6) Consumer Satisfaction
7) Bell Atlantic Staff satisfaction
8) Data Posting/Manual Processing
9) Eligibility and Enrollment Transmission Posting
10) Bell Atlantic Support Response
11) Availability and Accuracy of Information Sent to Outside
Organizations
12) Premium Payments
13) Action Gram
14) Performance Guarantee Adjudication Process
15) Solicitation and Negotiation of HMO Premium Rates
16) Fulfillment of Requests for Printed Materials and Routine
Correspondence
17) System Availability
18) Telephone Abandon Rate
19) Routine Testing and Maintenance of Disaster Recovery Plan
20) Vendor Score Card

3
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 1 - Telephone Answer Speed

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

Definition Telephone Answer Speed for any month shall mean the number
of calls received during the month directed to NMS's service
center or administrative staff which are answered within ***
seconds of the first ring (*** seconds is the maximum time
placed on hold after the voice response system recorded
message is complete), expressed as a percentage of all such
telephone calls received during the month.
- --------------------------------------------------------------------------------
Standard The average of the Telephone Answer Speed for one month of
the measuring period shall be greater than or equal to ***.
- --------------------------------------------------------------------------------
Penalty The monthly service charge will be reduced *** for each full
*** by which the average of the Telephone Answer Speed for
the month of the measuring period is less than the Standard.

Maximum monthly penalty is ***.
- --------------------------------------------------------------------------------
Exceptions The Telephone Answer Speed shall be deemed to be equal to
its Performance Standard for any month in which the number
of the telephone calls directed to NMS's service center or
administrative staff exceed *** (within the exception of
annual enrollment).
- --------------------------------------------------------------------------------

4
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 2 - Percentage of Calls Resolved During First Contact

- --------------------------------------------------------------------------------
Definition Calls Resolved During First Contact for any month shall mean
the number of calls received during the month directed to
NMS's service center or administrative staff which are
resolved within the first phone call, expressed as a
percentage of all such telephone calls directed to the
service center or administrative staff during the month.
- --------------------------------------------------------------------------------
Standard The percentage of Calls Resolved During First Contact shall
be greater than or equal to ***.
- --------------------------------------------------------------------------------
Penalty The monthly service charge will be reduced *** for each full
*** which the percentage of Calls Resolved During First is
less than the Standard.

There will be no penalty assessment for open enrollment ***
or for 1st quarter ***. NMS shall report 2nd quarter ***
results by July ***. These results will be used to amend or
adjust the Performance Standard and its definition if
necessary.

Maximum monthly penalty is ***.
- --------------------------------------------------------------------------------
Exceptions No exceptions.
- --------------------------------------------------------------------------------

5
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 3 - Staff Availability

- --------------------------------------------------------------------------------
Definition The Staff Availability Percentage shall mean for any month
the number of scheduled minutes that the service team (HMO
Counselors and Senior Source Representatives) is actually
available, expressed as a percentage of the total number of
minutes scheduled to have been available. No more than ***
of the overall staff should be scheduled for vacation or
other scheduled days off at the same time (*** of staff is
available at all times).
- --------------------------------------------------------------------------------
Standard The average of the Staff Availability Percentage for each
month of the measuring period shall be ***.
- --------------------------------------------------------------------------------
Penalty The monthly service charge will be reduced *** for each full
*** by which the average Staff Availability Percentage for
each month of the measuring period is less than ***.

Maximum monthly penalty is ***.
- --------------------------------------------------------------------------------
Exceptions The Staff Availability Percentage shall be deemed to be
equal to the Performance Standard for the period of time in
which a third party's facility problem occurs (e.g., a power
failure, fire, or other natural disaster).
- --------------------------------------------------------------------------------

6
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 4 - Customer Service Staff Responsiveness

- --------------------------------------------------------------------------------
Definition The Customer Service Staff Responsiveness Percentage shall
mean for any month the number of return phone calls to
employees regarding outstanding research items, expressed as
a percentage of the total number of outstanding customer
service issues. These are the total of issues that cannot be
resolved during the first contact.
- --------------------------------------------------------------------------------

Standard The average of the Customer Service Staff responsiveness for
each month of the measuring period shall be *** of calls
resolved within *** hours (or ***) and *** of calls resolved
within *** hours (or within *** business days). The customer
service representative must specify a return call time to
the caller at the time an unresolved issue is identified. If
the issue is not resolved within the established time
period, the customer service representative will continue to
call the caller each day until resolution.
- --------------------------------------------------------------------------------
Penalty The monthly service charge will be reduced *** for each full
*** by which the average Customer Service Staff
Responsiveness Percentage for each month of the measuring
period is less than the Standard.

Maximum monthly penalty is ***.
- --------------------------------------------------------------------------------
Exceptions The Customer Service Staff Responsiveness Percentage shall
be deemed to be equal to the Performance Standard for the
period of time in which a third party's facility problem
occurs (e.g., a power failure, fire, or other natural
disaster).
- --------------------------------------------------------------------------------

7
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 5 - Correspondence Responsiveness

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

Definition The Correspondence response Percentage for any month shall
mean the number of pieces of correspondence received from or
in reference to Bell Atlantic employees, retirees, surviving
spouses, and dependents to whom a response has been directed
by mail or telephone within *** business days following
NMS's receipt of the correspondence, expressed as a
percentage of the total number of pieces of such
correspondence received during the month. For purposes of
this Standard, the term correspondence shall mean items
received by mail or fax that require a reply but shall not
include items that can be processed immediately that do not
require confirmation. A response will not necessarily
include a resolution of the issue raised in the
correspondence. Correspondence to include: direct member
correspondence, faxes, electronic mail messages and HCFA
medicare HMO Enrollment Forms.
- --------------------------------------------------------------------------------

Standard The average of the Correspondence Response Percentage for
one month of the measuring period shall be greater than or
equal to *** within *** business days. The remaining ***
must be responded to within *** business days.
- --------------------------------------------------------------------------------
Penalty The monthly service charge will be reduced *** for each full
*** by which the average of the Correspondence Response
Percentage for the month the measuring period does not meet
the Standard.

Maximum monthly penalty is ***.
- --------------------------------------------------------------------------------
Exceptions Correspondence associated with a Bell Atlantic communication
error.
- --------------------------------------------------------------------------------

8
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 6 - Customer Satisfaction

- --------------------------------------------------------------------------------
Definition Consumer Satisfaction shall mean the percentage of consumers
(i.e., persons who use the service - employees, retirees,
dependents) who rate the service provided to them by NMS as
"satisfactory" or better. This rating will be measured by
sampling consumers through the use of periodic surveys.

NMS will begin to collect this information during the first
year following implementation of the contract (Plan Year
2000). The information will be forwarded to Bell Atlantic
along with the other Performance Standards. NMS and Bell
Atlantic will negotiate a Consumer Satisfaction Performance
Standard (and applicable penalties) following the first year
of the Service Period.,
- --------------------------------------------------------------------------------
Standard The tool to be used to measure consumer satisfaction is a
postcard used as part of the Score Card Program. Variations
in survey tool or measure will require additional
discussions between Bell Atlantic and NMS.
- --------------------------------------------------------------------------------
Penalty *** of fees.
- --------------------------------------------------------------------------------
Exceptions No exceptions.
- --------------------------------------------------------------------------------

9
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 7 - Bell Atlantic Staff Satisfaction

- --------------------------------------------------------------------------------
Definition Bell Atlantic Staff Satisfaction shall mean the percentage
of staff (i.e., staff members who use the service) who rate
the service provided to them by NMS as "satisfactory" or
better. This rating will be measured by sampling staff
through the use of periodic surveys.

NMS will begin to collect this information during the first
year following implementation of the contract. The
information will be forwarded to Bell Atlantic along with
the other Performance Standards. NMS and Bell Atlantic will
negotiate a Bell Atlantic Staff Satisfaction Performance
Standard (and applicable penalties) following the first year
of the Service Period.
- --------------------------------------------------------------------------------
Standard The tool to be used to measure Client Satisfaction will be
the NMS's annual Client Satisfaction Survey. Annual survey
tentatively scheduled for the third quarter of each year.
- --------------------------------------------------------------------------------
Penalty *** of fees.
- --------------------------------------------------------------------------------
Exceptions No exceptions.
- --------------------------------------------------------------------------------

10
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 8 - Data Posting/Manual Processing

- --------------------------------------------------------------------------------
Definition The Data Posting Percentage for any month shall mean the
manual updates correctly posted to the database, expressed
as a percentage of all manual data items received during the
month.
- --------------------------------------------------------------------------------
Standard The average of the Data Posting Percentage for the month of
the measuring period shall be greater than or equal to ***.
- --------------------------------------------------------------------------------
Penalty The monthly service charge will be reduced *** for each full
*** by which the average of the Data Posting Percentage for
the month the measuring period is less than ***.
- --------------------------------------------------------------------------------
Exceptions No exceptions.
- --------------------------------------------------------------------------------

Note: This Performance Standard does not apply. There are no manual updates.

11
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 9 - Eligibility and Enrollment Transmission Posting

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

Definition NMS will post Bell Atlantic's eligibility and enrollment
information (from Kwasha Lipton) to the system per the
agreed-upon schedule below. NMS will process this
information accurately using the data passed by Kwasha
Lipton.

NMS will receive enrollment information for the active and
retiree populations weekly from Kwasha Lipton. Weekly
imports to be received each Tuesday by *** CST and will be
posted within *** business days.
- --------------------------------------------------------------------------------

Standard Enrollment information will be posted within *** business
days, following receipt of file from Kwasha Lipton, *** of
the time.

The Accuracy of all updates to the system shall be equal to
***.
- --------------------------------------------------------------------------------
Penalty The monthly fee will be reduced by *** for each full *** by
which the timing of the posting is less than the Standard.

The monthly fee will be reduced by *** for each full *** by
which the Accuracy of information is less than the Standard.

Maximum monthly penalty is ***.
- --------------------------------------------------------------------------------

Exceptions There will be no penalty for incorrect information passed to
NMS by Kwasha Lipton.

There will be no penalty for eligibility and enrollment
information received later than the agree-upon schedule.
- --------------------------------------------------------------------------------

12
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 10 - Bell Atlantic Support Response

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

Definition The Support Response Rate for any month shall mean the
number of ad hoc reports and/or files completed within the
agreed-upon schedule. Standard reporting requests will be
filled within *** business days of NMS's receipt of Bell
Atlantic's request, expressed as a percentage of all such
requests received during the month. Ad Hoc reports requiring
additional resources and programming will be subject to a
predetermined due date as agreed upon by Bell Atlantic and
NMS based on the scope of the request.,

Samples of Standard Reports
- Premiums Paid by HMO (Financial Services)
- Type of Issues/Inquiries (Call Tracking Reports)

Samples of potential Ad Hoc Reports
- Migration Reports
- --------------------------------------------------------------------------------
Standard The Support Response Rate for each month shall be ***. ***
of all requests will be computed within two business days of
the agreed-upon time schedule.
- --------------------------------------------------------------------------------
Penalty The monthly service charge for the month following any month
in which this Standard is not met shall be reduced *** for
each day a report is late, up to a maximum of *** per report
or file request.
- --------------------------------------------------------------------------------
Exceptions No exceptions.
- --------------------------------------------------------------------------------

13
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 11 - Availability and Accuracy of Information Sent to
Outside Organizations

- --------------------------------------------------------------------------------
Definition Information sent to outside organizations includes Bell
Atlantic, Kwasha Lipton, and HMOs. This includes periodic
reports (Score Card, other standard reports, and interface
files) and ad-hoc report files produced weekly, monthly,
quarterly, annually, or at any other defined interval.
- --------------------------------------------------------------------------------
Standard Information sent to outside organizations will be processed
based on the agreed-upon schedule *** of the time.
Information sent to outside organizations will be processed
based on the agreed-upon schedule and delivered within one
business day following the agreed-upon schedule dates *** of
the time.

The average of Accuracy for the month of the measuring
period shall be greater than or equal to ***.
- --------------------------------------------------------------------------------
Penalty The monthly service charge will be reduced *** for each full
*** by which the Accuracy of information sent to outside
organizations is less than the Standard.

The monthly fee will be reduced *** for each full *** by
which the timing of the information sent to outside
organizations is less than the Standard.

Note: Vendor Score Card to be implemented for Plan Year 2000.

14
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 12 - Premium Payments

- --------------------------------------------------------------------------------
Definition NMS will pay premiums to HMOs on behalf of Bell Atlantic.
- --------------------------------------------------------------------------------
Standard Premiums will be paid based on the agreed-upon schedule
(monthly) *** of the time.*

The average of Accuracy for the month of the measuring
period shall be equal to ***.

*Funds must arrive at NMS account by *** to be considered
-received- on that date. If after ***, funds will be
considered -received- the following business day. Funds will
be distributed within *** following receipt of funds.
- --------------------------------------------------------------------------------
Penalty The monthly fee will be reduced *** for each full *** by
which the Premium Payment Percentage for the month of the
measuring period is less than *** and/or by which the
average of Accuracy for the month is less than ***.

15
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 13 - Action Gram

- --------------------------------------------------------------------------------
Definition The Action Gram is a notice that NMS sends to an HMO after
NMS is notified of a significant participant issue.
- --------------------------------------------------------------------------------

Standard Action Grams will be sent to the HMO within *** after a
significant issue has been discovered *** of the time.
Action Grams will be sent to the HMO within *** business
days after a significant issue has been discovered *** of
the time.

Resolution of the Action Gram is expected within *** hours.
NMS will follow up with the HMO receiving the Action Gram
within the *** period to assure resolution *** of the time.

- --------------------------------------------------------------------------------
Penalty The monthly fee will be reduced *** for each full *** by
which the Action Gram Production Schedule does not meet the
Standard.

Note: Not applicable for year ***.

Action Grams to be forwarded to: Marianne Clements and Jessica Bennett at Bell
Atlantic.

16
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 14 - Performance Guarantee Adjudication Process

- --------------------------------------------------------------------------------
Definition NMS will conduct a performance guarantee adjudication
process with each HMO quarterly.
- --------------------------------------------------------------------------------
Standard The performance guarantee adjudication process will be
conducted on time and according to mutually agreed-upon
guidelines each quarter.
- --------------------------------------------------------------------------------
Penalty Fees for the quarter will be reduced *** if the Standard is
not met.
- --------------------------------------------------------------------------------
Exceptions No exceptions.
- --------------------------------------------------------------------------------

Note: Not applicable for the 1999 Plan Year. No adjudication of penalties to be
assessed during the 1999 Plan Year.

17
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 15 - Solicitation and Negotiation of HMO Premium Rates

- --------------------------------------------------------------------------------
Definition NMS will solicit and negotiate HMO premium rates with every
Bell Atlantic HMO each year.

NMS commits to reviewing annually the contracts between Bell
Atlantic and its vendors. However, NMS reserves the right to
secure multi-year contracts with HMOs as appropriate.
- --------------------------------------------------------------------------------
Standard Rates will be negotiated and provided to Bell Atlantic and
Kwasha Lipton based on a mutually agreed-upon schedule each
year.
- --------------------------------------------------------------------------------
Penalty Fees for the year will be reduced *** if the Standard is not
met.
- --------------------------------------------------------------------------------
Exceptions No exceptions.
- --------------------------------------------------------------------------------

Note: Not applicable for the 1999 Plan Year.

18
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 16 - Fulfillment of Requests for Printed Materials and
Routine Correspondence

- --------------------------------------------------------------------------------
Definition Printed materials shall include forms, provider directories,
routine correspondence, and other plan-related materials.

For the 1999 Plan Year, printed materials shall mean HMO
provider directories. The fulfillment of the provider
directory requests is contingent upon the receipt of stock
from the targeted HMO.
- --------------------------------------------------------------------------------

Standard *** of all printed materials shall be distributed/mailed
within *** business days.
- --------------------------------------------------------------------------------
Penalty The monthly fee will be reduced *** for each full *** by
which the response rate for the month of the measuring
period is less than the Standard.

19
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 17 - System Availability

- --------------------------------------------------------------------------------
Definition The System Availability Percentage shall mean for any month
the number of scheduled minutes that the systems used to
support standard operations are available for use, expressed
as a percentage of the total number of minutes scheduled
have been available.

NMS scheduled availability time shall mean systems will be
available between the hours of *** and ***.

Systems used to support standard operations are defined as
all UNIX systems, telecommunications systems, data
communications systems, voice conversion systems, system
access via reporting tool, and Internet/Intranet used to
deliver customer service and/or systems used directly by the
client during normal operating hours (e.g., BEN-NET). This
does not include connections not supported by NMS (e.g.,
Client WAN/LAN, etc.).
- --------------------------------------------------------------------------------
Standard The average of the System Availability Percentage for each
month of the measuring period shall be greater than or equal
to ***.
- --------------------------------------------------------------------------------
Penalty The monthly service charge will be reduced *** for each full
*** by which the average System Availability Percentage for
each month of the measuring period is less than ***.

Maximum monthly penalty is ***.
- --------------------------------------------------------------------------------

Exceptions There is an expectation that systems will be unavailable for
*** hours each *** for periodic maintenance. In addition,
there will be mutually agreed-upon instances (with at least
one week's notice) when systems will not be available.

The System Availability Percentage shall be deemed to be
equal to the Performance Standard for the period of time in
which a third party's facility problem occurs (e.g., a power
failure, fire, or other natural disaster).
- --------------------------------------------------------------------------------

20
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 18 - Telephone Abandon Rate

- --------------------------------------------------------------------------------
Definition Telephone Abandon Rate for any month shall be defined as the
number of telephone calls abandoned after being directed to
NMS's service center or administrative staff, expressed as a
percentage of all such telephone calls received during the
month.
- --------------------------------------------------------------------------------
Standard The average of the Telephone Abandon Rate for *** of the
measuring period shall be less than or equal to ***.
- --------------------------------------------------------------------------------
Penalty No penalty if the rate is above *** for one month. If the
abandoNMSent rate is greater than *** for ***, there will be
a *** penalty for all consecutive months following the first
month of greater than *** abandoNMSent rate. NMS will define
and implement corrective action to reduce the rate.
- --------------------------------------------------------------------------------
Exceptions No exceptions.
- --------------------------------------------------------------------------------

21
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 19 - Routine Testing and Maintenance of Disaster
Recovery Plan

- --------------------------------------------------------------------------------
Definition The disaster recovery plan must include details for
providing business continuation in the event of an
emergency. These details must include redundant systems
(hardware and software), telecommunications, data backup and
recovery plans, staffing, and alternate power supplies.
- --------------------------------------------------------------------------------
Standard The disaster recovery plan must be tested annually, with
results reported to Bell Atlantic each year.
- --------------------------------------------------------------------------------
Penalty *** of annual fees.
- --------------------------------------------------------------------------------
Exceptions No exceptions.
- --------------------------------------------------------------------------------

22
<PAGE>

Bell Atlantic
Performance Standards
- --------------------------------------------------------------------------------

NMS Performance Standard 20 - Vendor Score Card

- --------------------------------------------------------------------------------
Definition NMS will collect all information required to produce the
Vendor Score Card and produce the Score Card based on an
agreed-upon schedule.
- --------------------------------------------------------------------------------
Standard *** of all information must be collected and included in the
Vendor Score Card. The Vendor Score Card must be produced
within 48 hours of the agreed-upon schedule.
- --------------------------------------------------------------------------------
Penalty There will be a penalty of *** if the Vendor Score Card is
incomplete or received by Bell Atlantic more than 48 hours
after the anticipated delivery date.
- --------------------------------------------------------------------------------
Exceptions No exceptions.
- --------------------------------------------------------------------------------

Note: Not applicable for 1999 Plan Year.

<PAGE>

EXHIBIT 10.6

ADMINISTRATIVE SERVICES AGREEMENT***
------------------------------------

This ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is made and
entered into as of this 6th day of May, 1999 (the "Effective Date"), by and
between the Blue Cross Blue Shield Association ("THE ASSOCIATION"), an Illinois
not-for-profit organization, and Network Management Services, Inc. ("NMS"), a
Minnesota corporation.

RECITALS:
--------

A. THE ASSOCIATION provides certain centralized enrollment, financial and
other administrative services in connection with certain programs (currently
designated under the names HMO Blue USA; Medicare Blue USA and BluesCONNECT)
through which Blue Cross and/or Blue Shield Plans provide and/or administer
health benefits coverage for employees of accounts;

B. THE ASSOCIATION and NMS are parties to an Administrative Services
Agreement dated August 29, 1997 (the "BluesCONNECT Agreement"), pursuant to
which THE ASSOCIATION has outsourced to NMS certain enrollment, financial and
other administrative services that are provided through THE ASSOCIATION in
connection with the BluesCONNECT program; and

C. NMS is in the business of providing administrative services to health
plans, insurance carriers and to purchasers of health care coverage, and
possesses the expertise necessary to assist THE ASSOCIATION in administering the
HMO Blue USA, Medicare Blue USA and other centralized programs; and to continue
to assist in the administration of the BluesCONNECT program.

NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this Agreement, the parties agree as follows:

***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

SECTION 1
DEFINITIONS

When used in this Agreement, the following terms shall have the meanings
set forth below:

1.1 Account. "Account" means an employer or other entity which has
-------
employees for whom the Account provides any type of health coverage products,
including indemnity, health maintenance organization, point of service, or
preferred provider organization products.

1.2 Administrative Services. "Administrative Services" means certain
-----------------------
centralized enrollment, eligibility, billing and disbursement, financial and
reporting, client issue resolution and related administrative services and
products which have been delegated by the Participating Plans to THE ASSOCIATION
in connection with the Program(s) and are provided to Participating Accounts
through THE ASSOCIATION.

1.3 Bank. "Bank" means the First National Bank of Chicago and/or any
----
other financial institution selected from time to time by THE ASSOCIATION in
which the Bank Account will be maintained.

1.4 Bank Account. "Bank Account" means a fiduciary bank deposit account
------------
established by THE ASSOCIATION and used for the receipt and disbursement of
monies in connection with the Program(s) in accordance with Section 4 below.

1.5 BEN-NET(TM). "BEN-NET(TM)" means NMS's proprietary eligibility
-----------
management tools, software and services which provides the capability for group
set-ups, vendor set-ups, enrollment and eligibility management, enrollment and
eligibility data edits, eligibility distribution to vendors, retroactive
enrollment adjustments, consolidated billing, customer services and payment to
Health Plans.

1.6 Blue Plan. "Blue Plan" means any Blue Cross and/or Blue Shield
---------
Health Plan or its licensed affiliates.

1.7 BluesCONNECT. "BluesCONNECT" refers to the national account program
------------
through which Blue Plans provide health maintenance organization ("HMO") and
HMO-based insurance products to Accounts, supported by certain enhanced
centralized Administrative Services provided by THE ASSOCIATION through NMS
pursuant to the BluesCONNECT Agreement.

2
<PAGE>

1.8 BluesNET. "BluesNET" means the private wide-area computer network
--------
through which THE ASSOCIATION maintains communications with selected Health
Plans and other entities.

1.9 Business Day. "Business Day" means any day other than Saturday,
------------
Sunday or a United States National holiday.

1.10 Consolidated Bill. "Consolidated Bill" means a detailed monthly
-----------------
billing invoice based upon the Participating Plan's premium and rate data in
BEN-NET(TM) and the entry of Subscriber information received from Participating
Plans or Participating Accounts.

1.11 Core Services. "Core Services" means all of the services NMS agrees
-------------
to perform under this Agreement, including but not limited to the services
referenced under Section 2 of this Agreement; except those services identified
as non-Core Services on Schedule I hereto.

1.12 Coverage Month. "Coverage Month" means a month during the term of
--------------
this Agreement in which a Member receives health care coverage from a
Participating Plan.

1.13 Eligible Employee. "Eligible Employee" means a bona-fide employee
-----------------
of a Participating Account.

1.14 Enrollment Form. "Enrollment Form" means a form completed by an
---------------
Eligible Employee or other Member to enroll in benefits coverage offered by a
Participating Plan or to terminate from or make changes to his/her enrollment in
benefits coverage offered by a Participating Plan.

1.15 Environmental Analysis. "Environmental Analysis" means an interview
----------------------
and analysis conducted by NMS with representatives of a Participating Account to
determine current enrollment, financial, and customer service processes for
applicable coverage benefits sponsored by such Participating Account, as
described in Section 2.1 below.

1.16 Health Plan. "Health Plan" means a health care service plan or
-----------
affiliated entity, insurance carrier, health maintenance organization or other
provider of health care benefits or benefits administration.

1.17 HMO Blue USA. "HMO Blue USA" refers to the national account program
------------
through which Blue Plans provide HMO and HMO-based insurance products to
Accounts, supported by centralized Administrative Services.

3
<PAGE>

1.18 Lock Box. "Lock Box" means a lock box to be established at the
--------
Bank for the receipt and distribution of monies in connection with the
Program(s) in accordance with Section 4 below.

1.19 Medicare Blue USA. "Medicare Blue USA" refers to the national
-----------------
account program through which Blue Plans provide HMO and HMO-based insurance to
Medicare enrollees of Participating Accounts supported by centralized
Administrative Services in a manner substantially similar to that for HMO Blue
USA.

1.20 Member. "Member" means a person enrolled for benefits coverage
------
as a result of such Member's relationship with a Subscriber maintained in BEN-
NET(TM) including but not limited to Eligible Employees and dependents of
Eligible Employees, retirees, dependents of retirees, COBRA continuees,
dependents of COBRA continuees, persons on leaves of absence and other
continuations of coverage.

1.21 Participants. "Participants" means collectively, THE ASSOCIATION,
------------
NMS, the Participating Accounts, the Participating Plans and all Members.

1.22 Participating Account. "Participating Account" means an Account
---------------------
which participates in the Program(s) (current list on Schedule II hereto) and
for which NMS receives fees as described in Schedule I for providing Core
Services to the Account hereunder.

1.23 Participating Plan. "Participating Plan" means a Blue Plan which
------------------
participates in the Program(s), or any Blue Plan affiliate which has been
permitted to participate in the Program(s).

1.24 Program(s). "Program(s)" means the HMO Blue USA, Medicare Blue USA,
----------
BluesCONNECT (as such names may change from time to time) and other programs
which may be identified and/or developed from time to time through which Blue
Plans provide any type of health insurance products, including indemnity, health
maintenance organization, point of service or preferred provider organization
products to Accounts, and in connection with which THE ASSOCIATION provides
centralized Administrative Services.

1.25 Program Rules. "Program Rules" means the administrative rules for
-------------
Program participation by Accounts and Health Plans, as promulgated from time to
time and implemented by THE ASSOCIATION in its sole discretion as set forth in
Section 10.3 below.

4
<PAGE>

1.26 Self-Bill. "Self-Bill" means the billing method by which a
---------
Participating Account or third party administrator maintains its own membership
files and calculates monthly premiums owed under the Program(s).

1.27 Subscriber. "Subscriber" means an individual who is enrolled in
----------
benefits coverage through the Program(s) and is the certificate holder,
including Eligible Employees, retirees, COBRA continuees, persons on leaves of
absence and other continuations of coverage. "Subscriber" does not include any
dependents of such individual.

SECTION 2
DUTIES OF NMS

During the term of this Agreement, NMS shall provide the following Core
Services in accordance with the standards set forth below:

2.1 Participating Account and Participating Plan Setup.
--------------------------------------------------

a. (i) NMS will perform an Environmental Analysis with each
Participating Account that has an enrollment of *** or more Subscribers. Each
such Environmental Analysis will include an on-site interview conducted by NMS
with representatives of the Participating Account to determine current
enrollment, financial and customer service processes for applicable benefits
sponsored by such Participating Account to determine group reporting, rate and
benefit structure requirements, and Participating Plan contract setup.

(ii) At THE ASSOCIATION's request, NMS will also perform an
Environmental Analysis for a Participating Account that has an enrollment of
less than *** subscribers for the fees described in Schedule I.

(iii) At THE ASSOCIATION's request, NMS will also perform an
expanded Environmental Analysis that will involve additional site visits and
further analysis for any Participating Accounts that do not have the capacity to
provide a single electronic enrollment file (e.g., as a result of maintaining
multiple payroll systems). The terms and conditions for that expanded
Environmental Analysis shall be mutually agreed upon by THE ASSOCIATION and NMS.

b. NMS staff shall actively participate in the implementation
process of new Participating Accounts into the Program(s) in accordance with the
requirements of this

<PAGE>

Agreement. NMS staff shall be responsible for ensuring that a new Participating
Account is set-up correctly in BEN-NET(TM), based on information provided by THE
ASSOCIATION, and that the implementation is well-defined and documented. NMS
staff shall develop and manage an implementation project plan for each new
Participating Account's implementation. Provided that NMS shall not be required
to convert any Participating Account which, prior to October 31, 1999, has given
notice to the Participating Plans of its termination of participation in the
Program(s) to be effective prior to December 31, 1999, and THE ASSOCIATION has
notified NMS of such termination.

c. For each Participating Plan, NMS shall complete implementation of
the electronic connectivity for such Participating Plan by a date mutually
agreed to by THE ASSOCIATION, NMS and the Participating Plan.

2.2 Collection and Distribution of Enrollment and Eligibility Data.
--------------------------------------------------------------

a. (i) For all Participating Accounts which have the
capability to send enrollment and eligibility data electronically, NMS shall
have the capability and shall receive and process enrollment information
regarding additions, changes and terminations of enrollment of Members from
those Participating Accounts in the manner described in Schedule III hereto as
modified from time to time by THE ASSOCIATION (except for new Participating
Accounts with less than *** subscribers, in which case NMS shall only be
obligated to accept electronic data if the Participating Account uses a standard
industry import);

(ii) For all Participating Accounts which do not have the
capability to send electronic enrollment and eligibility data or for those
accounts with less than *** subscribers that do not use a standard industry
import, NMS shall receive and process Enrollment Forms and materials regarding
additions, changes and terminations of enrollment from those Participating
Accounts.

b. NMS shall follow the eligibility rules established for each
Participating Account in processing enrollment and eligibility information.

c. NMS shall establish and maintain ongoing electronic
connectivity for enrollment information between NMS and each Participating
Plans' membership systems, in accordance with THE ASSOCIATION's specifications
described in Schedule III, and as modified by THE ASSOCIATION from time to time.

<PAGE>

d. NMS shall distribute enrollment information electronically
to Participating Plans for all Participating Accounts where the enrollment data
is submitted directly to NMS, either electronically or on paper Enrollment
Forms, within time frames to be determined by mutual agreement.

e. NMS shall at all times maintain the capability to
disseminate enrollment data to Participating Plans via paper where the
Participating Plan does not have the capability to receive electronic enrollment
data from NMS.

f. NMS will forward paper copies of Enrollment Forms to
Participating Plans for all Participating Accounts relying upon centralized
"paper form flow" to communicate enrollment information to the Participating
Plans. THE ASSOCIATION will make reasonable efforts to improve the efficiency of
this process.

g. NMS shall maintain and make available to THE ASSOCIATION a
log of electronic connectivity, which identifies the current status of
electronic connectivity for each Participating Plan. The log will identify in
detail any issues or problems with establishing and maintaining such
connectivity for any Participating Plan and the action plan devised by the
Participating Plan for resolving such issues or problems and the timetable for
that resolution.

h. NMS shall process and distribute enrollment and eligibility
information in the manner and within the time frames described in this Agreement
and Schedule IV hereto.

2.3 Billing and Reconciliation.
--------------------------

(a) Except as provided in Section 2.3(b) below with respect to Self-
Bill Accounts, NMS shall accurately calculate the correct amount of premiums and
other payments due from each Participating Account, including but not limited to
all premiums, broker's and administrative fees, late payments and other charges
based on the applicable rates, administrative fees and other charges to each
Participating Account and Participating Plan provided by THE ASSOCIATION (which
have been obtained from the Participating Plans, as applicable). The amounts due
from the Participating Account and any changes to the rates or other charges
applicable to such amounts shall be included by NMS in a Consolidated Bill. The
Consolidated Bill for each month shall be transmitted to the applicable
Participating Account no later than the

7
<PAGE>

twenty-first day of the month prior to the Coverage Month represented by that
invoice or by such other date as established from time to time by THE
ASSOCIATION.

(b) NMS shall receive, review for accuracy and process invoices from
Participating Accounts which Self-Bill. Self-Bill invoices shall be transmitted
to NMS either electronically or by paper.

