EMPLOYMENT AGREEMENT

                  EMPLOYMENT AGREEMENT made as of July 11, 2000, between ADVANCE
PARADIGM, INC. (hereinafter "Company"), a Delaware corporation having its
principal place of business in Irving, Texas, and DAVID D. HALBERT (hereinafter


         WHEREAS, Employee desires to render faithful and efficient service to
         the Company; and

         WHEREAS, the Company desires to receive the benefit of Employee's
         service; and

         WHEREAS, Employee is willing to be employed by the Company; and

         WHEREAS, both the Company and the Employee desire to formalize the
         conditions of Employee's employment by written agreement.

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

         1.       Office. The Company hereby employs Employee as its Chairman of
                  the Board of Directors and Chief Executive Officer, and
                  Employee hereby agrees to serve the Company in such

         2.       Term of Employment. Employee's employment shall be for the
                  "Employment Period" with the initial term commencing on the
                  date of closing of the purchase of PCS Health Systems, Inc. by
                  the Company, and extending therefrom for three years. The
                  initial term shall be automatically renewed and extended upon
                  the expiration thereof for successive periods of one year
                  until such time as the Employment Period shall terminate
                  pursuant to the terms of this Agreement, or until the Company
                  on the one hand, or Employee on the other hand, shall
                  terminate the Employment Period by giving written notice to
                  the other party on or before 60 days prior to the expiration
                  date of the initial or any renewal term. The renewal and
                  extension of this Agreement shall also be referred to as the
                  "Employment Period." The effective date of Employee's
                  termination of employment for whatever reason under this
                  Agreement shall be the "Termination Date."

         3.       Responsibilities. During the Employment Period, Employee shall
                  devote his business time and attention, except during
                  reasonable vacation periods, to, and exert his best efforts to
                  promote, the affairs of the Company, and shall render such
                  services to the Company as may be required by the Board of
                  Directors of the Company ("Board") consistent with his
                  employment as Chairman and Chief Executive Officer. Nothing
                  herein contained shall preclude service by Employee 

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                  on a reasonable number of boards of directors, advisors or
                  trustees of other entities not engaged in any business
                  competitive with the business of the Company, provided such
                  services do not interfere with his service hereunder, or shall
                  preclude Employee's investment in any such entity.

         4.       Incapacity. If, during the Employment Period, Employee should
                  be prevented from performing his duties or fulfilling his
                  responsibilities by reason of any incapacity or disability for
                  a continuous period of 90 days, then the Company's Board of
                  Directors, in its sole and absolute discretion, may, based on
                  the opinion of a qualified physician, consider such incapacity
                  or disability to be total and may terminate the Employment
                  Period. Benefits and payments shall be made under this
                  Agreement following incapacity as if it were a termination
                  without Good Cause in accordance with Section 8(a). Such
                  termination shall not adversely affect Employee's rights under
                  any disability insurance policy that will be provided by the
                  Company to the Employee.

         5.       Death. The Employment Period shall automatically terminate
                  upon the death of Employee. In such instance all further
                  benefits and payments would cease, but all shares or options
                  previously awarded to Employee but not yet vested or
                  exercisable shall become fully vested as of the date of death
                  and shall be exercisable for one year commencing on that date.

         6.       Compensation. During the Employment Period, Employee shall

                  (a)      an initial base salary (hereinafter "Annual Base
                           Salary") that shall be an annual amount of not less
                           than $1 million, payable in accordance with the
                           payroll practices of the Company;

                  (b)      an annual performance bonus with a target of 100% of
                           Annual Base Salary payable in accordance with the
                           Company's Annual Incentive Performance Program.

                  (c)      a reasonable automobile allowance to cover the cost
                           of leasing, maintaining and providing insurance on an
                           automobile to be selected by the Employee;

                  (d)      a reasonable amount to cover, as applicable, the cost
                           of initiation and annual dues and fees of a social or
                           professional club in Dallas, Texas, Baltimore,
                           Maryland and Phoenix, Arizona, each to be determined
                           by the Employee;

                  (e)      Reasonable reimbursement to cover the costs and
                           expenses of travel and Company-related entertainment;

                  (h)      eligibility for, and compensation to cover the costs
                           of participation in, all benefit plans and programs,
                           including those for executive employees, that 

<PAGE>   3

                           may be made available by the Company to its
                           employees, and also for the Employee a term life
                           insurance policy in an amount not less than $5
                           million, a disability insurance policy that would pay
                           at least 80% of the Employee's Annual Base Salary as
                           well as health and dental insurance benefits.

