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                                                                 EXHIBIT 10.9


                     GOVERNMENT OF THE DISTRICT OF COLUMBIA

                          STANDARD CONTRACT PROVISIONS

                                  FOR USE WITH

                         DISTRICT OF COLUMBIA GOVERNMENT
                          SUPPLY AND SERVICES CONTRACTS






                                 OCTOBER 1, 1999

                      OFFICE OF CONTRACTING AND PROCUREMENT
                                 ROOM 800 SOUTH
                               441 4TH STREET, NW
                             WASHINGTON, D.C. 20001


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                          STANDARD CONTRACT PROVISIONS

                                TABLE OF CONTENTS

1.     Covenant Against Contingent Fees .............................. 1
2.     Shipping Instructions-- Consignment ........................... 1
3.     Order Of Precedence And Contract .............................. 1
4.     Patents ....................................................... 1
5.     Quality ....................................................... 2
6.     Inspection Of Supplies ........................................ 2
7.     Inspection Of Services                                          5
8.     Waiver ........................................................ 6
9.     Default ....................................................... 6
10.    Indemnification ............................................... 8
11.    Transfer ...................................................... 8
12.    Taxes ......................................................... 8
13.    Payments ...................................................... 9
14.    Evaluation of Prompt Payment Discount ......................... 9
15.    Responsibility For Supplies Tendered .......................... 9
17.    Officers Not To Benefit ...................................... 10
18.    Disputes                                                       10
19.    Changes ...................................................... 13
20.    Termination For Convenience Of The District .................. 13
21.    Recovery Of Debts Owed The District .......................... 18
22.    Examination Of Books, Etc. By The Office Of Inspector General
       And The District Of Columbia Auditor ......................... 18
23.    Non-Discrimination Clause .................................... 18
24.    Definitions .................................................. 20
25.    Estimated Quantities ......................................... 20
26.    Health And Safety Standards .................................. 21
27.    Appropriation Of Funds ....................................... 21
28.    Hiring Of District Residents ................................. 21
29.    Buy American Act ............................................. 21
30.    Service Contract Act of 1965 ................................. 22
31.    Cost and Pricing Data ........................................ 27
32.    Cost-reimbursement Contracts ................................. 29
33.    Multiyear Contract ........................................... 29
34.    Termination Of Contracts For Certain Crimes And Violations ... 29


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     1. COVENANT AGAINST CONTINGENT FEES:

        The Contractor warrants that no person or selling agency has been
        employed or retained to solicit or secure the contract upon an agreement
        or understanding for a commission, percentage, brokerage, or contingent
        fee, excepting bona fide employees or bona fide established commercial
        or selling agencies maintained by the Contractor for the purpose of
        securing business. For breach or violation of this warranty, the
        District government shall have the right to terminate the contract
        without liability or in its discretion to deduct from the contract price
        or consideration or otherwise recover, the full amount of the
        commission, percentage, brokerage, or contingent fee.

     2. SHIPPING INSTRUCTIONS -- CONSIGNMENT:

        Unless otherwise specified in this Invitation for Bids/Request for
        Proposals, each case, crate, barrel, package, etc., delivered under this
        contract must be plainly stencil marked or securely tagged, stating the
        Contractor s name, contract number and delivery address as noted in the
        contract. In case of carload lots, the Contractor shall tag the car,
        stating Contractor s name and contract number. Any failure to comply
        with these instructions will place the material at the Contractor's
        risk. Deliveries by rail, water, truck or otherwise, must be within the
        working hours and in ample time to allow for unloading and if necessary,
        the storing of the materials or supplies before closing time. Deliveries
        at any other time will not be accepted unless specific arrangements have
        been previously made with the contact person identified in the contract
        at the delivery point.

     3. ORDER OF PRECEDENCE AND CONTRACT:

        Any inconsistency in this solicitation shall be resolved by giving
        precedence in the following order: The Schedule, the Specifications, the
        Special Conditions, the General Conditions. The Bid/Request for
        Proposal, with respect to all items accepted, and all papers
        accompanying the same, including the Schedule and continuation sheets,
        if any, the Specifications, the Instructions to Bidders, these General
        Conditions, and other papers and documents referred to in any of the
        foregoing, shall constitute the formal contract between the bidder/
        offeror and the District; PROVIDED THAT any such contract in excess of
        $1,000,000, shall not be binding or give rise to any claim or demand
        against the said District until approved by the Mayor or his designated
        representative.

     4. PATENTS:

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        The Contractor shall hold and save the District, its officers, agents,
        servants, and employees harmless from liability of any nature or kind,
        including costs, expenses, for or on account of any patented or
        un-patented invention, article process, or appliance, manufactured or
        used in the performance of this contract, including their use by the
        District, unless otherwise specifically stipulated in this contract.



     5. QUALITY:

        Unless otherwise specified, all materials used for the manufacture or
        construction of any supplies covered by this bid/proposal shall be new
        and of the best quality and the workmanship shall be of the highest
        grade. The use of the name of a manufacturer or of any special brand or
        make in describing any item in this bid/proposal does not restrict
        bidder/offeror to that manufacturer, or specific brand or make; the
        reference thereto indicates the character or quality of article desired,
        but articles on which bids/proposals are submitted must be equal to
        those referred to. Bidders/offerors offering any article other than the
        specific make, brand or manufacture named in this solicitation must so
        state in each instance, otherwise the bid/proposal will be considered as
        being based upon furnishing the specific make, brand or manufacture
        named in the solicitation.

     6. INSPECTION OF SUPPLIES:

        (a)    Definition. "Supplies," as used in this clause, includes, but
               is not limited to raw materials, components, intermediate
               assemblies, end products, and lots of supplies.

        (b)    The Contractor shall provide and maintain an inspection system
               acceptable to the District covering supplies under this
               contract and shall tender to the District for acceptance only
               supplies that have been inspected in accordance with the
               inspection system and have been found by the Contractor to be
               in conformity with contract requirements. As part of the
               system, the Contractor shall prepare records evidencing all
               inspections made under the system and the outcome. These
               records shall be kept complete and made available to the
               District during contract performance and for as long
               afterwards as the contract requires. The District may perform
               reviews and evaluations as reasonably necessary to ascertain
               compliance with this paragraph. These reviews and evaluations
               shall be conducted in a manner that will not unduly delay the
               contract work. The right of review, whether exercised or not,
               does not relieve the Contractor of the obligations under this
               contract.

        (c)    The District has the right to inspect and test all supplies
               called for by the contract, to the extent practicable, at all
               places and  times, including the period of manufacture, and in
               any event before acceptance. The District

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               shall perform inspections and tests in a manner that will not
               unduly delay the work. The District assumes no contractual
               obligation to perform any inspection and test for the benefit
               of the Contractor unless specifically set forth elsewhere in
               the contract.

        (d)    If the District performs inspection or test on the premises of
               the Contractor or subcontractor, the Contractor shall furnish,
               and shall require subcontractors to furnish, without
               additional charge, all reasonable facilities and assistance
               for the safe and convenient performance of these duties.
               Except as otherwise provided in the contract, the District
               shall bear the expense of District inspections or tests made
               at other than Contractor's or subcontractor's premise;
               provided, that in case of rejection, the District shall not
               be liable for any reduction in the value of inspection or test
               samples.

        (e)(1) When supplies are not ready at the time specified by the
               Contractor for inspection or test, the Contracting Officer
               may charge to the Contractor the additional cost of inspection
               or test.

           (2) The Contracting Officer may also charge the Contractor for any
               additional cost of inspection or test when prior rejection
               makes re-inspection or retest necessary.

        (f)    The District has the right either to reject or to require
               correction of nonconforming supplies. Supplies are
               nonconforming when they are defective in material or
               workmanship or otherwise not in conformity with contract
               requirements. The District may reject nonconforming supplies
               with or without disposition instructions.

        (g)    The Contractor shall remove supplies rejected or required to
               be corrected. However, the Contracting Officer may require or
               permit correction in place, promptly after notice, by and at
               the expense of the Contractor. The Contractor shall not tender
               for acceptance corrected or rejected supplies without
               disclosing the former rejection or requirement for correction,
               and when required, shall disclose the corrective action taken.

        (h)    If the Contractor fails to promptly remove, replace, or
               correct rejected supplies that are required to be replaced or
               corrected, the District may either (1) by contract or
               otherwise, remove, replace or correct the supplies and charge
               the cost to the Contractor or (2)  terminate the contract for
               default. Unless the Contractor corrects or replaces the
               supplies within the delivery schedule, the Contracting Officer
               may require their delivery and make an equitable price
               reduction. Failure to agree to a price reduction shall be a
               dispute.

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        (i)(1) If this contract provides for the performance of District
               quality assurance at source, and if requested by the District,
               the Contractor shall furnish advance notification of the time
               (i) when Contractor inspection or tests will be performed in
               accordance with the terms and conditions of the contract and
               (ii) when the supplies will be ready for District inspection.

           (2) The District request shall specify the period and method of
               the advance notification and the District representative to
               whom it shall be furnished. Requests shall not require more
               than 2 workdays of advance notification if the District
               representative is in residence in the Contractor's plant,
               nor more than 7 workdays in other instances.

        (j)    The District shall accept or reject supplies as promptly as
               practicable after delivery, unless otherwise provided in the
               contract. District failure to inspect and accept or reject the
               supplies shall not relieve the Contractor from responsibility,
               nor impose liability upon the District, for non- conforming
               supplies.

        (k)    Inspections and tests by the District do not relieve the
               Contractor of responsibility for defects or other failures to
               meet contract requirements discovered before acceptance.
               Acceptance shall be conclusive, except for latent defects,
               fraud, gross mistakes amounting to fraud, gross mistakes
               amounting to fraud, or as otherwise provided in the contract.

        (l)    If acceptance is not conclusive for any of the reasons in
               paragraph (k) hereof, the District, in addition to any other
               rights and remedies provided by law, or under provisions of
               this contract, shall have the right to require the Contractor
               (1) at no increase in contract price, to correct or replace
               the defective or nonconforming supplies at the original point
               of delivery or at the Contractor's plant at the Contracting
               Officer's election, and in accordance with a reasonable
               delivery schedule as may be agreed upon between the Contractor
               and the Contracting Officer; provided, that the Contracting
               Officer may require a reduction in contract price if the
               Contractor fails to meet such delivery schedule, or (2) within
               a reasonable time after receipt by the Contractor of notice of
               defects or noncompliance, to repay such portion of the
               contract as is equitable under the circumstances if the
               Contracting Officer elects not to require correction or
               replacement. When supplies are returned to the Contractor, the
               Contractor shall bear the transportation cost from the
               original point of delivery to the Contractor's plant and
               return to the original point when that point is not the
               Contractor's plant. If the Contractor fails to perform or act
               as required in (1) or (2) above and does not cure such failure
               within a period of 10 days (or such longer period as the
               Contracting Officer may authorize in writing) after receipt of
               notice from the Contracting Officer

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               specifying such failure, the District shall have the right to
               contract or otherwise to replace or correct such supplies and
               charge to the Contractor the cost occasioned the District
               thereby.