(c) NMS shall direct each Participating Account to remit all amounts
due under its Consolidated Bill or Self-Bill invoice directly to the Lock Box at
the Bank Account by electronic funds transfer or other means acceptable to THE
ASSOCIATION. Upon request by THE ASSOCIATION, NMS shall provide copies of any or
all Consolidated Bills and Self-Bill invoices to THE ASSOCIATION. In the event
that THE ASSOCATION's request requires substantial time and effort on NMS's
behalf, THE ASSOCATION shall reimburse NMS for its reasonable expenses related
to the request.

(d) For self funded Participating Accounts, NMS shall receive and
consolidate claims expenses from vendors on a weekly basis, analyze expense
reporting, perform high-level audits, collect funds from the Participating
Accounts and direct the distribution of those funds to the applicable Health
Plan.

(e) NMS's BEN-NET(TM) system shall be able to support a variety of
billing rates, including composite and coverage-tier driven rates.

2.4 Delinquency Process. NMS shall promptly notify all Participating
-------------------
Accounts of any past due amounts owed and shall make reasonable efforts to
collect such amounts in accordance with the delinquency process described in
Schedule V. NMS shall not commence legal action to collect past due amounts.
The Participating Plans shall have the sole authority to terminate the
participation of any Participating Account in the Program(s) and may do so
without NMS's consent. If one or more Participating Plans elect to waive or
postpone compliance with payment requirements, THE ASSOCIATION shall so advise
NMS and shall be responsible for facilitating any necessary arrangements among
Participating Plans. The delinquency process described in this Section 2.4
shall be carried out in accordance with procedures that have been approved in
advance by THE ASSOCIATION and such procedures must comply with all applicable
state and federal laws.

8
<PAGE>

2.5 No Liability for Unpaid Amounts. Neither THE ASSOCIATION nor NMS
-------------------------------
shall have any obligation to remit or guaranty collection of any unpaid amounts
owed by a Participating Account for any services provided hereunder.

2.6 Reconciliation Services.
-----------------------

2.6.1 Reconciliation of Premiums and Membership. Commencing from the
-----------------------------------------
effective date of the transfer of a Participating Account to NMS hereunder, NMS
shall be responsible for resolving all discrepancies in premiums and enrollment
and eligibility for the Participating Account arising on or after the effective
date of transfer of a Participating Account to NMS hereunder, including
discrepancies resulting from differences in the timing for processing of
enrollment and eligibility data, data entry inaccuracies and retroactive
enrollment and eligibility changes. THE ASSOCIATION shall cooperate with NMS in
performing these reconciliations. Notwithstanding the above, THE ASSOCIATION
shall, within 60 days commencing from the effective date of the transfer of a
Participating Account to NMS hereunder, be responsible for resolving all
discrepancies in premiums and enrollment for that Participating Account which
occurred prior to the date of the transfer, including discrepancies resulting
from differences in the timing for processing of enrollment and eligibility
data, data entry inaccuracies and retroactive enrollment and eligibility
changes. NMS shall cooperate with THE ASSOCIATION in performing these
reconciliations.

2.6.2 5500 and 1099 Reporting. Each calendar year and only one time
-----------------------
each calendar year, NMS will provide to each Participating Account and/or broker
or representative for each Participating Account the information related to the
Program(s) to be used for preparation of a premium summary report reflecting
annual premiums paid by each Participating Account for Schedule A production of
IRS Forms 5500 and 1099. NMS will be responsible for providing premium summary
data for the period during which NMS performed Administrative Services for the
Participating Account.

2.7 Customer Service.
----------------

2.7.1 Toll-Free Number. NMS shall make telephone support available
----------------
to THE ASSOCIATION, Participating Accounts and Participating Plans, via a
dedicated toll-free (800) telephone number available from 7:00 a.m. to 7:00 p.m.
(Central Time) each Business Day. The toll-free number shall be staffed with
NMS personnel trained to answer eligibility, enrollment,

9
<PAGE>

premium, billing and payment status and other questions related to the
Program(s) and NMS's performance hereunder.

2.7.2 NMS Response. NMS shall promptly respond to all inquiries from
------------
Participating Plans and Participating Accounts regarding the eligibility,
enrollment, premium, billing and payment status and other issues related to the
Program(s) and NMS's performance hereunder. NMS shall promptly notify THE
ASSOCIATION of any unresolved concerns or problems identified by a Participating
Plan or Participating Account. THE ASSOCIATION shall direct to NMS all inquiries
and concerns regarding the foregoing issues that THE ASSOCIATION receives. THE
ASSOCIATION shall support, and shall use its reasonable efforts to enforce, the
agreed upon resolution of customer service issues.

2.7.3 Issue Tracking System. NMS shall maintain an automated record
---------------------
of each issue or problem communicated to NMS's customer service department by a
Participating Account or Participating Plan relating to the Program(s) or to
NMS's services hereunder, including but not limited to telephone calls, e-mail
messages, facsimile or paper communications. The record shall also reflect the
disposition of each such contact. All records created pursuant to this Section
2.7.3 shall be available to THE ASSOCIATION on a confidential basis.

2.8 Implementation Plan.
-------------------

2.8.1 Implementation Plan. Attached hereto as Schedule VI is a
-------------------
summary of the critical tasks, dates and project resources set forth in the
Implementation Plan mutually developed by the NMS and THE ASSOCIATION which is
intended to produce a prompt and efficient transition to NMS of Program
operations and Administration Services delegated to NMS hereunder. NMS shall be
primarily responsible for implementing the Implementation Plan in a prompt
manner and in accordance with the time schedule set forth in the Implementation
Plan with minimal disruption to the provision of Core and Non-Core Services to
the Participating Accounts and the Participating Plans. NMS shall provide the
project management and issue resolution staff identified in the Implementation
Plan and such other support and resources as are required to fulfill its
responsibilities under the Implementation Plan. For each Participating Account
being transferred hereunder, NMS shall incorporate into BEN-NET(TM) limited
historical Member level and Participating Account enrollment and eligibility
information in THE

10
<PAGE>

ASSOCIATION's billing system from the initial import from (i) the most recent
anniversary date of that Account's participation in the Program(s) or (ii) 90
days from the Effective Date of this Agreement, whichever historical period is
greater. The process of incorporating the foregoing information into BEN-NET(TM)
shall be completed by the date such Participating Account is transferred
hereunder.

2.8.2 Reimbursement of Association Costs. In the event that all
----------------------------------
Participating Accounts are not fully transitioned to NMS in accordance with the
Implementation Plan by October 31, 1999 and that delay is not attributable to
THE ASSOCIATION's failure to meet its obligations under this Agreement or the
Implementation Plan, NMS shall pay to THE ASSOCIATION all costs incurred by THE
ASSOCIATION to continue to provide Core Services to those untransitioned
Participating Accounts after October 31, 1999, including the salary, benefits,
assigns and overhead for THE ASSOCIATION employees and any compensation for
ASSOCIATION contractors providing those Core Services. THE ASSOCIATION shall
provide to NMS a written accounting of such reimbursable costs, which NMS will
have the opportunity to review. At THE ASSOCIATION's election, such costs shall
be withheld from amounts otherwise payable to NMS hereunder or shall be paid
directly by NMS to THE ASSOCIATION. At no time will these costs include any
consequential costs resulting from NMS not meeting its obligations.

2.9 Rollover of BluesCONNECT Program.
--------------------------------

2.9.1 Termination of BluesCONNECT Agreement. The parties hereby
-------------------------------------
agree that the BluesCONNECT Agreement shall terminate as of the close of
business on December 31, 1999. Except as expressly provided in this Agreement,
termination of the BluesCONNECT Agreement shall not relieve the parties of their
respective obligations that are intended to survive termination of the Blues
CONNECT Agreement, including under Section 6.7 thereof, nor shall such
termination constitute a waiver or release of any breach of the BluesCONNECT
Agreement by either party.

2.9.2 Rollover of BluesCONNECT Accounts. Effective as of January 1,
---------------------------------
2000, (i) all BluesCONNECT Accounts under the BluesCONNECT Agreement shall
become Participating Accounts under this Agreement and (ii) NMS shall provide
Core and non-Core Services to those former BluesCONNECT Accounts in accordance
with all of the terms and

11
<PAGE>

conditions of this Agreement, including the compensation terms set forth in
Schedule I hereto. The foregoing shall not apply to the IKON Account and other
Participating Accounts which receive a limited number of Core and/or Non-Core
Services. Those limited service Accounts shall continue to be handled under the
pricing in place as of the Effective Date of this Agreement.

2.10 Reports and Records.
-------------------

2.10.1 Provision of Reports. NMS shall provide the following
--------------------
accurate and complete reports to THE ASSOCIATION in the manner set forth herein:

(i) The Standard Reports referenced on Schedule VII hereto
shall be provided in accordance with the requirements set forth therein.

(ii) Upon request by THE ASSOCIATION, a record of all
significant transactions and communications with each Participating Account and
such Account's Members;

(iii) Such additional reports relating to the Program(s)
and/or the services provided by NMS hereunder as are specified from time to time
by THE ASSOCIATION, provided that the parties mutually agree on additional
compensation payable to NMS to generate such reports.

Except as provided in Section 2.10.1(iii) above, NMS shall bear all costs
incurred to create and provide the foregoing reports. All such reports shall be
provided to THE ASSOCIATION electronically and/or by hard copy as directed by
THE ASSOCIATION.

2.10.2 Maintenance of Records and Files. NMS shall create and
--------------------------------
maintain complete records of each Participating Account, including copies of all
payment distributions, Consolidated Bill and Self Bill invoices, paper
enrollment reports and/or forms, significant correspondence with Participating
Accounts, Participating Plans and/or brokers, and records of all other
significant transactions relating to the Program(s). Such records shall be
maintained for at least seven years from the date of the termination of this
Agreement. Such records may be maintained in an electronic format and/or paper
and shall be preserved in NMS's custody. Such records shall be available for
examination and copying upon request by THE ASSOCIATION. In the event that THE
ASSOCATION'S copying request requires substantial time and effort on NMS's
behalf, THE ASSOCATION shall reimburse NMS for its reasonable expenses related
to the request.

12
<PAGE>

2.11 Data Information Systems.
------------------------

2.11.1 Maintenance of Systems, Personnel. NMS shall maintain
---------------------------------
adequate hardware, software, operating systems and personnel to deliver the Core
Services and Non-Core Services required hereunder, including electronic
connectivity with Participating Plans in the manner and to the extent set forth
in this Agreement. NMS shall ensure that NMS personnel are fully trained in the
hardware, software and operating systems necessary to provide the Core Services
and Non-Core Services in the manner and to the extent set forth in this
Agreement.

2.11.2 Enhancement to BEN-NET(TM). From time to time, THE
--------------------------
ASSOCIATION may request NMS to make enhancements or modifications to BEN-NET(TM)
to accommodate the unique requirements of THE ASSOCIATION and the Program(s).
The parties shall agree in advance on the terms and conditions of such changes
to BEN-NET(TM), including the price to be charged to THE ASSOCIATION for such
changes and the parties' respective rights and licenses to such changes.

2.11.3 BEN-NET(TM) Training for ASSOCIATION Staff. At THE
------------------------------------------
ASSOCIATION's request, NMS shall train designated staff from THE ASSOCIATION
and/or the Participating Plan(s) on the capabilities of BEN-NET(TM) and on other
aspects of the Program(s). The travel and out-of-pocket expenses incurred by NMS
in providing that training following the completion of the implementation of the
Implementation Plan shall be paid by THE ASSOCIATION in accordance with the
procedures set forth in Schedule I hereto.

2.11.4 Backup and Disaster Recovery. NMS shall maintain a business
----------------------------
resumption plan (the "Business Resumption Plan") attached hereto as Schedule
VIII. NMS represents and warrants that the Business Resumption Plan shall ensure
that computer and telephone systems essential to the performance by NMS of its
duties under this Agreement shall not be inoperational for more than 24 hours,
other than as a result of natural disasters or other causes not within the
reasonable control of NMS. NMS will give written notice in advance of any
substantial changes NMS intends to make to the Business Resumption Plan.

2.11.5 Y2K Compliance. NMS shall assist THE ASSOCIATION and Accounts
--------------
to enable electronic data files from Participating Accounts that transmit
electronically to be Year 2000 Compliant (as defined in Section 9.2 below).

13
<PAGE>

2.12 Performance Standards.
---------------------

2.12.1 Performance Standards. Commencing on the Effective Date, NMS
---------------------
shall use reasonable efforts to meet or exceed the Target Performance Threshold
percentages set forth in Schedule IV hereto. Commencing November 1, 1999, the
Penalty Percentage for failure to meet such Target Performance Thresholds
described in Schedule IV shall go into effect and be applied to NMS's
performance of its duties hereunder commencing on that date. If NMI fails to
achieve the Schedule IV Target Performance Threshold for a standard during a
given quarter, NMI will pay a percentage penalty as indicated in the Schedule IV
Penalty Percentage column. The penalty percentage represents that percentage by
which the corresponding quarter's billed fees will be penalized. Upon receipt of
such bill, NMS shall immediately remit the amount of such penalties to THE
ASSOCIATION.

2.12.2 Minimum Performance Threshold. Commencing on the Effective
-----------------------------
Date, NMS shall satisfy the Minimum Performance Threshold referenced in Schedule
IV hereto which reflects the minimum level of acceptable performance by NMS of
its duties hereunder. Commencing November 1, 1999, the penalty points for
failure to achieve the Minimum Performance Threshold described in Schedule IV
shall go into effect and be applied to NMS's performance of its duties hereunder
commencing on that date. If NMI fails to achieve the Minimum Performance
Threshold for a standard during a given quarter, NMI will be assessed penalty
points equal to the number set forth in the Schedule IV Penalty Points column.
If for any given quarter, the total penalty points assessed is equal to or
greater than 20, NMI will pay a penalty equal in amount to that corresponding
quarter's total billed fees. The Penalty Percentage shall be assessed and billed
to NMS on a quarterly basis, in arrears. Upon receipt of such bill, NMS shall
immediately remit the amount of such penalties to THE ASSOCIATION.

2.12.3 Modification. The terms and conditions set forth in Schedule
-------------
IV may be modified from time to time by THE ASSOCIATION'S board or any
ASSOCIATION committee to which the board delegates such functions. Requested
modifications will be mutually agreed upon by THE ASSOCIATION and NMS.

2.13 Capabilities Support. At the request and direction of THE
--------------------
ASSOCIATION, NMS will assist THE ASSOCIATION to provide information to Accounts
and Participating Plans about NMS's capabilities to perform Core Services and
non-Core Services. NMS's assistance

14
<PAGE>

may include, but shall not be limited to, site visits, system demonstrations and
participation in proposal responses and presentations, as THE ASSOCIATION may
reasonably request.

2.14 Non-Blue Health Plans. Both parties agree that certain Participating
---------------------
Accounts may desire NMS to provide services similar to those listed herein to
non-Blue Cross, Blue Shield or Blue Cross Blue Shield Health Plans. In such
situations, NMS may, upon THE ASSOCIATION's request, develop and implement the
necessary interfaces to accommodate such requests. Fees charged in conjunction
with such services provided by NMS shall be outlined in a separate agreement
acceptable to NMS and THE ASSOCIATION.

2.15 Modification to Services. The parties recognize and agree that from
------------------------
time to time it may be appropriate to modify the scope and manner that NMS
provides Core and non-Core Services hereunder to better and more efficiently
serve the needs of the Participating Accounts and Participating Plans, including
modifications made to take advantage of technology enhancements available to
NMS, to address the changing needs and expectations of Accounts and Health Plans
and to adopt improvements to the delivery of services resulting from the
experience of the parties hereunder. A party who wishes to request a
Modification to this Agreement shall advise the other party in writing of the
requested Modification and the rationale for making that Modification. The
parties agree to thereafter negotiate in good faith to attempt to reach
agreement on the terms and conditions for incorporating that Modification as a
written amendment to this Agreement.

SECTION 3
DUTIES OF THE ASSOCIATION

During the term of this Agreement, THE ASSOCIATION shall provide the
following services hereunder:

3.1 Information. THE ASSOCIATION and/or the Participating Plans shall
-----------
retain responsibility for informing potential new Accounts and Health Plans
about the Program(s). All costs incurred associated with providing such
information, including the cost of issuing proposals, will be borne by the party
providing the information. The level, manner, effort and scope of efforts under
this Section 3.1, including the choice of Accounts and Health Plans to which
such information is provided, shall be determined by THE ASSOCIATION and/or the
Participating Plans in their sole discretion.

15
<PAGE>

3.2 Relationships with Health Plans. THE ASSOCIATION shall retain
-------------------------------
responsibility for managing relationships with Participating Plans. THE
ASSOCIATION shall use its reasonable efforts to resolve any Participating Plan
issues, and to enforce the Participating Plans' compliance with the Program
Rules. All agreements with Participating Plans relating to the Program(s) shall
be entered into directly with THE ASSOCIATION, on terms and conditions
acceptable to THE ASSOCIATION.

3.3 Account Relationships. THE ASSOCIATION and/or Participating Plans
---------------------
shall retain responsibility for managing business relationships with the
Participating Accounts and shall act as national account manager for all
Participating Accounts. THE ASSOCIATION shall make reasonable efforts to request
all Self-Bill Accounts to convert to a Consolidated Bill methodology on or
before the Participating Account's initial and subsequent renewal dates.

3.4 Program Rules. THE ASSOCIATION shall be responsible for development
-------------
and maintenance of Program Rules.

3.5 Electronic Connectivity. THE ASSOCIATION will provide the
-----------------------
specifications for NMS to establish electronic interfaces between BEN-NET and
the eligibility systems of the Participating Plans, as set forth in Section 2.1
above. This connectivity will support data flows between BEN-NET and the
Participating Plans, in accordance with THE ASSOCIATION'S specifications
described in Schedule III, and as modified by THE ASSOCIATION from time to time.
Modifications to existing file formats or file transmission methods will be
mutually agreed upon by THE ASSOCIATION and NMS.

3.6 Account Set-up. THE ASSOCIATION shall provide to NMS accurately,
--------------
completely, in writing and in a timely manner the necessary Participating
Account, Participating Plan and other information in order for NMS to provide
the Administrative Services hereunder. This includes, but is not limited to,
group structure, premium amounts, other administrator fees, Participating
Plan(s) contact information, and Participating Account contact information.

3.7 Unsupported Functions. THE ASSOCIATION will continue to provide
---------------------
Administrative Services related to the Program(s) that are not designated as NMS
responsibilities under this Agreement.

16
<PAGE>

3.8 Payment to NMS. THE ASSOCIATION shall reimburse NMS according to
---------------
Section 5 and Schedule I and any other fees pursuant to this Agreement. Any fees
payable to NMS shall ultimately be the responsibility of THE ASSOCIATION.

SECTION 4
MAINTENANCE OF BANK ACCOUNT AND DISTRIBUTION OF FUNDS

4.1 Bank Account. THE ASSOCIATION shall maintain one or more Bank
------------
Accounts at a Bank of THE ASSOCIATION's choice dedicated to the receipt of
moneys from Participating Accounts in connection with Core Services and Non-Core
Services provided under the Program(s). All monies in the Bank Account shall be
held in a fiduciary capacity by THE ASSOCIATION on behalf of the Participating
Plans, and NMS shall be entitled to direct the application of such moneys only
in strict accordance with the provisions of this Agreement. NMS shall not have
the power to assign, transfer, securitize or pledge the monies in the Bank
Account in any fashion, or to use the funds in the Accounts for any purpose
other than as expressly authorized hereunder.

4.2 Records of Bank Account. THE ASSOCIATION shall maintain complete and
-----------------------
accurate records of all deposits to and disbursements from the Bank Account.

4.3 NMS Payment Reconciliation. NMS shall verify that each Participating
--------------------------
Account's payment matches the corresponding invoice, noting any payment
adjustments. When a Participating Account's payment does not match the relevant
invoice, NMS shall contact the Participating Account to attempt to resolve the
discrepancy. If possible, NMS shall apply the Participating Account's payment to
the amount then due. NMS shall also maintain clear and accurate accounting
records of amounts due to Participating Plans, THE ASSOCIATION, NMS and other
administrators.

4.4 Disbursement of Funds.
---------------------

4.4.1 Reporting. On each Business Day, NMS shall notify THE
---------
ASSOCIATION of the amounts to be disbursed from the Bank Account to the
following parties: (i) Participating Plans for premium and other moneys due;
(ii) THE ASSOCIATION for authorized administrative fees; (iii) NMS for
authorized fees due; (iv) other administrative, brokers and service providers
for applicable fees, if any, and (v) any other disbursements authorized by this
Agreement. The notice given to THE ASSOCIATION by NMS shall be

17
<PAGE>

accurate and complete and shall include all data required for the generation of
a check or wire transfer of such disbursements and shall provide such
information in a format in accordance with Schedule IX to enable THE ASSOCIATION
to make a single consolidated disbursement to each Participating Plan and will
also be compatible with THE ASSOCIATION's accounting system.

4.4.2 Approval of Disbursements. THE ASSOCIATION shall authorize the
-------------------------
Bank to make the disbursements referenced in Section 4.4.1 in accordance with
the requirements of this Agreement. THE ASSOCIATION shall be entitled to rely on
the information provided by NMS under Section 4.4.1 above in making those
disbursements.

SECTION 5
COMPENSATION

5.1 Payment of Compensation.
-----------------------

5.1.1 Fixed Fees. For all Core Services required to be provided by
----------
NMS for the period from the Effective Date through December 31, 1999, NMS shall
be entitled to the compensation set forth in part 1 of Schedule I hereto and on
the terms and conditions and subject to the limitations set forth therein.

5.1.2 Per Subscriber Per Month Charges. Effective January 1, 2000,
--------------------------------
NMS shall be compensated for Core Services provided on and after that date on a
per subscriber per month basis in accordance with Schedule I hereto and on the
terms and conditions and subject to the limitations set forth therein. The per
subscriber per month fees shall be disbursed to NMS when distributions are made
of premiums for that month to the Participating Plans.

5.1.3 Payment for Non-Core Services. Except for the daily export and
-----------------------------
student status generation services which shall be paid in accordance with
Section 5.1.2 hereto, for all non-Core Services provided by NMS, NMS shall
receive such compensation as is agreed upon in writing by the parties.

5.1.4 Cost and Expenses. Except as specifically provided in Schedule
-----------------
I NMS shall be responsible for all out-of-pocket costs and expenses it incurs in
performing its duties hereunder.

5.1.5 Comparable Services to Blue Plans. In the event that NMS
---------------------------------
agrees to provide Core Services or other services substantially equivalent in
substance to the Core Services provided hereunder to any Blue Plan or subsidiary
or affiliate of such Blue Plan at a per

18
<PAGE>

subscriber per month rate or other price or rate that is less than the then
current per subscriber per month rate then in effect under this Agreement, the
per subscriber per month rate then in effect under this Agreement and any
subsequent rates hereunder shall retroactively be reduced to that lower rate as
of the date that lower rate was in effect at the other Blue Plan. For purposes
of enforcing the obligations of this Section 5.1.5, NMS shall promptly inform
THE ASSOCIATION of the basic terms of any agreements it enters into with any
Blue Plans. In the event the parties disagree as to whether the foregoing
adjustments are required to be made in a particular case, they will engage a
mutually agreeable third party expert to determine what, if any, such adjustment
in the rates hereunder shall be required. The final determination of such expert
shall be binding upon the parties. The parties shall bear the expenses of such
expert equally.

5.1.6 Comparable Services to Non-Blue Plans. The parties agree to
-------------------------------------
engage in good faith negotiations with the intent and goal of reaching agreement
on reductions in the rates charged by NMS hereunder and/or expansion in the
scope of Core Services provided by NMS hereunder to reasonably assure that the
rates charged to THE ASSOCIATION for the scope of Core Services under this
Agreement are competitive with those NMS charges to any Non-Blue Plans.

SECTION 6
TERM AND TERMINATION

6.1 Initial Term and Renewal. The initial term of this Agreement (the
------------------------
"Initial Term") shall commence on the Effective Date and will expire at 11:59
p.m. on December 31, 2002. This Agreement may be extended or renewed with the
written consent of both parties.

6.2 Termination for Breach. This Agreement may be terminated by either
----------------------
party at any time in the event of a material breach of this Agreement by the
other party and the failure of the breaching party to fully cure or correct such
breach, within 60 days after its receipt of written notice of such breach. Upon
receipt of such written notice, the breaching party shall promptly advise the
other party in writing of its specific plan to cure such breach.

6.3 Plan, Participating Account and Member Noncompliance Not a Breach.
-----------------------------------------------------------------
Notwithstanding anything to the contrary in this Agreement, THE ASSOCIATION
shall not be deemed to be in breach of this Agreement as a result of the failure
by any Participating Plan, Participating Account or Member's failure to comply
with the Program Rules or its obligation or

19
<PAGE>

failure to pay the fees it owes under the Program(s). Under the Program(s), if a
Participating Plan, Participating Account or Member fails materially to comply
with the Program Rules, or commits any other material breach of its obligations
with respect to the Program(s), then NMS's remedy for such material failure or
breach shall be to request THE ASSOCIATION to disqualify and remove such
Participating Plan, Participating Account or Member from the Program(s) and/or
to request additional compensation if such noncompliance following that request
results in extra costs to NMS.

6.4 Performance Below Termination Standards. THE ASSOCIATION may
---------------------------------------
terminate the Agreement immediately upon written notice to NMS if NMS fails to
meet the Minimum Performance Threshold for any two consecutive calendar months
or for any three months of any calendar year.

6.5 Insolvency. This Agreement may be terminated by either party if the
----------
other party (i) applies for or consents to the appointment of a receiver,
trustee, or liquidator of all or a substantial portion of its assets; (ii) files
a voluntary petition in bankruptcy or admits in writing its inability to pay its
debts as they become due; (iii) makes a general assignment for the benefit of
creditors; or (iv) files a petition or an answer seeking reorganization or
arrangement with creditors or to take advantage of any insolvency law; or if an
order, judgment, or decree will be entered by a court of competent jurisdiction,
on the application of the creditor, adjudicating the party bankrupt or insolvent
or approving a petition seeking reorganization of the party or appointment of a
receiver, trustee, or liquidator of all or a substantial portion of the party's
assets.

6.6 Termination Due to Changes in Law. The contract may be terminated in
----------------------------------
accordance with paragraph 10.20.

NMS 6.7 Post Notice of-Termination Duties. Upon termination of this
---------------------------------
Agreement, the responsibilities of the parties shall be as follows:

(a) Group Application Review. Review of group applications and group
------------------------
set-ups in the BEN-NET(TM) system by NMS shall cease on a date to be determined
by THE ASSOCIATION not later than the effective date of the termination of the
Agreement. Any group applications received by NMS subsequent to such date shall
be sent to THE ASSOCIATION via facsimile and first-class mail within two (2)
Business Days of receipt.

20
<PAGE>

(b) Enrollment Processing. New enrollment of Participating Accounts
---------------------
and Eligible Employees by NMS shall cease on a date to be determined by THE
ASSOCIATION but in no event later than the effective date of the termination.
Any Enrollment Forms received by NMS subsequent to such date shall be sent to
THE ASSOCIATION via facsimile and first-class mail within two (2) Business Days
of receipt.

(c) Payments. THE ASSOCIATION shall pay for any services performed by
--------
NMS after the effective date of termination of the Agreement, at rates mutually
agreed to by the parties, subject to any rights of offset or credit authorized
under the Agreement.

(d) Transition. NMS shall provide commercially reasonable cooperation
----------
to THE ASSOCIATION or any third party retained by THE ASSOCIATION to assume the
performance of the Core Services. Such cooperation shall include providing THE
ASSOCIATION and such third party access electronically and/or by paper to all
records and data in NMS's possession pertaining to this Agreement. Any such
third party will be required to abide by any confidentiality provisions as
agreed to hereunder.

6.8 Effect of Termination. Termination of this Agreement shall have no
---------------------
effect upon the rights and obligations of the parties arising out of any
transactions or events (including the processing of all pre-termination claims)
occurring prior to the effective date of final termination, including but not
limited to, the obligations under "Post Notice of Termination Duties" (Section
6.7), "Indemnification" (Section 7.2), "Compliance with Government Mandate"
(Section 8.2), "Representations and Warranties of NMS" (Section 9),
"Confidentiality" (Section 10.7), "Dispute Resolution" (Section 10.9), and
"Quality and Financial Audits" (Section 10.11).

SECTION 7
INSURANCE, INDEMNIFICATION AND FIDUCIARY STATUS

7.1 Insurance. NMS shall procure and maintain, at its own sole expense,
---------
errors and omission and general liability insurance and other insurance and
surety or fidelity bonds as may be necessary to protect itself and its
employees, agents, or representatives against any claims, liabilities, damages
or judgments and costs of defense that arise out of services provided by or to
be provided by NMS or its employees, agents or representatives in the discharge
of NMS's responsibilities under this Agreement. NMS shall provide proof of such
insurance to THE

21
<PAGE>

ASSOCIATION upon request and shall notify THE ASSOCIATION if such insurance
coverage is terminated or materially altered.

7.2 Indemnification.
---------------

7.2.1 By NMS. NMS shall defend, hold harmless and indemnify THE
------
ASSOCIATION and the Participating Plans from any claims, liabilities, damages or
judgments asserted against, imposed upon or incurred by THE ASSOCIATION and/or
the Participating Plans or that arise out of NMS's negligence, intentional
wrongdoing, breach of its responsibilities under this Agreement or in failure to
obtain or maintain "Applicable Licenses" as set forth in Section 8.1.2 below.
The indemnification granted under this Section 7.2.1 expressly includes
indemnification with respect to expense costs, legal fees, defense costs, fines,
penalties, court costs, or amounts paid in settlement or in satisfaction of any
judgment or award.

7.2.2 By The Association. THE ASSOCIATION agrees to defend, hold
------------------
harmless, and indemnify NMS from any claims, liabilities, damages or judgments
asserted against, imposed upon or incurred by NMS that arise out of THE
ASSOCIATION's negligence, intentional wrongdoing, or breach of its
responsibilities under this Agreement. The indemnification granted under this
Section 7.2.2 expressly includes indemnification with respect to expense costs,
legal fees, defense costs, fines, penalties, court costs, or amounts paid in
settlement or in satisfaction of any judgment or award.

7.2.3 Procedure for Asserting Indemnification Claims. If any claim
----------------------------------------------
or liability is asserted in writing against a party entitled to indemnification
under this Section 7 (the "Indemnified Party") which would give rise to a claim
under this Section 7, the Indemnified Party shall notify the agent of the person
providing the indemnity ("Indemnifying Party") in writing of the same within
fifteen (15) days of receipt of such written assertion of a claim or liability.
The Indemnifying Party shall have the right to defend a claim and control the
defense, settlement and prosecution of any litigation. If the Indemnifying
Party, within thirty (30) days after notice of such claim, fails to defend such
claim, the Indemnified Party will (upon further notice to the Indemnifying
Party) have the right to undertake the defense, compromise or settlement of such
claim on behalf of and for the account and risk of the Indemnifying Party,
subject to the right of the Indemnifying Party, through its agent, to assume the
defense of such claim at any time prior to settlement, compromise or final
determination thereof. Anything in

22
<PAGE>

this Section 7.2.3 notwithstanding, (i) if there is a reasonable probability
that a claim may materially and adversely affect the Indemnified Party other
than as a result of money damages or other money payments, the Indemnified Party
shall have the right, at its own cost and expense, to defend, compromise and
settle such claim, and (ii) the Indemnifying Party shall not, without the
written consent of the Indemnified Party, settle or compromise any claim or
consent to the entry of any judgment which does not include as an unconditional
term thereof the giving by the claimant to the Indemnified Party a release from
all liability in respect to such claim. All parties agree to cooperate as
necessary in the defense of such matters.

7.3 Fiduciary Status. THE ASSOCIATION and NMS acknowledge and agree that
-----------------
NMS shall not be a fiduciary within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, or any state or federal law with
respect to any Plan. NMS shall not have any discretion with respect to the
management or administration of any Health Plan or with respect to determining
or changing the rules or policies pertaining to eligibility or entitlement of
any Member or Subscriber in any Health Plan to benefits under such Health Plan.
NMS also shall not have any control or authority with respect to any assets of
any Health Plan, including the investment or disposition thereof. All discretion
and control with respect to the terms, administration or assets of any Health
Plan shall remain with the named fiduciaries under such Health Plan.