                  (i)      reimbursement of $25,000 for Employee's legal costs
                           regarding this Agreement and the commencement of his

         7.       Equity.

                           (a) Initial Options. Upon the execution of this
                           Agreement, Employee shall receive options for 1
                           million shares of the Company's common stock
                           exercisable at a price of $20 per share. These
                           options shall vest over four years: the first
                           one-quarter of them vesting on the first anniversary
                           of this Agreement; and the remaining three quarters
                           vesting in turn on the subsequent three anniversaries
                           of this Agreement.

                           (b) Incentive Plan. Employee shall be eligible for
                           participation in any incentive stock plan approved by
                           the Board.

         8.       Severance Payments.

                  (a)      In the event that Employee's employment is terminated
                           by the Company while this Agreement is in effect
                           without Good Cause, as that term is defined in
                           Sections 8(c) hereof; or if the Employee leaves the
                           Company's employ for Good Reason, i.e., (i) because,
                           after good faith negotiations, the Company refuses to
                           renew this Agreement; (ii) if a Change of Control
                           takes place as that term is defined in Section 9
                           hereof; or (iii) if the Employee's duties and
                           responsibilities are materially changed as a result
                           of action by the Board:

                           (1)      The Company shall pay to Employee an
                                    aggregate amount of three times his combined
                                    then annual salary and target bonus, which
                                    payment shall be made within 90 calendar
                                    days of the date of termination. The Company
                                    shall continue to keep in full force and
                                    effect all plans or policies of medical,
                                    accident and life insurance benefits with
                                    respect to Employee and his dependents with
                                    the same level of coverage available to
                                    employees under the terms of those employee
                                    benefit plans for a period of 12 months,
                                    upon the same terms, costs and otherwise to
                                    the same extent as such plans are in effect
                                    for employees of the Company who were
                                    similarly situated to Employee as of the
                                    Termination Date, provided such continuation
                                    is permitted by law and such insurance
                                    policies. There shall be no other payments
                                    to the Employee.

<PAGE>   4

                           (2)      Upon termination as set forth in Section
                                    8(a) above, shares or options previously
                                    awarded to Employee but not yet vested or
                                    exercisable shall become fully vested as of
                                    the Termination Date and all vested stock
                                    options shall be exercisable for one year
                                    commencing on the Termination Date.

                  (b)      In the event that Employee's employment is terminated
                           by the Company for Good Cause as defined in Section

                           (1)      Any vested Shares or stock options
                                    previously granted but unexercised shall be
                                    exercisable within 90 days of the
                                    termination date. Any Shares or stock
                                    options unvested at the Termination Date
                                    shall be forfeited.

                           (2)      Employee shall be entitled to no other
                                    compensation other than set forth in this
                                    section 8(b) if he is terminated for Good

                   (c)     "Good Cause" shall mean: (i) the commission of a
                           proven act of fraud or dishonesty in the course of
                           employment; (ii) conviction of a crime constituting a
                           felony or in respect of any act of fraud, dishonesty
                           or moral turpitude; (iii) the commission of an act
                           which would make the Employee subject to being
                           enjoined, suspended, barred or otherwise disciplined
                           for violation of federal or state securities laws,
                           rules or regulations, including a "statutory
                           disqualification;" If the Employee unilaterally
                           terminates his Employment without "Good Reason" as
                           defined in Section 8(a), said termination will be
                           equivalent to a "Good Cause" termination under this

                  (d)      Following the Employment Period, and in addition to
                           that which is provided in paragraph 8(a)(1) above,
                           the Employee shall be eligible for continuation of
                           health and dental insurance coverage pursuant to the
                           Consolidated Omnibus Budget Reconciliation Act
                           (COBRA) for the 18 months following the Termination