     7. INSPECTION OF SERVICES:

        (a)    Definition. "Services" as used in this clause includes
               services performed, workmanship, and material furnished or
               utilized in the performance of services.

        (b)    The Contractor shall provide and maintain an inspection system
               acceptable to the District covering the services under this
               contract. Complete records of all inspection work performed by
               the Contractor shall be maintained and made available to the
               District during contract performance and for as long
               afterwards as the contract requires.

        (c)    The District has the right to inspect and test all services
               called for by the contract, to the extent practicable at all
               times and places during the term of the contract. The District
               shall perform inspections and tests in a manner that will not
               unduly delay the work.

        (d)    If the District performs inspections or tests on the premises
               of the Contractor or subcontractor, the Contractor shall
               furnish, without additional charge, all reasonable facilities
               and assistance for the safety and convenient performance of
               these duties.

        (e)    If any of the services do not conform to the contract
               requirements, the District may require the Contractor to
               perform these services again in conformity with contract
               requirements, at no increase in contract amount. When the
               defects in services cannot be corrected by performance, the
               District may (1) require the Contractor to take necessary
               action to ensure that future performance conforms to contract
               requirements and reduce the contract price to reflect value of
               services performed.

        (f)    If the Contractor fails to promptly perform the services again
               or take the necessary action to ensure future performance in
               conformity to contract requirements, the District may (1) by
               contract or otherwise, perform the services and charge the
               Contractor any cost incurred by the District that is directly
               related to the performance of such services, or (2) terminate
               the contract for default.

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     8.    WAIVER:

           The waiver of any breach of the contract will not constitute a waiver
           of any subsequent breach thereof, nor a waiver of the contract.

     9.    DEFAULT:

           (a)    The District may, subject to the provisions of paragraph (c)
                  below, by written notice of default to the Contractor,
                  terminate the whole or any part of this contract in any one of
                  the following circumstances:

                  (1)  If the Contractor fails to make delivery of the supplies
                       or to perform the services within the time specified
                       herein or any extension thereof; or

                  (2)  If the Contractor fails to perform any of the other
                       provisions of this contract, or so fails to make progress
                       as to endanger performance of this contract in accordance
                       with its terms, and in either of these two circumstances
                       does not cure such failure within a period of ten (10)
                       days (or such longer period as the Contracting Officer
                       may authorize in writing) after receipt of notice from
                       the Contracting Officer specifying such failure.

           (b)    In the event the District terminates this contract in whole or
                  in part as provided in paragraph (a) of this clause, the
                  District may procure, upon such terms and in such manner as
                  the Contracting Officer may deem appropriate, supplies or
                  service similar to those so terminated, and the Contractor
                  shall be liable to the District for any excess costs for
                  similar supplies or services; provided, that the Contractor
                  shall continue the performance of this contract to the extent
                  not terminated under the provisions of this clause.

           (c)    Except with respect to defaults of subcontractors, the
                  Contractor shall not be liable for any excess costs if the
                  failure to perform the contract arises out of causes beyond
                  the control and without the fault or negligence of the
                  Contractor. Such causes may include, but are not restricted
                  to, acts or God or of the public enemy, acts of the District
                  or Federal Government in either their sovereign or contractual
                  capacity, fires, floods, epidemics, quarantine restrictions,
                  strikes, freight embargoes, and unusually severe weather; but
                  in every case the failure to perform must be beyond the
                  control and without fault or negligence of the Contractor. If
                  the failure to perform is caused by the default of the
                  subcontractor, and if such default arises out of causes beyond
                  the control of both the Contractor and the subcontractor, and
                  without the fault or negligence of either of them, the
                  Contractor shall not be liable for

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                  any excess cost for failure to perform, unless the supplies or
                  services to be furnished by the sub- contractor were
                  obtainable from other sources in sufficient time to permit the
                  Contractor to meet the required delivery schedule.

           (d)    If this contract is terminated as provided in paragraph (a) of
                  this clause, the District, in addition to any other rights
                  provided in this clause, may require the Contractor to
                  transfer title and deliver to the District, in the manner and
                  to the extent directed by the Contracting Officer, (i)
                  completed supplies, and (ii) such partially completed supplies
                  and materials, parts, tools, dies, jigs, fixtures plans,
                  drawing information, and contract rights (hereinafter called
                  "manufacturing materials") as the Contractor has specifically
                  produced or specifically acquired for the performance of such
                  part of this contract as has been terminated; and the
                  Contractor shall, upon direction of the Contracting Officer,
                  protect and preserve property in possession of the Contractor
                  in which the District has an interest. Payment for completed
                  supplies delivered to and accepted by the District shall be at
                  the contract price. Payment for manufacturing materials
                  delivered to and accepted by the District shall be at the
                  contract price. Payment for manufacturing materials delivered
                  to and accepted by the District and for the protection and
                  preservation of property shall be in an amount agreed upon by
                  the Contractor and Contracting Officer; failure to agree to
                  such amount shall be a dispute concerning a question of fact
                  within the meaning of the clause of this contract entitled
                  "Disputes". The District may withhold from amounts otherwise
                  due the Contractor for such completed supplies or
                  manufacturing materials such sum as the Contracting Officer
                  determines to be necessary to protect the District against
                  loss because of outstanding liens or claims of former lien
                  holders.

           (e)    If, after notice of termination of this contract under the
                  provisions of this clause, it is determined for any reason
                  that the Contractor was not in default under the provisions of
                  this clause, or that the default was excusable under the
                  provisions of this clause, the rights and obligations of the
                  parties shall, if the contract contains a clause providing for
                  termination of convenience of the Government, be the same as
                  if the notice of termination had been issued pursuant to such
                  clause. See Clause 20 for Termination for Convenience of the
                  Government.

           (f)    The rights and remedies of the District provided in this
                  clause shall not be exclusive and are in addition to any other
                  rights and remedies provided by law or under this contract.

           (g)    As used in paragraph (c) of this clause, the terms
                  subcontractor(s)" means subcontractor(s) at any tier.


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     10.   INDEMNIFICATION:

           The Contractor shall indemnify and save harmless the District and
           all its officers, agents and servants against any and all claims or
           liability arising from or based on, or as consequence of or result
           of, any act, omission or default of the Contractor, its employees,
           or its subcontractors, in the performance of this contract. Monies
           due or to become due the Contractor under the contract may be
           retained by the District as necessary to satisfy any outstanding
           claim which the District may have against the Contractor.

     11.   TRANSFER:

           No contract or any interest therein shall be transferred by the
           parties to whom the award is made; such transfer will be null and
           void and will be cause to annul the contract.

     12.   TAXES:

           (a)    The Government of the District of Columbia is exempt from and
                  will not pay Federal Excise Tax, Transportation Tax, and the
                  District of Columbia Sales and Use.

           (b)    Tax exemption certificates no longer issued by the District
                  for Federal Excise Tax. The following statement may be used by
                  the supplier when claiming tax deductions for Federal Excise
                  Tax exempt items sold to the District.

                          "THE DISTRICT OF COLUMBIA GOVERNMENT IS EXEMPT FROM
                          FEDERAL EXCISE TAX -- REGISTRATION NO. 52-73-0206-K
                          INTERNAL REVENUE SERVICE, BALTIMORE, MARYLAND."

                          EXEMPT FROM MARYLAND SALES TAX, REGISTERED WITH THE
                          COMPTROLLER OF THE TREASURY AS FOLLOWS:

                          Deliveries to Glenn Dale Hospital-- Exemption No. 4647

                          Deliveries to Children's Center -- Exemption No. 4648

                          Deliveries to other District Departments or Agencies
                          -- Exemption No. 09339

     13.   PAYMENTS:

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           Unless otherwise specified in this contract, payments will be made
           only after performance of the contract in accordance with all
           provisions thereof.

     14.   EVALUATION OF PROMPT PAYMENT DISCOUNT:

           (a)    Prompt payment discounts shall not be considered in the
                  evaluation of bids/offers. However, any discount offered will
                  form a part of the award and will be taken by the District if
                  payment is made within the discount period specified by the
                  bidder/offeror.

           (b)    In connection with any discount offered, time will be computed
                  from the date of delivery of the supplies to carrier when
                  delivery and acceptance are at point of origin, or from date
                  of delivery at destination when delivery, installation and
                  acceptance are at that, or from the date correct invoice or
                  voucher is received in the office specified by the District,
                  if the latter date is later than date of delivery. Payment is
                  deemed to be made for the purpose of earning the discount on
                  the date of mailing of the Government check.

     15.   RESPONSIBILITY FOR SUPPLIES TENDERED:

           The Contractor shall be responsible for the materials or supplies
           covered by this contract until they are delivered at the designated
           point, but the Contractor shall bear all risk on rejected materials
           or supplies after notification of rejection. Upon failure to do so
           within ten (10) days after date of notification, the District may
           return the rejected materials or supplies to the Contractor at his
           risk and expense.

     16.   APPOINTMENT OF ATTORNEY:

           (a)    The bidder/offeror or Contractor (whichever the case may be)
                  does hereby irrevocably designate and appoint the Clerk of the
                  District of Columbia Superior Court and his successor in
                  office as the true and lawful attorney of the Contractor for
                  the purpose of receiving service of all notices and processes
                  issued by any court in the District of Columbia, as well as
                  service all pleadings and other papers, in relation to any
                  action or legal proceeding arising out of or pertaining to
                  this contract or the work required or performed hereunder.

           (b)    The bidder/offeror or Contractor (whichever the case may be)
                  expressly agrees that the validity of any service upon the
                  said Clerk as herein authorized shall not be affected either
                  by the fact that the Contractor was personally within the
                  District of Columbia and otherwise subject to personal service
                  at the time of such service upon the said Clerk or by the fact
                  that the Contractor failed to receive a copy of such process,
                  notice or other paper so


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                  served upon the said Clerk provided the said Clerk shall have
                  deposited in the United States mail, registered and postage
                  prepaid, a copy of such process, notice pleading or other
                  paper addressed to the bidder/offeror or Contractor at the
                  address stated in this contract.