23
<PAGE>

SECTION 8
REGULATORY AND CONTRACTING COMPLIANCE

8.1 Regulatory Compliance.
---------------------

8.1.1 Applicable License. NMS shall be solely responsible for
------------------
ensuring that it complies with all applicable federal, state or local laws and
regulations, including all applicable requirements under state insurance laws,
federal and state privacy laws, government procurement and contracting laws, the
Health Insurance Portability and Accountability Act of 1996 and for obtaining
and maintaining all federal, state and local licenses, permits, registrations,
certifications and approvals required for it to perform all of its duties
hereunder, and as may be required under applicable state insurance laws and
regulations governing the subject matter of this Agreement (the "Applicable
Licenses").

8.1.2 Necessity Determination. In the event the parties disagree as
-----------------------
to the necessity for and/or type of state license(s) required to be obtained by
NMS under state insurance laws or regulations, the parties may agree to jointly
contact the relevant state insurance department(s) to obtain a written opinion
from such state insurance department(s) as to whether NMS is required to obtain
such licenses in order to fulfill its obligations hereunder. The parties agree
to abide by the terms and conditions of any such written opinion. In the event
the parties disagree as to the necessity for and/or type of state insurance
license(s) required to be obtained by NMS under state insurance laws or
regulations, and the parties choose not to contact the relevant state insurance
department(s) for a written opinion as to the necessity for licensure or any
state department of insurance refuses to provide such opinion, NMS shall
indemnify THE ASSOCIATION and/or any of the Participating Plans, in accordance
with the indemnification provisions set forth in Section 7.2 above herein, for
any fines, penalties or other monetary damages or judgments levied against THE
ASSOCIATION and/or any of the Plans by any state insurance department arising
out of and as a result of NMS's failure to have obtained such Applicable
License. In such an event NMS shall immediately commence the appropriate license
process under state insurance laws and regulations.

8.1.3 Information Regarding Pending License Applications. In the
--------------------------------------------------
event NMS has commenced the license process under state insurance laws prior to
or after the Effective Date of this Agreement, NMS shall ensure that THE
ASSOCIATION is kept apprised of the status and process of all such license
activities.

24
<PAGE>

8.2 Compliance with Government Mandate. NMS acknowledges and agrees that,
----------------------------------
as a contractor with the U.S. Federal Government, THE ASSOCIATION and its
subcontractors are required to comply fully with the terms and conditions of the
Federal Government's "Addendum to Subcontract Under the Health Insurance for the
Aged and Disabled Act (42 U.S.C., chapter 7, Supp., as Amended)" the terms of
which are attached hereto and incorporated herein as Schedule X, and NMS agrees
that it shall so comply.

8.3 Compliance with Code of Business Conduct. THE ASSOCIATION has adopted
----------------------------------------
a Code of Business Conduct ("Code") which governs the conduct of every
ASSOCIATION employee and establishes specific ethical standards for its
employees. Certain significant provisions of the Code include conflict of
interest, gifts or gratuities, kickbacks, entertainment, improper payments, and
protecting information. A copy of the Code has previously been made available
to NMS. NMS agrees that neither it nor any of its employees, representatives or
agents will engage in any conduct that will cause any ASSOCIATION employee to
act contrary to or in contravention of the Code.

8.4 Excluded Vendors. NMS warrants that it is not, as of the Effective
----------------
Date of this Agreement, (i) excluded in any fashion for any reason from
participation in the Medicare, Medicaid or any other federally-funded health
programs, nor (ii) controlled by a person or entity that is so excluded. NMS
shall notify THE ASSOCIATION within twenty-four (24) hours if it receives
written notice from a federal agency with proper authority, or otherwise becomes
aware, that it or a controlling person or entity is so excluded regardless
whether such a determination is appealable by NMS or controlling person or
entity. Such exclusion shall be grounds for termination of this Agreement by THE
ASSOCIATION in a manner and in a timeframe deemed appropriate by THE ASSOCIATION
in its sole discretion, notwithstanding any other provisions of this Agreement.

25
<PAGE>

SECTION 9
REPRESENTATIONS AND WARRANTIES OF NMS

9.1 General Representations and Warranties. NMS hereby represents and
--------------------------------------
warrants to THE ASSOCIATION that the following statements are true, complete and
correct.

(a) NMS is a duly formed corporation, and is validly existing and is
duly qualified to carry on its business as a foreign corporation in each
jurisdiction where such qualification is legally required.

(b) The execution and performance of this Agreement by NMS has been
duly authorized by NMS and has been validly executed by an appropriate officer
of NMS.

(c) As referenced in Section 8.1 above, NMS has all Applicable
Licenses required to perform all of the duties required under this Agreement and
all such Applicable Licenses are in good standing and are not subject to nor
threatened with any suspension, termination or non-renewal or other adverse
action.

(d) NMS is not in violation of and has complied with all applicable
laws and there are no suits, investigations, or legal, administrative or other
proceedings pending or threatened against NMS that would have a material effect
on NMS's ability to perform under this Agreement. NMS shall notify THE
ASSOCIATION promptly on becoming aware of any such threatened or ongoing
proceedings.

(e) The BEN-NET system and the use of and participation in the
Program(s) by THE ASSOCIATION, the Participating Plans, the Participating
Accounts and the Members do not and will not infringe or misappropriate any
patent, copyright, trademark, trade secret or other proprietary right of any
third party.

9.2 Year 2000 Representation and Warranty. NMS represents and warrants
-------------------------------------
that the products and services provided by NMS to THE ASSOCIATION and the
Participating Accounts and Participating Plans will accurately process date/time
data (including, but not limited to, calculating, comparing, and sequencing)
from, into and between the twentieth and twenty-first centuries, and will
correctly handle leap year calculations (the foregoing hereafter "Year 2000
Compliant"). NMS shall provide reasonable assistance as requested by THE
ASSOCIATION to demonstrate that such products and services are Year 2000
Compliant. Such cooperation may include testing with simulated data configured
to represent dates from, into and between the twentieth and twenty-first
centuries.

26
<PAGE>

9.3 Survival of Representations and Warranty; No Limitation of Remedy.
-----------------------------------------------------------------
Notwithstanding any provision of the Agreement to the contrary, the
representations and warranties set forth in this Section 9 shall not be limited
by any limitation of remedy, limitation of damages or waiver set forth in the
Agreement.

SECTION 10
GENERAL PROVISIONS

10.1 Location of Operations. Except for the site visits referenced in
----------------------
Section 2.1, NMS will provide Core and Non-Core Services from its office(s) in
Minnesota. At the request of THE ASSOCIATION and upon reasonable notice, NMS
shall make available a representative in Chicago or at any other location
specified by THE ASSOCIATION, to address issues arising under this Agreement or
the general administration of the Program(s).

10.2 Time of Performance. Time is of the essence for any provision in this
-------------------
Agreement in which time is a factor. For purposes of this Agreement. if an
obligation is required to be performed on or by a specific date or a specific
day of the month, and such date or day of the month falls on a day other than a
Business Day, then such obligation shall be performed on or by the next
succeeding Business Day.

10.3 Program Rules. THE ASSOCIATION, in consultation with NMS, has adopted
-------------
and implemented Program Rules to govern the administration of the Program(s).
THE ASSOCIATION may, in consultation with NMS, add to or modify current Program
Rules from time to time, and shall notify NMS promptly of any changes in the
Program Rules. Notwithstanding any consultation with NMS, the development,
implementation and modification of the Program Rules shall be in the sole
discretion of THE ASSOCIATION. If there are changes in the Program Rules that
substantially affect the cost to NMS of performing its duties hereunder, the
terms and payments for any resulting changes in cost shall be mutually agreed
upon by THE ASSOCIATION and NMS.

10.4 Designated Representatives. In order to avoid unreasonable delay in
--------------------------
the provision of the services to be rendered pursuant to this Agreement, NMS and
THE ASSOCIATION shall each designate a specific representative to perform the
day-to-day administration of the Program(s) and to serve as the primary contact
for communications between the parties. Each party shall provide reasonable and
prompt assistance to the other party to address any concerns or

27
<PAGE>

problems relating to the Program(s) and/or this Agreement identified by NMS, THE
ASSOCIATION, a Participating Plan or Participating Account. THE ASSOCIATION
shall provide reasonable effort and support in assisting NMS to cause the
Participating Plans and/or Participating Accounts to promptly respond to all
inquiries from NMS.

10.5 Waiver. Failure to insist upon strict compliance with any terms,
-------
covenants or conditions of this Agreement at any one time shall not be deemed a
waiver of such term, covenant or condition at any time nor shall any waiver or
relinquishment of any right or power herein at any time be deemed a waiver or
relinquishment of the same or any other right or power at any other time.

10.6 Non-Solicitation.
----------------

10.6.1 Employees. Each party agrees that unless mutually agreed to
---------
otherwise, it shall not solicit for employment or employ any person who is then
employed by the other party in any capacity, including without limitation, as an
employee or consultant, during the term of this Agreement and for two years
thereafter.

10.6.2 Accounts.
---------

a. During the period that a Participating Account is in the
Program(s) and for 6 months thereafter (the "Restricted Period"), NMS and its
subsidiaries and affiliates shall not, directly or through any agent or
representative, knowingly target market, solicit or offer to provide or contract
to provide Comparable Services (as defined below) to that Participating Account,
except that NMS and its subsidiaries and affiliates can offer to provide or
contract to provide such Comparable Services to that Participating Account if it
has followed 10.6.2b below. Notwithstanding the foregoing, NMS and its
subsidiaries and affiliates shall be able to solicit, offer to provide and/or
contract to provide Comparable Services to any Participating Account that by
reason of merger, acquisition or other business combination becomes an affiliate
or subsidiary of an Account for which NMS is providing Comparable Services or to
any Account that NMS is already providing Comparable Services at the time that
Account becomes a Participating Account.

b. If NMS or its subsidiary or affiliate directly or
indirectly receives an unsolicited request to provide Comparable Services to an
Account (the "Request") during the Restricted Period for that Participating
Account, NMS shall notify THE ASSOCIATION of that Request and the details
thereof and request a response from THE ASSOCIATION. THE ASSOCIATION shall
promptly respond to NMS by specifying the conditions and terms on which NMS may
respond to that Request, which conditions and terms shall not be commercially
unreasonable. THE ASSOCIATION may withhold its consent for NMS to respond if in
its reasonable judgement the response to the Request would result in the current
participation in the Program(s) by that Participating Account to be adversely
affected.

28
<PAGE>

c. Comparable Services shall mean administrative services
that are the same or substantially similar to the Core Services under this
Agreement.

10.7 Confidentiality. The parties have executed the confidentiality
---------------
agreement dated as of March 16, 1999 and the parties agree that the terms of
that confidentiality agreement are incorporated and are a part of this Agreement
as if such terms were restated herein.

10.8 Intellectual Property. Nothing contained in this Agreement shall
---------------------
confer to THE ASSOCIATION any property rights, proprietary interest or licenses
in the software, written materials, techniques or know-how used by NMS and its
BEN-NET/TM/ system.

10.9 Dispute Resolution.
------------------

a. Negotiation. Except as provided in Section 10.8(d) below, any
-----------
dispute, controversy or claim between THE ASSOCIATION and NMS arising out of or
related to the existence, interpretation, performance or breach of this
Agreement, whether in tort, contract or otherwise (a "Dispute"), will be
referred to the parties' designated representatives, who will attempt to resolve
the Dispute by good faith negotiation. If the designated representatives are
unable to resolve the Dispute within fifteen (15) business days, either party
may submit the Dispute for binding arbitration in accordance with Section
10.9(b).

b. Arbitration Procedure. If any Dispute cannot be resolved by
---------------------
negotiation as set forth in Section 10.9(a), either party may submit the Dispute
to be resolved by binding arbitration. The arbitration shall be in accordance
with the rules of the American Arbitration Association or such alternative
dispute resolution service as agreed by the parties. The arbitration shall be
conducted in Chicago, Illinois. Arbitration shall be conducted by three (3)
arbitrators reasonably acceptable to the parties, each of NMS and THE
ASSOCIATION designating one (1) arbitrator and such arbitrators selecting the
third arbitrator. The arbitrators shall be bound by applicable state and federal
law and shall issue a written opinion setting forth findings of fact and
conclusions of law. The arbitrators shall have the power to grant all legal and
equitable remedies provided by law except that the arbitrators shall not award
punitive damages. The parties expressly agree and covenant to be bound by the
decision of the arbitrators

29
<PAGE>

as a final determination of the matter in dispute. Judgment upon the
arbitrators' decision may be entered and enforced in any court of competent
jurisdiction.

c. Arbitration Fee. The parties agree to share equally the
---------------
administrative fee as well as the arbitrators' fees, if any, unless otherwise
assessed by the arbitrator. The administrative fee shall be advanced by the
party who submits the Dispute to arbitration, subject to final apportionment by
the Arbitrators in the award.

d. Equitable Remedies. Nothing in this Agreement shall prevent
------------------
either party from seeking emergency equitable relief, such as temporary
injunctive relief, from a court of proper jurisdiction, including for breach of
Section 10.6.

10.10 Binding Effect. This Agreement and the rights, covenants,
--------------
conditions and obligations of the respective parties and any instrument or
agreement executed pursuant to this Agreement shall be binding upon the parties
and upon the successors, assignees and legal representatives of the respective
parties.

10.11 Quality and Financial Audits.
----------------------------

a. Financial Audits. NMS shall maintain adequate books, accounts
----------------
and records, and prepare all financial statements in compliance with the rules
of any governmental or regulatory authority having jurisdiction over NMS, and
permit employees or agents of THE ASSOCIATION at such reasonable times to
inspect NMS's facilities, and to examine, audit and make copies and memoranda of
NMS's books, accounts and records which are related to this Agreement.

b. Quality Audits. THE ASSOCIATION may audit and examine records
--------------
and accounts which pertain, directly or indirectly, to any services provided by
NMS hereunder. NMS shall cooperate with THE ASSOCIATION or its auditors;
however, such audit shall not unduly interfere with the NMS conduct of its
business. NMS shall be reimbursed for its out-of-pocket expenses incurred in
support of the audit.

c. Audit Participants. Any audit review may be undertaken directly
------------------
by THE ASSOCIATION or by third parties engaged by THE ASSOCIATION, including
accountants and consultants. NMS shall cooperate fully with THE ASSOCIATION or
any such third party in connection with the audit review. Any third party
auditor shall not be involved in or be subsidiary to a business engaged in
activities competitive to NMS.

30
<PAGE>

d. NMS Review of Audits. NMS shall have the opportunity, prior to
--------------------
the release of any audit report, to review a draft of such report and to include
in the report its responses to issues raised by the report.

10.12 Right to Contract. Nothing in this Agreement shall preclude THE
------------------
ASSOCIATION from contracting with third parties to provide Administrative
Services that are the same or substantially similar to the Core Services in
connection with Program(s) other than the "HMO stitcher Program(s)" as that term
is defined below. THE ASSOCIATION will not contract with other third parties to
provide Administrative Services that are the same or substantially similar to
the Core Services in connection with "HMO stitcher Program(s)," except in the
event THE ASSOCIATION (1) gives notice of termination for failure to perform in
accordance with Section 6.4, then this restriction shall no longer apply as of
the date such notice of termination is given or, (2) THE ASSOCIATION gives
notice of termination for breach in accordance with Section 6.2, then this
restriction shall no longer apply as of 30 days after such notice of breach is
given. For purposes of this paragraph, "HMO stitcher Program(s)" shall mean
Program(s) through which Blue Plans separately underwrite any HMO or HMO-based
type of health insurance products which they provide to Accounts and in
connection with THE ASSOCIATION provides centralized Administrative Services
(i.e. the current HMO Blue USA, BluesCONNECT and Medicare Blue USA Programs).

10.13 Headings. All headings are for convenience of reference only.
--------

10.14 Assignment. Neither party may assign, subcontract or delegate any
----------
of its rights, duties or obligations hereunder without the prior written consent
of the other party, which consent may be withheld in its sole discretion,
however, upon written notice to the other party, either party may assign this
Agreement to a successor in title to substantially all of its business or
assets.

10.15 Entire Agreement; Amendments and Modifications. This Agreement and
----------------------------------------------
any documents expressly included by reference and the BluesCONNECT Agreement are
the full and complete expression of the understandings between NMS and THE
ASSOCIATION and supersede and replace any prior agreements between the parties.
No amendment or modification to this Agreement shall be binding upon the parties
unless it is in writing and signed by both parties.

31
<PAGE>

10.16 Applicable Law. This Agreement shall be governed and construed in
--------------
accordance with the laws of the State of Illinois, without regard to principles
of conflict of law.

10.17 Notices. Any notice required under this Agreement shall be sent to
-------
the parties at the following addresses, or at such other address as such party
may specify in writing from time to time via US Mail Certified Mail return
receipt requested or via Federal Express:

To THE ASSOCIATION:

Blue Cross Blue Shield Association
225 North Michigan Avenue
Chicago, IL 60601
Attn: President and Chief Executive Officer, Patrick G. Hayes
With copies to: Executive Director, National Managed Care
Services, Kathe Hamen; and General Counsel, Roger
G. Wilson, Esq.

To NMS:

Network Management Services, Inc.
5500 Wayzata Blvd.
Suite 1275
Minneapolis, MN 55416
Attn: Mark Tierney
With copies to: Chief Financial Officer, Scott P. Halstead

Any notice under this Agreement shall be deemed received when the receiving
party actually receives the notice.

10.18 Relationship of Parties. NMS is an independent, licensed contractor
-----------------------
to THE ASSOCIATION and neither party is a partner, agent or joint venturer of
the other party. Each party is solely responsible for the acts and omissions,
control and direction of its own employees.

10.19 Counterparts. This Agreement may be executed in counterparts.
------------

10.20 Changes in Law. In the event that any provision of this Agreement
---------------
is not deemed to be in compliance with any state or federal law, regulation,
bulletin, regulatory agency policy, or the like, governing the subject matter
hereof, this Agreement shall be automatically amended to so conform with such
law, regulation, bulletin or regulatory agency policy. To the extent that the
automatic amendment described in this Section 10.20 is the result of a change in
any state or federal law, regulation, bulletin, regulatory agency policy, or the
like, that occurred after the

32
<PAGE>

Effective Date of this Agreement and creates a material adverse change of either
party's duty hereunder, the parties agree to negotiate in good faith to attempt
to reach agreement on the terms and conditions for incorporating such change in
law as a written amendment to this Agreement. In the event the parties cannot
reach agreement on changes to the Agreement to fairly address the change in law
prior to the effective date of the change in law, either party may terminate
this Agreement upon 60 days prior written notice or the effective date of the
change in law, whichever occurs first.

IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the Effective Date.

BLUE CROSS AND BLUE NETWORK MANAGEMENT
SHIELD ASSOCIATION SERVICES, INC.

/s/ Patrick G. Hayes /s/ Mark Tierney
- ------------------------------- --------------------------
Patrick G. Hayes Mark Tierney
President and Chief Executive Chairman
Officer

33
<PAGE>

Schedule I

Part 1 - Core Services
- -----------------------

Fixed Fee for Calendar year 1999

In 1999, THE ASSOCIATION shall pay to NMS a fixed fee not to exceed *** for Core
Services provided in connection with Participating Accounts existing as of the
effective date of the Administrative Services Agreement (the "Fixed Fee").
This Fixed Fee will be paid to NMS according to the following schedule:

On or Before Amount Due
- -------------------------------
6/1/99 ***
9/1/99 ***
12/1/99 ***

The Fixed Fee shall be reduced as follows. If at the end of calendar 1999, 100%
of the Participating Accounts existing as of the effective date of the
Administrative Services Agreement have not been transferred to NMS (the "Non-
Transferred Members"), for each Non-Transferred Member, the Fixed Fee shall be
reduced by an amount equal to the 1999 Per Subscriber Per Month ("PSPM") rate
(listed below) applicable to the Participating Account for that Non-Transferred
Member multiplied by the number of full and partial calendar months that the
transition of that Participating Account has been delayed beyond the date for
that transition set forth in the implementation plan referenced in Section 2.8
of the Administrative Services Agreement providing NMS causes the delay. The
foregoing adjustment shall be made no later than January 31, 2000 and shall be
paid by credit or offset against other amounts due to NMS under the
Administrative Services Agreement.

1999 PSPM Fee Schedule for Adjustments

Participating Account Size PSPM Fee

0-499 Members *** PSPM
500-999 Members *** PSPM
1000-1499 Members *** PSPM
1500-1999 Members *** PSPM
2000-2499 Members *** PSPM
2500-4999 Members *** PSPM
greater than 5000 Members *** PSPM

The Participating Account Size for purposes of determining the above referenced
1999 PSPM Fee Schedule Adjustments shall be based on the number of Members
enrolled in the Participating Account as of December 31, 1999.

The Fixed Fee shall be increased as follows:

In the event that NMS is required to transfer more than *** Participating
Accounts who enroll in the Program after the Effective Date of the Agreement and
prior to January 1, 2000, NMS shall receive an additional PSPM fee in accordance
with the 1999 PSPM Fee Schedule Adjustments for each such new Participating
Account in excess of ***. There shall be an additional electronic discount
of *** PSPM applied to the adjustment. This electronic discount applies to
Participating Accounts with *** or more enrolled subscribers and those
Participating Accounts with less than *** enrolled subscribers if such
Participating Accounts use a standard industry import.

Fees shall be as set forth below for calendar years after 1999:

Year Core Service Pricing
PSPM

2000 Core PSPM - ***
Electronic Discount - ***
Self Bill Surcharge- ***

2001 Core PSPM - ***
Electronic Discount - ***
Self Bill Surcharge - ***

2002 Core PSPM - ***
Electronic Discount - ***
Self Bill Surcharge- ***

Part 2 - Non-Core Services
- --------------------------

. Daily Exports - Send enrollment exports to Participating Plans on a daily
basis rather than semi-weekly basis. Price = *** PSPM

. Student status letter generation - Generate a standard letter prior to the
members maximum age and run a report for Participating Accounts indicating
which members have been terminated due to no response. Price = *** PSPM

Part 3 - Other Costs/Fees
- -------------------------
. THE ASSOCIATION shall reimburse travel expenses incurred by NMS in accordance
with THE ASSOCIATION travel policy guidelines and as approved in advance by
THE ASSOCIATION.
. THE ASSOCIATION shall reimburse NMS for the toll-free customer service
telephone line costs including, but not limited to set-up, ongoing
maintenance, and cost of calls.
. THE ASSOCIATION shall reimburse NMS for 5500 and 1099 reporting at *** per
Participating Account and per agent per year for Schedule A production
. THE ASSOCIATION shall pay NMS for (i) initial import programming costs for
Participating Accounts with less than *** enrolled subscribers; (ii)
requested significant modifications to existing imports; and (iii) initial
import programming costs for Participating Accounts with less than ***
enrolled subscribers that convert from paper to electronic submission after
the Effective Date of this Agreement. Such payments shall be made at a rate
of *** per hour. NMS shall be responsible for all costs associated with
initial import programming for Participating Accounts currently sending
electronic imports under the HMO Blue USA program prior to the Effective Date
of this Agreement.
. THE ASSOCIATION assumes all Bank Account fees.
. THE ASSOCIATION shall pay NMS for export programming costs at a rate of ***
per hour for new export formats or significant alterations to the format
standards identified in Schedule III.
. THE ASSOCIATION shall pay NMS training fees at a rate of *** per hour. The
term training does not include that time during which NMS is marketing NMS's
capabilities. Such training must be pre-approved as training by THE
ASSOCIATION.
. THE ASSOCIATION shall pay for the Environmental Analysis described in Section
2.1.a.(ii) and (iii) of the Agreement at a rate of *** per hour.
. THE ASSOCIATION shall reimburse NMS for costs associated with overnight or
expedited packages.

Schedule II
OSC Accounts

***[five pages redacted]

Schedule III(A)

Program
Electronic Connectivity for Enrollment

Purpose

The purpose of this document is to describe the current process for
communicating enrollment and eligibility information, in an electronic format,
between a Participating Account, NMI and the Participating Plans. Once received
from the Participating Account, NMI uses the enrollment data file to load a
central membership database in order to perform centralized premium billing,
collection and disbursement functions on behalf of the network products. Once
the data file is received at the Participating Plans, the enrollment data is
loaded into their membership systems in order to enroll the Participating
Account's subscribers, issue ID cards and provide ongoing health care coverage.

Program Electronic Connectivity For Enrollment Diagram

The overall approach to electronic connectivity for enrollment supporting both
BluesCONNECT and HMO Blue USA is shown in the diagram contained as Attachment
#1. The diagram shows the electronic data imports coming from the Participating
Accounts to NMI and the electronic data exports going from NMI to Participating
Plans. With both imports and exports, the diagram also shows the data format
options, transmission options, file options and frequency supported by the
Programs.

Electronic Enrollment Imports

In the typical Program arrangement involving electronic imports of enrollment
information, the Participating Account is responsible for producing a single
electronic data file and sending the file to NMI. In some cases the electronic
file is created by the Participating Account from their payroll or human
resource/benefits administration system. In other cases, the electronic file is
created by a third party benefit administrator and sent to multiple network
administrators, including NMI.

A key feature of BluesCONNECT/HMO Blue USA approach to electronic connectivity
is that the Participating Account can submit the data in any reasonable client-
defined data format. The data format, however, must provide all of the necessary
data elements required to establish and maintain the enrollment data at NMI and
the Participating Plans.

The data file can be sent to NMI in a variety of ways, either via electronic
transmission or via US Mail. At the Participating Accounts' option, NMI can
receive electronic data via internet FTP, modem to modem or even via internet
<PAGE>

BluesCONNECT and HMO Blue USA
Electronic Connectivity for Enrollment
Page 2

e-mail. Electronic files can also be sent through the US Mail on media such as
diskette, reel tape and tape cartridge. And, finally, the enrollment data can be
sent to NMI on paper enrollment application forms.

The Programs will support receiving electronic enrollment data in either a full
file or a change file format. A full file is a file which contains a record for
each member enrolled from the Participating Account, usually with a transaction
code identifying adds, changes and terminations included in the appropriate
records. In those cases where the transaction codes are not present, the
challenge in receiving and processing a full file is determining the
transactions that need to be processed against the membership file. In this
case, the transactions are identified through a "file compare" process which
identifies the changes since the last update. On the other hand, a change file
usually only includes one record for each add, change or termination
transactions transmitted on the file.

The Programs recommend that each Participating Account provide enrollment
updates at least once each week in order to enable NMI to maintain accurate, up-
to-date files. In addition, weekly files enables NMI to send enrollment data
to the Participating Plans and enables the Participating Plans to process the
transactions and issue ID cards on a timely basis. The Programs will, however,
accommodate other frequencies requested by the Participating Account.

Electronic Enrollment Exports

Once enrollment data is received and processed by NMI, NMI is responsible for
sending the enrollment data on to Participating Plans for processing on
Participating Plan membership systems. The Programs currently support four file
format options for sending electronic enrollment data to the Participating
Plans: ASC X12 834 v4010, ASC X12 834 v3040, ASC X12 834 v3051, and the ITS
Membership Exchange Format (MEF). ASC X12 834 v4010 is the insurance industry
standard for transmitting enrollment data between trading partners and is fully
Y2K and HIPAA compliant. This standard will be replacing ASC X12 834 v3040 and
ASC X12 V3051 during 1999. The ITS MEF is a proprietary Blue Cross and Blue
Shield Association data exchange format developed for use with the BlueCard
Point-of-Service (POS) initiative. Each Participating Plan must elect to
receive all of their enrollment data from NMI in one of these two supported
formats.

NMI will send electronic data to Participating Plans via either BluesNet or the
BluesNet Advantis networks with the choice at the Participating Plan's option.
Data transmitted over BluesNet to Participating Plans uses a software product
called Network Data Mover (NDM) (also known as Direct:Connect), sold and
supported by Sterling Software, to transmit the data. The Participating Plans
electing to receive the data via the BluesNet Advantis network usually use the
<PAGE>

BluesCONNECT and HMO Blue USA
Electronic Connectivity for Enrollment
Page 3

EDI-Kit, a software product developed by TSI International, to receive and
download the data.

The Participating Plans that receive data via BluesNet NDM usually "map" the
data directly into legacy application systems that automatically process the
enrollment transactions against the Participating Plan membership system. Once
the enrollment data is received, the Participating Plan is responsible for
sending ASC X12 997 functional acknowledgements back to NMI.

The Participating Plans that receive enrollment data via BluesNet Advantis
usually use the EDI-Kit to download and process the file. The EDI-Kit enables
the Participating Plan to print "smart" paper (electronically printed)
enrollment forms that are then data entered and processed against the membership
system. The EDI-Kit automatically creates and transmits the ASC X12 997
functional acknowledgements to NMI to confirm receipt of the enrollment file.
In some cases, the Participating Plan processes the EDI-Kit transaction files
directly into legacy application systems that apply the transactions to the
membership system.

The Program enrollment data files sent to Participating Plans on a routine,
ongoing basis are change files, which contain one record for each add, change or
termination transactions transmitted on the file. Periodically, but not more
than on a quarterly basis, NMI may elect to send a full file to Participating
Plans to enable the Participating Plans to conduct a full-file audit of their
membership system.

NMI is expected to transmit or send enrollment data to Participating Plans
within 2 business days of the receipt of the data from the Participating
Account.

Participating Plans Without Electronic Connectivity

The process described above is used for Participating Accounts which send
electronic enrollment data to NMI and for NMI to send to Participating Plans
which are currently capable of receiving electronic enrollment data. There are
currently *** BluesCONNECT products capable of receiving electronic data.

For those Participating Plans that have not yet established and tested
electronic connectivity, NMI will send "smart" paper enrollment reports to the
Participating Plan within 2 business days of receiving the electronic enrollment
file.

Over the next 2 years, it is expected that the vast majority of HMO Blue USA
products, numbering approximately ***, will establish electronic connectivity
for enrollment with NMI in one of the two primary methods described above.

[CHART]

*** Pursant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and files seperately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

Schedule IV

Performance Standards for NMS
05/06/99

Penalty Assessment Methodology

As provided in Section 2.12.1 of the Agreement, if NMS fails to achieve the
Target Performance Threshold for a standard during a given quarter, NMS will pay
a penalty equal in amount to a percentage of the corresponding quarter's billed
fees, as indicated in the Penalty Percentage column.

As provided in Section 2.12.2 of the Agreement, if NMS fails to achieve the
Minimum Performance Threshold for a standard during a given month, NMS will be
assessed penalty points equal to the number set forth in the Penalty Points
column. If for any given month, the total penalty points assessed is equal to or
greater than 20, NMS will pay a penalty equal in amount to that corresponding
month's billed fees. In addition, in accordance with Section 6.4 of the
Agreement, THE ASSOCIATION may terminate the Agreement immediately upon written
notice to NMS if NMS fails to meet the Minimum Performance Threshold for any two
consecutive calendar months or for any three months of any calendar year.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
STANDARD LANGUAGE STANDARD TARGET PENALTY MINIMUM
PERFORMANCE PERCENTAGE PERFORMANCE
THRESHOLD THRESHOLD
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Enrollment (defined as any membership
change)
- --------------------------------------------------------------------------------------------------------------------------------
1. Enrollment Distribution Time: The *** *** *** ***
time it takes to send enrollments
received from national accounts, both *** *** ***
paper and electronic, to HMOs.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
2. Enrollment data entry: Time it takes *** *** *** ***
to load enrollment information into
the enrollment/billing system. *** *** ***
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------

STANDARD LANGUAGE PENALTY NETWORK MANAGEMENT COMMENTS/Proposed COMMENTS
POINTS Measurements 4/6/99
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enrollment (defined as any membership
change)
- ---------------------------------------------------------------------------------------------------------------------------------
1. Enrollment Distribution Time: The *** ***
time it takes to send enrollments
received from national accounts, both *** ***
paper and electronic, to HMOs.

- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
2. Enrollment data entry: Time it takes *** ***
to load enrollment information into
the enrollment/billing system. *** ***

<PAGE>

Schedule IV
Performance Standards for NMS
05/06/99

<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
3. Paper Enrollment Accuracy: The accuracy of *** *** *** *** ***
paper enrollment information entered into the
billing system.
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
4. Electronic Enrollment Accuracy: Accuracy of *** *** *** *** ***
electronic enrollment information transmitted to
Plans.
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5. Enrollment and Eligibility Reporting: The time *** *** *** *** ***
it takes to send the enrollment and eligibility
tracking reports to national accounts and Control
Plans.
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Billing
- ---------------------------------------------------------------------------------------------------------------------------------
6. Premium disbursement time: The time it takes *** *** *** ***
to disburse premiums received from national
accounts to HMOs. *** *** *** ***
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
3. Paper Enrollment Accuracy: The accuracy of ***
paper enrollment information entered into the
billing system.
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
4. Electronic Enrollment Accuracy: Accuracy of ***
electronic enrollment information transmitted to
Plans.
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5. Enrollment and Eligibility Reporting: The time ***
it takes to send the enrollment and eligibility
tracking reports to national accounts and Control
Plans.
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Billing
- ---------------------------------------------------------------------------------------------------------------------------------
6. Premium disbursement time: The time it takes ***
to disburse premiums received from national
accounts to HMOs.
- ---------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ----------------------------------------------------------------------------------
<S> <C>
4. Electronic Enrollment Accuracy: Accuracy of ***
electronic enrollment information transmitted to
Plans.
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
5. Enrollment and Eligibility Reporting: The time ***
it takes to send the enrollment and eligibility
tracking reports to national accounts and Control
Plans.
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Billing
- ----------------------------------------------------------------------------------
6. Premium disbursement time: The time it takes ***
to disburse premiums received from national
accounts to HMOs.
- ----------------------------------------------------------------------------------
</TABLE>

SCHEDULE IV

<TABLE>
<CAPTION>
Performance Standards for NMS
05/06/99

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

- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7. Bill Production Time: The time it takes to *** *** *** *** ***
produce and send consolidated bills.

- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
8. Billing Information Accuracy: The *** *** *** ***
accuracy of rates, fee structure and
contractual eligibility requirements.

- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
9. Outstanding premium: The amount of *** *** *** *** ***
time total monthly premium is outstanding.

- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
10. Reconciliation Report Processing Time: The *** *** *** *** ***
time it takes to process reconciliation
reports received from HMOs.

<CAPTION>
- ------------------------------------------------------------------------------------------------------
***

- ------------------------------------------------------------------------------------------------------
<S> <C>
***

- ------------------------------------------------------------------------------------------------------
</TABLE>

***Pursuant to Rule 406 of the Securities Act 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
<PAGE>

Schedule IV

<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Overall Performance - Billing and Enrollment
- -------------------------------------------------------------------------------------------------------------------------------
11. Plan Satisfaction with billing and *** *** *** ***
enrollment services: Results from NMCS
annual Plan Satisfaction Surveys.
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
12. Account Satisfaction with billing and *** *** *** ***
enrollment: Results from NMCS annual Account
Satisfaction Surveys.
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Client Services
- -------------------------------------------------------------------------------------------------------------------------------
13. Client Issue Turnaround Time: The time it *** *** *** ***
takes to resolve client issues. *** *** *** ***
------- *** *** *** ***
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
14. Call Response Time: Time it takes to *** *** *** ***
respond to incoming calls.
- -------------------------------------------------------------------------------------------------------------------------------
15. Call Abandon Rate: Percentage of total *** *** *** ***
calls abandoned.
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
***
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Overall Performance - Billing and Enrollment
- ----------------------------------------------------------------------------------------------------------------------------------
11. Plan Satisfaction with billing and *** ***
enrollment services: Results from NMCS
annual Plan Satisfaction Surveys.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
12. Account Satisfaction with billing and *** ***
enrollment: Results from NMCS annual
Account Satisfaction Surveys.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Client Services
- ----------------------------------------------------------------------------------------------------------------------------------
13. Client Issue Turnaround Time: The time it *** ***
takes to resolve client issues. *** ***
*** ***
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
14. Call Response Time: Time it takes to *** ***
respond to incoming calls.
- -----------------------------------------------------------------------------------------------------------------------------------
15. Call Abandon Rate: Percentage of total *** ***
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Overall Performance - Billing and Enrollment
- ------------------------------------------------------------------------------------------
11. Plan Satisfaction with billing and ***
enrollment services: Results from NMCS
annual Plan Satisfaction Surveys.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
12. Account Satisfaction with billing and ***
enrollment: Results from NMCS annual Account
Satisfaction Surveys.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Client Services
- ------------------------------------------------------------------------------------------
13. Client Issue Turnaround Time: The time it ***
takes to resolve client issues.
- ------------------------------------------------------------------------------------------
</TABLE>

Schedule IV

Performance Standards for NMS
05/06/99

<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
16. Call blockage rate: Percentage of *** *** *** ***
total calls that are blocked.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Overall Performance - Customer Service
- ----------------------------------------------------------------------------------------------------------------------------------
17. Plan Satisfaction with Customer *** *** *** ***
Service: Results from NMCS annual
Plan Satisfaction Surveys.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
18. Account Satisfaction with Customer *** *** *** ***
Service: Results from NMCS annual
Plan Satisfaction Surveys.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
16. Call blockage rate: Percentage of *** ***
total calls that are blocked.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Overall Performance - Customer Service
- ----------------------------------------------------------------------------------------------------------------------------------
17. Plan Satisfaction with Customer *** *** ***
Service: Results from NMCS annual
Plan Satisfaction Surveys.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
18. Account Satisfaction with Customer *** *** ***
Service: Results from NMCS annual
Plan Satisfaction Surveys.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

/1/
__________________________

SCHEDULE V

HMO Blue USA

Premium Delinquency Procedure

***[five pages redacted]

*** Pursuant to Rule 406 of the securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

Schedule VI - A: HBU Conversion Staffing Plan

***[ten pages redacted]

*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibti 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

Schedule VII BluesCONNECT and HMO Blue USA - Standard Reports and Other
Information Requirements
Page 1
Financial Reports

<TABLE>
<CAPTION>
Premium Collection/Disbursement Reports
- ------------------------------------------------------------------------------------------------------------------------------------
Title Description Purpose Frequency Priority
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1) Outstanding Accounts *** *** *** ***
Receivable Via Internet
- ------------------------------------------------------------------------------------------------------------------------------------
2) Premium Receipts and *** *** *** ***
Disbursements Summary
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Enrollment/Eligibility Disbursement Reports
- ------------------------------------------------------------------------------------------------------------------------------------
Title Description Purpose Frequency Priority
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1) Electronic Enrollment *** *** *** ***
Log Via Internet
- ------------------------------------------------------------------------------------------------------------------------------------
2) Electronic Connectivity *** *** *** ***
Log Via Internet
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

Schedule VII BluesCONNECT and HMO Blue USA - Standard Reports and Other
Information Requirements
Page 2
Other

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Title Description Purpose Frequency Priority
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1) OSC Monthly Volume Report *** *** *** ***
- ------------------------------------------------------------------------------------------------------------------------------------
2) OSC Monthly APS Performance *** *** *** ***
Report
- ------------------------------------------------------------------------------------------------------------------------------------
3) BluesCONNECT Monthly Volume *** *** *** ***
Report
- ------------------------------------------------------------------------------------------------------------------------------------
4) BluesCONNECT Monthly APS *** *** *** ***
Performance Report
- ------------------------------------------------------------------------------------------------------------------------------------
5) BluesCONNECT Enrollment Report *** *** *** ***
- ------------------------------------------------------------------------------------------------------------------------------------
6) HMO Blue USA Enrollment Report *** *** *** ***
- ------------------------------------------------------------------------------------------------------------------------------------
7) BluesCONNECT Enrollment Report *** *** *** ***
by Tier
- ------------------------------------------------------------------------------------------------------------------------------------
8) HMO Blue USA Enrollment Report *** *** *** ***
By Tier
- ------------------------------------------------------------------------------------------------------------------------------------
9) BluesCONNECT Enrollment Report; *** *** *** ***
Showing Revised Enrollment Counts
- ------------------------------------------------------------------------------------------------------------------------------------
10) HMO Blue USA Enrollment Report; *** *** *** ***
Showing Revised Enrollment Counts
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* All monthly reports by the tenth business day of each month.
** Any references to specific software applications may be changed upon mutual
agreement of the parties.
*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

Schedule IX

This file contains the record layout for the data file to upload to the
PeopleSoft Disbursement system to generate payments to HMO Blue USA Operation
Service Center participating HMO's.

Record Layout for PeopleSoft Upload

***[three pages redacted]

SCHEDULE X

Addendum to Subcontract Under the
Health Insurance for the Aged and Disabled Act
(42 U.S.C., Chapter 7, Supp., as Amended)

The clauses of this Addendum are a part of and are applicable, as indicated, to
the subcontract by and between ______________________________________
________________________, hereinafter referred to as the "Contractor" and
____________________________________________________________________________,
hereinafter referred to as the "Subcontractor." The term "Secretary" as used
herein, means the Secretary of Health and Human Services or his delegate unless
specified otherwise.

TABLE OF CONTENTS

Clause Title Page
No. No.
- ------ ----
Section I

I Facilities Nondiscrimination Clause 03
II Disclosure of Information 04
III Automatic Termination of Subcontract Clause 04
IV Liquidated Damages in Subcontracts 04
V Privacy Act 05
VI Cost or Pricing Data 05

Section II

VII Subcontracting of Responsibilities 06
VIII Inspection 06

IX Rights in Data 06

X Subcontractor as Common Subcontractor 08
XI Modification of Subcontract 08

XII Regulations and General Instructions 09
XIII Prohibition Against Billing Services 09

Section III

Federal Acquisition Regulation Clauses (FAR)

52.203-7 Anti-Kickback Procedures 10
52.203-10 Price or Fee Adjustment for Illegal or Improper Activity 10
52.203-11 Certification and Disclosure Regarding Payments 10
to Influence Certain Federal Transactions
52.203-12 Limitation on Payments to Influence Certain 10
Federal Transactions
52.215-2 Audit and Records - Negotiation 10

October 1996
<PAGE>

Page 2 of 11

52.219-8 Utilization of Small, Small Disadvantaged and Women-
Owned Business Concerns 10
52.219-9 Small, Small Disadvantaged and Women-Owned 10
Business

Subcontracting Plan 10
52.219-16 Liquidated Damages - Subcontracting Plan 11
52.222-21 Certification of Nonsegregated Facilities 11
52.222-26 Equal Opportunity 11
52.222-35 Affirmative Action for Special Disabled and 11
Vietnam Era Veterans
52.222-36 Affirmative Action for Handicapped Workers 11
52.222-37 Employment Reports on Special Disabled Veterans 11
and Veterans of the Vietnam Era
52.223-6 Drug-Free Workplace 11

(Note - If there are any questions by the Subcontractor as to the applicability
of the above clauses to this subcontract or whether the Subcontractor will be
performing under this subcontract one of the Medicare "functions" or other
responsibilities requiring prior approval of the Secretary as provided in the
Medicare agreement between the Contractor and the Secretary, clarification
should be requested from the Contractor in writing prior to execution hereof.)
<PAGE>

Page 3 of 11

Section I

The clauses in Section I are applicable to this subcontract (and to lower tier
subcontracts hereunder) unless excluded by the virtue of the lead-in language or
other provisions contained in the body of the individual clauses.

Clause I
FACILITIES NONDISCRIMINATION CLAUSE

The following provisions are applicable if this subcontract is for the lease of
real estate:

"As used in this clause, the term `Facility' means stores, shops, restaurants,
cafeterias, restrooms, and any other facility of a public nature in the building
in which the space covered by this lease is located.

"The lessor agrees that he will not discriminate by segregation or otherwise
against any person or persons because of race, color, religion, sex, or national
origin in furnishing or by refusing to furnish, to such person or persons, the
use of any facility, including any or all services, privileges, accommodations,
and activities provided thereby. Nothing herein shall require the furnishing to
the general public of the use of any facility customarily furnished by the
lessor solely to tenants, their employees, customers, patients, clients, guests
and invitees.

"It is agreed that the lessor's noncompliance with the provisions of this clause
shall constitute a material breach of this lease. In the event of such
noncompliance, the lessee may take appropriate action to enforce compliance, may
terminate this lease, or may pursue such other remedies as may be provided by
law. In the event of termination, the lessor shall be liable for all excess
costs of the lessee in acquiring substitute space. Substitute space shall be
obtained in as close proximity to the lessor's building as is feasible and
moving costs will be limited to the actual expenses thereof as incurred.

"The lessor agrees to include, or to require the inclusion of the foregoing
provisions of this clause (with the terms "lessor" and "lessee" appropriately
modified) in every agreement or concession pursuant to which any person other
than the lessor operates or has the right to operate any facility. Nothing
herein contained, however, shall be deemed to require the lessor to include or
require the inclusion of the foregoing provisions of this clause in any existing
agreement or concession arrangement or one in which the contracting party other
than the lessor has the unilateral right to renew or extend the agreement or
arrangement, until the expiration of the existing agreement or arrangement and
the unilateral right to renew or extend. The lessor also agrees that it will
take any and all lawful actions as expeditiously as possible with respect to any
such agreement as the contracting agency may direct to enforce this clause,
including but not limited to termination of the agreement or concessions and
institution of court action.
<PAGE>

Page 4 of 11

Clause II
DISCLOSURE OF INFORMATION

This clause is applicable to this subcontract and to any lower tier subcontract
hereunder if it provides for the performance of any of the functions required
for the administration of the Medicare agreement between the Contractor and the
Secretary, and to any other subcontract where the Subcontractor, its agents,
officers, or employees might reasonably be expected to have access to
information within the purview of section 1106 of the Social Security Act, as
amended, and regulations prescribed pursuant thereto.

"The Subcontractor agrees to establish and maintain procedures and controls so
that no information contained in its records or obtained from the Contractor
and/or the Secretary or from others in carrying out terms of its subcontract
shall be used by or disclosed by it, its agents, officers, or employees except
as provided in section 1106 of the Social Security Act, as amended, and
Regulations prescribed thereunder."

Clause III
AUTOMATIC TERMINATION OF SUBCONTRACT CLAUSE

This clause is applicable to this subcontract if its term exceeds the term of
the agreement between the Secretary and the Subcontractor, except where the
Secretary agrees to its omission or if this subcontract is solely for the
purchase of supplies and equipment.

Notwithstanding the following, if the Contractor wishes to continue the
subcontract relative to its own business after the contract between the
Secretary and the contractor has been terminated or nonrenewed, it may do so
provided it assures the Secretary in writing that the Secretary's obligations
will terminate at the time the Medicare contract terminates or is nonrenewed
subject to the termination cost provisions provided for in the contract.

The clause is as follows:

"In the event the Medicare contract between the Secretary and the Contractor is
terminated, the subcontract between the Contractor and the Subcontractor will be
terminated unless the Secretary and the Contractor agree to the contrary. Such
termination shall be accomplished by delivery of written notice to the
Subcontractor of the date upon which said termination will become effective."
<PAGE>

Page 5 of 11

Clause IV
LIQUIDATED DAMAGES IN SUBCONTRACTS

The following provisions are applicable to this subcontract if it contains
liquidated damages provisions which relate solely to Medicare:

"The Secretary, after consultation with the Contractor, shall have the right to
determine that the specified levels of performance have not been attained by the
Subcontractor. In such event, the Secretary may direct the Contractor to notify
the Subcontractor of the Secretary's determination that liquidated damages apply
and to set-off the liquidated damages against the Subcontractor."

Clause V
PRIVACY ACT

The Privacy Act of 1974, Public Law 93-579, and the Regulations and General
instructions issued by the Secretary pursuant thereto, are applicable to this
subcontract, and to all subcontracts hereunder to the extent that the design,
development, operation, or maintenance of a system of records as defined in the
Privacy Act is involved.

Clause VI
COST OR PRICING DATA

This clause is applicable to this subcontract and to any modification thereof,
(1) where the estimated cost to Medicare exceeds or will exceed ***, and (2) the
estimated cost was not based on adequate price competition, established catalog
or market prices of commercial items sold in substantial quantities to the
general public, or prices set by law or regulation.

"The Subcontractor is required to submit written cost or pricing data and
certify that the data submitted was accurate, complete and current at the time
of entry into this subcontract or modification in accordance with Subpart 15.804
of the Federal Acquisition Regulation and to maintain full and complete
accounting records to support cost or pricing data submitted. The Subcontractor
must provide for full access by the Contractor, the Secretary, and the
Comptroller General of the United States for the purpose of examining the
accuracy of cost or pricing data submitted as aforesaid, and in accordance with
Subpart 15.804 of the Federal Acquisition Regulation, agrees to a reduction in
price if the cost or pricing data submitted is found to be defective."

***Pursuant to Rule 406 of the Securites Act of 1933, as amended, confidential
portions of Exhibit 10(_) have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
<PAGE>

Page 6 of 11

Section II

In addition to the clauses n Section I, the clauses contained in Section II are
also applicable to this subcontract regardless of amount if the subcontract (a)
provides for the performance of any of the functions required for the
administration of the Medicare agreement between the Contractor and the
Secretary, or (b) involves subcontracting for automated data processing systems
or facilities management services which required the Secretary's prior approval.

Clause VII
SUBCONTRACTING OF RESPONSIBILITIES

The Subcontractor agrees that it shall not enter into any lower tier subcontract
with any other party to carry out the primary responsibilities of this
subcontract without the prior written approval of the Secretary. In the event
such approval is given, the Subcontractor further agrees that the substance of
these clauses shall be inserted in each lower tier subcontract.

Clause VIII
INSPECTION

The Secretary shall have the right, at all reasonable times and upon reasonable
notice, to inspect or to otherwise evaluate the work performed or being
performed under this subcontract, and the premises in which it is being
performed. If an inspection or evaluation is made, the Subcontractor shall
provide all reasonable facilities and assistance for the safety and convenience
of the Secretary's representatives in the performance of their duties. All
inspections and evaluations by the Secretary's representatives shall be
performed in such a manner as will not unduly delay the work.

Clause IX
RIGHTS IN DATA

A. The Subcontractor agrees that the Secretary shall at such time and in such
manner as he may prescribe, have access to any data acquired or utilized by it
in the development and processing of claims or in carrying out its other
functions under this subcontract, and further, shall have use of such data
obtained solely from private business of the Subcontractor). The Subcontractor
shall also, at such times and in such manner as the Secretary may prescribe,
furnish to other organizations for use in administering health care or health
care financing programs under the Act, data acquired or utilized by it in the
development and processing of claims or other data (other than discrete data
such as trade secrets, commercial or financial data obtained solely from private
business of the Subcontractor) acquired by it in carrying out its functions
under this subcontract. This does not apply to the proprietary data of
subcontractors which is utilized by the Contractor for program purposes.

<PAGE>

Page 7 of 11

B. As used in this clause, the term "Subject Data" means writings, sound
recordings, pictorial reproductions, drawings, designs, or other graphic
representations, all systems documentation, program logic, operational manuals,
forms, diagrams, workflow charts, equipment descriptions, data files, data
processing or computer programs, all other operational methods and procedures
involved in the performance of functions under the subcontract and works of any
similar nature (whether copyrighted or copyrightable) which are acquired or
utilized by the Subcontractor in carrying out its functions under this
subcontract, for which more than 50 percent of the cost of development has been
paid out of Government funds. The term does not include financial reports, cost
analyses, and similar information incidental to contract administration.

C. Government rights. Subject only to provisions of (D) below, the Government
may use, duplicate or disclose in any manner, and for any purpose whatsoever,
and have or permit others to do so, all Subject Data.

D. License to copyright data. In addition to the Government rights as provided
in (C) above with respect to any Subject Data which may be copyrighted, the
Subcontractor agrees to and does hereby grant to the Government a royalty-free,
nonexclusive, and irrevocable license throughout the world to use, duplicate or
dispose of such data in any manner and for any purpose whatsoever, and to have
or permit others to do so; provided, however, that such licenses shall be only
to the extent that the Subcontractor now has, or prior to completion or final
settlement of this subcontract may require, the right to grant such license
without becoming liable to pay compensation to others solely because such grant.

E. Relation to patents. Nothing contained in this clause shall imply a license
to the Government under any patent or be construed as affecting the scope of any
license or other right otherwise granted to the Government under any patent.

F. Marking and identification. The Subcontractor shall not affix any restrictive
markings upon any Subject Data, and if such markings are affixed, the Government
shall have the right at any time to modify, remove, obliterate, or ignore such
markings.

G. Deferred ordering and delivery of data. The Government shall have the right
to order, at any time during the performance of this subcontract, or within two
years from either acceptance of all items to be delivered under this subcontract
or termination of this subcontract, whichever is later, any Subject Data, or
data generated in performance of the subcontract developed with Government
funds, and the Subcontractor shall promptly prepare and deliver such Subject
Data or data as may be required. When Subject Data is delivered pursuant to this
paragraph G, payment shall be made for converting the Subject Data or data into
the prescribed form, reproducing it or preparing it for delivery. The
Government's right to use data delivered pursuant to this paragraph G shall be
the same as the rights in Subject Data as provided in (C) above. The
Subcontractor shall be relieved of the obligation to furnish Subject Data or
data upon the expiration of two years from the date it accepts such items.
<PAGE>

Page 8 of 11

H. The Subcontractor shall retain such data or Subject Data subject to the time
limit imposed by the Examination of Records clause of this Addendum and the
right to examine such records by the Comptroller General of the United States
and the Secretary (including their duly authorized representatives).

Clause X
SUBCONTRACTOR AS COMMON SUBCONTRACTOR
In the event a systems change, as designated by the Secretary, is required as
the result of an act of Congress, Regulation, or General Instruction, and it
applies to more than one Medicare contractor for which the Subcontractor
("Common Subcontractor") provides similar services, each contractor shall
individually arrange for the Common Subcontractor to implement such change to
its system. If an increase in cost is sought by the Common Subcontractor for the
modification, the Contractor shall pay a reasonable price, based upon certified
cost or pricing data submitted by the Common Subcontractor. As soon as possible
thereafter, the Contractor shall submit the supporting data, along with all
other pertinent documentation, to the Secretary. On a basis to be determined by
the Secretary, a reasonable price shall then be established for the common
systems change as implemented by all affected contractors and such price shall
be divided among those contractors. The cost of any additional modifications
needed to meet the specific requirements of a particular contractor shall be
borne only by that contractor. Should the Secretary determine that the increase
in price for the common change or other modification is not adequately
supported, the Common Subcontractor agrees to refund such amount to the
Contractor. In the event the Common Subcontractor refuses to refund the above
amount, the Secretary may request that the Contractor take action to recover
from the Common Subcontractor that portion of the price which the Secretary
finds to be unsupported. The Secretary shall reimburse the Contractor for all
reasonable costs relating to such action. The Secretary shall from time-to-time
notify the Contractor of the identity of other Medicare contractors with common
subcontracts.

Clause XI
MODIFICATION OF SUBCONTRACT

(A) Neither this subcontract nor any lower tier subcontract under this
subcontract shall be modified or amended, regardless of amount, without
obtaining prior written approval of the Secretary if it provides for the
performance of any of the functions contained in the Medicare agreement between
the Contractor and the Secretary.

(B) If this subcontract does not fall within the purview of paragraph (A) of
this clause, the Secretary's prior approval shall be obtained for any
modification or amendment thereof where the estimated cost of such change or
changes would result in an increase of the costs to Medicare in excess of fifty
percent of the Contractor's threshold amount as provided in its agreement.

(C) Before this subcontract is renewed or any option herein is exercised, the
Secretary's approval shall be obtained, unless the Secretary has previously
stipulated otherwise in writing.
<PAGE>

Page 9 of 11

Clause XII
REGULATIONS AND GENERAL INSTRUCTIONS

The Contractor is obliged under its agreement with the Secretary to comply with
all Regulations and General Instructions as the Secretary may from time-to-time
prescribe for the administration of its agreement. To the extend that such
Regulations and General Instructions affects this subcontract, the Subcontractor
shall also comply with such Regulations and General instructions.

Clause XIII
PROHIBITION AGAINST BILLING SERVICES

The provisions of this clause are applicable to this subcontract if it provides
for facilities management services or any electronic data processing which
contemplates performance of an integral part of the Medicare claims process.
However, such provisions do not apply if this subcontract is for the lease or
purchase of equipment or supplies.

The Subcontractor (or a parent, subsidiary, or affiliated organization) shall
not perform services for providers which involve (1) the preparation or
completion of preliminary or initial cost reports, or (2) the allocation of
expenses to provider cost centers and apportionment of such costs between
Medicare beneficiary patients and other patients of the provider where such data
may be used in the preparation of cost reports subsequently submitted to the
Subcontractor for desk review and audit and which serve as the basis for
determination of Medicare program payments by the Subcontractor. The
Subcontractor (or a parent, subsidiary or affiliated organization) shall not
perform, in any jurisdiction in which it is serving as a Subcontractor to a
Medicare Contractor, billing services for a provider where billings by such
providers are to be subsequently processed by the Subcontractor for Medicare
payments. This does not preclude the subcontractor from offering and operating
an automated billing service (software and equipment) for a provider as long as
operating such a billing service does not require the Subcontractor to describe
or code the health-care services being billed.
<PAGE>

Page 10 of 11

SECTION III

This subcontract incorporates the following clauses by reference with the same
force and effect as if they were given in full text. Upon request, the Secretary
will make their full text available to the Subcontractor.

The clauses are applicable to this subcontract and to lower tier subcontractors
if the cost of the subcontract or lower tier subcontract to Medicare is equal to
or greater than the amount in brackets located to the right of the listed
clause, unless specifically exempted by applicable rules, regulations, or
Executive Orders. The term "Contractor" as used therein shall mean the
"Subcontractor".

FEDERAL ACQUISITION REGULATION
(48 CFR, CHAPTER 1) CLAUSES

52.203-7 Anti-Kickback Procedures ($100,000)
(July 1995)

52.203-10 Price or Fee Adjustment for Illegal or ($100,000)
Improper Activity
(September 1990)

52.203-11 Certification and Disclosure Regarding ($100,000)
Payments to Influence Certain Federal
Transactions
(April 1991)

52.203-12 Limitation on Payments to Influence ($100,000)
Certain Federal Transactions

(January 1990)

52.215-2 Audit and Records - Negotiation ($100,000)
(October 1995)

52.219-8 Utilization of Small, Small ($100,000)
Disadvantaged and Women-Owned
Business Concerns
(October 1995)

52.219-9 Small, Small Disadvantaged and (Subcontracts that
Women-Owned Subcontracting offer
Plan subcontracting
(October 1995) possibilities and
any subcontract
exceeding $500,000,
$1,000,000
for construction
of any public
facility)
<PAGE>

Page 11 of 11

52.219-16 Liquidated Damages - Subcontracting (Subcontracts that
(October 1995) offer
subcontracting
possibilities and
any subcontract
exceeding
$500,000
$1,000,000 for
construction of
any public
facility)

52.222-21 Certification of Nonsegregated ($10,000)
(April 1984)

52.222-26 Equal Opportunity ($10,000)
(April 1984)

52.222-35 Affirmative Action for Special ($10,000)
Disabled and Vietnam Era Veterans

(April 1984)

52.222-36 Affirmative Action for Handicapped ($2,250)
Workers
(April 1984)

52.222-37 Employment Reports on Special Disabled ($10,000)
Veterans and Veterans of the Vietnam
Era
(January 1988)

52.223-6 Drug-Free Workplace (No Minimum)
(July 1990)

<PAGE>

EXHIBIT 10.7

ADMINISTRATIVE SERVICES AGREEMENT ***

THIS ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is entered into as of
January 1, 1996 (the "Effective Date") by and between GE Capital Services
Corporation, with an address of 260 Long Ridge Road, Stamford, CT 06927, ("GECS"
or "Company"), and Network Management Services, Inc., with an address of 5500
Wayzata Boulevard, Suite 1450, Minneapolis, MN 55416-1241 ("NMS").

RECITALS

WHEREAS, GECS desires to retain NMS to provide certain administrative Services
for certain employee benefit plans maintained by GECS; and

WHEREAS, NMS desires to provide such services on the terms and conditions set
forth in this agreement,

NOW THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, and subject to the terms and conditions set forth below, NMS
and GECS hereby agree as follows:

ARTICLE 1. CERTAIN DEFINITIONS
- -------------------------------

As used in the Agreement, the following terms shall have the following meanings:

1. "BEN-NET"(TM) shall mean NMS' proprietary technology services software
program providing services including but not limited to group set-up,
Vendor set-up, enrollment management, enrollment data edits, eligibility
distribution to Vendors, retroactive enrollment adjustments, payments to
Vendors, and other direct individual billing administration.

2. "Company" or "GECS" shall mean GE Capital Services Corporation and those
subsidiary companies which participate in the Plan.

3. "Employee" shall mean an individual employee or retiree of GECS
participating in or who may by eligible to participate in one of more of
GECS's Plans.

4. "Enrollment Form" shall mean the application an Employee completes to
participate in a Vendor sponsored by GECS.

5. "Vendor" shall mean a licensed organization chartered to provide or arrange
for health care or other employee welfare services and shall include but
not be limited to health maintenance organizations, preferred provider
organizations, pharmacy benefits managers, indemnity insurance
organizations, third party administrators, mental health/substance abuse
service organizations, short and long term disability managers, life
insurance organizations, retiree plan administrators, flexible benefit
administrators,

***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.7 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

COBRA/HIPAA (as those terms are hereinafter defined) administrator, and
employee assistance program administrators.

6. "Plan" or "Plans" shall mean any of the employee benefit plans of GECS with
respect to which NMS provides services, as defined in Appendix A to this
Agreement, which is attached hereto and made a part hereof or any amendment
or supplement thereto.

ARTICLE 2. NMS RESPONSIBILITIES
- --------------------------------

1. NMS shall be responsible for ensuring that all services, reports, program
and information are rendered according to the highest industry standards.

2. Wherever possible, and when indicated by size, NMS will interact with GECS
and Vendors on a fully electronic basis for the transmission of
eligibility, enrollment and financial data.

3. NMS shall maintain all appropriate regulatory approval necessary to provide
the services specified in this Agreement. NMS will promptly notify GECS of
the institution of any disciplinary proceeding against it or any of its
principal persons or employees relating to any state or federal regulatory
issue.

4. Vendor Management. To the extent directed by GECS, NMS shall provide
overall management of Company's Vendors relating to matters of enrollment,
eligibility distributions, payment, reconciliation, customer service and
general communications.

5. Enrollment Processing.

a) Processing: NMS shall process completed Enrollment Forms within three
(3) business days of receipt. NMS will contact the GECS business for
clarification of all forms that are not properly completed and NMS
cannot determine the correct information. The GECS business unit will
provide NMS with corrected information within three business days. NMS
win process all corrections within one (1) business day of receipt.

b) Electronic Files: NMS shall process GECS's electronic eligibility
files within two (2) business days of receipt. NMS and Company shall
develop a mutually agreed to process for managing records identified
by the BEN-NET(TM) System's edit processing routines. NMS will provide
GECS or the appropriate business unit with an enrollment edit within
three (3) business days of original receipt. This edit will be
communicated to GECS or the appropriate business unit either via
facsimile or e-mail.

c) Notice to Vendors: NMS shall notify each Vendor servicing GECS of new
enrollments and of the date on which coverage will be effective via
electronic file

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<PAGE>

transfer if possible. If a Vendor is unable to accept an electronic
file or a smaller number of Company's Employees are enrolled, new
enrollment information will be sent via a paper enrollment report. NMS
shall use its best efforts to assure that the Vendors receive
notification of such enrollment as soon as possible. NMS shall provide
notice, in the first weekly transmission of eligibility information
after NMS' receipt of information, to the appropriate Vendor when new
enrollments occur.