         9.       "Change in Control" shall mean the following: (i) a merger or
                  consolidation of the Company in which the then current
                  shareholders of the Company hold less than 50% of the capital
                  stock of the surviving corporation; (ii) a sale of all or
                  substantially all of the assets of the Company; (iii) the sale
                  of a majority of the outstanding voting securities of the
                  Company; (iv) a liquidation and dissolution of the Company;
                  provided, that, without limitation such a change in control
                  shall be deemed to have occurred if (a) any "person" (as
                  defined in the Securities and Exchange Act of 1934) other than
                  the Company or any "person" who on the effective date of this
                  agreement is an officer or director of the Company, or any
                  employer of such "person" or any "affiliate" (as defined in
                  the Exchange Act), becomes the beneficial owner, directly or
                  indirectly, of securities of the Company 

<PAGE>   5

                  representing 50% or more of the combined voting power of the
                  Company's outstanding securities, (b) individuals who
                  constitute the Board of Directors of the Company on any day
                  (the "Incumbent Board") cease for any reason other than their
                  deaths to constitute at least a majority of the Incumbent
                  Board on the following day (which day shall be the day on
                  which a "change in control" shall be deemed to have occurred),
                  provided that any individual becoming a director subsequent to
                  the date of this Agreement whose election or nomination for
                  election was approved by a vote of not less than two-thirds of
                  the Incumbent Board shall be considered, for purposes of this
                  section, as though such person were a member of the Incumbent
                  Board, and (c) material diminution or change of Employee's
                  duties hereunder.

         10.      Confidentiality.

                  (a)      Confidential Information. The Employee acknowledges
                           that the information, observations and data obtained
                           by him while employed by the Company concerning the
                           business or affairs of the Company ("Confidential
                           Information") are the property of the Company.
                           Therefore, Employee agrees that, except in the
                           performance of duties for the Company, he shall not
                           disclose to any unauthorized person or use for his
                           own account any Confidential Information without
                           prior written consent of the Board, except (i) to the
                           extent that the aforementioned matters become
                           generally known to and available for use by the
                           public other than as a result of Employee's acts or
                           omissions to act, (ii) as necessary to comply with
                           compulsory legal process, provided that Employee
                           shall provide prior notice to the Company regarding
                           such disclosure and the Company, as applicable, shall
                           have the right to contest such disclosure, (iii) as
                           necessary to counsel and other professional advisors
                           retained by the Employee, subject to the
                           attorney/client privilege or a valid and binding
                           non-disclosure agreement between Employee and such
                           professional and (iv) disclosures of information
                           obtained from a third party free of restrictions or
                           disclosure of information in Employee's possession
                           prior to the date hereof which was obtained from a
                           source other than the Company or its predecessors.
                           Employee shall deliver to the Company at the
                           termination of the Employment Period, all memoranda,
                           notes, plans, records, reports, computer tapes and
                           software and other documents and data (and copies
                           thereof) relating to Confidential Information, Work
                           Product or the business of the Company which he may
                           then possess or have under his control.

                  (b)      Non-Compete, Non-Solicitation.

                           (1)      Employee acknowledges that in the course of
                                    his employment with the Company, he will
                                    become familiar with the Company's trade
                                    secrets and with other confidential
                                    information concerning the Company and that
                                    his services will be of special, unique and

<PAGE>   6

                                    extraordinary value to the Company.
                                    Therefore, Employee agrees that, during the
                                    Employment Period, and for two years after
                                    such termination (the "Non-Compete Period"),
                                    he shall not directly or indirectly, own,
                                    manage, control, participate in, consult
                                    with, render services for, or in any manner
                                    engage in any business competing within the
                                    continental United States with the
                                    businesses of the Company as such businesses
                                    exist or are in process on the date of the
                                    termination of Employee's employment.
                                    Notwithstanding the foregoing, nothing
                                    herein shall prohibit Employee from (i)
                                    continuing his ownership, management and/or
                                    control of any business in which and to the
                                    extent which he held such interests prior to
                                    the Non-Compete Period, or (ii) being a
                                    passive owner of not more than 5% of the
                                    outstanding stock of any class of a company
                                    which is publicly traded, so long as
                                    Employee has no active participation in the
                                    management or the business of such company.