     17.   OFFICERS NOT TO BENEFIT:

           No member of or delegate to Congress, or officer or employee of the
           District shall be admitted to any share or part of this contract or
           to any benefit that may arise therefrom, and any contract made by
           the Contracting Officer of any District employee authorized to
           execute contract which they or the employee of the District shall be
           personally interested shall be void, and no payment shall be made
           thereon by the District or any officer thereof, but this provision
           shall not be construed to extend to this contract if made with a
           corporation for its general benefit. However, should a Federal or
           District employee submit a bid for his personal benefit, the
           Contracting Officer reserves the right to waive the aforementioned
           restriction; providing that said employee furnishes a Notarized
           Affidavit prior to the time set for opening of bids or submission of
           proposal, setting forth intention to resign his/her Federal or
           District employment in the event said employee shall be considered
           for an award of contract. Failure to submit such affidavit shall
           automatically render his/her bid/proposal non-responsive and no
           further consideration shall be given thereto. (See Representations,
           Certifications and Acknowledgments.)

     18.   DISPUTES:

           A.     All disputes arising under or relating to this contract shall
                  be resolved As provided herein.

           B.     Claims by a Contractor against the District.

                  (a)    Claim, as used in Section B of this clause, means a
                         written assertion by the Contractor seeking, as a
                         matter of right, the payment of money in a sum certain,
                         the adjustment or interpretation of contract terms, or
                         other relief arising under or relating to this
                         contract. A claim arising under a contract, unlike a
                         claim relating to that contract, is a claim that can be
                         resolved under a contract clause that provides for the
                         relief sought by the claimant.

                  (b)    All claims by a Contractor against the District arising
                         under or relating to a contract shall be in writing and
                         shall be submitted to the Contracting Officer for a
                         decision.

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                  (c)    For any claim of $50,000 or less, the Contracting
                         Officer shall issue a decision within sixty (60) days
                         from receipt of a written request from a Contractor
                         that a decision be rendered within that period.

                  (d)    For any claim over $50,000, the Contracting Officer
                         shall issue a decision within ninety (90) days of
                         receipt of the claim. Whenever possible, the
                         Contracting Officer shall take into account factors
                         such as the size and complexity of the claim and the
                         adequacy of the information in support of the claim
                         provided by the Contractor.

                  (e)    Any failure by the Contracting Officer to issue a
                         decision on a contract claim within the required time
                         period will be deemed to be a denial of the claim. The
                         Contractor may appeal denial of the claim as provided
                         herein.

                  (f)(1) If a Contractor is unable to support any part of his or
                         her claim and it is determined that the inability is
                         attributable to a material misrepresentation of fact or
                         fraud on the part of the Contractor, the Contractor
                         shall be liable to the District for an amount equal to
                         the unsupported part of the claim in addition to all
                         costs to the District attributable to the cost of
                         reviewing that part of the Contractor's claim.

                     (2) Liability under this paragraph (f) shall be determined
                         within six (6) years of the commission of the
                         misrepresentation of fact or fraud.

                  (g)    Interest on amounts found due to a Contractor on claims
                         shall be payable at a rate set in D. C. Code Section
                         28-3302(b) applicable to judgments against the District
                         and shall begin accruing from the date the Contracting
                         Officer receives the claim until payment of the claim.

                  (h)    The decision of the Contracting Officer shall be final
                         and not subject to review unless an administrative
                         appeal or action for judicial review is timely
                         commenced by the Contractor as authorized by D. C. Code
                         Section 1-1189.4.

                  (i)    Pending final decision of an appeal, action, or final
                         settlement, a Contractor shall proceed diligently with
                         performance of the contract in accordance with the
                         decision of the Contracting Officer.

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     C.    Claims by the District against a Contractor

           (a)    Claim as used in Section C of this clause; means a written
                  demand or written assertion by the District seeking, as a
                  matter of right, the payment of money in a sum certain, the
                  adjustment of contract terms, or other relief arising under or
                  relating to this contract. A claim arising under a contract,
                  unlike a claim relating to that contract, is a claim that can
                  be resolved under a contract clause that provides for the
                  relief sought by the claimant.

           (b)(1) All claims by the District against a Contractor arising under
                  or relating to a contract shall be decided by the Contracting
                  Officer.

              (2) The Contracting Officer shall send written notice of the claim
                  to the Contractor. The Contractor may respond to the claim
                  within thirty (30) days from the date the Contractor receives
                  the claim.

              (3) After the expiration of sixty (60) days from the date the
                  Contractor receives the claim, the Contracting Officer shall
                  issue a decision in writing, and furnish a copy of the
                  decision to the Contractor.

              (4) The decision shall be supported by reasons and shall inform
                  the Contractor of his or her rights as provided herein.
                  Specific findings of fact are not required, but, if made,
                  shall not be binding in any subsequent proceeding.

              (5) The authority contained in this clause shall not apply to a
                  claim or dispute for penalties or forfeitures prescribed by
                  statute or regulation which another District agency is
                  specifically authorized to administer, settle, or determine.

              (6) This clause shall not authorize the Contracting Officer to
                  settle, compromise, pay, or otherwise adjust any claim
                  involving fraud.

           (c)    Interest on amounts found due to the District from a
                  Contractor on claims shall be payable at the rate set in D.C.
                  Code Section 28-3302(b) applicable to judgments against the
                  District, and shall begin accruing from the date the
                  Contractor receives a Contracting Officer's written decision
                  on behalf of the District until payment of the claim.

           (d)    The decision of the Contracting Officer shall be final and not
                  subject to review unless an administrative appeal or action
                  for judicial


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                         review is timely commenced by the District as
                         authorized by D.C. Code Section 1-1189.4.

                  (e)    Pending final decision of an appeal, action, or final
                         settlement, the Contractor shall proceed diligently
                         with performance of the contract in accordance with the
                         decision of the Contracting Officer.

     19.   CHANGES:

           The Contracting Officer may, at any time, by written order, and
           without notice to the surety, if any, make changes in the contract
           within the general scope hereof. If such change causes an increase
           or decrease in the cost of performance of this contract, or in the
           time required for performance, an equitable adjustment shall be
           made. Any claim for adjustment under this paragraph must be asserted
           within ten (10) days from the date the change is offered, provided,
           however, that the Contracting Officer, if he or she determines that
           the facts justify such action, may receive, consider and adjust any
           such claim asserted at any time prior to the date of final
           settlement of the contract. If the parties fail to agree upon the
           adjustment to be made, the dispute shall be determined as provided
           in the Dispute clause hereto. Nothing in this clause shall excuse
           the Contractor from proceeding with the contract as changed.

     20.   TERMINATION FOR CONVENIENCE OF THE DISTRICT:

           (a)    The District may terminate performance of work under this
                  contract in whole or, from time to time, in part if the
                  Contracting Officer determines that a termination is in the
                  District's interest. The Contracting Officer shall terminate
                  by delivering to the Contractor a Notice of Termination
                  specifying the extent of termination and effective date.

           (b)    After receipt of a Notice of Termination, and except as
                  directed by the Contracting Officer, the Contractor shall
                  immediately proceed with the following obligations, regardless
                  of any delay in determining or adjusting any amounts due under
                  this clause:

                  (1)  Stop work as specified in the notice.

                  (2)  Place no further subcontracts or orders (referred to as
                       subcontracts in this clause)for materials, services, or
                       facilities, except as necessary to complete the
                       continued portion of the contract.

                  (3)  Terminate all contracts to the extent they relate to the
                       work terminated.

                                       13
<PAGE>   16

                  (4)  Assign to the District, as directed by the Contracting
                       Officer, all rights, title and interest of the Contractor
                       under the subcontracts terminated, in which case the
                       District shall have the right to settle or pay any
                       termination settlement proposal arising out of those
                       terminations.

                  (5)  With approval or ratification to the extent required by
                       the Contracting Officer, settle all outstanding
                       liabilities and termination settlement proposals arising
                       from the termination of subcontracts. The approval or
                       ratification will be final for purposes of this clause.

                  (6)  As directed by the Contracting Officer, transfer title
                       and deliver to the District (i) the fabricated or
                       unfabricated parts, work in process, completed work,
                       supplies, and other materials produced or acquired for
                       the work terminated, and (ii) the completed or partially
                       completed plans, drawings, information, and other
                       property that, if the contract has been completed, would
                       be required to be furnished to the District

                  (7)  Complete performance of the work not terminated.

                  (8)  Take any action that may be necessary, or that the
                       Contracting Officer may direct, for the protection and
                       preservation of the property related to this contract
                       that is in the possession of the Contractor and in which
                       the District has or may acquire an interest.

                  (9)  Use its best efforts to sell, as directed or authorized
                       by the Contracting Officer, any property of the types
                       referred to in subparagraph (6) above; provided, however,
                       that the Contractor (i) is not required to extend credit
                       to any purchaser and (ii) may acquire the property under
                       the conditions prescribed by, and at prices approved by,
                       the Contracting Officer. The proceeds of any transfer or
                       disposition will be applied to reduce any payments to be
                       made by the District under this contract, credited to the
                       price or cost of the work, or paid in any other manner
                       directed by the Contracting Officer.

           (c)   After the expiration of ninety (90) days (or such longer period
                 as may be agreed to) after receipt by the Contracting Officer
                 of acceptable inventory schedules, the Contractor may submit to
                 the Contracting Officer a list, certified as to quantity and
                 quality of termination inventory not previously disposed of
                 excluding items authorized for disposition by the Contracting
                 Officer. The Contractor may request the District to remove
                 those items or enter into an agreement for their storage.
                 Within fifteen (15) days, the


                                       14
<PAGE>   17

                  District will accept title to those items and remove them or
                  enter into a storage agreement. The Contracting Officer may
                  verify the list upon removal of the items, or if stored,
                  within forty five (45) days from submission of the list, and
                  shall correct the list, as necessary, before final settlement.

           (d)    After termination, the Contractor shall submit a final
                  termination Settlement proposal to the Contracting Officer in
                  the form and with the certification prescribed by the
                  Contracting Officer. The Contractor shall submit the proposal
                  promptly, but no later than 6 months from the effective date
                  of termination, unless extended in writing by the Contracting
                  Officer upon written request of the Contractor within this 6
                  month period. However, if the Contracting Officer determines
                  that the facts justify it, a termination settlement proposal
                  may be received and acted on after 6 months or any extension.
                  If the Contractor fails to submit the proposal within the time
                  allowed, the Contracting Officer may determine, on the basis
                  of information available, the amount, if any, due to the
                  Contractor because of the termination and shall pay the amount
                  determined.