6. Changes in Enrollment.

a) Records of Changes: NMS shall receive, administer and record any
changes in enrollment status within two (2) business days of receipt.

b) Notice to Vendors: NMS shall provide notice, in the first weekly
transmission of eligibility information after NMS' receipt of
information, to the appropriate Vendor when enrollment changes occur.
The parties shall mutually agree on increasing the frequency of
eligibility information transmissions.

c) HIPAA/COBRA: Based on the eligibility information supplied by Company,
NMS shall provide to Company's Vendor, ABR CobraServ, Inc. ("ABR"),
data feeds required by ABR to generate (1) notices for new hires
regarding their rights under the Consolidated Omnibus Reconciliation
Act of 1985 ("COBRA"); (2) qualifying event notice letters for
participants as required by COBRA; and (3) certificates of creditable
coverage as required by the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA"). NMS shall comply with the
reasonable requirements of ABR in providing such services. In
addition, NMS shall provide notice to Vendor benefits administrators
of participant COBRA elections in the same manner as other records of
changes required to be provided pursuant to this section.

7. Enrollment Edits. NMS shall apply Company specific and general edits to
incoming enrollment data. Edit protocols and corrections will either be
made by NMS or NMS and Company will jointly determine how corrections
should be made. Enrollment edits NMS will provide shall include but not be
limited to "Enrollment Tape Fall Offs", "Duplicates within Family",
"Missing Birth dates", "Missing SSNs", "Questionable Relationship", "Non-
Qualifying Event People", and "Coverage Tier Discrepancies".

8. Primary Care Physician Management. NMS will either receive primary care
physician selection from Company electronically or receive and load
selections via paper applications completed by employees. In cases where
Vendor procedures allow, NMS will validate primary care physician selection
against a file supplied to NMS by Vendors.

9. Disenrollment. NMS shall provide notice, in the first weekly transmission
of eligibility information after NMS' receipt of information, to the
appropriate Vendor when a member terminates coverage. The parties shall
mutually agree on increasing the frequency of

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<PAGE>

eligibility information transmissions.

10. Electronic Transfer. NMS shall have the capability to accept Company's
payments by automated clearinghouse, and to transmit premium payments to
Vendors by electronic fund transfer.

11. Distribution Reports. NMS shall provide to the Vendors distribution reports
containing summary and detailed enrollment and premium payment information
on a monthly basis. These distribution reports shall contain full
retroactivity data according to Company and Vendor payment rules.

12. (Intentionally omitted.)

13. Customer Service Phone Lines. NMS shall provide a toll free customer
service telephone number for use by GECS benefits staff between 8:00 a.m.
and 6:00 p.m. (Central Time) each business day. The toll free number shall
be staffed with personnel trained to answer eligibility, premium and
service fee payment, invoice and status questions. This customer service
phone line shall not be published of communicated in any way to Company's
Employees who will be directed to contact Company or Vendors as their
primary source of problem resolution. Telephone use reports that detail the
types of calls NMS' customer service unit receives relating to Company,
shall be available to Company on a quarterly basis.

14. Company and Vendor Inquiries. NMS shall promptly respond to all inquiries
from Company and Vendors regarding eligibility, premium, service fees,
invoice and status questions. NMS will promptly refer inquiries not related
to its duties under this Agreement (e.g., coverage issues) to the
appropriate Vendor. Employees will be directed by Company to call their
selected Vendor or Company for service issues whereas NMS is not considered
the first point of contact for Employees.

15. Vendor Inquiries. NMS shall be the primary source of contact for most
Vendor issues with respect to day-to-day administration of the Plan but not
concerning Plan interpretations, appeals or other fiduciary issues and
shall promptly respond to all inquiries from Vendors, whether directly from
the Vendor or Company, regarding the status of enrollees, billing and/or
receipt and disbursement of premium, and reconciliation issues. NMS shall
promptly notify Company of any unresolved concerns or problems identified
by a Vendor.

16. Funds Transfers. NMS shall send to Company via facsimile an invoice that
provides a detailed accounting of the payments to be made to the Vendors
and NMS. Company shall review the invoice and contact NMS to resolve
questions. NMS shall use best efforts to respond to such inquiries within
one (1) business day. Company shall then notify NMS of the amounts to be
withdrawn from the fiduciary account(s) for transmission to the

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<PAGE>

following parties: (a) the Vendors for premiums, ASO fees or claims
payments due, and (b) NMS for administrative fees due. Payments to Vendors
and NMS shall be made to the extent possible via electronic transfer to the
accounts designated by each party. Premiums and other service fees shall be
billed monthly while claims funding requests submitted by Vendors shall be
billed weekly, unless otherwise agreed by the parties.

17. Financial Reporting. NMS shall report to Company, with each invoice,
current and annual cumulative premium, service fee and claims expenditures
according to Company's specific division and group structure reporting
needs as instructed by Company.

18. Materials Fulfillment. NMS shall store, collate and mail to Company
locations enrollment materials relating to the Plan. NMS shall maintain an
adequate supply of such materials to meet anticipated demand and shall
contact the appropriate Vendor or Company to replenish its supply. These
materials shall include but not be limited to medical provider directories,
enrollment forms, summary plan descriptions and other information relating
to the Plan.

19. Performance Reporting. NMS shall report to Company, on a quarterly basis,
its standard information package relating to the performance of Vendors.
This report shall include measures of cost, quality, access and service and
shall compare Vendor performance to industry averages for normal and
exception- performance. Each quarterly report shall contain data pertaining
to the most recent quarter along with year to date data. As a part of the
fourth quarter report, NMS shall also perform a summary of each Vendor's
performance for the entire year. This summary will be used by NMS to
calculate and adjudicate the financial risk arrangements with each Vendor.
Quarterly reports shall be provided to GECS within fifteen (15) days of
receipt of relevant data from Vendors. NMS shall provide to Company an
annual comparison of each Vendor's HEDIS data. This report will be provided
thirty (30) days following receipt of data from Vendors.

20. BEN-NET System. NMS shall utilize the BEN-NET system for performing its
obligations under this Agreement. NMS hereby represents that such system
will be fully capable of performing all systems functions necessary to
fulfill NMS' responsibilities under this Agreement. NMS shall be solely
responsible for the upkeep and maintenance of the BEN-NET system.

21. Enhancements to BEN-NET System. NMS will release system enhancements which
can be used as a standard feature of BEN-NET across clients at no charge.
Company will be fully responsible for the cost, if approved in advance, of
enhancements which are made to accommodate the unique requirements of its
operations and which are generally not to be incorporated into BEN-NET as
standard features to be used by other clients.

22. Specific Services and Vendors. NMS shall provide the services, reports,
programs and

-5-
<PAGE>

information as outlined herein subject to the number and types of Vendors
and other vendors as outlined in Appendix B which is attached hereto and
made a part hereof

23. GECS Service Team. The parties shall agree on the staffing level and
credentials of personnel providing or coordinating NMS's services pursuant
to this Agreement (the "GECS Service Team"). GECS shall have the right to
interview and approve all members of the GECS Service Team. NMS will
provide GECS access to 7 day, 24-hour voice mail systems, which shall
include direct dial telephone numbers for GECS Service Team members. The
GECS service team shall include, but not be limited to, an executive lead,
account manager, business analyst, and data integrator.

24. Representations and Warranties of NMS. NMS warrants and represents that:

a) it has and will continue to conduct its activities in accordance and
compliance with all applicable laws, regulations, ordinances,
Executive Orders, codes, standards, permits and liens;

b) to the best of its knowledge, all information it has submitted
heretofore and contemporaneously is true and accurate in every
material respect;

c) it has requisite personnel, competence, skill and physical resources
necessary to perform the services herein set forth. NMS further
warrants that services performed by or delivered through NMS shall be
in accordance with the highest generally accepted standards of the
profession at the time services are performed;

d) it will comply with the stated standards, policies and practices of
GECS, including but not limited to GECS's standards, policies and
practices relating to integrity, and to require the same stringent
standards, policies and practices for its employees or other workers
in regard to its services hereunder;

e) it will require each member of the GECS service team to execute the
acknowledgment form referenced on Appendix C, attached hereto and made
a part hereof, acknowledging such person's agreement to comply with
certain policies of GECS designated therein. NMS shall solicit the
execution of such acknowledgment by each such person, and NMS shall
not permit any member of the GECS service team that does not execute
such acknowledgment to perform any services hereunder. NMS shall
furnish GECS with a copy of such acknowledgment that has been executed
by each member of the GECS service team prior to the start of such
performance by such person; and

f) it shall promptly provide any information or materials relating to
services provided hereunder to GECS at its request.

ARTICLE 3. COMPANY RESPONSIBILITIES
- ------------------------------------

-6-
<PAGE>

1. Company shall supply to NMS, according to a mutually agreed to schedule,
regular electronic files or paper reports relating to Employee's selection
of Vendors. If Company does not transmit data in a timely fashion or sends
incomplete or inaccurate data, Company shall recognize that NMS may not be
able to administer its services in complete conformity to the standards and
content contained in this Agreement.

2. Company shall respond to inquiries, including enrollment edits referenced
in section 5b of Article 2, from NMS, relating to administering the
services contained in this Agreement, in a manner sufficient to allow NMS
to fulfill its obligations herein.

3. Company shall reasonably communicate to Employees instructions for
completing enrollment information and otherwise communicating with NMS.
Company shall consider NMS requests to improve Company's communication and
general human resource policies relating to administrative services
provided by NMS.

4. Company shall execute all requests for fund transfers from NMS to Vendors
and NMS by the end of the following business day unless, in Company's
opinion, the request is inaccurate, incomplete or otherwise does not meet
reasonable standards for completeness and documentation.

5. Company, not NMS, shall be responsible for any late payment or
reinstatement fees levied by Vendors relating to improper or late payment
of premiums, service fees of claims funding requests if such improper or
late payments are not the fault or error of NMS. If such improper or late
payments are due to the fault or error of NMS, NMS shall be responsible for
such fees.

6. Company shall reimburse NMS according to Appendix D of this Agreement and
also subject to the following:

a) Fees for routine administrative services, including but not limited to
Employees Enrollment, distribution of enrollment data to Vendors,
payment of fees and reconciliation of payment to Vendors, Customer
Service and general program management shall be immediately and fully
payable to NMS on a monthly basis at the time GECS reimburses Vendors
(unless alternative schedule(s) are mutual agreed upon by the
applicable parties).

b) NMS will be responsible for providing services to GECS in relation to
only those Vendors specifically listed in Appendix D. Services and
fees relating to Vendors not listed in Appendix D must be jointly
agreed to in writing by both parties.

c) Fees services and expenses not reimbursed to NMS on a regular monthly
basis, including but not limited to special projects, are due to NMS
forty five (45) days after the invoice date.

-7-
<PAGE>

d) GECS shall reimburse NMS for all approved and reasonable travel
related expenses including but not limited to airfare, ground
transportation, and hotel and meal expenses. Expense reimbursements
are due to NMS forty five (45) days after the invoice date.

e) All bank charges imposed in connection with the establishment and
maintenance of banking accounts shall be paid by GECS

f) Any costs for printing, mailing and overnight delivery charges
relating to the distribution of information to Company, Employees or
Vendors are the sole responsibility of Company unless otherwise
described in Appendix D.

ARTICLE 4. INDEMNIFICATION, INSURANCE AND FIDUCIARY STATUS
- -----------------------------------------------------------

1. Indemnity. Each party (the "Indemnifying Party") shall indemnify and hold
harmless the other party (the "Indemnified Party") from and against any
costs, claims, damages, liabilities, or losses (including costs and
expenses and attorney fees incurred in connection therewith) ("Claims")
arising from injuries, including death, or damage to property resulting
from the negligence or willful misconduct of the indemnifying Party, its
employees, contractors or agents. The Indemnified Party shall notify the
Indemnifying Party promptly of any Claim. The Indemnifying Party may, but
shall not be required to, assume the defenses of any such Claims. The
Indemnified Party shall cooperate with the Indemnifying Party in the
defense of any such claim, and shall not settle or compromise such Claim
without the prior written consent of the Indemnifying Party.

2. Insurance. During the term of this Agreement, NMS shall maintain in force
the following insurance coverage:

a) Workers' Compensation and related insurance as prescribed by the law
of the state(s) in which the work is to be performed

b) General comprehensive liability coverage, with limits of *** per
occurrence and *** in the aggregate

c) Property damage coverage in the amount of *** per occurrence

d) E&O insurance with limits of ***

e) Upon GECS's request, NMS shall provide certificates of insurance
evidencing the aforementioned coverages.

3. Intellectual Property Indemnification. NMS shall indemnify and hold GECS
harmless

-8-
<PAGE>

from any award of costs and damages in any action against GECS
based on a claim that any of the services or materials delivered to GECS in
connection- therewith, including without limitation any computer software,
infringe upon any United States patent right or copyright of any third
party, provided that (i) NMS is promptly notified in writing of any such
suit or claim; and (ii) GECS permits NMS to defend, compromise or settle
any such suit or claim, and gives NMS all available information, reasonable
assistance, and authority necessary to do so. Notwithstanding the
foregoing, NMS shall have no obligation to indemnify GECS with respect to
any claim of infringement pertaining solely to any portion of services or
material prepared in connection therewith modified or prepared by NMS to
conform to specific instructions or directions provided by GECS.

4. Fiduciary Status. GECS and NMS understand and intend that NMS shall not be
a fiduciary within the meaning of the Employee Retirement Income Security
Act of 1974 as amended, or any state law with respect to any Plan. NMS
shall not have any discretion with respect to the management or
administration of any Plan or with respect to determining or changing the
rules or policies pertaining to eligibility or entitlement of any
participant in any Plan to benefits under such Plan. NMS also shall not
have any control or authority with respect to any assets of any Plan,
including the investment or disposition thereof All discretion and control
with respect to the terms, administration or assets of any Plan shall
remain with GECS or with the named fiduciaries under such Plan.

ARTICLE 5. TERM AND TERMINATION
- --------------------------------

1. The term of this Agreement will be two years (2) commencing on the
Effective Date hereof and will thereafter by automatically renewed for
successive terms of one (1) year each.

2. This Agreement may be terminated by either party without cause at any time
after first anniversary of the Effective Date upon one hundred twenty (120)
calendar days advance written notice to the other party.

3. In the event that a party materially breaches in the performance, of any of
its requirements under this Agreement, the other party may, at its sole
discretion, provide notice to the breaching party of its intent to
terminate this Agreement.

4. The breaching party shall have thirty (30) days to cure the default and
avoid termination. If the default is not cured within thirty (30) days of
the notice, the other party may execute its termination notice to be
effective thirty (30) days after the end of the expiration of the default
cure period.

5. For the purposes of this Agreement and without limiting the foregoing
generally, a material breach shall include but not be limited to the
following:

a) Failure by NMS to substantially provide the services outlined herein;

-9-
<PAGE>

b) Failure by Company to reimburse NMS according to the terms of this
Agreement;

c) A party's filing a petition in bankruptcy or for reorganization or for
the adoption of an arrangement under the Bankruptcy Act (or similar
law of the United States or any other jurisdiction, which law relates
to the liquidation or reorganization of companies or the modification
or alteration of the rights of creditors) or an answer or other
pleading admitting or failing to deny the material allegations of such
a petition or seeking, consenting to or acquiescing in the relief
therein provided;

d) A party's making an assignment, or so called trust mortgage or the
like, for the benefit of its creditors or by its making a proposal to
its creditors under any bankruptcy act;

e) A party's consenting to the appointment of a receiver or a trustee (or
other person performing a similar function) for all or a substantial
part of its property;

f) A party's being adjudicated bankrupt;

g) The entry of a court order which has not been vacated, set aside or
stayed within thirty (30) days from the date of entry, either (i)
appointing a receiver or a trustee for all or a substantial part of
its property or (ii) approving a petition filed or application made
against it for, or effecting an arrangement in, bankruptcy or made
against it for, or effecting an arrangement in, bankruptcy or for a
reorganization or other relief pursuant to any bankruptcy act or for
any other judicial modification or alteration of the rights of
creditors;

h) The assumption of custody or sequestration by a court of competent
jurisdiction of all or substantially all of a party's property, which
custody or sequestration has not been suspended or terminated within
thirty (30) days from its inception; and/or

i) A party's insolvency, as defined by law.

6. Obligations Upon Termination. Upon any termination or non-renewal of this
Agreement, either party shall deliver to the other party any and all data
or information (in whatever form or media) that is owned or developed by or
licensed to the other party and that is supplied hereunder. Furthermore,
NMS shall cooperate with GECS in the transfer of NMS' obligations hereunder
to a replacement service provider.

ARTICLE 6. CONFIDENTIALITY AND PROPERTY RIGHTS
- -----------------------------------------------

1. Confidential Information. Confidential Information shall include all
information disclosed by one party (the "Discloser") to the other (the
"Recipient") in writing and marked "Confidential" or disclosed visually or
orally and subsequently confirmed writing to be confidential within 20 days
after the first disclosure. Confidential Information shall

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<PAGE>

not, however, include the following:

a) Information which is now or hereafter comes into the public domain

b) Information learned by the Recipient from third parties

c) Information known to the Recipient or developed by the Recipient
independently of information disclosed by the Discloser or

d) Information required to be disclosed by Recipient pursuant to
requirements of law.

2. Confidential Treatment. The Recipient shall treat the Confidential
Information as confidential, using the same standard of care that it uses
to protect its own proprietary or confidential information (but not less
that a reasonable standard of care), and shall use reasonable measure to
prevent disclosure of the Confidential Information to any third party
without the Recipient's consent. The Recipient shall disclose the
Confidential Information only to those of its employees, agents or
subcontractors who have a reasonable need for access thereto for.

3. Return of Information. All Confidential Information shall remain the
property of the Discloser. Upon the Discloser's request, the Recipient
shall promptly return the Confidential Information, provided, however, that
the Recipient may retain copies solely for archival purposes only.

4. NMS Intellectual Property. Nothing contained in this Agreement shall confer
to GECS any property rights, proprietary interest or licenses in the
software, written materials, techniques, or know how used by NMS and its
BEN-NET System.

5. Employee Data. All of the Employee-specific data and any other materials
pertaining to the GECS's requirements or the Plans and provided to NMS by
GECS pursuant to this Agreement shall at all times remain the property of
GECS. NMS shall return all such data to GECS upon GECS's request.

6. Warranty of Title. NMS warrants that it has, or will have as of the date of
delivery to GECS of each item deliverable hereunder, free and clear title
to, and the right to possess, use, sell, transfer, license, lease, and
assign any and all of such deliverable items.

7. Non-Solicitation. For the term of this Agreement and a period of one (1)
year thereafter, neither party shall, in any way, solicit an employee of
the other party to seek employment without the written consent of the other
party.

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<PAGE>

ARTICLE 7. ARBITRATION OF DISPUTES
- -----------------------------------

Any dispute, controversy or claim that cannot be resolved by the parties arising
out of or relating to this engagement letter or the services covered by this
letter shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"), and judgment
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof The arbitration shall be held in New York, NY, or in such
other location as the parties may mutually agree upon. The arbitration will be
conducted before a panel of three arbitrators, with one arbitrator named by each
party and the third named by the two party-appointed arbitrators, or (if they
should fail to agree on the third) by the AAA. The arbitrators may not award
non-monetary or equitable relief of any sort. They shall have no power to award
punitive damages or any other damages not measured by the prevailing party's
actual damages. All aspects of the arbitration shall be treated as confidential.
Neither the parties nor the arbitrators may disclose the existence, content or
results of the arbitration, except as necessary to comply with legal or
regulatory requirements. Before making any such disclosure, a party shall give
written notice to all other parties and shall afford such parties a reasonable
opportunity to protect their interests.

ARTICLE 8. BOOKS AND RECORDS
- -----------------------------

1. GECS shall have the right, but not the obligation, to audit the books and
records of NMS pertaining to NMS' services rendered hereunder no more than
once every 12 months, upon reasonable notice to NMS. Such right to audit
shall survive the termination of this Agreement for two (2) years. All
audits shall be at GECS's expense.

2. NMS will make available for audit by either GECS or its designee
("Auditor") its files, books, procedures and records (including computer
terminal access to same) pertaining to the services provided by NMS under
this Agreement during the hours of 8 a.m. to 6 p.m. Monday through Friday,
but excluding holidays. NMS shall fully cooperate with such audit and shall
make available for interview with the Auditor those personnel with material
involvement or responsibility with respect to the services provided by NMS
under this Agreement. GECS will give NMS reasonable notice of each audit
prior to commencement of the audit. The audit shall be conducted at NMS'
offices.

3. NMS shall have the opportunity, prior to the release of the audit report,
to review the draft and to include in the report its responses to issues
raised by the report.

ARTICLE 9. NOTICES
- -------------------

1. General. All notices, requests, demands and other communications required
to be given hereunder shall be in writing and shall be deemed to have been
duly given one day after delivery by hand or via a nationally recognized
overnight courier or five days after mailing, certified or registered mail,
return receipt requested to the party for whom intended at the address
specified in this Article. Either party may designate an alternated

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<PAGE>

address for notices by given written notice thereof in accordance with the
provisions of this Article.

2. Notices to NMS. All notices to NMS shall be directed as follows:

Network Management Services
5500 Wayzata Blvd., Suite 1450
Minneapolis, MN 55416-1241
Attn: Chief Financial Officer

3. Notices to GECS. All notices to client shall be directed as follows:

GE Capital Corporation
260 Long Ridge Road
Stamford, CT 06927
Attn: Wendy N. Fuess, Manager, Health Care

ARTICLE 10. QUALITY
- --------------------

NMS shall devote appropriate personnel and resources to participate in the
GECS's "Six Sigma" quality improvement efforts as required by GECS, including
but not limited to identifying and measuring critical-to-quality ("CTQ")
characteristics, developing projects designed to improve process and outcomes
quality and measuring and reporting such efforts.

ARTICLE 11. GENERAL PROVISIONS
- -------------------------------

1. Control of Work. NMS shall be solely responsible for the conduct and
control of the work to be performed under this Agreement by NMS and its
agents or employees.

2. NMS Employees. It is expressly understood and agreed that for all purposes,
including but not limited to workers' compensation insurance, unemployment
insurance, FICA, and federal and state tax withholding, NMS and any of its
agents, contractors or employees performing services under this Agreement
shall not be deemed employees of GECS. NMS shall indemnify GECS from and
against any, taxes imposed on GECS as a result of any determination of any
taxing authority that the agents of NMS performing services hereunder are
employees of GECS. NMS and its employees shall not be entitled to any of
the benefits that GECS provides to its employees and NMS shall provide all
legally required insurance coverage for NMS's employees.

3. No Agency. NMS shall perform its services hereunder as an independent
contractor. This Agreement shall not be deemed or construed to create any
association, partnership, joint venture, or relationship of principal and
agent or master and servant between the parties hereto or any affiliates or
subsidiaries thereof, or to provide either party with the right, power, or
authority, whether express or implies, to create any such duty or

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<PAGE>

obligation on behalf of the other party.

4. Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York.

5. Publicity. Each party shall obtain the prior written consent of the other
party concerning the content and plan of distribution of any public
announcement, press release or advertisement concerning this Agreement,
provided that NMS may include references to GECS in client lists,
proposals, and other non-public communications concerning NMS or its
services. No prior consent shall be required regarding the inclusion of the
other party's name in notices, disclosure documents, or other filing or
publications required by law or regulations.

6. Paragraph Headings. Section headings are for convenience only and shall not
be considered part of the terms and conditions of this Agreement.

7. Modification. No modification, waiver or amendment of any term or condition
of this Agreement shall be effective unless and until it shall be reduced
to writing and signed on behalf of NMS and GECS

8. Waiver. Failure by either party at any time to require full performance by
the other party or to claim a breach of any term of this Agreement will not
(a) be construed as a waiver of any right under this Agreement, (b) affect
any subsequent breach, or (c) affect the validity of this Agreement or any
part thereof

9. Severability. If any term or provision of this Agreement should be declared
invalid by a court of competent jurisdiction, the remaining terms and
conditions of this Agreement shall be unimpaired.

10. Complete Agreement. The Agreement, including the Appendices, constitutes
the entire agreement between the parties with respect to the subject matter
hereof and j supersedes all prior proposals, negotiations, conversations,
discussions and agreements between the parties. This Agreement may be
modified only by a written instrument executed on behalf of both of the
parties hereto.

11. Assignment. Neither party may assign any of its rights under this Agreement
without the prior written consent of the other party. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be
binding upon and insure to the benefit of and be enforceable by the
successors and permitted assigns of GECS and NMS.

12. Survival. The respective obligations of each party that would be their
nature continue after the termination or expiration of this Agreement,
including without limitation those contained in Confidentiality,
Indemnification, and Intellectual Property Indemnification,

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<PAGE>

and shall survive the termination or expiration of this Agreement.

13. Counterparts. This Agreement may be executed in one or more counterparts
each of which shall be deemed to be an original and all of which, taken
together, shall constitute a single instrument.

14. Benefit of the Parties. This Agreement is for the sole and exclusive
benefit of the parties hereto and is not intended to, nor does it, confer
any benefit upon any third party.

15. Contract Benefits Extensions. From time to time, GECS may identify
opportunities for NMS to lower its costs by taking advantage of terms GECS
has negotiated with GECS's suppliers of goods and services. NMS agrees to
cooperate with GECS in identifying such opportunities, and to use its best
efforts to obtain such cost savings when they are available. NMS and GECS
agree that any mutually determined cost savings realized by NMS will be
shared equally between GECS and NMS. NMS also agrees to consider making the
terms of this Agreement available to GECS's customers and suppliers, when
identified by GECS, and to cooperate with GECS to identify opportunities
for GECS's customers and suppliers to reduce their benefit plan
administration costs.

16. Competitiveness Efforts. GECS and NMS shall meet no less than annually to
specifically review the pricing and productivity improvements NMS has
implemented to both ensure NMS's competitive position in the marketplace
and that GECS's agreement with NMS reflects NMS's competitiveness.

IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have executed this Agreement effective as of the day and year
first set forth above.

NETWORK MANAGEMENT SERVICES, INC.

By: /s/ Michael C. Bingham
---------------------------------
Name: Michael C. Bingham
Title: President

GE CAPITAL CORPORATION

By: /s/ Wendy N. Fuess
---------------------------------
Wendy N. Fuess
Manager, Health Care

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<PAGE>

APPENDIX A-GECC PLANS

GE Capital Services Medical Plan-Traditional and Point-of-Service
GE Capital Services Dental Plan

A-1
<PAGE>

APPENDIX B- REPORTS AND OTHER SERVICES

Health Care Vendors Consolidated Report - Quarterly/Annually
Consolidated Claims, Service Fee and Enrollment Report - Monthly
Monthly Cash Flow Report - Monthly
Employee Count by Health Plan - Monthly *
Employee Count with Medical Coverage - Monthly *
Employee Count with Dental Coverage - Monthly *
Employees with Medical Coverage Only - Monthly *
Employees with Dental Coverage Only - Monthly *
Coordination of Benefits Report - Quarterly
Over Age Dependent Report - Monthly

* These reports will be consolidated into one (1) report in 1998.

B-1
<PAGE>

APPENDIX C-GE INTEGRITY FORM

ACKNOWLEDGEMENT

Date: ________________

Reference: Agreement entered into as of January 1, 1996, between GENERAL-
ELECTRIC CAPITAL SERVICES COMPANY ("GECC") and Network Management
Services, Inc.

I, ____________________, will be performing services pursuant to the above-
referenced Agreement. I have received previously or concurrently with this
Acknowledgment a copy of General Electric Company ("GE") policies 20.4, 20.5,
20.7, 20.10, 30.5, and 30.10. I have read these policies, understand them, and
agree to comply with them. Further, I am familiar with and agree to comply with
the Office of Federal Procurement Policy Act Amendments of 1988 (the Act), its
applicable implementing regulations, and GE guidelines regarding the Act, and I
will report immediately to my contact in the GE any information concerning a
violation or possible violation of the Act or its implementing regulations.

____________________________________
Signature

____________________________________
Printed or Typed Name of Signer

C-1
<PAGE>

APPENDIX D

1. NMS shall provide the services contained herein for the following Vendors:

Met Life Dental
ABR CobraServ, Inc.
MetraHealth/United HealthCare
USHealthCare
HealthPartners
ComPsych

2. Services for other Vendors shall be subject to a mutually agreeable fee.

3. Company shall reimburse NMS in accordance with the table below for services
rendered by NMS hereunder.

January 1996 through December 1996 *** per employee per month
January 1997 through May 1997 *** per employee per month
June 1997 through December 1997 *** per employee per month

Pricing for future periods of the Agreement shall be mutually agreed to by the
parties. All other fees must be approved in writing by Company.

4. Expenses, to the extent billable hereunder, will be invoiced at cost. NMS
shall adhere to GE travel policy and shall utilize, when made available to NMS,
the GE Travel Center for all travel arrangements pursuant to this Agreement.
Notwithstanding anything to the contrary in the foregoing, automobile travel win
be invoiced at the applicable Internal Revenue Service limit.

*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.7 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

D-1

<PAGE>

EXHIBIT 10.8

SERVICES AGREEMENT ***

THIS SERVICES AGREEMENT (the "Agreement") is entered into as of January 1,
1997, by and between General Electric Company, with an address of 3135 Easton
Tpk., Fairfield, CT 06431 ("GE"), and Network Management Services, Inc., with an
address of 5500 Wayzata Blvd., Suite 1275, Minneapolis, MN 55416-1241
("Supplier").

RECITALS

WHEREAS, GE desires to retain Supplier to provide certain consulting
services for certain employee benefit plans maintained by GE; and

WHEREAS, Supplier is willing to provide such services on the terms and
conditions set forth in this Agreement;

NOW THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, and subject to the terms and conditions set forth below,
Supplier and GE hereby agree as follows:

ARTICLE 1. CERTAIN DEFINITIONS

As used in this Agreement, the following terms shall have the following
meanings:

"Participant" shall mean an individual participating in or who may be
eligible to participate in one or more of the Plans.

"Plan" or "Plans" shall mean any of the employee benefit, state-mandated or
compensation plans or programs of GE with respect to which Supplier
provides consulting services, as defined in Exhibit A to this Agreement or
any amendment or supplement thereto.

ARTICLE 2. CONSULTING SERVICES

2.1 General. Supplier shall perform the services as described in the attached
Exhibit B to this Agreement, which Exhibit is attached hereto and made a
part hereof, as directed and with respect to locations and/or health plan
suppliers designated by GE. Supplier may also perform additional services
for GE subject to such terms as the parties may mutually agree to in
writing. Supplier shall perform the services with due care and in
accordance with the requirements of this Agreement. In cases where this
Agreement does not specify a standard of performance, Supplier shall
perform the services in accordance with prevailing industry or professional
standards, Supplier will endeavor to perform all of the services to GE's
satisfaction.

2.2 Change Orders. The parties may change any aspect to this Agreement by
mutual agreement in accordance with the procedures set forth in this
section. Either party may

***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.8 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

request a change by submitting to the other a change request. If the
parties decide to implement a requested change, they shall execute an
appropriate memorandum of such change, including any financial terms
thereby affected. Execution of such memorandum by both parties shall
constitute a modification of the Agreement and shall be binding on both of
the parties.

2.3. Status Reports. Upon GE's reasonable request Supplier shall provide written
status reports describing its performance under this Agreement.

2.4 GE Service Team. The parties shall agree on the staffing level and
credentials of personnel providing or coordinating Supplier's services
pursuant to this Agreement (the "GE Service Team"). GE shall have the right
to interview and approve all members of the GE Service Team. Supplier will
provide GE access to 7-day, 24-hour voice mail systems, which shall include
direct dial telephone numbers for GE Service Team members.

2.5 Technical/Clinical Consultants. Supplier represents and warrants that any
consultants responsible for technical or clinical analysis on the GE
Service Team are and shall remain duly licensed or certified with respect
to such technical or clinical proficiency in accordance with prevailing
professional standards and shall maintain a policy of professional
liability insurance with a licensed insurance company.

2.6 Records. Supplier shall maintain complete and accurate records of all
amounts billable to and payment made by GE in accordance with generally
accepted accounting practices. Supplier shall retain such records for a
period of two years after the date of final payment. GE and its authorized
agents may inspect such records at GE's expense during normal business
hours upon reasonable prior notice to Supplier.