                           (2)      During the Employment Period and for one
                                    year thereafter, Employee shall not,
                                    directly or indirectly, through another
                                    entity (i) solicit, encourage, interview,
                                    entice, discuss with or induce or attempt to
                                    induce any employee of the Company (with the
                                    exception of Laura I. Johansen and Stephanie
                                    Thomas) to leave the employ of the Company,
                                    or in any way interfere with the
                                    relationship between the Company and any
                                    employee thereof, or (ii) hire any person
                                    (with the exception of Laura I. Johansen and
                                    Stephanie Thomas) who was an employee of the
                                    Company at any time during the Employment

                  (d)      Enforcement. If, at the time of enforcement of
                           section 10 of this Agreement, a court holds that the
                           restrictions stated herein are unreasonable under
                           circumstances then existing, the parities hereto
                           agree that the maximum period, scope or geographical
                           area reasonable under such circumstances shall be
                           substituted for the stated period, scope and area.

         11.      Effect of Termination of the Employment Period. Upon the
                  termination of the Employment Period, this Agreement shall
                  terminate, and all of the parties' obligations hereunder shall
                  forthwith terminate, except that rights and remedies accruing
                  prior to such termination or arising out of this Agreement
                  shall survive, and except for the obligations set forth in
                  section 10 above.

         12.      Notice. Any notice required to be given by the Company
                  hereunder to Employee shall be in proper form and signed by an
                  officer or Director of the Board of the Company. Until one
                  party shall advise the other in writing to the contrary,
                  notices shall be deemed delivered:

<PAGE>   7

                  (a)      To the Company if delivered to the Chairman of the
                           Compensation Committee of the Board of Directors of
                           the Company, or if mailed, certified or registered
                           mail postage prepaid: to Advance Paradigm, 545 E.
                           John Carpenter Freeway, Irving, Texas 75062.

                  (b)      To employee if delivered to Employee, or if mailed to
                           him by certified or registered mail, postage prepaid
                           to: David D. Halbert, 3103 Caris Brook Court,
                           Colleyville, Texas 76034.

         13.      Benefit. This Agreement shall bind and inure to the benefit of
                  the Company and the Employee, their respective heirs,
                  successors and assigns.

         14.      Severability. If a judicial determination is made that any of
                  the provisions of this Employment Agreement are unreasonable
                  or otherwise unenforceable, the remainder of its provisions is
                  severable and shall be given full force and effect.

         15.      Choice of law. This Agreement shall be governed by the law of

         16.      Arbitration. The parties agree that any and all disputes,
                  claims or controversies arising out of or relating to this
                  agreement that are not resolved by their mutual agreement
                  shall be submitted to final and binding arbitration before JO
                  AO MO S/ENDISPUTE, or its successor, pursuant to the United
                  States Arbitration Act, 9 U.S.C. Sec. 1, et seq. Either party
                  may commence the arbitration process called for in this
                  agreement by filing a written demand for arbitration with JO
                  AO MO S/ENDISPUTE, with a copy to the other party. The
                  arbitration will be conducted in accordance with the
                  provisions of JO AO MO S/ENDISPUTE's Streamlined Arbitration
                  Rules and Procedures in effect at the time of filing of the
                  demand for arbitration. The parties will cooperate with JO AO
                  MO S/ENDISPUTE and with one another in selecting an arbitrator
                  from Jo Ao Mo S/ENDISPUTE's panel of neutrals, and in
                  scheduling the arbitration proceedings. The parties covenant
                  that they will participate in the arbitration in good faith,
                  and that they will share equally in its costs. The provisions
                  of this Paragraph may be enforced by any Court of competent
                  jurisdiction, and the party seeking enforcement shall be
                  entitled to an award of all costs, fees and expenses,
                  including attorneys fees, to be paid by the party against whom
                  enforcement is ordered.

         17.      Counterparts. This Agreement may be executed in counterparts,
                  each of which may be considered a duplicate original.


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                  IN WITNESS WHEREOF, the parties hereto have executed this
Agreement this ____ day of ____, 2000.

ATTEST:                                          ADVANCE PARADIGM, INC.

By:                                              By:
   ----------------------------                     ----------------------------
         Corporate Secretary                        Chairman of the Compensation

WITNESS:                                         "EMPLOYEE"

-------------------------------                  -------------------------------
                                                 David D. Halbert