           (e)    Subject to paragraph (d) above, the Contractor and the
                  Contracting Officer may agree upon the whole or any part
                  of the amount to be paid because of the termination. The
                  amount may include a reasonable allowance for profit on work
                  done. However, the agreed amount, whether under this paragraph
                  (e) or paragraph (f) below, exclusive of costs shown in
                  subparagraph (f)(3) below, may not exceed the total contract
                  price as reduced by (1) the amount of payment previously made
                  and (2) the contract price of work not terminated. The
                  contract shall be amended, and the Contractor paid the agreed
                  amount Paragraph (1) below shall not limit, restrict, or
                  affect the amount that may be agreed upon to be paid under
                  this paragraph.

          (f)     If the Contractor and the Contracting Officer fail to agree on
                  the whole amount to be paid because of the termination work,
                  the Contracting Officer shall pay the Contractor the amounts
                  determined by the Contracting Officer as follows, but without
                  duplication of any amounts agreed on under paragraph (e)
                  above:

                  (1)   The contract price for completed supplies or Services
                        accepted by the District (or sold or acquired under
                        subparagraph (b)(9) above) not previously paid for,
                        adjusted for any saving of freight and other charges.

                  (2)   The total of--

                                       15
<PAGE>   18

                            (i)   The costs incurred in the performance of the
                                  work terminated, including initial costs and
                                  preparatory expense allocable thereto, but
                                  excluding any costs attributable to supplies
                                  or services paid or to be paid under
                                  subparagraph (f)(1) above;

                            (ii)  The cost of settling and paying termination
                                  settlement proposals under terminated
                                  subcontracts that are properly chargeable to
                                  the terminated portion of the contract if not
                                  included in subparagraph (f)(i) above; and

                            (iii) A sum, as profit on subparagraph (f)(i) above,
                                  determined by the Contracting Officer to be
                                  fair and reasonable; however, if it appears
                                  that the Contractor would have sustained a
                                  loss on the entire contract had  it been
                                  completed, the Contracting Officer shall allow
                                  no profit under this subparagraph (iii) and
                                  shall reduce the settlement to reflect the
                                  indicated rate of loss.

                  (3)   The reasonable cost of settlement of the work
                        terminated, including-

                            (i)   Accounting, legal, clerical, and other
                                  expenses reasonably necessary for the
                                  preparation of termination settlement
                                  proposals and supporting data;

                            (ii)  The termination and settlement of
                                  subcontractors (excluding the amounts of such
                                  settlements) and

                            (iii) Storage, transportation, and other costs
                                  incurred, reasonably necessary for the
                                  preservation, protection, or disposition of
                                  the termination inventory.

           (g)    Except for normal spoilage, and except to the extent that the
                  District expressly assumed the risk of loss, the Contracting
                  Officer shall exclude from the amounts payable to the
                  Contractor under paragraph (f) above, the fair value as
                  determined by the Contracting Officer, of property that is
                  destroyed, lost, stolen, or damaged so as to become
                  undeliverable to the Government or to a buyer.

           (h)    The Contractor shall have the right of appeal, under the
                  Disputes clause, from any determination made by the
                  Contracting Officer under paragraphs (d), (f) or (j), except
                  that if the Contractor failed to submit the termination


                                       16
<PAGE>   19

                  settlement proposal within the time provided in paragraph (d)
                  or (j), and failed to request a time extension, there is no
                  right of appeal. If the Contracting Officer has made a
                  determination of the amount due under paragraph (d), (f)
                  or (j), the District shall pay the Contractor(1) the
                  amount determined by the Contracting Officer if there is
                  no right of appeal or if no timely appeal has been taken,
                  or (2) the amount finally determined on an appeal.

           (i)    In arriving at the amount due the Contractor under this
                  clause, there shall be deducted --

                  (1)   All unliquidated advance or other payments
                        to the Contractor under the termination
                        portion of the contract,

                  (2)   Any claim which the District has against
                        the Contractor under this contract; and

                  (3)   The agreed price for, or the proceeds of
                        sale of, materials, supplies, or other
                        things acquired by the Contractor or sold
                        under the provisions of this clause and not
                        recovered by or credited to the District.

           (j)    If the termination is partial, the Contractor may file a
                  proposal with the Contracting Officer for an equitable
                  adjustment of the price(s) of the continued portion of the
                  contract. The Contracting Officer shall make any equitable
                  adjustment agreed upon. Any proposal by the Contractor for an
                  equitable adjustment under this clause shall be requested
                  within ninety (90) days from the effective date of termination
                  unless extended in writing by the Contracting Officer.

           (k)(1) The District may, under the terms and conditions it
                  prescribes, make partial payments and payments against costs
                  incurred by the Contractor for the terminated portion of the
                  contract, if the Contracting Officer believes the total of
                  these payments will not exceed the amount to which the
                  Contractor will be entitled.

              (2) If the total payments exceed the amount finally determined to
                  be due, the Contractor shall repay the excess to the District
                  upon demand together with interest computed at the rate of 10
                  percent (10%) per year. Interest shall be computed for the
                  period from the date the excess payment is received by the
                  Contractor to the date the excess payment is repaid. Interest
                  shall not be charged on any excess payment due to a reduction
                  in the Contractor s termination settlement proposal because of
                  retention or other disposi-

                                       17
<PAGE>   20

                  tion of termination inventory until 10 days after the date of
                  the retention or disposition, or a later date determined by
                  the Contracting Officer because of the circumstances.

              (1) Unless otherwise provided in this contract or by statue,
                  the Contractor shall maintain all records and documents
                  relating to the terminated portion of this contract for 3
                  years after final settlement. This includes all books and
                  other evidence bearing on the Contractor s costs and expenses
                  under this contract. The Contractor shall make these records
                  and documents available to the District, at the Contractor's
                  office, at all reasonable times, without any direct charge. If
                  approved by the Contracting Officer, photographs, micrographs,
                  or other authentic reproductions may be maintained instead of
                  original records and documents.

     21.   RECOVERY OF DEBTS OWED THE DISTRICT:

           The Contractor hereby agrees that the District of Columbia may use
           all or any portion of any consideration or refund due the Contractor
           under the present contract to satisfy in whole or part, any debt due
           the District.

     22.   EXAMINATION OF BOOKS, ETC. BY THE OFFICE OF INSPECTOR GENERAL AND
           THE DISTRICT OF COLUMBIA AUDITOR:

           The Contracting Officer, the Inspector General and the District of
           Columbia Auditor, or any of their duly authorized representatives
           shall, until three years after final payment, have the right to
           examine any directly pertinent books, documents, papers and records
           of the Contractor involving transactions related to the contract.

     23.   NON-DISCRIMINATION CLAUSE:

           (a)    The Contractor shall not discriminate in any manner against
                  any employee or applicant for employment that would constitute
                  a Violation of the District of Columbia Human Rights Act,
                  approved December 13, 1977 ( D. C. Law 2-38: D. C. Code
                  I-2512) (1981 Ed.). The Contractor shall include a similar
                  clause in all subcontracts, except subcontracts for standard
                  commercial supplies or raw materials. In addition, Contractor
                  agrees and any sub- contractor shall agree to post in
                  conspicuous places, available to employees and applicants for
                  employment, notice setting forth the provisions of this
                  non-discrimination clause-proved in Section 251 of the
                  District of Columbia Human Rights Act (D. C. Code 1-2522).

           (b)    Pursuant to rules of the Department of Human Rights and Local
                  Business Development, published on August 15, 1986 in the D.C.
                  Register, the following clauses apply to this contract:

                                       18
<PAGE>   21

                  1103.2 -- The Contractor shall not discriminate against any
                  employee or applicant for employment because of race, color,
                  religion, national origin, sex, age, martial status, personal
                  appearance, sexual orientation, family responsibilities,
                  matriculation, political affiliation, or physical handicap.

                  1103.3--The Contractor agrees to take affirmative action to
                  ensure that applicants are employed, and that employees are
                  treated during employment, without regard to their race,
                  color, religion, national origin, sex, age, martial status,
                  personal appearance, sexual orientation, family
                  responsibilities, matriculation, political affiliation, or
                  physical handicap. The affirmative action shall include, but
                  not be limited to the following:

                            (1)   employment, upgrading or transfer;

                            (2)   recruitment, or recruitment advertising;

                            (3)   demotion, layoff, or termination;

                            (4)   rates of pay, or other forms of compensation;

                            (5)   and selection for training and apprenticeship.

                  1103.4 -- The Contractor agrees to post in Conspicuous places,
                  available to employees and applicants for employment, notices
                  to be provided by the Contracting Agency, setting forth the
                  provisions in subsections 1103.2 and 1103.3 concerning
                  non-discrimination and affirmative action.

                  1103.5 --The Contractor shall, in all solicitations or
                  advertisements for employees placed by or on behalf of the
                  Contractor, state that all qualified applicants will receive
                  consideration for employment pursuant to the nondiscrimination
                  requirements set forth in subsection 1103.2.

                  1103.6--The Contractor agrees to send to each labor union or
                  representative of workers with which he has a collective
                  bargaining agreement or other contract or understanding, a
                  notice to be provided by the Contracting Officer, advising the
                  said labor union or workers' representative of that
                  contractor's commitments under this chapter, and shall post
                  copies of the notice in conspicuous places available to
                  employees and applicants for employment.

                  1103.7 -- The Contractor agrees to permit access to his books,
                  records and accounts pertaining to its employment practices,
                  by the Chief Procurement Officer or his/her alternates, for
                  purposes of investigation to ascertain

                                       19
<PAGE>   22

                  compliance with this chapter, and to require under terms of
                  any subcontractor agreement each subcontractor to permit
                  access of such subcontractors books, records, and accounts for
                  such purposes.

                  1103.8 -- The Contractor agrees to comply with the provisions
                  of this chapter and with all guidelines for equal employment
                  opportunity applicable in the District of Columbia adopted by
                  the Chief Procurement Officer, or any authorized official.

                  1103.9--The prime Contractor shall include in every
                  subcontract the equal opportunity clauses, subsection 1103.2
                  through 1103.10 of this section, so that such provisions shall
                  be binding upon each subcontractor or vendor.

                  1103.10-- The prime Contractor shall take such action with
                  respect to any subcontract as the Contracting Officer may
                  direct as a means of enforcing these provisions, including
                  sanctions for noncompliance; provided, however, that in the
                  event the prime Contractor becomes involved in, or is
                  threatened with, litigation with a subcontractor or vendor as
                  a result of such direction by the contracting agency, the
                  prime Contractor may request the District to enter into such
                  litigation to protect the interest of the District.