2.7 Representations and Warranties of Supplier. Supplier warrants and
represents that:

(a) it has and will continue to conduct its activities in accordance and
compliance with all applicable laws, regulations, ordinances,
Executive Orders, codes, standards, permits and liens;

(b) all information it has submitted heretofore and contemporaneously is
true and accurate in every material respect;

(c) it has requisite personnel, competence, skill and physical resources
necessary to perform the services herein set forth. Supplier further
warrants that services performed by or delivered through Supplier
shall be in accordance with the highest generally accepted standards
of the profession at the time services are performed;

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<PAGE>

(d) it will comply with the stated standards, policies and practices of
GE, including but not limited to GE's standards, policies and
practices relating to integrity, and to require the same stringent
standards, policies and practices for its employees or other workers
in regard to its services hereunder;

(e) it will require each person who will or does perform services
hereunder to execute Exhibit C, attached hereto and made a part
hereof, acknowledging such person's agreement to comply with certain
policies of GE designated therein. Supplier shall solicit the
execution of such Exhibit C by each such person, and Supplier shall
not permit any person that does not execute such Exhibit C to perform
any services hereunder. Supplier shall furnish GE with a copy of such
Supplement that has been executed by each person that Supplier engages
for performance of services hereunder prior to the start of such
performance by such person; and

(f) it shall promptly provide any information or materials relating to
services provided hereunder to GE at its request.

ARTICLE 3. COMPENSATION FOR SERVICES

3.1 Fees. GE shall pay Supplier for its services hereunder in accordance with
the amounts specified in Exhibit D, which is attached hereto and made a
part hereof. Except as herein stated, Supplier shall not impose any other
charges on GE for its services pursuant to this Agreement.

3.2 Expenses. Subject to the terms of Exhibit D hereto, GE shall reimburse
Supplier for any out-of-pocket expenses reasonably incurred by Supplier in
connection with the performance of the its services hereunder. Supplier
will submit such documentation for reimbursable expenses as may be
reasonably required by GE. Supplier shall not incur any unusual or
extraordinary expenses without GE's specific prior approval.

3.3 Invoicing and Payment. Supplier shall invoice GE on a monthly basis. GE
shall pay Supplier's invoices within 45 days of receipt of such invoice.
Supplier's federal tax identification number is 41-1758843.

ARTICLE 4. TERM AND TERMINATION

4.1 Term. The Agreement shall become effective on April 21, 1997 (the
"Commencement Date") and shall continue in effect through December 31,
1999, unless earlier terminated pursuant to this Article 4, or extended by
mutual written agreement of the parties.

4.2 Termination on Notice. Either party may terminate this Agreement at any
time by giving written notice to the other 120 days before the effective
date of termination.

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<PAGE>

4.3 Termination for Other Defaults.

(a) In the event that a party materially breaches in the performance of
any of its requirements under this Agreement, the other party may, at
its sole discretion, provide notice to the breaching party of its
intent to terminate this Agreement. The breaching party shall have
thirty (30) days to cure the default and avoid termination. If the
default is not cured within thirty (30) days of the notice, the other
party may execute its termination notice to be effective thirty (30)
days after the end of the expiration of the default cure period.

(b) For, the purposes of this Agreement and without limiting the foregoing
generally, a material breach shall include but not be limited to the
following:

(i) A party's filing a petition in bankruptcy or for reorganization
or for the adoption of an arrangement under the Bankruptcy Act
(or similar law of the United States or any other jurisdiction,
which law relates to the liquidation or reorganization of
companies or to the modification or alteration of the rights of
creditors) or an answer or other pleading admitting or failing
to deny the material allegations of such a petition or seeking,
consenting to or acquiescing in the relief therein provided;

(ii) A party's making an assignment, or so called trust mortgage or
the like, for the benefit of its creditors or by its making a
proposal to its creditors under any bankruptcy act;

(iii) A party's consenting to the appointment of a receiver or a
trustee (or other person performing a similar function) for all
or a substantial part of its property;

(iv) A party's being adjudicated bankrupt;

(v) The entry of a court order which has not been vacated, set
aside or stayed within thirty (30) days from the date of entry,
either (i) appointing a receiver or a trustee for all or a
substantial part of its property or (ii) approving a petition
filed or application made against it for, or effecting an
arrangement in, bankruptcy or made against it for, or effecting
an arrangement in, bankruptcy or for a reorganization or other
relief pursuant to any bankruptcy act or for any other judicial
modification or alteration of the rights of creditors;

(vi) The assumption of custody or sequestration by a court of
competent jurisdiction of all or substantially all of a party's
property, which custody

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<PAGE>

or sequestration has not been suspended or terminated within
thirty (30) days from its inception; and/or

(vii) A party's insolvency, as defined by law.

With respect to this section and (S)4.2, termination of this Agreement
will riot terminate the rights or obligations of either party arising
out of the period during which this Agreement was in effect.

4.4 Obligations Upon Termination. Upon any termination or non-renewal of this
Agreement, Supplier shall deliver to GE any and all data or information (in
whatever form or media) that is owned or developed by or licensed to GE and
that is supplied to Supplier by GE hereunder. Furthermore, Supplier shall
cooperate with GE in the transfer of Supplier's obligations hereunder to a
replacement service provider.

ARTICLE 5. INDEPENDENT CONTRACTOR

5.1 Control of Work. Supplier shall be solely responsible for the conduct and
control of the work to be performed under this Agreement by Supplier and
its agents or employees.

5.2 Supplier's Employees. It is expressly understood and agreed that for all
purposes, including but not limited to workers' compensation insurance,
unemployment insurance, FICA, and federal and state tax withholding,
Supplier and any of its agents, contractors or employees performing
services under this Agreement shall not be deemed employees of GE. Supplier
shall indemnify GE from and against any taxes imposed on GE as a result of
any determination of any taxing authority that the agents of Supplier
performing services hereunder are employees of GE. Supplier and its
employees shall not be entitled to any of the benefits that GE provides to
its employees and Supplier shall provide all legally required insurance
coverage for Supplier's employees.

5.3 No Agency. Supplier shall perform its services hereunder as an independent
contractor. This Agreement shall not be deemed or construed to create any
association, partnership, joint venture, or relationship of principal and
agent or master and servant between the parties hereto or any affiliates or
subsidiaries thereof, or to provide either party with the right, power, or
authority, whether express or implies, to create any such duty or
obligation on behalf of the other party.

5.4 Fiduciary Status. GE and Supplier understand and intend that Supplier shall
not be a fiduciary within the meaning of the Employee Retirement Income
Security Act of 1974 as amended, or any state law with respect to any Plan.
Supplier shall not have any discretion with respect to the management or
administration of any Plan or with respect to determining or changing the
rules or policies pertaining to eligibility or entitlement of any
participant in any Plan to benefits under such Plan. Supplier also shall
not have any

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<PAGE>

control or authority with respect to any assets of any Plan, Including the
investment or disposition thereof. All discretion and control with respect
to the terms, administration or assets of any Plan shall remain with GE or
with the named fiduciaries under such Plan.

ARTICLE 6. RIGHTS IN DELIVERABLES AND DATA

6.1 Deliverables. Subject to the provisions of Article 7 hereof entitled
Confidentiality, the parties shall, from and after the date of this
amendment and prior to the initiation of any product development or project
effort (collectively, the "GE Project"), discuss in good faith the
treatment of intellectual property rights with respect to any system,
process, invention or tool which may be developed pursuant to the services
rendered by Supplier pursuant to this Agreement. If the parties cannot
agree as to such treatment, GE may, at its sole option, discontinue use of
Supplier for such New Project and shall retain all intellectual property
rights to any system, process, invention or tool owned by GE prior to the
initiation of such development effort. In such event, Supplier shall return
all any notes, reports, or memoranda provided to Supplier by GE in
connection with such New Project. Notwithstanding anything to the contrary
in the foregoing, the parties agree that (1) the GE Disability Policy Guide
and the GE Disability Policies and Procedures Manual (collectively, the "GE
Products") shall be owned by GE and (2) Supplier may perform services for
other parties involving projects and products that may be similar to a New
Project or a GE Product, and the provisions of this section shall not
preclude Supplier from providing such services. GE may obtain and hold in
its own name any copyrights, registrations and other protection that may be
available in the GE Products, and Supplier shall provide reasonable
assistance to perfect such protection.

6.2 Intellectual Property. Except as provided in (S)6.1, nothing contained in
this Agreement shall confer to either party any property rights,
proprietary interest or license in the software, written materials,
techniques, system, process, invention or tool, or know how used by the
other party.

6.3 Participant Data. All of the Participant data and any other materials
pertaining to the GE's requirements or the Plans and provided to Supplier
by GE pursuant to this Agreement is Confidential Information (as that term
is hereinafter defined) and shall at all times remain the property of GE.
Supplier shall return all such data to GE upon GE's request.

ARTICLE 7. CONFIDENTIALITY

7.1 Confidential Information. Confidential information shall include all
information disclosed by one party (the "Discloser") to the other (the
"Recipient") in writing and marked "Confidential" or "Proprietary" or
disclosed visually or orally and subsequently confirmed in writing within
20 days after the first disclosure ("Confidential Information"). The terms
and conditions of this Agreement shall be deemed Confidential

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<PAGE>

Information with respect to both parties. Confidential Information shall
not, however, include the following:

(a) Information which is now or hereafter comes into the public
domain;

(b) Information learned by the Recipient from third parties;

(c) Information known to the Recipient or developed by the Recipient
independently of information disclosed by the Discloser; or

(d) Information required to be disclosed by Recipient pursuant to
requirements of law.

7.2 Confidential Treatment. The Recipient shall treat the Confidential
Information as confidential, using the same standard of care that it uses
to protect its own proprietary or confidential information (but not less
than a reasonable standard of care), and shall use reasonable measure to
prevent disclosure of the Confidential Information to any third party
without the Recipient's consent. The Recipient shall disclose the
Confidential Information only to those of its employees, agents or
subcontractors who have a reasonable need for access therefor.

7.3 Return of Information. All Confidential Information shall remain the
property of the Discloser. Upon the Discloser's request, the Recipient
shall promptly return the Confidential Information, provided, however, that
the Recipient may retain copies solely for archival purposes only.

7.4 Trademarks and Copyrights. The parties reserve the right to the control and
use of their names and all copyrights, symbols, trademarks, or service
marks presently existing or later established. Neither party shall use the
other party's copyrights, symbols, trademarks, or service marks in
advertising or promotional materials or otherwise without the prior written
consent of such other party.

ARTICLE 8. INDEMNIFICATION AND INSURANCE

8.1 Insurance. During the term of this Agreement, Supplier shall maintain in
force the following insurance coverage; (a) Workers' Compensation and
related insurance as prescribed by the law of the state(s) in which the
work is to be performed; (b) general comprehensive liability coverage, with
limits of *** per occurrence and *** in the aggregate; (c) property damage
coverage in the amount of *** per occurrence; and

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<PAGE>

(d) E&O insurance with limits of ***. Upon GE's request, Supplier shall
provide certificates of insurance evidencing the aforementioned coverages.

8.2 Indemnity. Each party (the "Indemnifying Party") shall indemnify and hold
harmless the other party (the "Indemnified Party") from and against any
costs, claims, damages, liabilities, or losses (including costs and
expenses and attorney fees incurred in connection therewith) ("Claims")
arising from injuries, including death, or damage to property resulting
from the negligence or willful misconduct of the indemnifying Party. The
Indemnified Party shall notify the Indemnifying Party promptly of any
Claim. The Indemnifying Party may, but shall not be required to, assume the
defenses of any such Claims. The Indemnified Party shall cooperate with the
Indemnifying Party in the defense of any such Claim, and shall not settle
or compromise such Claim without the prior written consent of the
Indemnifying Party.

8.3 Intellectual Property Indemnification. Supplier shall indemnify and hold GE
harmless from any award of costs and damages in any action against GE based
on a claim that any of the services or materials delivered to GE in
connection therewith, including without limitation any computer software,
infringe upon any United States patent right or copyright of any third
party, provided that (i) Supplier is promptly notified in writing of any
such suit or claim; and (ii) GE permits Supplier to defend, compromise or
settle any such suit or claim, and gives Supplier all available
information, reasonable assistance, and authority necessary to do so.
Notwithstanding the foregoing, Supplier shall have no obligation to
indemnify GE with respect to any claim of infringement pertaining solely to
any portion of services or material prepared in connection therewith
modified or prepared by Supplier to conform to specific instructions or
directions provided by GE.

ARTICLE 9. NOTICES

9.1 General. All notices, requests, demands and other communications required
to be given hereunder shall be in writing and shall be deemed to have been
duly given one day after delivery by hand or via a nationally recognized
overnight courier or five days after mailing, certified or registered mail,
return receipt requested to the party for whom intended at the address
specified in this Article. Either party may designate an alternate address
for notices by given written notice thereof in accordance with the
provisions of this Article.

9.2 Notices to Supplier. All notices to Supplier shall be directed as follows:

Network Management Services

-8-
<PAGE>

5500 Wayzata Blvd., Suite 1275
Minneapolis, MN 55416-1241
Attn: Michael C. Bingham, President

9.3 Notices to GE. All notices to client shall be directed as follows:

General Electric Company
3135 Easton Turnpike, E2B
Fairfield, Connecticut 06431
Attn: Shelly C. Wolff, Program Leader, Disability Programs

with a copy to:

General Electric Company
3135 Easton Turnpike, W3C
Fairfield, Connecticut 06431
Attn: Kevin J. F. Fitzgerald, Health Care Counsel

ARTICLE 10. GENERAL PROVISIONS

10.1 Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York.

10.2 Publicity. Supplier shall obtain the prior written consent of GE
concerning the content and plan of distribution of any public announcement,
press release, advertisement or other public communication concerning this
Agreement, the services provided by Supplier under this Agreement, and the
Deliverables or any descriptions thereof. Notwithstanding anything to the
contrary in the foregoing, provided that Supplier may include references to
GE as a client in client lists, proposals, and other non-public
communications concerning Supplier or its services. No prior consent shall
be required regarding the inclusion of the other party's name in notices,
disclosure documents, or other filing or publications required by law or
regulations. For the purposes of this section, "public communication"
shall include the participation by Supplier personnel in any trade
association, educational or promotional event (e.g., a disability
----
management seminar).

10.3 Arbitration. Any dispute, controversy or claim that cannot be resolved by
the parties arising out of or relating to this engagement letter of the
services covered by this letter shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"), and judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
The arbitration shall be held in New York, New York, or in such other
location as the parties may mutually agree upon. The arbitration will be
conducted before a panel of three arbitrators, with one arbitrator named by
each party and the third named by the two party-

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<PAGE>

appointed arbitrators, or (if they should fail to agree on the third) by
the AAA. The arbitrators may not award non-monetary or equitable relief of
any sort. They shall have no power to award punitive damages or any other
damages not measured by the prevailing party's actual damages. All aspects
of the arbitration shall be treated as confidential. Neither the parties
nor the arbitrators may disclose the existence, content or results of the
arbitration, except as necessary to comply with legal or regulatory
requirements. Before making any such disclosure, a party shall give written
notice to all other parties and shall afford such parties a reasonable
opportunity to protect their interests.

10.4 Books and Records.

(a) GE shall have the right, but not the obligation, to audit the books
and records of Supplier pertaining to Supplier's services rendered
hereunder, upon reasonable notice to Supplier. Such right to audit
shall survive the termination of this Agreement.

(b) Supplier will make available for audit by either GE or its designee
("Auditor") its files, books, procedures and records (including
computer terminal access to same) pertaining to the services provided
by Supplier under this Agreement during the hours of 7 a.m. to 7 p.m.
Monday through Friday, but excluding holidays. Supplier shall fully
cooperate with such audit and shall make available for interview with
the Auditor those personnel with material involvement or
responsibility with respect to the services provided by Supplier under
this Agreement. GE will give Supplier reasonable notice of each audit
prior to commencement of the audit. The audit shall be conducted at
Supplier's offices.

10.5 Paragraph Headings. Section headings are for convenience only and shall
not be considered part of the terms and conditions of this Agreement.

10.6 Modification. No modification, waiver or amendment of any term or
condition of this Agreement shall be effective unless and until it shall be
reduced to writing and signed on behalf of Supplier and GE.

10.7 Waiver. Failure by either party at any time to require full performance by
the other party or to claim a breach of any term of this Agreement will not
(a) be construed as a waiver of any right under this Agreement, (b) affect
any subsequent breach, or (c) affect the validity of this Agreement or any
part thereof.

10.8 Severability. If any term or provision of this Agreement should be
declared invalid by a court of competent jurisdiction, the remaining terms
and conditions of this Agreement shall be unimpaired.

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<PAGE>

10.9 Complete Agreement. The Agreement, including the Exhibits, constitutes
the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior proposals, negotiations,
conversations, discussions and agreements between the parties. This
Agreement may be modified only by a written instrument executed on behalf
of both of the parties hereto.

10.10 Assignment. Neither party may assign any of its rights under this
Agreement without the prior written consent of the other party. Subject
to the foregoing, all of the terms and provisions of this Agreement shall
be binding upon and insure to the benefit of and be enforceable by the
successors and permitted assigns of GE and Supplier.

10.11 Survival. The respective obligations of each party that would by their
nature continue after the termination or expiration of this Agreement,
including without limitation those contained in Article 7
(Confidentiality), (S)(S)8.2 and 8.3, ("Indemnification" and
"Intellectual Property indemnification" respectively), and (S)10.2
("Publicity") shall survive the termination or expiration of this
Agreement, provided, however, that the restrictions contained in (S)10.2
shall expire one year after termination of this Agreement.

10.12 Counterparts. This Agreement may be executed in one or more counterparts
each of which shall be deemed to be an original and all of which, taken
together, shall constitute a single instrument.

10.13 Contract Benefits Extensions. From time to time, GE may identify
opportunities for Supplier to lower its costs by taking advantage of
terms GE has negotiated with GE's suppliers of goods and services.
Supplier agrees to cooperate with GE in identifying such opportunities,
and to use its best efforts to obtain such cost savings when they are
available. Supplier and GE agree that any mutually determined cost
savings realized by Supplier will be shared equally between GE and
Supplier. Supplier also agrees to consider making the terms of this
Agreement available to GE's customers and suppliers, when identified by
GE, and to cooperate with GE to identify opportunities for GE's customers
and suppliers to reduce their benefit plan administration costs.

10.14 Competitiveness Efforts. GE and Supplier shall meet no less than annually
to specifically review the pricing and productivity improvements Supplier
has implemented to both ensure Supplier's competitive position in the
marketplace and that GE's agreement with Supplier reflects Supplier's
competitiveness.

10.15 Benefit of the Parties. This Agreement is for the sole and exclusive
benefit of the parties hereto and is not intended to, nor does it, confer
any benefit upon any third party.

10.16 Changes in Law or the Plans. In the event of Federal or State
governmental action or a change in the Plans that materially affects in a
negative manner Administrator's ability to meet the obligations provided
for in this Agreement, Company and Administrator agree

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<PAGE>

to negotiate in good faith to revise Administrator's obligations under
this Agreement on an equitable basis. If the parties are unable to agree
on a mutually acceptable revision, either party may terminate this
Agreement on 60 days prior written notice to the other party.

IN WITNESS WHEREOF, the parties hereto, through their duly authorized
representatives, have executed this Agreement effective as of the day and year
first set forth above.

SUPPLIER GENERAL ELECTRIC COMPANY

By: /s/ Scott Halstead By: /s/ Shelly Wolff
---------------------------------- --------------------------------
Name: Scott P. Halstead Shelly C. Wolff
Title: Chief Financial Officer Program Leader, Disability Programs

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<PAGE>

EXHIBIT A - PLANS

GE Life, Disability and Medical Plan (Continued Life Insurance
Protection/Disability Extension and Short-Term Disability Benefits)

GE Long Term Disability Income Plan for Hourly Employees

GE Long Term Disability Income Plan for Salaried Employees

GE Pension Plan (Disability Pension)

Salary Continuance (pursuant to GE compensation policy and practice)

Worker's Compensation (pursuant to State law)

A-1
<PAGE>

EXHIBIT B - SERVICES TO BE PROVIDED BY SUPPLIER

I. Consulting Services

Contribute to GE's competitiveness by providing cost management services to
further develop GE's integrated disability management practices. The services
will advance and improve GE's disability objectives to assure maximum value with
a focus on quality and cost control.

. Develop cost savings opportunities across all programs and locations.

. Identify internal and external best practices.

. Evaluate and select specialty programs.

. Provide policy interface between businesses and the Health and Disability,
Benefits Center.

. Deliver and assist in implementation of on-site disability management
"best value" strategies.

. Support in the development and execution of key performance indicators and
analytics, including but not limited to a supplier scorecard and other
quality measurement tools and processes implementing the GE as quality
initiative.

. Assist in planning and project management to identify synergy's across
various benefits.

. Explore contract opportunities for risk/reward aspects of supplier partner
services.

. Develop network to link HCP and Workers' Compensation as identified.

. Support new programs and development for GE core businesses.

. Provide education/training to GE stakeholders for effective new program
implementation.

In providing its services hereunder, Supplier shall establish and maintain
coordination with the following parties:

. GE Disability Leads

. GE Health Care Managers

. GE Health Care Team Leaders

. GE Business Finance

. GE Sourcing

. GE Corporate Legal

. GE On-site Medical Staff- GE Medical Doctors/CARE

B-1
<PAGE>

. GE Environmental Health & Safety

. GE Health & Disability Benefits Center

. Electric Insurance Company

. Third Party Administrators (e.g., Sedgwick James for disability, various
----
medical plan MBAs)

II. Sourcing/Performance Management Services

A. Selection and Contracting Process

1. Draft and update key documents relating to the selection and
contracting process, including but not limited to RFI, RFP and
selection criteria

2. Coordinate entire RFP process and teams

3. Research and identify potential disability suppliers

4. Prepare and send RFP, coordinate response and scoring processes
and prepare and send appropriate follow-up communications

5. Coordinate and participate in site visits

6. Coordinate and attend final negotiations

B. Performance Management

1. Identify opportunities to enhance performance with existing
suppliers

2. Conduct site visits

3. Perform data analysis functions, including but not limited to
CORE, EIC Medstat data reports

4. Designing and implementing targeted improvement programs (e.g.,
----
supplier scorecard)

5. Budgeting and financial reviews

B-2
<PAGE>

EXHIBIT C
GE INTEGRITY FORM

ACKNOWLEDGEMENT

Date: _________________________

Reference: Agreement entered into as of April 21, 1997, between GENERAL
ELECTRIC COMPANY ("GE") and Network Management Services, Inc.
("SUPPLIER").

I, ___________________________________, will be performing services pursuant to
the above-referenced Agreement. I have received previously or concurrently with
this Acknowledgment a copy of GE policies 20.4, 20.5, 20.7, 20.10, 30.5, and
30.10. I have read these policies, understand them, and agree to comply with
them. Further, I am familiar with and agree to comply with the Office of
Federal Procurement Policy Act Amendments of 1988 (the Act), its applicable
implementing regulations, and GE guidelines regarding the Act, and I will report
immediately to my contact in the GE any information concerning a violation or
possible violation of the Act or its implementing regulations.

_______________________________
Signature

_______________________________
Printed or Typed Name of Signer

C-1
<PAGE>

EXHIBIT D
FEES

A. Base Fees

GE shall establish an annual budget, based on full-time equivalents (FTEs)
utilized, for all consulting services of the type provided by Supplier pursuant
to this Agreement and other entities performing similar services. Supplier shall
be compensated based on its pro rata share of such FTEs in relation to the total
number of FTEs budgeted by GE. For each calendar year under this Agreement, the
GE budget is *** based on 1 FTEs. Supplier is scheduled to provide such *** with
respect to such calendar year; provided, however, that in any calendar year
under this Agreement in which Supplier provides less than *** on an annualized
basis (including but not limited to 1997) the budget will be reduced pro rata in
accordance with the hiring date of the resource. In addition, GE shall allocate
up to an additional *** for performance-based compensation and Supplier shall
put up to *** of its base fees at risk as set forth in Section C below, both
such figures to be prorated, if applicable, consistent with the foregoing
sentence.

B. Expenses

Expenses will be invoiced at cost. Supplier shall adhere to GE travel policy
and shall utilize, when made available to Supplier, the GE Travel Center for all
travel arrangements pursuant to this Agreement. Notwithstanding anything to the
contrary in the foregoing, automobile travel will be invoiced at the applicable
Internal Revenue Service limit. In addition, Supplier shall be reimbursed up to
*** for recruiter fees actually incurred in hiring personnel as required
pursuant to Section A above; provided, however that such sums shall be refunded
if the personnel hired does not provide services under this Agreement for at
least one year from the Commencement Date. In addition, if the personnel hired
to provide services is retained on a less than *** basis, such reimbursement for
recruiter fees shall be prorated accordingly (unless the recruiter fee payment
is based on a customary percentage basis multiplied by the actual, not
annualized, salary of the retained personnel.)

C. Incentive Arrangement

In addition to the base fee above described, Supplier will be eligible to
receive incentive payments of up to *** for each calendar year of this
Agreement, and, with respect to calendar years 1998 and 1999, Supplier shall
put *** of its base fees at risk as herein described, provided, however, that
with respect to first year of this Agreement, there shall be no incentive
compensation payable if Supplier is reimbursed for any recruiting fees pursuant
to Section B above. Incentive bonuses or penalties shall be prorated (in
addition to the proration, if

D-1
<PAGE>

applicable, set forth in Section A hereof) in the case of termination of this
Agreement that does not encompass a complete calendar year, except with respect
to calendar year 1997. In all cases of partial year-calculation, trend
calculations shall be annualized.

1. Calendar Year 1997 (partial from the Commencement Date)
-------------------------------------------------------

Supplier shall be eligible to earn incentive compensation as described
below:

a. One-half of the total incentive compensation payable will be based
on customer satisfaction. The customer satisfaction will be
determined based on a survey of GE Corporate and business health
care team members and such other persons as designated by GE (e.g.,
----
other GE health care suppliers). The parties shall mutually develop
a survey using a five-point scale (5 = very satisfied to 1 = very
dissatisfied). Based on the results of such survey, and overall
score shall be tabulated by GE. Scores and resulting payouts shall
be as follows:

<TABLE>
<CAPTION>
Score Bonus
----- -----
<S> <C>
above 4 ***
above 3.5 but below 4 ***
below 3 ***
</TABLE>

b. One-half of the total incentive compensation shall be based on
reductions in GE's combined overall STD and WC Program Costs
measured on costs per eligible employee per year basis versus the
prior year as calculated by GE. The chart below sets forth the
incentive arrangement. With respect to any given calendar year
under this Agreement, "STD and WC Program Costs" will be determined
on a paid basis for such year.

<TABLE>
<CAPTION>
Trend Bonus
---- -----
<S> <C>
Meet or exceed GE SII Trend Budget ***
Any other result ***
</TABLE>

D-2
<PAGE>

2. Calendar Years 1998 and 1999
----------------------------

The incentive arrangement for calendar years 1998 and 1999 shall be
structured as described below:

a. One-half of the total incentive compensation payable will be based
on customer satisfaction. The customer satisfaction will be
determined based on a survey of GE Corporate and business health
care team members and such other persons as designated by GE
(e.g., other GE health care suppliers). The parties shall mutually
-----
develop a survey using a five-point scale (5 = very satisfied to 1
= very dissatisfied). Based on the results of such survey, and
overall score shall be tabulated by GE. Scores and resulting
payouts shall be as follows:

<TABLE>
<CAPTION>
Score Bonus/Penalty
----- -------------
<S> <C> <C>
above 4 ***
above 3.5 but below 4 ***
below 3 ***
</TABLE>

b. One-half of the total incentive compensation shall be based on
reductions in GE's combined overall STD and WC Program Costs
measured on costs per eligible employee per year basis versus the
prior year as calculated by GE. The chart below sets forth the
incentive arrangement. "STD and WC Program Costs" shall be defined
to include all medical, income replacement, and other program
costs as set forth in the H&DBC monthly cost report. With respect
to any given calendar year under this Agreement, "STD and WC
Program Costs" will be determined on a paid basis for such year.

<TABLE>
<CAPTION>
Trend Bonus/Penalty
----- -------------
<S> <C>
Meet or exceed GE SII Trend Budget target ***
Miss GE SII Trend Budget by more than 2.5% ***
Any other result ***
</TABLE>

3. Incentive arrangements for any other period not herein provided for
shall be subject to mutual agreement of the parties.

D-3
<PAGE>

D. Payment of Incentives

With respect to any given calendar year under this Agreement, incentive payments
shall be calculated and paid on or before February 28 of the succeeding calendar
year.

D-4

<PAGE>

EXHIBIT 10.20

HEALTHEON SERVICE

EMPLOYER GROUP DISTRIBUTION AGREEMENT ***

This Healtheon Service Employer Group Distribution Agreement ("Agreement")
is entered into by and between Healtheon Corporation, a corporation organized
under the laws of Delaware, with principal offices at 4600 Patrick Henry Drive,
Santa Clara, CA 95954 ("Healtheon"), and Network Management Services, Inc.
("NMS"), effective as of September 30, 1999 (the "Effective Date").

1. Definitions. For purposes of this Agreement, the following terms shall
have the following meanings:

(a). "NMS Accounts" shall mean those customers that entered into a contract
with NMS to obtain the Healtheon Service and that are enrolled to access and use
the Healtheon Service.

(b). "Benefits Carriers" shall mean any benefit carrier which is designated
by NMS Account and/or NMS to receive enrollment data from NMS.

(c) "Employee" shall mean an employee of a NMS Account who is eligible for
benefits under the terms of a NMS Account's benefit plan who is enabled by NMS
and/or NMS Account to access and use the Healtheon Service or whose enrollment
or other benefit data is entered into and resides on the System.

(d). "End User" shall mean any person who is eligible for benefits under
the terms of a NMS Account's benefits plan who is enabled by NMS and/or a NMS
Account to access and use the Healtheon Service or whose enrollment or other
benefit data is entered into and resides on the System.

(e). "Healtheon Service" shall mean Healtheon's Internet-based benefit
enrollment service, as described on Exhibits A-1 and A-2 hereto, as well as all
updates, improvements, and modifications thereto. The Healtheon Service may not
include new or additional applications, services, or features that may be
offered by Healtheon in connection with Healtheon Service in the future.

(f). "System" shall mean the entire system, including all related hardware
and software, now or hereafter developed by or for Healtheon which enables NMS
Accounts and End Users to obtain access to, and use of, the Healtheon Service,
including all updates, improvements, and modifications thereto.

2. Licenses.

(a). Distribution of Healtheon Service. Subject to the terms and conditions
of this Agreement, during the Term (as defined herein), Healtheon hereby grants
and NMS hereby accepts, a nonexclusive and nontransferable right and license to
distribute to NMS Accounts headquartered in North America the Healtheon Service,
in each case for the purpose of permitting NMS Accounts to offer the Healtheon
Service to End Users. NMS shall not sublicense or otherwise distribute the
Healtheon Service except to NMS Accounts and pursuant to a written agreement
which contains the provisions substantially in the form set forth in Exhibit B
(the "Service Terms"). The written agreement of any NMS Account to the Service
Terms may be included as part of the service or administration agreement
obtained by NMS from a NMS Account. NMS shall have no right to distribute the
Healtheon Service directly to End Users or to distribute the Healtheon Service
in any other manner except as expressly stated herein. The Service Terms may be
changed by Healtheon upon prior written notice to NMS. NMS agrees to implement
the modified Service Terms for prospective or renewal NMS Accounts as soon as
possible after such notification, and in no event later than ninety (90) days
after Healtheon provides such notice. Implementation of the modified Service
Terms for

***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.20 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

existing NMS Accounts shall be mutually agreed to by the parties, with such
agreement not to be unreasonably withheld.

(b). Intellectual Property License. Healtheon hereby grants and NMS hereby
accepts, a nonexclusive and nontransferable right and license, exercisable only
within the United States and only in conjunction with providing the
Implementation Services (as defined in Section 6(b) below), to use all elements
of Healtheon's Intellectual Property (as defined in Section 8(a) below) which
are necessary in order for NMS to perform the Implementation Services to enable
NMS Accounts and their End Users to have access to the Healtheon Service and to
perform any related maintenance and support services. NMS shall have no right to
use Healtheon's Intellectual Property for any purpose other than limited purpose
expressly stated herein.

3. Restrictions.

(a). Source Code Restrictions. NMS agrees not to copy, modify, translate,
decompile, reverse engineer, disassemble, or otherwise determine or attempt to
determine source code from the System, the Healtheon Service and the
Intellectual Property pertaining thereto or to create any derivative works based
upon the System, the Healtheon Service and/or the Intellectual Property
pertaining thereto, and agrees not to permit or authorize anyone else to do so.
Notwithstanding the foregoing, Healtheon acknowledges and agrees that this in no
way prohibits NMS from independently developing a system, software, application
or tool that is similar in feature and functionality to the Healtheon Service
without using any of Healtheon's Confidential Information or Intellectual
Property. Healtheon acknowledges that NMS asserts that it began a development
project that may have included similar features and functionality to the
Healtheon Service, and that such project has been suspended. NMS agrees to
provide Healtheon with written notice at least thirty (30) days prior to NMS (i)
committing resources to develop a Web-based benefits enrollment application or
service with a project plan and deliverables; (ii) making a written or oral
commitment to an existing or prospective customer that it is developing and/or
will provide a non-Healtheon Web-based benefits enrollment application or
service; or (iii) communicating in its sales and marketing program or materials
that NMS is developing or will provide a non-Healtheon Web-based benefits
enrollment application or service. Healtheon has the right to terminate this
Agreement immediately upon receipt of such notice or the discovery of any of the
foregoing events. Healtheon acknowledges that NMS, on a regular basis, enhances
its capabilities to provide employer/broker self-service capabilities to its
existing benefits administration systems and that these types of enhancements
are not subject to this Section.

(b). Other Restrictions. NMS shall comply with all applicable laws, rules
and regulations to preclude the acquisition of unlimited rights to technical
data, software and documentation provided with the Healtheon Service to a
governmental agency, and to ensure the inclusion of the appropriate "U.S.
Government End Users" notice required by the U.S. Government agencies or other
applicable agencies. Each party hereto shall comply with all legal requirements
applicable to it with respect to the offering of the Healtheon Service, and
access to and use of the Healtheon Service, to NMS Accounts and End Users as
contemplated herein.

(c). Nonsolicitation of Employees. During the Term and for one year
thereafter, neither party may solicit or employ, directly or indirectly, the
employees of the other party for employment or engagement (as an independent
contractor or otherwise) by such party, or otherwise induce or recommend any
employee of the other party to terminate their employment with such party.

4. NMS Training Services and Qualification of NMS Personnel.

(a). Training Services. If NMS requires additional training sessions,
Healtheon will use commercially reasonable efforts to accommodate such requests.
The cost of any such additional training is set

2
<PAGE>

forth in Exhibit A. All travel and living expenses of NMS's personnel to attend
any off-site training and/or other start up sessions shall be the responsibility
of NMS.

(b). Qualification of Personnel. NMS shall ensure that (i) the
Implementation Services and all other services performed by NMS under this
Agreement, including any Legacy Information Systems Integration Services,
(collectively, "NMS Services") will be performed by persons who are employees or
authorized personnel of NMS, each of whom will have entered into a proprietary
rights assignment and confidentiality agreement with NMS; (ii) each person
assigned to perform the NMS Services shall have the proper skill, training and
background so as to be able to perform the such services in a competent and
professional manner; and (iii) all work product and any other materials,
documentation and other items delivered under this Agreement shall have been
completed in a thorough and professional manner in conformance with any
specifications applicable thereto.

(c). Co-branding of Healtheon Service User Interface. Healtheon agrees that
NMS may Co-brand the Healtheon Service with one or more NMS Marks (or the Marks
of NMS Accounts), and may market and sell the Co-branded Healtheon Service to
NMS Accounts. "Co-branding" means the placement of NMS's trade names,
trademarks, logos, service marks, and/or such other business identifiers ("NMS
Marks") on certain areas of the Healtheon Service using the Customizer service
and on Information Materials. Co-branding shall be subject to the "Healtheon
Co-branding Guidelines", which Healtheon may modify from time to time. Except as
expressly permitted in this Agreement, NMS shall not delete, remove, or
otherwise disable the Healtheon Marks from the Healtheon Service or co-brand the
Healtheon Service in any other way. NMS shall not offer NMS Accounts the option
of removing the Healtheon Marks from the Healtheon Service, and shall use all
reasonable commercial efforts to convince any prospective NMS Account that makes
such a request to accept Healtheon's standard co-branding strategy and to
communicate the advantages of such strategy. Under special circumstances,
Healtheon agrees that it will accommodate a particular NMS Account's demand to
remove the Healtheon Marks from the Healtheon Service for that NMS Account if
there are compelling business reasons.

5. Development. NMS may request custom development of the System and the
Healtheon Service to meet NMS's particular requirements. Healtheon may, in its
sole discretion, provide or agree to perform such custom development work on
terms as may be mutually agreed upon by the parties. All such custom development
work shall be described in a written Statement of Work ("SOW") signed by
authorized representatives of both parties. The SOW shall specify each party's
responsibilities, the intellectual property rights with respect to such custom
development work, any other special terms applicable to the SOW, and a reference
to this Agreement. Unless otherwise agreed to by the parties, NMS will pay
Healtheon's then current time and materials rates, plus reasonable and necessary
expenses for the custom development work. The terms of this Agreement will apply
to the SOW. If there is a conflict between the SOW and this Agreement, the SOW
will control.

6. Implementation of the Healtheon Service at NMS Accounts.

(a). Initiation of Healtheon Service. NMS shall provide written notice to
Healtheon at least ten (10) business days prior to distributing the Healtheon
Service to a NMS Account. Such notice shall contain the name of the NMS Account,
and the anticipated "go live" date. Healtheon will use commercially reasonable
efforts to accommodate any reasonable request made by NMS with respect to the
anticipated "go live" date. NMS shall provide Healtheon with assurances that
each NMS Account has executed an agreement that contains the Service Terms
within thirty (30) business days of the execution of such agreement. Healtheon
shall have the right to terminate the Healtheon Service for a NMS Account if NMS
does not provide Healtheon with assurance that each NMS Account has executed
such agreement within one hundred fifty (150) days of the "go live" date for the
NMS Account.

3
<PAGE>

(b). Implementation Services. NMS shall be solely responsible for providing
and/or coordinating all services necessary to implement the Healtheon Service
with the appropriate benefit plan options, including but not limited to Legacy
Information Systems Integration described on Exhibit A-4 and customization of
the Healtheon Service using Healtheon's Customizer application, at each NMS
Account (collectively, the "Implementation Services"). In the event that NMS
needs the assistance of Healtheon in performing any such Implementation
Services, then, subject to Healtheon's other commitments and priorities,
Healtheon will use commercially reasonable efforts to make appropriate Healtheon
personnel available to assist NMS. NMS shall pay Healtheon the fees set forth in
Exhibit A for such services, in addition to reimbursement of all reasonable
expenses incurred by Healtheon in performing such services.

(c). Access to the Healtheon Service. Subject to NMS's compliance with the
terms of this Agreement, Healtheon will provide each NMS Account and its End
Users specified by NMS with access to and use of the Healtheon Service during
the term of this Agreement and the "runoff" period described in Section 11(e)
below.

(d). Responsibilities. Additional relative responsibilities of NMS, each
NMS Account, and Healtheon, relating to the System, the Healtheon Service, and
Implementation Services are set forth in Exhibit C. NMS shall be solely
responsible for providing customer support to the NMS Accounts and their End
Users, as described in Exhibit C. At the request of NMS, Healtheon may, at its
sole discretion, provide customer support directly to NMS Accounts and End
Users.

(e). Enforcement of Service Terms. NMS shall use commercially reasonable
efforts to enforce the Service Terms with at least the same degree of diligence
used in enforcing its own similar agreements with others. NMS shall be
responsible for enforcing the on-line End User agreements for the Healtheon
Service ("End User Agreement"), a copy of which is attached hereto as Exhibit B.
NMS shall not modify, delete or otherwise remove or disable such End User
Agreement, and shall provide reasonable assistance to Healtheon in the
enforcement of any such End User Agreement. NMS shall use commercially
reasonable efforts to protect Healtheon's intellectual property rights, and NMS
shall notify Healtheon of any breach of a material obligation under a Service
Terms and/or End User Agreement which comes to the attention of NMS, and will
use commercially reasonable efforts to cooperate with Healtheon in any legal
action pertaining thereto.

(f). NMS's Relationship with NMS Accounts. NMS shall have the sole right to
charge NMS Accounts for any fees for the Healtheon Service at NMS Accounts,
including but not any fees for Implementation Services. Healtheon shall not be
allowed to charge or assess any fees directly against any NMS Accounts or End
Users unless otherwise agreed to by the parties. NMS's payment obligations under
this Agreement are independent of any fee arrangement between NMS and NMS
Accounts, and NMS shall pay Healtheon for all fees incurred under this Agreement
as set forth herein.

7. Fees and Payment.

(a). Fees. NMS will pay Healtheon the fees specified in Exhibit A for the
services obtained by NMS (collectively referred to as the "Fees"). The Fees
shall be paid as follows:

(i) Service Fees. NMS will pay Healtheon Service Fees at the rates
specified in Exhibit A (the "Service Fees") for providing the NMS Accounts
(and all of their End Users) designated by NMS with access to and use of
the Healtheon Service. This Service Fee includes the basic support services
provided by Healtheon as described in Exhibit A-5. The Service Fee will be
computed on a monthly basis based on the number of Employees for each NMS
Account eligible to receive the Healtheon Service as of the 15th day of the
preceding month. Service Fees shall be due and payable by NMS within thirty
(30) days after receipt of the invoice, and Healtheon will invoice NMS each
month for such Service Fees. An Employee shall be deemed "eligible" for the
purposes of calculating the monthly Service Fees when Healtheon enables
NMS,

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NMS Account and/or the Employee to access and use the Healtheon Service.
Irrespective of the number of actual Employees eligible for the Healtheon
Service, NMS agrees that it shall pay to Healtheon at least the minimum
Service Fees identified in Exhibit A.

(ii). Miscellaneous Fees. NMS shall pay Healtheon the Miscellaneous
Fees set forth on Exhibit A for the additional implementation, maintenance,
and support services which may be provided to NMS, as set forth in Exhibit
A (the "Miscellaneous Fees") as compensation for additional services
hereafter requested by NMS and provided by Healtheon.

(b). Changes to the Fees. The Service Fees set forth in Exhibit A may not
be changed by Healtheon during the Term of the Agreement. Thereafter, Healtheon
may change the Service Fees upon sixty (60) days prior written notice. Healtheon
may change all other fees annually during the Term (and any renewal term) upon
sixty (60) days prior written notice to NMS, with such fee changes to become
effective on January 1 of the applicable calendar year.

(c). Taxes. All Fees are exclusive of all taxes, duties or levies, however
designated or computed, excepting any tax measured on the net income of
Healtheon. NMS shall be responsible for and pay all taxes based upon NMS's
distribution of the Healtheon Service to NMS Accounts or upon payments due under
this Agreement including, but not limited to, sales, use, or value-added taxes,
duties, withholding taxes and other assessments now or hereafter imposed on or
in connection with this Agreement, exclusive of taxes based upon Healtheon's net
income.

(d). Records. During the Term and for a period of three (3) years
thereafter, NMS shall keep and maintain full, true, and accurate records
pertaining to each NMS Account using the Healtheon Service, including the name,
address of each NMS Account and containing all data reasonably required for the
calculation and verification of the Fees.

(e) Late Fees. If NMS fails to pay any Fees when due, the unpaid balance of
the Fees shall bear interest at the lower of (x) one and one-half percent (1.5%)
per month, or (y) the maximum lawful rate.

8. Proprietary Rights.

(a). Proprietary Rights. NMS acknowledges and agrees that Healtheon and/or
its suppliers own all right, title and interest in the Healtheon Services, the
related System, and any invention or confidential or other information contained
therein (other than data supplied by NMS, NMS Accounts, Employees or End Users),
including, but not limited to all software, in both machine-readable and printed
form, and all derivative works thereof other than as may be expressly set forth
in a SOW, and any copyrighted material which resides on the System or which is
incorporated as part of the Healtheon Services or which is distributed in
conjunction therewith, and all related technical know-how and all rights
therein, including, without limitation, rights in patents, copyrights, and trade
secrets applicable thereto, (collectively, the "Intellectual Property").
Accordingly, NMS hereby assigns and shall assign to Healtheon all right, title
and interest it may have in and to the Intellectual Property and all inventions
that may be embodied therein, and all copyrights, patent rights, trade secret
rights, or other intellectual property rights therein. All right, title and
interest in and to the Intellectual Property shall remain in Healtheon and its
suppliers. All such Intellectual Property is protected by copyright, trade
secret and other intellectual property laws and treaties. NMS may not reverse
engineer, decompile, disassemble, modify in any way or create derivative works
of the Intellectual Property. NMS shall not knowingly take any actions, to
jeopardize, limit or interfere in any manner with Healtheon's ownership of and
rights with respect to any Intellectual Property, the Healtheon Service, the
System and any related documentation. NMS shall require that each NMS Account
agree to the Service Terms. NMS shall have only those rights in and to the
Healtheon Service and the related Intellectual Property granted to it pursuant
to this Agreement.

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(b). Trademarks; Proprietary Notices. Healtheon's trademarks or trade names
are the property of Healtheon and NMS agrees that it shall not use any of
Healtheon's trademarks or trade names without Healtheon's prior written consent.
NMS agrees not to register any Healtheon trademarks or trade names without
Healtheon's express prior written consent. Subject to the provisions of Section
10(a) relating to private labeling of marketing materials for the Healtheon
Service, (i) NMS shall not remove or alter any trademark, trade name, copyright,
or other proprietary notices, legends, symbols, or labels appearing on or in
materials pertaining to the Healtheon Service and the documentation related
thereto delivered to NMS by Healtheon, and (ii) Each portion of the Healtheon
Service documentation reproduced by NMS shall include the intellectual property
notice or notices appearing in or on the corresponding portion of such materials
as delivered by Healtheon hereunder, if any.

(c). Data. Healtheon acknowledges and agrees that NMS and/or its NMS
Accounts and/or End Users own all right, title and interest in the data that is
entered into the System. Healtheon shall be entitled only to store such data on
the System, to enable NMS-designated NMS Accounts and their End Users to access
and use the data, and to otherwise use the data in connection with providing the
Healtheon Service hereunder, or as otherwise may be agreed to in writing by the
parties. Notwithstanding the foregoing, nothing herein shall prohibit Healtheon
from using aggregate data for any purpose whatsoever.

9. Confidential Information.

(a). Confidential Information. The parties acknowledge that in the course
of performing under this Agreement, each party may be exposed to or acquire
information, which is proprietary to or confidential to the other party, its
suppliers or customers. Any and all such information of one party in any form
obtained by the other party or its employees, agents, or representatives in the
performance of this Agreement (including but not limited to the Intellectual
Property and any and all health care data of End Users) shall be deemed to be
confidential and proprietary information of such party. The parties agree to
hold such information in strict confidence and in conformance with all
applicable legal requirements, to only permit use of such information by its
employees and agents having a need to know in connection with performance under
this Agreement, and not to copy, reproduce, sell, assign, license, market,
transfer, give or otherwise disclose such information to third parties or to use
such information for any purposes whatsoever, without the express written
permission of the other party and to advise each of their employees, agents, and
representatives of their obligations to keep such information confidential. All
such confidential and proprietary information described herein in whatever form
is hereinafter collectively referred to as "Confidential Information."

(b). Exceptions to Confidential Information. Notwithstanding the
obligations set forth in Section 9(a), above, the confidentiality obligations of
Healtheon and NMS shall not extend to information that (i) was, as of the time
of its disclosure, or thereafter becomes part of the public domain through a
source other than the receiving party; (ii) the receiving party can demonstrate
was known to the receiving party as of the time of its disclosure; (iii) the
receiving party can demonstrate was independently developed by the receiving
party without use of the Confidential Information; or (iv) the receiving party
can demonstrate was subsequently learned from a third party not under a
confidentiality obligation to the providing party. In the event that a receiving
party is required to disclose certain Confidential Information of a disclosing
party pursuant to court order or government authority, the receiving party shall
provide reasonable notice to the disclosing party prior to such disclosure and
shall cooperate with the disclosing party in an attempt it may make to obtain
protection from such disclosure.

(c). Additional Confidentiality Commitments. Notwithstanding the provisions
of this Section 9, neither party shall have the right to disclose the other
party's Confidential Information to third parties without written permission
from the other party and subject to such party obtaining from such third parties
a confidentiality agreement reasonably acceptable to the other party and
protecting the Confidential Information

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in accordance with the terms of this Agreement, except as otherwise required by
law or legal process. Neither party shall disclose the terms and conditions of
this Agreement with any person or entity, without the other party's prior
written consent, except for disclosure to such party's employees who have a need
to know the terms of this Agreement or as otherwise required by law or legal
process. In the event a party is required by law or legal process to disclose
the Confidential Information of the other party, it shall provide reasonable
notice to the disclosing party prior to such disclosure and shall cooperate with
the disclosing party in any attempt it may make to obtain protection from such
disclosure.

10. Marketing.

(a) Marketing Materials. Healtheon will provide NMS with information
materials to use in creating brochure(s) describing the Healtheon Services and
the System. NMS may modify such materials to make them consistent with its other
material but may not substantially change the content of such materials without
Healtheon's prior written approval. NMS may (but is not required to) "co-brand"
(i.e., market the Healtheon Service under NMS's own name or brand, as opposed to
Healtheon's) the marketing materials in accordance with guidelines to be
mutually agreed upon by the parties. Pre-production samples of any advertising,
merchandising, promotional or display materials containing all or a portion of
the marketing materials or describing the Healtheon Service and/or the System
(collectively referred to as "Information Materials") shall be submitted by NMS
to Healtheon, for Healtheon's timely approval as to quality, style, appearance,
usage of any Healtheon trademarks and accuracy of the information, prior to any
actual production, use or distribution of any Information Materials by NMS or on
its behalf. Subject to Healtheon's prior written approval, NMS shall have the
right to distribute such approved Information Materials to NMS Accounts and End
Users.

(b) Publicity. Any public announcement regarding the parties' relationship
and the nature of this Agreement shall be coordinated between the parties and
shall be in a form, which is mutually agreeable to the parties.

11. Term and Termination.

(a). Term. The initial term of this Agreement (the "Term") shall commence
on the Effective Date and shall end on (i) January 31, 2003 unless the parties
mutually agree to extend the term ("renewal term"), or (ii) such earlier date
upon which this Agreement may be rightfully terminated in accordance with the
provisions of this Section 11.

(b). Default. Subject to the cure periods contained herein, either party
has the right to terminate this Agreement if the other party breaches or is in
default of any material obligation hereunder, which default is incapable of cure
or which, being capable of cure, has not been cured within forty-five (45) days
after receipt of notice of such default from the non-defaulting party or within
such additional cure period as the non-defaulting party may authorize. In the
event NMS breaches Section 2, 3, 8 or 9 of this Agreement, Healtheon may
terminate this Agreement upon ten (10) days prior written notice. In the event
Healtheon breaches Section 3, 6(g), 8 or 9 of this Agreement, NMS may terminate
this Agreement upon ten (10) days prior written notice.

(c) Right to Terminate with Notice. Each party has the right to terminate
this Agreement upon one hundred eighty (180) days prior written notice to the
other party. In the event Healtheon terminates this Agreement without cause, the
applicable terms and conditions of this Agreement shall continue to apply, at
NMS's option, to existing NMS Accounts in accordance with the "runoff"
procedures described in Section 11(e) below, provided that NMS remains in
material compliance with this Agreement during the runoff period.

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(d). Insolvency. Either party may terminate this Agreement by written
notice to the other, and may regard the defaulting party as in default of this
Agreement, if the defaulting party becomes insolvent, makes a general assignment
for the benefit of creditors, suffers or permits the appointment of a receiver
for its business or assets, becomes subject to any proceeding under any
bankruptcy or insolvency law, which is not dismissed within sixty (60) days,
whether domestic or foreign, or has wound up or liquidated, voluntarily or
otherwise. Any event described in the immediately preceding sentence shall be
deemed a breach of this Agreement that is incapable of cure for purposes of
Section 11.

(e) Rights and Obligations of the Parties on Termination. Upon the
expiration or earlier rightful termination of this Agreement, the provisions of
this Agreement shall continue to apply and be enforceable to allow for the
orderly runoff of all NMS Accounts and End Users, on a NMS Account basis, until
the next annual anniversary or renewal date of such NMS Account's contract with
NMS occurring immediately after the expiration or termination of this Agreement
but not to exceed twelve (12) months from the effective date of expiration or
termination. Upon the expiration or earlier rightful termination of this
Agreement: (i) at the end of the last runoff period, NMS shall forthwith return
to Healtheon all papers, materials, and other properties of Healtheon then in
its possession or under its control, including but not limited to any elements
of the System, the related documentation and any Intellectual Property,
including any copies which have been distributed to any third parties; (ii) at
the end of each applicable runoff period, Healtheon shall return to NMS all data
(in such format and on such media as may be reasonably required by NMS) or other
property of NMS, NMS Accounts, Employees or End Users relating to the foregoing,
and shall thereafter delete or otherwise destroy any copies of such data and
property, except to the extent such information is contained in Healtheon's
backup systems, and (iii) thereafter each party shall furnish to the other party
an affidavit signed by an officer of such party certifying that, to the best of
his or her knowledge, such delivery or destruction has been fully effected.
Notwithstanding the foregoing, Healtheon shall not be obligated to provide NMS
Accounts access to and use of the Healtheon Service during the applicable runoff
periods if NMS defaults on its material obligations under this Agreement and
fails to cure such default within fifteen (15) days after such written notice
thereof from Healtheon. This Agreement, and each Healtheon Service Agreement and
all related End User License Agreements granted hereunder shall terminate upon
the effective termination date of this Agreement or at the end of the applicable
runoff period, whichever is later.

(f). Effect on Rights. Termination of this Agreement by either party shall
not act as a waiver of any breach of this Agreement and shall not act as a
release of either party from any liability for breach of such party's
obligations under this Agreement. Within thirty (30) calendar days of
termination of this Agreement with respect to any particular NMS Account and
following the return of all NMS Account data as aforesaid, NMS shall pay to
Healtheon all sums then due and owing. Upon termination of this Agreement (or at
the end of applicable runoff periods for NMS Accounts, if any), all licenses for
Healtheon Service and Intellectual Property granted under this Agreement shall
terminate. The respective rights and obligations of Healtheon and NMS under the
provisions of Sections 3(a), 3(b), 6(g), 7, 8, 9, 11, 13, 14 and 15 shall
survive any termination of this Agreement.

(g) Nonsolicitation of NMS Accounts. During the Term of this Agreement,
Healtheon agrees that it will not directly solicit or service (other than
pursuant to this Agreement) any then currently active NMS Account to access and
use the Healtheon Service through a direct contract with Healtheon, instead of
through such NMS Account's existing contract with NMS. Nothing herein prohibits
Healtheon from providing the Healtheon Service to any NMS Account (active or
inactive) through the competitive efforts of another distributor or other third
party.

12. Representations and Warranties.

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(a). The System and Services. NMS acknowledges that complex computer
systems and software, such as the System, and on-line services such as the
Healtheon Service are rarely free of defects, perform without interruption and
provide complete security, and Healtheon does not warrant the same. However,
Healtheon does warrant that during the Term, the System shall function in
conformance with the specifications in all material respects and that the
Healtheon Service will provide the functions described on Exhibit A-2, excepting
only temporary (not to exceed up to four (4) consecutive hours per occurrence)
interruptions in service, except for Scheduled Downtime, unavailability excused
under Section 16(i) (Force Majeure) or interruptions resulting from problems
with the software, hardware, and other equipment of third parties including NMS,
NMS Account, or End User. As used herein, "Scheduled Downtime" refers to that
period of time when the Healtheon Service is unavailable to End Users to allow
Healtheon to perform any necessary maintenance, repair, upgrades, and updates.
Healtheon shall, at its sole cost and expense, make all corrections necessary to
correct any "High Priority Errors" which cause the System not to function in
accordance with the specifications in any material respect and the Healtheon
Service to remain unavailable for more than four (4) consecutive hours between 4
a.m. and 6 p.m. PST and Healtheon shall update the System to include any
required maintenance modifications as soon as commercially practicable. A "High
Priority Error" shall mean an error resulting in a catastrophic failure, system
down, data corruption or loss of data, or a major loss of functionality without
a known work around. Errors that are not High Priority Errors will be addressed
in conformance with assessment, prioritization and scheduling criteria to be
mutually agreed upon by Healtheon and NMS. NMS further acknowledges and agrees
that certain information which is provided to NMS Accounts and End Users as part
of the Healtheon Service is provided by third parties, such as health plans,
other Benefits Carriers and the NMS Accounts themselves (the "Third Party
Material"), and that Healtheon has not reviewed any such material for its
accuracy or appropriateness and Healtheon makes no representations or warranties
of any nature whatsoever regarding any Third Party Material and Healtheon
assumes no liability of any kind with respect to any Third Party Material.

(b). Healtheon Ownership. Healtheon represents and warrants (i) Healtheon
has full and sufficient rights to grant the rights and license granted to NMS in
this Agreement; and (ii) that the elements of the System developed by Healtheon
(i.e., excluding third party hardware and software) does not infringe any U.S.
issued patent, copyright, trademark or trade secrets or rights of any third
party of which, after due inquiry, Healtheon is aware, nor has any claim
(whether or not embodied in an action, past or present) of such infringement
been threatened or asserted, and no such claim is pending against Healtheon or,
insofar as Healtheon is aware against any entity from which Healtheon has
obtained such rights. Healtheon's sole obligation to NMS, for a breach by
Healtheon of the foregoing representations and warranties shall be Healtheon's
obligations under Section 13.

(c). NMS's Services and Warranty. NMS represents and warrants that (i) the
Implementation Services and all other NMS Services which relate to the Healtheon
Service will be performed by persons who are employees or other authorized and
trained personnel, each of whom will have entered into a proprietary rights
assignment and confidentiality agreement with NMS; (ii) each person assigned to
perform the NMS Services shall have the proper skill, training and background so
as to be able to perform such services in a competent and professional manner
and (iii) all work product and any other materials, documentation and other
items delivered under this Agreement shall have been completed in a thorough and
professional manner in conformance with any specifications applicable thereto.
NMS further warrants that its provision of the NMS Services hereunder will be in
compliance with all applicable laws, rules and regulations. NMS warrants that
for a period of one hundred eighty (180) days following each Implementation (or
any part thereof) performed by NMS, such Implementation (or any part thereof)
shall function in conformance with any applicable specifications and
requirements in all material respects. NMS shall, at its expense, make or have
an authorized integrator make all reasonable corrections requested by Healtheon
or the applicable NMS Account to correct any errors which cause the
Implementation to fail to function in accordance with the specifications or
requirements in any material respect.

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(d). Compliance with Applicable Laws. NMS acknowledges that the information
conveyed through the Healtheon System and Service may constitute confidential or
proprietary information of End Users or other persons or entities, and NMS
agrees that it (and not Healtheon) is solely responsible at all times for
obtaining all End User and any other legally or contractually required consents
or permissions necessary or advisable to disclose, transmit and process such
information through the Healtheon System and Service. NMS represents and
warrants that all information that it or its NMS Accounts and End Users provide
through NMS and any consents required for such information shall be in
compliance with all applicable laws, rules and regulations and contractual
obligations that may now or hereafter govern. NMS further represents and
warrants that its offer and sale of the employee benefits enrollment through the
Healtheon Service hereunder will be in compliance with all applicable laws,
rules and regulations.

(e). Authority. Healtheon and NMS each hereby represents and warrants to
the other that it is duly organized and validly existing under the laws of the
jurisdiction in which it is organized, in good standing therein, and has the
power to enter into this Agreement and to perform its obligations hereunder and,
furthermore, that the performance by it of its obligations under this Agreement
has been duly authorized by all necessary corporate or other action and will not
violate any provision of law or regulation or of any corporate charter or
bylaws.

(f). Back-up. Healtheon warrants that it shall maintain reasonable
safeguards against the destruction, loss and alteration of software and data
that is in the possession of Healtheon. In the event that additional safeguards
for NMS data are reasonably requested by NMS, Healtheon shall provide such
additional safeguards, and NMS shall reimburse Healtheon for any reasonable
additional fees and costs incurred by Healtheon. Healtheon, at no additional
cost to NMS, shall perform (i) incremental daily backups and (ii) weekly full
backup of all NMS and NMS Account data in its possession. In the event of loss
of data by Healtheon, Healtheon shall regenerate the lost data at Healtheon's
sole cost and expense as soon as practicable within ten (10) business days from
notification of the loss.

(g) Y2K Compliance. Healtheon hereby certifies that it has made reasonable
inquiry and investigation into whether the Healtheon Service and System are Year
2000 ("Y2K") Compliant (as defined below) such that the availability and
provision of the Healtheon Service will continue in accordance with the
requirements of this Agreement into the year 2000. Should Healtheon become aware
of any Y2K compliance issue that would or could have a material negative impact
on its ability to provide the Healtheon Service as contemplated herein, it shall
diligently work to minimize such negative impact on the Healtheon Service and
NMS (and its End Users). In case of breach of the foregoing, Healtheon promptly
shall correct the problem and provide NMS (and its End Users) with access to and
use of a corrected Healtheon Service. "Year 2000 Compliant" means that the
ability to calculate and compare date data between the twentieth and
twenty-first centuries (including calendar dates for the Leap Year), without
impairment in the functioning of the Healtheon Service, when used in accordance
with any documentation provided by Healtheon, but only if all associated
products, such as hardware, software and firmware, used in combination with the
Healtheon Service properly exchange date data with the Healtheon Service and
System.

(h) Representations Regarding the Healtheon Service. NMS represents and
warrants that it will not, directly or indirectly, make any representations to
any third parties, including NMS Accounts, of the services provided under this
Agreement in any manner which is inconsistent with Healtheon's specifications or
representations and warranties provided hereunder.

(i). No Other Representations or Warranties. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, HEALTHEON MAKES NO REPRESENTATIONS OR WARRANTIES OF CONDITION OF ANY
KIND WHETHER EXPRESS, IMPLIED OR STATUTORY (EITHER IN FACT OR BY OPERATION OF
LAW) WITH RESPECT TO THE HEALTHEON SERVICE, THE SYSTEM AND THE DOCUMENTATION

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RELATED THERETO. TO THE EXTENT PERMITTED BY APPLICABLE LAW, HEALTHEON EXPRESSLY
DISCLAIMS ALL IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE. HEALTHEON DOES NOT WARRANT THAT THE HEALTHEON SERVICE, THE
SYSTEM OR THE DOCUMENTATION ARE ERROR-FREE OR THAT OPERATION OF THE HEALTHEON
SERVICE OR THE SYSTEM WILL BE SECURE OR UNINTERRUPTED AND HEALTHEON HEREBY
DISCLAIMS ANY AND ALL LIABILITIES ON ACCOUNT THEREOF EXCEPT FOR SUCH LIABILITIES
EXPRESSLY ASSUMED PURSUANT TO THIS AGREEMENT.

(j). EXCLUSIVE REMEDIES. NMS' EXCLUSIVE REMEDY FOR ANY DEFAULT OR BREACH OF
THE WARRANTIES PROVIDED IN SECTIONS 12(a), 12(f), AND 12(g), OR ANY OTHER
EXPRESS OR IMPLED WARRANTY RELATING TO THE HEALTHEON SERVICE (EXCLUDING THE
WARRANTIES SPECIFIED IN SECTION 12(b)) OR THE HEALTHEON SYSTEM SHALL BE LIMITED
TO INVOCATION, AT HEALTHEON'S EXPENSE, OF THE ERROR CORRECTION PROCEDURES SET
FORTH IN THOSE SECTIONS (E.G., CORRECTION OF HIGH PRIORITY ERRORS, REGENERATION
OF LOST DATA, AND CORRECTION OF Y2K COMPLIANCE ISSUES), AND IN THE EVENT THE
ERROR IS NOT CORRECTED WITHIN NINETY (90) DAYS, TERMINATION OF THIS AGREEMENT
AND A PRO-RATA REFUND OF THE ONE-TIME START UP FEES STATED IN EXHIBIT A OF THIS
AGREEMENT PRORATED BASED UPON A FIVE (5) YEAR STRAIGHT LINE DEPRECIATION METHOD.
Healtheon may deduct from any such payment all other sums due Healtheon from
NMS.