     24.   DEFINITIONS:

           The terms Mayor, Chief Procurement Officer, Contract Appeals Board
           and District shall mean the Mayor of the District of Columbia, the
           Chief Procurement Officer of the District of Columbia or his/her
           alternate, the Contract Appeals Board of the District of Columbia,
           and the Government of the District of Columbia respectively. If the
           Contractor is an individual, the term Contractor shall mean the
           Contractor, his heirs, his executive and his administrator. If the
           Contractor is a corporation, the term Contractor shall mean the
           Contractor and its successor.

     25.   ESTIMATED QUANTITIES:

           It is the intent of the District to secure a contract for all of the
           needs of the designated Agencies for items specified herein which may
           occur during the contract term. The District agrees that it will
           purchase its requirements of the articles or services included herein
           from the Contractor. Articles and/or services specified herein have a
           history of repetitive use in the District agencies. The estimated
           quantities stated in the Invitation for Bids/Request for Proposals
           reflect the best estimates available. They shall not be construed to
           limit the quantities which may be ordered from the Contractor by the
           District or to relieve the Contractor of his obligation to fill all
           such orders. Orders will be placed from time to time if and when
           needs arise for delivery,

                                       20
<PAGE>   23
                  ALL CHARGES PREPAID, to the ordering Agency. The District
                  does not guarantee to order any specific quantities of any
                  item(s) or including work hours of service.

     26.          HEALTH AND SAFETY STANDARDS:

                  Items delivered under this contract shall conform to all
                  requirements of the Occupational Safety and Health Act of
                  1970, as amended, and Department of Labor Regulations under
                  the Act, and all Federal requirements in effect at time of
                  bid opening/proposal submission.

     27.          APPROPRIATION OF FUNDS:

                  The District s liability under this contract is contingent
                  upon the future availability of appropriated monies with
                  which to make payment for the contract purposes. The legal
                  liability on the part of the District for the payment of any
                  money shall not arise unless and until such appropriation
                  shall have been provided.

     28.          HIRING OF DISTRICT RESIDENTS:

                  All new employment resulting from this contract or
                  subcontracts hereto, as defined in Mayor's Order 83-265 and
                  implementing instructions, shall include the following basic
                  goals and objectives for utilization of bona fide residents
                  of the District of Columbia in each project s labor force:

                  (a)  at least fifty-one (51) percent of all jobs created are
                       to be performed by employees who are residents of the
                       District of Columbia.

                  (b)  at least fifty-one (51) percent of apprentices and
                       trainees employed shall be residents of the District of
                       Columbia registered in programs approved by the District
                       of Columbia Apprenticeship Council. The Contractor shall
                       negotiate an Employment Agreement with the District of
                       Columbia Department of Employment Services for jobs
                       created as a result of this contract. The Department of
                       Employment Services shall be the contractor s first
                       source of referral for qualified applicants trainees and
                       other workers in the implementation of employment goals
                       contained in this clause.

     29.          BUY AMERICAN ACT:

                  (a)  The Buy American Act (41 U.S.C. 10) provides that the
                       District give preference to domestic end products.

                       "Components," as used in this clause, means those
                       articles, materials, and supplies incorporated directly
                       into the end products.

                                       21

<PAGE>   24

                       "Domestic end product," as used in this clause, means,
                       (1) an unmanufactured end product mined or produced in
                       the United States, or (2) an end product manufactured in
                       the United States, if the cost of its components mined,
                       produced, or manufactured in the United States, exceeds
                       50 percent of the cost of all its components. Components
                       of foreign origin of the same class or kind as the
                       products referred to in paragraphs (b)(2) or (3) of this
                       clause shall be treated as domestic. Scrap generated,
                       collected, and prepared for processing in the United
                       States is considered domestic.

                       "End products," as used in this clause, means those
                       articles, materials, and supplies to be acquired for
                       public use under this contract.

                  (b)  The Contractor shall deliver only domestic end products,
                       except those--

                       (1)  For use outside the United States;

                       (2)  That the District determines are not mined,
                            produced, or manufactured in the United States in
                            sufficient and \ reasonable available commercial
                            quantities of a satisfactory quality;

                       (3)  For which the agency determines that domestic
                            preference would be inconsistent with the public
                            interest; or

                       (4)  For which the agency determines the cost to be
                            unreasonable.

     30.          SERVICE CONTRACT ACT OF 1965:

                  (a)  Definitions.  "Act," as used in this clause, means the
                       Service Contract Act of 1965, as amended (41 U.S.C.
                       351-358).

                       (1)  "Contractor," as used in this clause, means the
                            prime Contractor or any subcontractor at any tier.

                       (2)  "Service employee," as used in this clause, means
                            any person (other than a person employed in a bona
                            fide executive, administrative, or professional
                            capacity as defined in 29 CFR 541) engaged in
                            performing a Government contract not exempted under
                            41 U.S.C. 356, the principal purpose of which is to
                            furnish services in the United States, as defined
                            in section 22.1001 of the Federal Acquisition
                            Regulation. It includes all such persons regardless
                            of the actual or alleged contractual relationship
                            between them and a contractor.

                                       22

<PAGE>   25

                  (b)  Applicability. To the extent that the Act applies, this
                       contract is subject to the following provisions and to
                       all other applicable provisions of the Act and
                       regulations of the Secretary of Labor (20 CFR 4). All
                       interpretations of the Act in Subpart C of 29 CFR 4 are
                       incorporated in this contract by reference. This clause
                       does not apply to contracts or subcontracts
                       administratively exempted by the Secretary of Labor or
                       exempted by 41 U.S.C. 356, as interpreted in Subpart C
                       of 29 CFR 4.

                  (c)  Compensation.

                       (1)   The Contractor shall pay not less than the minimum
                             wage and shall furnish fringe benefits to each
                             service employee under this contract in accordance
                             with the wages and benefits determined by the
                             Secretary of Labor or the Secretary s authorized
                             representative, as specified in any attachments to
                             this contract.

                       (2)   If there is an attachment, the Contractor shall
                             classify any class of service employees not listed
                             in it, but to be employed under this contract. The
                             classification shall provide a reasonable
                             relationship to those listed in the attachment.
                             The Contractor shall pay that class wages and
                             fringe benefits determined by agreement of the
                             interested parties: The contracting agency, the
                             Contractor, and the employees who will perform the
                             contract or their representatives. If the
                             interested parties do not agree, the Contracting
                             Officer shall submit the question, with a
                             recommendation, for final determination by the
                             Office of Government Contract Wage Standards, Wage
                             and Hour Division, Employment Standards
                             Administration (ESA), Department of Labor. Failure
                             to pay such employees the compensation agreed upon
                             by the interested parties or finally determined by
                             ESA is a contract violation.

                       (3)   If the term of this contract is more than 1 year,
                             the minimum wages and fringe benefits required for
                             service employees under this contract shall be
                             subject to adjustment after 1 year and not less
                             often than once every 2 years, under wage
                             determinations issued by ESA.

                       (4)   The Contractor can discharge the obligation to
                             furnish fringe benefits specified in the
                             attachment or determined under paragraph (c)(2) of
                             this clause by furnishing any equivalent
                             combinations of bona fide fringe benefits, or by
                             making equivalent or differential cash payments,
                             in accordance with Subpart B and C of 29 CFR 4.

                                       23

<PAGE>   26

                  (d)  Minimum wage. In the absence of a minimum wage
                       attachment for this contract, the Contractor shall not
                       pay any service or other employees performing this
                       contract less than the minimum wage specified by section
                       6(a)(l) of the Fair Labor Standards Act of 1938, as
                       amended (29 U.S.C. 206). Nothing in this clause shall
                       relieve the Contractor of any other legal or contractual
                       obligation to pay a higher wage to any employee.

                  (e)  Successor contracts. If this contract succeeds a
                       contract subject to the Act under which substantially
                       the same services were furnished and service employees
                       were paid wages and fringe benefits provided for in a
                       collective bargaining agreement, then, in the absence of
                       a minimum wage attachment to this contract, the
                       Contractor may not pay any service employee performing
                       this contract less than the wages and benefits,
                       including those accrued and any prospective increases,
                       provided for under that agreement. No Contractor may be
                       relieved of this obligation unless the limitations of 29
                       CFR 4.lc(b) apply or unless the Secretary of Labor or
                       the Secretary's authorized representative--

                       (1)  Determines that the agreement under the predecessor
                            was not the result of arms-length negotiations; or

                       (2)  Finds, after a hearing under 29 CFR 4.10, that the
                            wages and benefits provided for by that agreement
                            vary substantially from those prevailing for
                            similar services in the locality.

                  (f)  Notification to employees. The Contractor shall notify
                       each service employee commencing work on this contract
                       of a minimum wage and any fringe benefits required to be
                       paid, or shall post a notice of these wages and benefits
                       in a prominent and accessible place at the worksite,
                       using such poster as may be provided by the Department
                       of Labor.

                  (g)  Safe and sanitary working conditions. The Contractor
                       shall not permit services called for by this contract to
                       be performed in buildings or surroundings or under
                       working conditions provided by or under the control or
                       supervision of the Contractor that are unsanitary,
                       hazardous, or dangerous to the health or safety of
                       service employees. The Contractor shall comply with the
                       health standards applied under 29 CFR Part 1925.

                  (h)  Records. The Contractor shall maintain for 3 years from
                       the completion of work, and make available for
                       inspection and transcription by authorized ESA
                       representatives, a record of the following:

                       (1)  For each employee subject to the Act--

                                       24

<PAGE>   27


                            (i)   Name and address;

                            (ii)  Work classification or classifications, rate
                                  or rates of wages and fringe benefits
                                  provided, rate or rates of payments in lieu
                                  of fringe benefits, and total daily and
                                  weekly compensation;

                            (iii) Daily and weekly hours worked; and

                            (iv)  Any deductions, rebates, or refunds from
                                  total daily or weekly compensation.

                       (2)  For those classes of service employees not included
                            in any wage determination attached to this
                            contract, wage rates or fringe benefits determined
                            by the interested parties or by ESA under the terms
                            of paragraph (c) of this clause. A copy of the
                            report required by paragraph (k) of this clause
                            will fulfill this requirement.

                  (i)  Withholding of payments and termination of contract. The
                       Contracting Officer shall withhold from the prime
                       Contractor under this or any other Government contract
                       with the prime Contractor any sums the Contracting
                       Officer, or an appropriate officer of the Labor
                       Department, decides may be necessary to pay underpaid
                       employees. Additionally, any failure to comply with the
                       requirements of this clause may be grounds for
                       termination for default.