13. Indemnification.

(a) Intellectual Property Indemnification by Healtheon. Healtheon will, at
its expense, defend or settle any claim, action or allegation brought against
NMS by a third party, other than a NMS Account, that the System and/or Healtheon
Service infringes any patent, copyright, trademark or trade secret or other
intellectual property right of any third party excluding NMS Accounts, and will
pay any final judgments awarded or settlements entered into, provided that NMS
gives prompt written notice to Healtheon after it receives notice of such claim,
action or allegation of infringement and gives Healtheon the authority to
proceed as contemplated herein. The failure to gove such notice shall not affect
NMS' indemnification rights hereunder unless the failure to prompt notice has
materially and adversely affected Healtheon's ability to successfully defend
against such claim, action or allegation. NMS may, at its own expense,
participate in the defense of any such claim with counsel reasonably acceptable
to Healtheon. However, Healtheon will have the exclusive right to control the
defense of any such claim, action or allegation and make settlements thereof at
its own discretion, and Distributor may not settle or compromise such claim,
action or allegation, except with prior written consent of Healtheon. NMS will
give such assistance and information as Healtheon may reasonably require to
settle or oppose such claims, at Healtheon's expense.

In addition, Healtheon may, at its sole option and expense: (i) provide NMS and
its Company Accounts access to a system and service which is functionally
equivalent to the System and Healtheon Service, without additional charge; (ii)
modify the System and/or the Healtheon Service to avoid the infringement; or
(iii) obtain a license for NMS to continue use of the Healtheon Service for the
Term of this Agreement and pay for any additional fee required for such license.
In the event that, in Healtheon's reasonable judgment, none of the foregoing
options are feasible, Healtheon shall have the right to terminate this
Agreement. [MOVED FROM BELOW

(b). Limitations on Infringement Indemnities. Healtheon shall have no
indemnity obligation for claims resulting from the Implementation Services
performed by NMS which results or which is alleged to result from (i)
development work performed by Healtheon in compliance with NMS' specifications
where Healtheon's method of compliance has been compelled by the terms of NMS'
specifications; (ii) NMS' use of the System and/or Healtheon Service in
combination with any hardware or software not furnished by,

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authorized by, or generally approved by Healtheon hereunder or any modifications
which have been made by Distributor; or (iii) for any claims which relate to any
Third-Party Material or any other information or data which has been supplied by
Distributor or its affiliates, including NMS Accounts and , End Users or which
has been provided by any health plans and/or other Benefits Carriers, which is
incorporated into the System and/or the Healtheon Service. In addition,
Healtheon shall have no indemnity obligation for claims of infringement
resulting from NMS' failure within a reasonable time frame to implement any
replacement or modification of the System which conforms to the requirements of
Section 13(d) herein. Healtheon's obligations under this Section 13 are
Healtheon's entire liability with respect to any third-party claim, action or
allegation infringement of any patent, copyright, trade secret or other
proprietary right by the System and/or Healtheon Service.

(c). Indemnification by NMS. NMS agrees to indemnify and hold harmless and
defend Healtheon and its suppliers from and against any and all claims,
liabilities, losses, damages expenses and costs (including reasonable attorneys'
fees and costs) arising out of, in connection with or relating to (i)
Distributor's breach of any representation or warranty to a third party
(including NMS Accounts) relating to the Healtheon Service or System; (ii) any
use of the Healtheon Service by NMS Accounts or End Users (excluding patent and
copyright infringement claims resulting from such use in accordance with
Healtheon documentation); (iii) any data or information provided by NMS which
was incorrect (excluding all such information provided to NMS by Healtheon) or
was not delivered in a timely manner or which violates any rights of any third
party or any claim based on NMS' noncompliance with any law, regulation or other
government requirement (other than resulting from its noncompliance); (iv) the
use of or the failure of NMS' proprietary benefits administration system, if
applicable, in conjunction with the System and/or the Healtheon Service; (v) any
modifications to the System or Healtheon Service which were requested by NMS and
performed by Healtheon in accordance with NMS' specifications and/or any
unauthorized modifications made by NMS to the Healtheon Service or System or the
use of the Healtheon Service or System in combination with any hardware or
software not authorized by Healtheon.

(d) Method of Asserting Claims; Payment of Claims. As used herein, an
"Indemnified Party" shall refer to a "Healtheon Indemnified Party" or a "NMS
Indemnified Party," as applicable, the "Notifying Party" shall refer to the
party hereto whose Indemnified Parties are entitled to indemnification
hereunder, and the "Indemnifying Party" shall refer to the party hereto
obligated to indemnify such Notifying Party's Indemnified Parties.

In the event that any of the Indemnified Parties is made a defendant in or party
to any action or proceeding, judicial or administrative, instituted by any third
party (any such third party action or proceeding being referred to as a
"Claim"), the Notifying Party shall give the Indemnifying Party prompt notice
thereof. The failure to give such notice shall not affect any Indemnified
Party's ability to seek reimbursement unless such failure has materially and
adversely affected the Indemnifying Party's ability to defend successfully a
Claim. The Indemnifying Party shall be entitled to control, contest and defend
such Claim; provided, that the Indemnifying Party (i) has a reasonable basis for
concluding that such defense may be successful and (ii) diligently contests and
defends such Claim. Notice of the intention so to contest and defend shall be
given by the Indemnifying Party to the Notifying Party within 20 business days
after the Notifying Party's notice of such Claim (but, in all events, at least
five business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
employed by the Indemnifying Party. The Notifying Party shall be entitled at any
time, at its own cost and expense (which expense shall not constitute an
indemnifiable loss), to participate in such contest and defense and to be
represented by attorneys reasonably acceptable to Indemnifying Party of its or
their own choosing. If the Notifying Party elects to participate in such
defense, the Notifying Party will cooperate with the Indemnifying Party in the
conduct of such defense. . If a party is entitled to indemnification hereunder,
such party's costs and expenses that are reimbursable pursuant to this Section
shall be promptly reimbursed by the Indemnifying Party following the receipt of
notice with respect to such costs and expenses by the Indemnifying Party.

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<PAGE>

14. Disclaimer; Limitation of Liabilities.

(a). Limitation of Liabilities. TO THE EXTENT ALLOWED BY APPLICABLE LAW, IN
NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS,
LOSS OF USE OR DATA, INTERRUPTION OF BUSINESS, OR FOR INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF
ESSENTIAL PURPOSE OF ANY LIMITED REMEDY, OR FOR ANY CLAIM AGAINST A PARTY BY ANY
THIRD PARTY, INCLUDING ANY NMS ACCOUNTS. In addition, in no event will Healtheon
or any of its suppliers be liable for (i) any representation or warranty made to
any third party by NMS or any agent of NMS; (ii) the failure of the Healtheon
Service to perform except as, and solely to the extent, otherwise expressly
provided herein; or (iii) the failure of the Healtheon Service to provide
security; (iv) any use of the Healtheon Service or the related documentation or
the results or information obtained or decisions made by End Users of the
Healtheon Service; or (v) any claims based on or arising from Third-Party Data.
Notwithstanding anything in this Agreement to the contrary, Healtheon's entire
liability to NMS for damages concerning the performance or nonperformance by
Healtheon or in any way related to the subject matter of this Agreement, and
regardless of whether the claim for such damages is based in contract or tort,
shall not exceed the amount received by Healtheon from NMS during the six (6)
months immediately preceding the day the act or omission occurred that gave rise
to the claim. Either party may obtain equitable or injunctive relief in addition
to the other remedies available under this agreement.

15. Dispute Resolution. Any disputes between the parties under this
Agreement that cannot be resolved by direct negotiations between the parties
shall be submitted to and determined by binding arbitration. The arbitration
shall be conducted under the commercial arbitration rules of the American
Arbitration Association then in effect. The arbitrator will be chosen from a
panel of persons with knowledge of industry practices in the health care data
information processing and admitted to practice law in at least one state. In
connection with any arbitration hearings, the parties shall be entitled to
submit written legal briefs for consideration by the arbitrator in accordance
with a schedule to be negotiated by the parties or to be established by the
arbitrator if the parties are unable to agree. The parties agree that the
arbitrator may award any remedy consistent with the commercial arbitration
rules; provided that the arbitrator will not have the authority to award any
punitive, exemplary or other non-compensatory damages, or any penalties relating
to any dispute arbitrated or litigated. The arbitrator may award reasonable
attorneys' fees and costs to the prevailing party. The arbitration will be held
in Santa Clara, California or any other mutually agreeable location. The parties
will be entitled to discovery to the same extent provided for civil actions in
the federal district court of the jurisdiction in which the arbitration is held.
The parties agree to endeavor in good faith to select an arbitrator within (30)
days after either party provides written notice to the other of its demand for
arbitration and to endeavor in good faith to complete the arbitration within
ninety (90) days following such notice. If the parties cannot mutually agree
upon an arbitrator within such 30-day period, one will be selected in accordance
with the rules of the AAA.

16. Miscellaneous.

(a). Entire Agreement. This Agreement, together with all appendices or
other attachments referenced herein, constitutes the entire agreement between
Healtheon and NMS regarding the subject matter of this Agreement and supersedes
any memorandums of understanding, written proposals, terms sheets and any other
oral discussions or agreements.

(b). Severability. Any invalidity, in whole or in part, of any provision of
this Agreement shall not affect the validity of any other of its provisions.

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<PAGE>

(c). Notices. Wherever under this Agreement one party is required or
permitted to give notice to the other party, such notice shall be deemed given
when delivered by hand, when telecopied or faxed and receipt confirmed, when
sent by overnight courier service to the address set forth above, or on the
third business day after mailing when mailed by United States Registered or
Certified Mail, Return Receipt Requested, postage prepaid, and addressed
attention: President with a copy attention: General Counsel. Either party hereto
may from time to time change its address for notification purposes by giving the
other party prior written notice of the new address and the date upon which such
new address will become effective.

(d). Insurance. During the Term of this Agreement, each party shall
maintain, either through external insurance coverage or internal self insurance,
such capability to bear the risks associated with the performance of this
Agreement as is reasonable, prudent and advisable under the circumstances.

(e). Assignment. This Agreement and the licenses granted hereunder are to
NMS as a specific legal entity , and are not assignable by NMS, nor are the
obligations imposed on NMS delegable without Healtheon's prior written consent.
Any attempt to sublicense (except as expressly permitted herein) assign or
transfer any of the rights, duties or obligations under this Agreement in
derogation hereof by either party shall be null and void.

(f). Amendment. No alteration, amendment, waiver, cancellation or any other
change in any term or condition of this Agreement shall be valid or binding on
either party unless mutually agreed to in a writing signed by both parties.

(g). Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the state of California, without reference to
conflict of laws principles.

(h). Independent Contractors. The parties hereto are independent
contractors. Nothing contained herein or done in pursuance of this Agreement
shall constitute either party the agent of the other party for any purpose or in
any sense whatsoever, or constitute the parties as partners or joint venturers.

(i). Force Majeure. Either party shall be excused from any delay or failure
in performance hereunder, except for the payment of monies, caused by reason of
any occurrence or contingency beyond its reasonable control, including but not
limited to, acts of God, earthquake, riots, war, actions or decrees of
governmental bodies or communications line or power failures. The obligations
and rights of the party so excused shall be extended on a day-to-day basis for
the period of time equal to that of the underlying the cause of the delay,
provided that Healtheon shall exercise commercially reasonable efforts to resume
the provision of the Healtheon Services and the availability of the System as
quickly as is practicable under the circumstances.

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<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and do each hereby warrant and represent that their respective signatory whose
signature appears below has been and is on the date of this Agreement duly
authorized by all necessary and appropriate corporate action to execute this
Agreement.

Healtheon Corporation NMS

By: /s/ Rajesh Radhakrishnan By: /s/ Mike Bingham
------------------------------- ----------------------------------
Name: Rajesh Radhakrishnan Name: Mike Bingham
------------------------- ---------------------------
Title: Title: Senior Vice President
------------------------- ---------------------------

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<PAGE>

EXHIBIT A
---------

HEALTHEON SERVICES AND FEES

1. Service Fees

The Service Fees described below in this part 1 constitute compensation for the
distribution by Distributor, and the access and use, by any Company Account and
its respective End Users, of the Healtheon Service, and specifically for the
functionality described on Exhibits A-1 attached hereto (the "Core Benefits
Administration Module" and "Data Distribution"), being all three components (the
Web Employee Self-Service, Administrator and Data Distribution)

For the term of the contract, the Service Fee will be calculated:

* At $*** Per eligible Employee Per Year (PEPY) for eBenX Accounts that use
the Healtheon Service for one a one-time open enrollment only use and
* At $*** Per eligible Employee Per Year (PEPY) for all other eBenX Accounts

2. Miscellaneous Fees (See Exhibit A-2)

The Miscellaneous Fees described below in this part 2 constitute compensation
for any services to be provided by Healtheon in connection with the
miscellaneous services described on Exhibit A-2 attached hereto.

Implementation Services- as requested $*** per hour
Refresher Training $***
Miscellaneous Technical Support $*** per hour

4. Support Services (See Exhibit A-3)

The Support Services described on Exhibit A-3 attached hereto are included in
the Service Fees.

5. Travel & Other Expenses

In addition to the other fees provided in this Exhibit A, Distributor shall be
responsible for Healtheon's travel and related expenses and other reasonable and
customary out-of-pocket expenses, which are incurred by Healtheon personnel in
performing any of the foregoing services.

*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.20 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

Exhibit A-1
-----------

Core Benefit Administration Module Description

Healtheon provides a suite of Internet-based applications that are accessible by
employees, human resource (HR) managers, external administrators and benefits
providers. Release 3.1 of this service includes the following components:

BenefitCentral(TM)

Web Employee Self-Service
Self-service on-line benefits enrollment and administration that presents
employees with a customized presentation of their personal benefits options with
a decision-support environment to aid in their benefits selection. Employees go
through a point-and-click process to enroll in their benefits. Employees can
make yearly benefits selections during open enrollment, make benefits changes as
the result of qualifying events and can review and update personal and benefit
information as needed anytime during the benefit year. Benefits which can be
supported include: medical plans, prescription drug plan, mental
health/substance abuse plan, vision plan, dental plan, basic life, supplemental
life, long term disability, short term disability, AD&D, 401 (k), employee
savings and retirement accounts, vacation sell/purchase, dependent care flexible
spending accounts, health care flexible spending accounts, group legal, long
term care, and other benefits. Specific functional capabilities include:

On-line employee communications - including summary plan descriptions and
benefit comparison charts for health care benefits

Personalized presentation - the presentation of benefit choices for each
participant is specific to the benefits for which they are eligible, based
on their unique dependent, demographic and employment information

Dynamic enrollment workflow - the workflow a participant is led through is based
upon business rules and options associated with benefit plan, benefit
provider and employer requirements as well as their unique situation of
open enrollment/new hire/change enrollment

Real time calculations - eligibility rules and cost calculations are based on
real-time evaluations of customized business rules

Personal information - entering and managing demographic and dependent
information

Beneficiaries - choosing primary and contingent beneficiaries and itemizing
percentages for different beneficiaries across benefits

Coordination of Benefits - supplying coordination of benefits information
regarding other health policies that may cover the participant.

Administrator
An on-line application which provides access to perform the day-to-day
activities required to effectively administer a benefits program. Some of the
features of the Administrator are:

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<PAGE>

Data Maintenance - Ability to review and update personal, dependent, employment,
benefits elections, and benefit plan data. This includes the capability to
enter new hires directly into the system.
.Multi Year Support - Ability to manage both current year and next year's
enrollments and enrollment activities though one interface.
Improved Query Capabilities - Ability to perform quick and complex searches to
support efficient and more flexible queries. Results of queries will remain
available for repetitive references.
EventMonitor - Full control over the events, activities, and all associated
parameters for each participant in an easy to use interface.
Viewing History - Ability to view person, employment, and election history at a
specific point in time or on a sequential basis. To support this, effective
dating has been added to the participants demographic and employment data.
Overrides - Multiple levels of overrides to manage different types of exception
processing on a participant's enrollment records.
Approvals - Approval service for handling EOI, Student, HMO forms, and other
back-office follow-up
Defaults Assignments - Ability for administrator to assign the default benefit
elections to participant(s) if the participant(s) do not make elections
through BenefitCentral(TM).

Reporter (part of Administrator)
An on-line application which allows administrators to select, configure,
schedule, run, view, download, and print standard or custom reports. Some
of the features of Reporter are:

Configurability - Reports can be configured through parameters which allow
users to broaden or minimize the scope of the data that is display on
the report, thus retrieving data that better meet their needs.
Scheduler - Once configured, reports can be scheduled to run once at a
specific time, or on a repetitive basis.
Internet Report Viewer - Viewing a report is through a viewer plug in that
the user downloads for free from Healtheon. This viewer supports
demand paging, pagination, searches, extracts, and printing.

Customizer (provided to Distributor only)
An on-line application which allows for the setup and definition of the end-user
environment for online benefits enrollment. Customer supports the setup of
company information, business rules, benefit plan details and presentation,
including :

Benefit Packages - Ability to categorize benefit plans by benefit groups if
necessary. For example, the benefits for union employees may be different
than the benefits for non-union employees.
MultiYear Support - Ability to setup the next enrollment period rules
independent of the current year rules. The Customizer can access through
one interface, both the current year and the subsequent year's rules for
easier setup and implementation.
Components - Ability to perform setup on components (i.e. rules, costs, events,
assets, etc.) and subsequently map those components to the desired
customized benefits. This allows components to be used across benefits.
Asset Management - Ability to consolidate graphics, text, marketing pages, etc.
in one location for easy reference when creating the Web content for the
overall presentation as well as the specific benefit presentation.
Rule Templates - The ability to create rules (i.e. eligibility rules) from a set
of comprehensive rule templates which provide for point and click
completion. This results in a more user friendly interface with less rules
creation and more point and click functionality.

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<PAGE>

Cost Tables - Easier setup and maintenance of costs through new costs tables.
These cost tables provide the ultimate flexibility in calculating a
participant's specific cost.
Event Customization - Benefit related events are customizable with an option to
allow each company to specify system behavior and the allowable options a
participant has as a result of the determined event.
Standard and Default Benefits - Ability to customize the standard and default
benefits that can be assigned by the administrator to the appropriate
participants.
Effective Dating - Rules are effective dated to ensure the appropriate rule for
the time is used for the transaction being processed.
Signoff - Provides the Customizer with a validation mechanism to ensure
customization was performed accurately and consistently within
predetermined boundaries.

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<PAGE>

Exhibit A-2
-----------

Miscellaneous Services

Implementation Services

For the stated hourly fee, Healtheon can assist Distributor in performing the
Implementation Services including:

Account set up customization

Healtheon can provide optional account set up services which may include
any activities related to customizing a Company Account on the Healtheon
Service.

Legacy Information Systems Integration

Through a one-time set-up process that is a separate option for the Company
Account, certain legacy information systems (LIS's) at the Company Account,
such as human resources information systems (HRIS) or payroll systems, can
transmit data to and receive data from the Healtheon Service. This file
exchange process can allow data to be synchronized between the LIS and
Healtheon. File exchange can be processed manually through the use of
Healtheon's Administrator.

Worksheet and report design

Healtheon can provide optional consultation services to custom design the
necessary End User benefit enrollment worksheet, confirmation report and
other forms necessary for the enrollment process.

Refresher Training

For the stated flat rate fee, Healtheon will also provide a Refresher Training ,
which includes up to *** hours of additional/refresher training of the following
processes:

Deployment
- ----------
Project Planning
Data Gathering
Using the Healtheon Customizer
Data Distribution
Testing
Sales & Marketing
- -----------------
Target Market Definition
Sales Strategies
Client Qualification
Presentation Materials
Product Demonstrations
Administrative & Maintenance Processes
- --------------------------------------
Using the Healtheon Administrator
Using the Healtheon Customizer

*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.20 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.

<PAGE>

The Refresher Training sessions will occur at locations to be mutually decided
by the parties. No more than 8 of Distributor's personnel may attend such
sessions.

Miscellaneous Technical Support
- -------------------------------

Healtheon may perform, at additional cost based on time and material rates, the
following additional services, in accordance with a mutually agreeable schedule:

* For the systems and data integration portion of a project, Healtheon can
review implementation plans, schedules and provide general counseling and
support while researching the nuances of the interface details.
* For Company Account setup, Healtheon can provide "sanity" checks on
customization activities and help in implementing complex rules within the
Healtheon environment.
* For the each end-to-end Company Account solution, Healtheon can provide a
technical review of implementation.
* Perform QA "sanity" checks on customization modifications. Help with
implementing complex rules within the Healtheon environment.
* Aid Distributor in researching the nuances of the interface details.
* Provide support to designated Distributor personnel to confirm that access
problems are within the employer's network or ISP connection. Aid in
managing Company Account's ISP connection. Trace source of exact problem
causing access problem potentially resident in desktop (e.g., inadequate
memory), LAN (e.g., security proxy not set or packet loss), ISP connection.
Develop trouble-shooting guides.
* Healtheon can provide marketing and pre-sales support in Company Account
presentations for business development opportunities initiated by
Distributor.
* For systems and data integration, Healtheon can provide project management
of system and data integration activities.
* For Account Customization, Healtheon can provide analysis and processing of
data to ensure consistency with coded rules. Turnkey customization
projects, including dedicated personnel to perform analysis of
requirements.
* Provision of technical assistance for data mapping and other generic SI
issues.
* Review interface changes to ensure proper overall data management.
* Develop new custom reports not available in standard offering.
* Develop and manage billing system for Distributor to bill their Company
Accounts.

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Exhibit A-3
-----------

Support Services Description

Basic Technical Support:

2nd Tier Support to Distributor for systems and data integration, account
customization, and all end-to-end Activities involved in deploying a
Company Account solution. Maintain integration documentation, customization
documentation, and requirements and implementation specifications.
Healtheon will provide 2nd tier Company Account support to Distributor. If
Distributor cannot answer questions posed by Company Accounts, Healtheon
will aid Distributor in deriving the answer. Distributor will then
communicate the necessary resolution with the Company Account.
Resolve questions arising from initial training provided by Healtheon to
Distributor personnel
Resolve questions regarding customization guidelines and tools. Move modified
rules, logos or text from test area to production area. Maintain copies of
customization documentation
Provide reports with detailed transaction statistics regarding data file
transfers. Maintain copies of legacy interface documentation.
Provide 7x24 access support to ensure that the Healtheon Service is available
and accessible from the Internet and operating properly.
Resolve questions associate with on-going enhancement/release. Receive and
document requests for feature enhancements in future releases. Provide
"key" Distributor personnel aid in their Healtheon account management
(e.g., forgotten passwords, access privilege changes, etc.). Provide all
necessary support and assistance in connection with any upgrades or System
enhancements.
On a semi-annual basis or in conjunction with major releases, provide updated
documentation and release implementation.

7
<PAGE>

EXHIBIT B

SERVICE TERMS

Company acknowledges that by subscribing to utilize the [System Name to
Come] Service, Company has agreed to the following terms and conditions for the
Term of the Company's subscription of the Service.

1. Proprietary Rights. Company acknowledges and agrees that the Administrator's
vendor and/or the Administrator and/or their suppliers (and not the
Company)(collectively, the "Providers"), own all right, title and interest in
the System, the benefit enrollment and administration services included in the
System (collectively, the "Service") and any invention or confidential or other
information contained therein, including, but not limited to the software and
any copyrighted material which resides on the System and/or the Services and all
trademarks which pertain thereto (the "Intellectual Property"). Accordingly,
Company hereby assigns and shall assign to the Providers, as appropriate, all
right, title and interest it may have in and to the Intellectual Property and
all inventions that may be embodied therein, and all copyrights, patent rights,
trade secret rights, or other intellectual property rights therein. All right,
title and interest in and to the Intellectual Property shall remain in the
Providers. All such Intellectual Property is protected by copyright, trade
secret, trademark and other intellectual property laws and treaties. Company may
not reverse engineer, decompile, disassemble, modify in any way or create
derivative works of the Intellectual Property.

2. Confidential Information. Company acknowledges that, in receiving the
Service, Company may be exposed to or acquire information which is proprietary
to or confidential to the Providers. Any and all such information in any form
obtained by Company or its employees or agents shall be deemed to be
confidential and proprietary information of the Providers, as appropriate.
Company agrees to hold such information in strict confidence and to only permit
use of such information by its employees and agents having a need to know in
connection implementing the Service, and not to copy, reproduce, sell, assign,
license, market, transfer, give or otherwise disclose such information to third
parties or to use such information for any other purpose whatsoever. The
confidentiality obligations of Company shall not extend to information that (i)
is part of the public domain through a source other than Company; (ii) was known
to Company as of the time of its disclosure; or (iii) is independently developed
by Company. In the event that Company is required to disclose any of such
information pursuant to court order, Company shall provide reasonable notice to
the Administrator, prior to such disclosure and shall cooperate with
Administrator to obtain protection from such disclosure.

3. Service Warranty. Company acknowledges that complex computer systems and
software, such as the System, and on-line services such as the Service, are
rarely free of defects, perform without interruption and provide complete
security, and neither Administrator nor its vendor warrants the same. However,
Administrator and its vendor do warrant that the Service shall function in
conformance with the applicable specifications in all material respects and they
shall promptly respond to "high priority errors" reported by Company to
Administrator in accordance with the terms of the agreement between
Administrator and its vendor.

4. Third Party Material. Company acknowledges and agrees that information which
is provided to Company and its end users as part of the Service is provided by
third parties, such as health plans, other benefit carriers and the Company (the
"Third Party Material"), and that neither the Administrator nor its vendor has
reviewed any such material for its accuracy or appropriateness and neither
Administrator nor its vendor makes any representations or warranties of any
nature whatsoever regarding any Third Party Material, nor assumes any liability
of any kind with respect to any Third Party Material.

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<PAGE>

5. Company's Acknowledgment and Warranty. Company acknowledges that the
information conveyed through the System and Service may constitute confidential
or proprietary information of plan participants or other persons or entities,
and Company agrees that it (and not Administrator or its vendor) is responsible
at all times for obtaining all end user and any other legally or contractually
required consents or permissions necessary or advisable to disclose, transmit,
and process such information through the System and Service. Company represents
and warrants that all information that it and, to the best of its knowledge, its
end users provide through Company to be incorporated into the Service and stored
on the System, and any consents required for such information, shall be in
compliance with all applicable laws, rules and regulations and contractual
obligations. Company acknowledges and agrees that Administrator and its vendor
shall have the right to remove any material which is put on the Service or
System which they reasonably believe infringes the rights of a third party or
which in violation of any applicable law.

6. Disclaimer of Warranties and Limitation of Liability. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, NEITHER ADMINISTRATOR NOR ITS VENDOR MAKES ANY WARRANTY,
EITHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO EITHER THE SYSTEM OR THE
SERVICE AND ALL IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY DISCLAIMED.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, NEITHER ADMINISTRATOR
NOR ITS VENDOR SHALL BE LIABLE TO COMPANY FOR ANY CONSEQUENTIAL, INDIRECT,
INCIDENTAL, OR SPECIAL OR ANY OTHER DAMAGES, INCLUDING LOST PROFITS OR LOST
DATA, EVEN IF ADMINISTRATOR AND/OR ITS VENDOR HAS BEEN APPRISED OF THE
LIKELIHOOD OF SUCH DAMAGES OCCURRING. IN NO EVENT SHALL ADMINISTRATOR, ITS
VENDOR, OR ANY OF THEIR RESPECTIVE SUPPLIERS BE HELD LIABLE FOR AMOUNTS IN
EXCESS OF THE TOTAL AMOUNT OF CONSIDERATION WHICH VENDOR RECEIVED FROM
ADMINISTRATOR DURING THE PREVIOUS SIX (6) MONTHS FOR THE SERVICES PROVIDED WHICH
GAVE RISE TO SUCH CLAIM.

7. Intellectual Property Indemnification. (a) Administrator will cause its
vendor, at its expense, to defend or settle any claim, action or allegation
brought against Company that the System and/or Service infringes any patent,
copyright, trademark or trade secret of any third party excluding Administrator
and Company, and to pay any final judgments awarded or settlements entered into,
provided that Company gives prompt written notice to Administrator within ten
(10) days after it receives notice of such claim, action or allegation of
infringement and gives Administrator and its vendor the authority to proceed as
contemplated herein. Company may, at its own expense, participate in the defense
of any such claim with counsel reasonably acceptable to Administrator's vendor.
However, Administrator's vendor will have the exclusive right to control the
defense of any such claim, action or allegation and make settlements thereof at
its own discretion, and Company may not settle or compromise such claim, action
or allegation, except with prior written consent of Administrator's vendor.
Company will give such assistance and information as Administrator or its vendor
may reasonably require to settle or oppose such claims, at Administrator's
expense.

(b). Limitations. Administrator's vendor shall have no idemnity obligation for
claims resulting from any implementation services performed by Administrator.
Neither Administrator nor its vendor shall have any indemnity obligation for
claims resulting from or which results or which is alleged to result from (i)
development work performed by them in compliance with Company's specifications
where their method of compliance has been compelled by the terms of Company's
specifications; (ii) Company's use of the System and/or Service in combination
with any hardware or software not furnished by or authorized by Administrator
hereunder or any modifications which have been made by Company; or (iii)

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for any claims which relate to any third-party material or any other information
or data which has been supplied by Company, end users or which has been provided
by any health plans and/or other benefit carriers, which is incorporated into
the System and/or the Service. In addition, neither shall have any indemnity
obligation for claims of infringement resulting or alleged to result from
Company's failure within a reasonable time frame to implement any replacement or
modification of the System which conforms to the requirements of paragraph 7(c)
herein.

(c) Infringement Remedy. In the event of any infringement claim, action or
allegation is brought or threatened by a third party other than Company,
Administrator and its vendor may, at their sole option and expense: (i) provide
Company access to a system and service which is functionally equivalent to the
System and Service, without additional charge; (ii) modify the System and/or the
Service to avoid the infringement; or (iii) obtain a license for Company to
continue use of the Service for the term of this Agreement and pay for any
additional fee required for such license. In the event that, in Administrator's
reasonable judgment, none of the foregoing options are feasible, Administrator
shall have the right to terminate this Agreement.

8. Source Code Restrictions. Company agrees not to copy, modify, translate,
decompile, reverse engineer, disassemble, or otherwise determine or attempt to
determine source code from the System, the Service and the Intellectual Property
pertaining thereto or to create any derivative works based upon the System, the
Service and/or the Intellectual Property pertaining thereto, and agrees not to
permit anyone under Company's control or to authorize anyone else to do so.

9. Third Party Beneficiary. Administrator's vendor of the Service is an express
and intended third party beneficiary of any agreements between Company and
Administrator relating to the System or Service.

[Insert Signature Block]

10
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EXHIBIT C
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CLARIFICATION OF COSTS AND RESPONSIBILITIES

The purpose of this Exhibit is to help clarify costs and responsibilities which
may or may not have been explicitly stated in the body or other Exhibits of this
Agreement.

Costs/Responsibility of Distributor
- -----------------------------------

The Distributor is fully responsible for the following:
Integration of the Healtheon System with Distributor's legacy system
Maintenance/support costs not specified as a deliverable

Providing Healtheon with reasonable access to Distributor personnel appropriate
to support Healtheon's implementation, deployment and operation of the
Service, which will include designating business and/or information systems
staff members responsible for expediting and coordinating the project
interactions with Healtheon.

Costs/Responsibility of Each Company Account
- --------------------------------------------

Each Company Account is fully responsible for providing enrollment information
to Healtheon. When the Company Account uses the Healtheon Service, the Company
Account is also responsible for the following:
Providing the initial load of employee and enrollment information.
Providing information to enable the Distributor to customize the Healtheon
Service including their benefits, plan descriptions, eligibility criteria,
etc.
Providing Internet access to Members
Providing Healtheon and/or Distributor with reasonable access to information and
Company Account personnel reasonably necessary or appropriate to support
the implementation, deployment and operation of the Service, which will
include designating business and/or information systems staff members
responsible for expediting and coordinating the project interactions with
Healtheon.
Integration of the Healtheon System with their own HRIS and/or payroll system,
if desired
Communications to Employees on use, initiation and termination of System
Providing front-line support to Company Account's end users of the Healtheon
Service, unless designated by Company