                  (j)  Subcontracts. The Contractor agrees to insert this
                       clause in all subcontracts.

                  (k)  Contractor's report.

                       (1)  If there is a wage determination attachment to this
                            contract and any classes of service employees not
                            listed on it are to be employed under the contract,
                            the Contractor shall report promptly to the
                            Contracting Officer the wages to be paid and the
                            fringe benefits to be provided each of these
                            classes, when determined under paragraph(c) of this
                            clause.

                       (2)  If wages to be paid or fringe benefits to be
                            furnished any service employees under the contract
                            are covered in a collective bargaining agreement
                            effective at any time when the contract is being
                            performed, the prime Contractor shall provide to
                            the Contracting Officer a copy of the agreement and
                            full information on the applica-


                                       25

<PAGE>   28

                            tion and accrual of wages and benefits (including
                            any prospective increases) to service employees
                            working on the contract. The prime Contractor shall
                            report when contract performance begins, in the
                            case of agreements then in effect, and shall report
                            subsequently effective agreements, provisions, or
                            amendments promptly after they are negotiated.

                       (l)  Variations, tolerances, and exemptions involving
                            employment. Notwithstanding any of the provisions
                            in paragraphs (c) through (k) of this clause, the
                            following employees may be employed in accordance
                            with the following variations, tolerances, and
                            exemptions authorized by the Secretary of Labor.

                            (1)   (i)      In accordance with regulations
                                           issued under Section 14 of the Fair
                                           Labor Standards Act of 1938 by the
                                           Administrator of the Wage and Hour
                                           Division, ESA (29 CFR 520, 521, 524,
                                           and 525), apprentices, student
                                           learners, and workers whose earning
                                           capacity is impaired by age or by
                                           physical or mental deficiency or
                                           injury, may be employed at wages
                                           lower than the minimum wages
                                           otherwise required by section
                                           2(a)(1) or 2(b)(1) of the Service
                                           Contract Act, without diminishing
                                           any fringe benefits or payments in
                                           lieu of these benefits required
                                           under section 2(a)(2) of the Act.

                                  (ii)     The Administrator will issue
                                           certificates under the Act for
                                           employing apprentices,
                                           student-learners, handicapped
                                           persons, or handicapped clients of
                                           sheltered workshops not subject to
                                           the Fair Labor Standards Act of
                                           1938, or subject to different
                                           minimum rates of pay under the two
                                           acts, authorizing appropriate rates
                                           of minimum wages, but without
                                           changing requirements concerning
                                           fringe benefits or supplementary
                                           cash payments in lieu of these
                                           benefits.

                                    (iii)  The Administrator may also withdraw,
                                           annul, or cancel such certificates
                                           under 29 CFR 525 and 528.

                            (2)     An employee engaged in an occupation in
                                    which the employee customarily and
                                    regularly receives more than $30 a month in
                                    tips credited by the employer against the
                                    minimum wage required by section 2(a)(1) or
                                    section 2(b)(1) of the Act, in accordance
                                    with regulations in 29 CFR 531. However,
                                    the amount of credit shall not exceed 40
                                    percent of the minimum rate specified in
                                    section 6(a)(l) of the Fair Labor Standards
                                    Act of 1938 as amended.

                                       26

<PAGE>   29
     31.  COST AND PRICING DATA:

          (a)     This paragraph and paragraphs b through e below shall apply
                  to Contractors or offerors in regards to: (1) any procurement
                  in excess of $100,000, (2) any contract awarded through
                  competitive sealed proposals, (3) any contract awarded
                  through sole source procurement, or (4) any change order or
                  contract modification. By entering into this contract or
                  submitting this offer, the Contractor or offeror certifies
                  that, to the best of the Contractor's or offeror's knowledge
                  and belief, any cost and pricing data submitted was accurate,
                  complete and current as of the date specified in the contract
                  or offer.

         (b)      Unless otherwise provided in the solicitation, the offeror or
                  Contractor shall, before entering into any contract awarded
                  through competitive sealed proposals or through sole source
                  procurement or before negotiating any price adjustments
                  pursuant to a change order or modification, submit cost or
                  pricing data and certification that, to the best of the
                  Contractor's knowledge and belief, the cost or pricing data
                  submitted was accurate, complete, and current as of the date
                  of award of this contract or as of the date of negotiation of
                  the change order or modification.

         (c)      If any price, including profit or fee, negotiated in
                  connection with this contract, or any cost reimbursable under
                  this contract, was increased by any significant amount
                  because (1) the Contractor or a subcontractor furnished cost
                  or pricing data that were not complete, accurate, and current
                  as certified by the Contractor, (2) a subcontractor or
                  prospective subcontractor furnished the Contractor cost or
                  pricing data that were not complete, accurate, and current as
                  certified by the Contractor, or (3) any of these parties
                  furnished data of any description that were not accurate, the
                  price or cost shall be reduced accordingly and the contract
                  shall be modified to reflect the reduction.

         (d)      Any reduction in the contract price under paragraph c above
                  due to defective data from a prospective subcontractor that
                  was not subsequently awarded the subcontract shall be limited
                  to the amount, plus applicable overhead and profit markup, by
                  which (1) the actual subcontract or (2) the actual cost to
                  the Contractor, if there was no subcontract, was less than
                  the prospective subcontract cost estimate submitted by the
                  Contractor, provided that the actual subcontract price was
                  not itself affected by defective cost or pricing data.

         (e)      Cost or pricing data includes all facts as of the time of
                  price agreement that prudent buyers and sellers would
                  reasonably expect to affect price negotia-

                                       27

<PAGE>   30

                  tions significantly. Cost or pricing data are factual, not
                  judgmental, and are therefore verifiable. While they do not
                  indicate the accuracy of the prospective Contractor's
                  judgment about estimated future costs or projections, cost or
                  pricing data do include the data forming the basis for that
                  judgment. Cost or pricing data are more than historical
                  accounting data; they are all the facts that can be
                  reasonably expected to contribute to the soundness of
                  estimates of future costs and to the validity of
                  determinations of costs already incurred.

          (f)      The following specific information should be included as
                   cost or pricing data, as applicable:

                   (1) Vender quotations;

                   (2) Nonrecurring costs;

                   (3) Information on changes in production methods or
                       purchasing volume;

                   (4) Data supporting projections of business prospects and
                       objectives and related operations costs;

                   (5) Unit-cost trends such as those associated with labor
                       efficiency;

                   (6) Make-or-buy decisions;

                   (7) Estimated resources to attain business goals;

                   (8) Information on management decisions that could have a
                       significant bearing on costs.

         (g)      If the offeror or Contractor is required by law to submit
                  cost or pricing data in connection with pricing this contract
                  or any change order or modification of this contract, the
                  Contracting Officer or representatives of the Contracting
                  Officer shall have the right to examine all books, records,
                  documents and other data of the Contractor (including
                  computations and projections) related to negotiating,
                  pricing, or performing the contract, change order or
                  modification, in order to evaluate the accuracy,
                  completeness, and currency of the cost or pricing data. The
                  right of examination shall extend to all documents necessary
                  to permit adequate evaluation of the cost or pricing data
                  submitted, along with the computations and projections used.
                  Contractor shall make available at its office at all
                  reasonable times the materials described above for
                  examination, audit, or reproduction until three years after
                  the later of:

                                       28

<PAGE>   31


                  (1)      final payment under the contract;

                  (2)      final termination settlement; or

                  (3)      the final disposition of any appeals under the
                           disputes clause or of litigation or the settlement
                           of claims arising under or relating to the contract.

         32.      COST-REIMBURSEMENT CONTRACTS:

                  If this contract is a cost-reimbursement contract, then only
                  costs determined in writing to be reimbursable by the
                  Contracting Officer, in accordance with the cost principles
                  set forth in rules issued pursuant to Title VI of the
                  Procurement Practices Act of 1985, shall be reimbursable.

         33.      MULTIYEAR CONTRACT:

                  If this contract is a multiyear contract, then the following
                  provisions are made part of this contract:

                  If funds are not appropriated or otherwise made available for
                  the continued performance in a subsequent year of a multiyear
                  contract, the contract for the subsequent year shall be
                  terminated, either automatically or in accordance with the
                  termination clause of the contract, if any. Unless otherwise
                  provided for in the contract, the effect of termination is to
                  discharge both the District government and the contractor
                  from future performance of the contract, but not from the
                  existing obligations. The contractor shall be reimbursed for
                  the reasonable value of any non-recurring costs incurred but
                  not amortized in the price of the supplies or services
                  delivered under the contract.

         34.      TERMINATION OF CONTRACTS FOR CERTAIN CRIMES AND VIOLATIONS:

                  (a)  The District may terminate without liability any
                       contract and may deduct from the contract price or
                       otherwise recover the full amount of any fee,
                       commission, percentage, gift, or consideration paid in
                       violation of this title if:

                       (1)  The Contractor has been convicted of a crime
                            arising out of or in connection with the
                            procurement of any work to be done or any payment
                            to be made under the contract; or

                       (2)  There has been any breach or violation of:

                                       29

<PAGE>   32

                                  (A)    Any provision of the Procurement
                                         Practices Act of 1985, as amended, or

                                  (B)    The contract provision against
                                         contingent fees.

                  (b)  If a contract is terminated pursuant to this section,
                       the Contractor:

                       (1)  May be paid only the actual costs of the work
                            performed to the date of termination, plus
                            termination costs, if any; and

                       (2)  Shall refund all profits or fixed fees realized
                            under the Contract.

                  (c)  The rights and remedies contained in this are in
                       addition to any other right or remedy provided by law,
                       and the exercise of any of them is not a waiver of any
                       other right or remedy provided by law.

                                       30
<PAGE>   33

-------------------------------------------------------------------------------
[insert logo here]

                     GOVERNMENT OF THE DISTRICT OF COLUMBIA

                       CONTRACT FOR GOODS AND/OR SERVICES

                                                         Page No. 1 of x   pages
                                                                       ---

-------------------------------------------------------------------------------
DEPARTMENT:                             ADDRESS: 825 North Capitol Street, N.W.
  Department of Health                           Washington, D.C.  20002
-------------------------------------------------------------------------------
CONTRACT NO.              HCOCO139344
             ----------------------------------------------------------------

USING AGENCY OR AGENCIES  MMA
                         ----------------------------------------------------

CAPTION   Medicaid Managed Care Program (MMCP) MCO Services
          -------------------------------------------------------------------

-------------------------------------------------------------------------------
                              TERMS AND CONDITIONS
-------------------------------------------------------------------------------

Contract terms and conditions attached.



*Subject to the right of the District to order a No-Cost contract termination in
accordance with Contract Article XII.

<TABLE>
<S>                                                  <C>
----------------------------------------------------------------------------------------------------------
CONTRACTOR:   (Contractor shall not commence          ACCEPTANCE BY THE DISTRICT:
               performance until the District
               has signed  this document.)            /s/ Susan L. Fitgerald
                                                      ----------------------------------------------------
       AMERIGROUP Maryland, Inc.,                     Contracting Officer
       A Managed Care Organization
                                                           3/31/00
----------------------------------------------------  ----------------------
Contractor's Name                                     Date
By: David E. Ford                                     ----------------------------------------------------
----------------------------------------------------
Signature of Authorized Representative                The information contained in the boxes below is for
                                                      District use only and, in the event of a discrepancy
        President & CEO Mid Atlantic                  between this information and the terms of the
----------------------------------------------------  contract, the contract terms shall control.
Title

     3/9/00
---------------------------------------
Date
                                                      ----------------------------------------------------

----------------------------------------------------                            PERIOD OF CONTRACT:
Mailing Address of Contractor
                                                      $   $20,113,044 est.      From 1 YR from date of
----------------------------------------------------  --------------------
857 Elkridge Landing Rd, Linthicum, Md.                   Contract Amount
----------------------------------------------------

   410 859-5800                  410- 981-4010                                     To AWARD* (See
--------------------             -------------------                                  -----------
Telephone No.                    Fax. No.                                       Above)
                                                                                ------
----------------------------------------------------  ----------------------------------------------------
CASE FILE                        CONTRACTOR               PSD                        USING AGENCY
----------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>   34


<TABLE>
<S>                                                  <C>
-----------------------------------------------------------------------------------------------------------------------------------
                                                     1. Contract Number
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT   NC0C0139344                            Page of Pages
                                                                                         1                     2
-----------------------------------------------------------------------------------------------------------------------------------
2.  Amendment/Modification Number                    3. Effective Date            4. Requisition/    5. Solicitation Caption MMCP
1                                                    31-Mar-00                    Purchase Request   Managed Health Care Services
                                                                                  No. HC0CO139344

-----------------------------------------------------------------------------------------------------------------------------------
6. Issued By:                                                Code        2        7. Administered By (if other than line 6)
OFFICE OF CONTRACTING AND PROCUREMENT                             --------------  Department of Health
on behalf of the D.C. Department of Health                                        Medical Assistance Administration
441 4th Street, N.W., Suite 800 South                                             825 North Capitol Street, N.E.
Washington, D.C. 20001                                                            Washington, D.C. 20002


-----------------------------------------------------------------------------------------------------------------------------------
8.  Name and Address of Contractor (No. Street, city, country, state and ZIP Code)

Amerigroup Maryland, Inc.
857 Elkridge Landing Road, Suite 300
Linthicum, Maryland 21090                                                                                 (X)  9A. Amendment of
                                                                                                         ----- Solicitation No.

                                                                                                         --------------------------
                                                                                                               9B. Dated (See Item
                                                                                                               11)
                                                                                                         --------------------------
                                                                                                               10A. Modification of
                                                                                                               Contract/order No.
                                                                                                               Contract No.
                                                                                                           x   HC0CO139344
---------------------------------------------------------------------------------------------------------      --------------------
                                                                                                               10B. Dated (See Item
                 Code                                                               Facility                   13) 31-Mar-00

-----------------------------------------------------------------------------------------------------------------------------------
                                     11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS

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

       The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [___]
-----  is extended. [___] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in
       the solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning ______
       copies of the amendment: (b) By acknowledging receipt of this amendment on solicitation copy of the offer submitted; or (c)
       By separate letter or fax which includes a reference to the solicitation and amendment number. FAILURE OF YOUR
       ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY
       RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such
       change may be made by letter or fax, provided each letter or telegram makes reference to the solicitation and this amendment,
       and is received prior to the opening hour and date specified.

-----------------------------------------------------------------------------------------------------------------------------------
12. Accounting and Appropriation Data (If Required)

-----------------------------------------------------------------------------------------------------------------------------------
                                   13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDER,
                                     IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14

-----------------------------------------------------------------------------------------------------------------------------------
 (x)   A. This change order is issued pursuant to: Changes Clause of the Contract
-----  The changes set forth in Item 14 are made in the contract/order no. in item 10A.

-----------------------------------------------------------------------------------------------------------------------------------
       B. The above number contract/order is modified to reflect the administrative changes (such as changes in paying office,
       appropriation date, etc.) set forth in item 14, pursuant to the authority of 27 DCMR, Chapter 36, Section 3601.2.
-----------------------------------------------------------------------------------------------------------------------------------
       C. This supplemental agreement is entered into pursuant to authority of:
-----------------------------------------------------------------------------------------------------------------------------------
       D. Other (Specify type of modification and authority)
-----------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT            Contractor    X    is not,   is required to sign this document and return ____ copies to the issuing office.
-----------------------------------------------------------------------------------------------------------------------------------
14. Description of amendment/modification (Organized by UCF Section headings, including solicitation/contract subject matter where
feasible.)

See Continuation Sheet, Page 2.


-----------------------------------------------------------------------------------------------------------------------------------
Except as provided herein, all terms and conditions of the document referenced in Item (9A or 10A) remain unchanged and in full
force and effect
-----------------------------------------------------------------------------------------------------------------------------------
15A. Name and Title of Signer (Type or print)        16A. Name of Contracting Officer

                                                          Susan Fitzgerald
                                                          Supervisory Contracting Officer
-----------------------------------------------------------------------------------------------------------------------------------
15B. Name of Contractor     15C. Date Signed         16B. District of Columbia                                     16C. Date Signed

                                                     Susan I. Fitgerald                                              3/31/00

(Signature of person
authorized to sign)                                                         (Signature of Contracting Officer)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       2
<PAGE>   35


Contract HC0CO139344                                                 Page 2 of 2

D.C. Department of Health Contract No. HC0CO139344 for Managed Health Care
Services as part of the D.C. Medicaid Managed Health Care Program is hereby
modified as follows:


1.    Page 11 , ARTICLE 1 - SCOPE OF SERVICES, Section E. REQUIRED INFORMATION,
      paragraph 7, is revised to read as follows:

      7.    Operational Indicators of Provider Performance and Encouter Data

            Provider shall provide to the District information on Performance
            Indicators for HMOs in accordance with the D.C. Medical Assistance
            Administration's "Measurement Specifications and Reporting Template
            for MCO Performance Measures" and Attachment V to this contract. In
            addition, Provider shall report to the District the following
            information for EPSDT services, quarterly by the 30th of the month
            following the calendar quarter of activity:

            a.    Number of individuals eligible for EPSDT enrolled with the
                  MCO;
            b.    Number of individuals receiving at least one initial or
                  periodic screening service from the MCO;
            c.    Actual number of initial and periodic screening services;
            d.    Number of individuals referred for corrective treatment;
            e.    Number of individuals receiving corrective treatment;
            f.    Number of individuals receiving vision assessments;
            g.    Number of individuals receiving dental assessments;
            h.    Number of individuals receiving hearing assessments.

2.    Page 22, ARTICLE 1 - SCOPE OF SERVICES, Section G. ENROLLMENT, EDUCATION,
      AND OUTREACH, paragraph 6, is revised to read as follows:

      6.    Automatic Enrollment of Newborns

            All infants born to an enrollee shall be enrolled with the mother's
            provider effective on the date of birth. This enrollment with the
            mother's provider shall extend until the mother elects to disenroll
            the child, or the child is no longer eligible for Medicaid.

3.    Page 50, ARTICLE XVIII - INCORPORATED DOCUMENTS, Section A is revised to
      add a new subsection 8 to read as follows:

            8.    Attachment: D.C. Medical Assistance Administration's
            "Measurement Specifications and Reporting Template for MCO
            Performance Measures" (Attachment V).

                                       3
<PAGE>   36

================================================================================

               DISTRICT OF COLUMBIA MEDICAID MANAGED CARE PROGRAM

                              DEPARTMENT OF HEALTH

                        PREPAID, CAPITATED RISK CONTRACT

                            CONTRACT NO. ND0CO139344

================================================================================

Subject to the terms and conditions set forth herein, the Government of the
District of Columbia (hereinafter "DISTRICT") and Americaid Community Care
(hereinafter "PROVIDER OR CONTRACTOR"), hereby enter into a contract in
accordance with the following terms:

WITNESSETH:

WHEREAS, persons eligible for care under the Medical Assistance Program
operating under Title XIX of the Social Security Act, are in need of Medical
Care;

WHEREAS, Section 1902(a)(27) of Title XIX of the Social Security Act requires
states to enter into written agreement with every person or institution
providing services under the State Plan for Medical Assistance (Title XIX);

WHEREAS, pursuant to Reorganization Plan No. 4 of 1996, effective July 11, 1997
which makes the D.C. Department of Health the agency responsible for
administering the Medical Assistance Program (Title XIX) in the District of
Columbia, and authorizes the Department of Health to take all necessary steps
for the proper and efficient administration of the District of Columbia Medical
Assistance Program;

WHEREAS, prospective Provider has been selected by the Department of
Administrative Services through Solicitation No. 70l0-AA-NS-2-CR to participate
in the D.C. Medicaid Managed Care Program, established pursuant to the authority
set forth in the Medicaid Managed Care Amendment Act 1992, D.C. Law 9-247, D.C.
Code, Sec 1-359(d) and Mayor's Order No. 93-218 and Provider's response to said
solicitation is incorporated by reference into this contract and made a part
hereof the same as if it were written herein; and

WHEREAS, award of this contract is necessary to provide for continuity of
medical care during the period of time needed by the District to advertise and
award replacement contracts as necessary to satisfy the District's minimum
needs;

NOW, THEREFORE, the parties intending to be legally bound hereby agree as
follows:

                                       4
<PAGE>   37


ARTICLE I - SCOPE OF SERVICES

       A.     GENERAL CAPABILITIES

              1.     Provider shall at all times throughout the term of this
                     contract:

                     a.     maintain an adequate network of health service
                            providers and agencies which is sufficient to meet
                            the health care needs of Medicaid enrollees and
                            which meets the specifications of this contract;

                     b.     maintain accurate and current information regarding
                            the membership of its provider network and the
                            capacity (with supporting documentation) of each
                            primary care provider within the network to accept
                            new patients;

                     c.     provide complete, accurate and current written
                            information on its provider network membership and
                            the new patient capabilities of each primary care
                            provider within the network to any prospective or
                            current enrollee (or her representative), the
                            representatives of such enrollees, or organizations
                            that counsel Medicaid-eligible persons regarding
                            their choice of plans; and

                     d.     provide or arrange for services, which are covered
                            under this contract in accordance with
                            professionally accepted standards of medical
                            practice and the terms of this contract.

              2.     Provider shall at all times throughout the term of this
                     contract operate in accordance with the specifications
                     contained in this document and amendments thereto, all
                     applicable federal and District laws and regulations, and
                     the written representations contained in Provider's
                     Proposal and Best and Final Offer in response to
                     Solicitation No. 7010-AA-NS-2-CR regarding its capabilities
                     and services.

       B.     COMPLIANCE WITH FEDERAL AND DISTRICT LAW

       Provider shall at all times throughout the term of this contract meet the
       conditions of participation applicable to providers of services described
       in Section 1903(m) of the Social Security Act, 42 U.S.C. Section
       l396b(m) and implementing federal regulations.

              1.     Provider shall at all times operate in accordance with the
                     terms and provisions of the waiver of federal law granted
                     to the District by the Secretary of Health and Human
                     Services under Section 1915 (b) of the Social Security Act
                     (42 U.S.C. Section 1396n(b)).

                                       5
<PAGE>   38

              2.     Provider shall at all times throughout the term of this
                     contract meet all conditions of participation applicable to
                     providers of managed care services under the district Code
                     Section 1-359, and District of Columbia Municipal
                     Regulation, Title 29, Chapters 53, 54 and 55.

              3.     Provider and its sub-contractors shall at all times
                     throughout the term of this contract comply with all
                     federal laws and laws of the District barring
                     discrimination in enrollment, access to health services,
                     provision of health care coverage.

PROGRAM INTEGRITY

              4.     Provider certifies that it has not been excluded, debarred,
                     or suspended from participation in any program under Title
                     XVIII or Title XIX under any of the provisions of Section
                     1128(a) or (b) of the Social Security Act (42 USC Section 1
                     320 a-7). Provider must notify the District contract
                     administrator within 3 days of the time it receives notice
                     that any action is being taken against Provider or any
                     person defined under the provisions of Section 1128(a) or
                     (b) or any subcontractor, which could result in exclusion,
                     debarment, or suspension of Provider or a subcontractor
                     from the Medicaid program.

              5.     Provider must comply with the provisions of, and file the
                     certification of compliance required by the Byrd
                     Anti-Lobbying Amendment, found at 31 U.S.C. 1352, relating
                     to use of federal funds for lobbying for or obtaining
                     federal contracts.

FRAUD AND ABUSE COMPLIANCE PLAN

              6.     This contract is subject to all District and federal laws
                     and regulations relating to fraud and abuse in health care
                     and the Medicaid program. Provider must cooperate and
                     assist DOH/MAA and any other District or federal agency
                     charged with the duty of identifying, investigating,
                     sanctioning or prosecuting suspected fraud and abuse.
                     Provider must provide originals and/or copies of all
                     records and information requested and allow access to
                     premises and provide records to DOH/MAA or its authorized
                     agent(s), HCFA, the U.S. Department of Health and Human
                     Services, and the FBI. All copies of records must be
                     provided free of charge.

              7.     Compliance Plan. Provider must submit to DOH/MAA for
                     approval a written fraud and abuse compliance plan, no
                     later than 90 days after the effective date of the
                     contract. Provider must designate an officer or director in
                     its organization who has the responsibility and authority
                     for carrying out the provisions of its compliance plan.
                     Provider must submit any updates or modifications in its
                     compliance plan to the District for approval at least 30
                     days prior to the modifications going into effect.
                     Provider's fraud and abuse compliance plan must:

                     a.     ensure that all officers, directors, managers and
                            employees know and understand the provisions of
                            Provider's fraud and abuse compliance plan;

                                       6
<PAGE>   39

                     b.     contain procedures designed to prevent and detect
                            potential or suspected abuse and fraud in the
                            administration and delivery of services under this
                            contract;

                     c.     contain provisions for the confidential reporting of
                            plan violations to the designated person in
                            Provider's organization;

                     d.     contain provisions for the investigation and
                            follow-up of any compliance plan reports;

                     e.     ensure that the identity of individuals reporting
                            violations of the plan is protected;

                     f.     contain specific and detailed internal procedures
                            for officers, directors, managers and employees for
                            detecting, reporting, and investigating fraud and
                            abuse compliance plan violations;

                     g.     require any confirmed or suspected fraud and abuse
                            under District or federal law be reported to
                            DOH/MAA;

                     h.     ensure that no individual who reports plan
                            violations or suspected fraud and abuse is
                            retaliated against.

              8.     Training. Provider must designate executive and essential
                     personnel to attend mandatory training in fraud and abuse
                     detection, prevention and reporting. Provider must schedule
                     and complete training no later than 90 days after the
                     effective date of any initial issue, update or modification
                     of the written Model Compliance Plan.

              9.     If Provider updates or modifies its written fraud and abuse
                     compliance plan, Provider must train its executive and
                     essential personnel on these updates or modifications no
                     later than 90 days after the effective date of the updates
                     or modifications.

              10.    Provider's failure to report potential or suspected fraud
                     or abuse may result in sanctions, contract cancellation, or
                     exclusion from participation in the Medicaid program.

       C.     SPECIFIC PROVIDER QUALIFICATION

              1.     Qualified HMO

                     a.     Provider shall throughout the term of this contract
                            maintain its status as a federally qualified HMO or
                            meet the requirements of an HMO as defined in the
                            State Plan of Medical Assistance, Section 2.1C and
                            Attachment 2.lA, which is incorporated herein by
                            reference.

                                       7
<PAGE>   40

                     b.     Provider shall throughout the term of this contract
                            be in compliance with standards of operation under
                            the district of Columbia's Health Maintenance
                            Organization Act of 1996.

              2.     Medicaid Advisory Committee

                     Provider shall establish a Medicaid Advisory Committee,
                     which shall meet at least quarterly to advise Provider on
                     matters relating to services to Medicaid enrollees and
                     whose membership shall include at least two (2) individuals
                     enrolled with Provider as Medicaid beneficiaries under this
                     contract.

              3.     Rules Regarding Provision of Certain Hospital Services

                     a.     Provider shall utilize in its network only hospitals
                            located in the District of Columbia and shall ensure
                            that enrollees are admitted only to hospitals
                            located in the district unless:

                            (1)    The enrollee has an emergency medical
                                   condition as defined in Article XXI of this
                                   contract, is admitted to a hospital located
                                   outside of the District, and cannot be
                                   transferred because the enrollee's condition
                                   has not been stabilized as required prior to
                                   the transfer of an individual under Section
                                   1867 of the Social Security Act; or

                            (2)    The patient requires one or more specialized
                                   services, which are available only from or
                                   through a hospital, which is located outside
                                   of the District.

              4.     Place of Business

              Provider shall maintain a business office in the District which
              shall operate during normal business hours and which shall be
              adequately staffed to ensure prompt and accurate responses to
              inquires from current or prospective enrollees, members of
              Provider's network and officials of the District or federal
              governments.

              5.     Anti-discrimination

              Provider shall not discriminate with respect to participation,
              reimbursement, or indemnification for any provider acting within
              the scope of that provider's license or certification under
              applicable State law, solely on the basis of such license or
              certification. This paragraph shall not be construed to prohibit
              an organization from including providers only to the extent
              necessary to meet the needs of the organization's enrollees or
              from establishing any measure designed to maintain quality and
              control costs consistent with the responsibilities of the
              organization.

                                       8
<PAGE>   41

       D.     FINANCIAL REQUIREMENTS

              1.     Debts of Provider

              Provider shall ensure through its contracts, subcontracts and any
              other appropriate manner that neither enrollees nor the District
              are held liable for Provider's debts in the event of Provider's
              insolvency.

              2.     Provider Payment Arrangements

                     a.     For Provider that subcontracts with a Federally
                            Qualified Health Center (FQHC), Provider shall
                            contract with the FQHC on the same payment terms as
                            other providers of similar services. If the FQHC
                            exercises its right to be reimbursed at 100% of its
                            reasonable costs, the District shall be responsible
                            for the excess of reasonable cost over that amount
                            paid to the FQHC by Provider.

                     b.     Provider shall reimburse emergency facilities at the
                            contracted rate for network facilities and at the
                            current Medicaid rate for non-network facilities for
                            the following services:

                            (1)    the evaluation of an emergency medical
                                   condition or active labor which is required
                                   under the Emergency Treatment and Active
                                   Labor Act (Section 1867 of the Social
                                   Security Act) to determine the existence of
                                   an emergency;

                            (2)    all medically necessary care and services
                                   furnished prior to the time that the enrollee
                                   becomes stabilized, as defined under that Act
                                   and can be appropriately transferred; and

                            (3)    a medically appropriate transfer as defined
                                   under that Act.

              3.     Equity Balance

              Provider shall maintain a positive equity balance equal at all
              times to no less than $50.00 (fifty dollars) per Medicaid managed
              care enrollee.

              4.     Escrow Requirements

                     a.     Provider shall deposit into an escrow account, which
                            is established and held in trust in a financial
                            institution for the sole purpose of holding this
                            escrow, deposits, cash, short term securities, or
                            letters of credit, or combination thereof. However,
                            in no case shall letters of credit constitute more
                            than 50% of the total deposit.

                     b.     The total amount of the amount held in the escrow
                            account at any time shall be the greater of the
                            following:

                                       9
<PAGE>   42

                            (1)    Five percent (5%) of Provider's estimated
                                   annual expenditures for health care services
                                   furnished to Medicaid enrollees;

                            (2)    One hundred thousand dollars ($100,000).

                     c.     For purposes of paragraph 4.b of this section, the
                            basis for calculating the amount of funds, which
                            Provider must deposit into the escrow account, shall
                            be Provider's prior year annual expenditures for
                            health care services. For a Provider that is a new
                            provider, the basis shall be its estimated first
                            year's operating expenses as approved by the
                            District.

                     d.     The District may require Provider to increase its
                            escrow deposits during any quarter in which, in the
                            judgement of the District, Provider is experiencing
                            rapid growth which exceeds the capabilities of the
                            existing escrow find. District may order suspension
                            of new Medicaid enrollment until the appropriate
                            deposit is certified to the District.

                     e.     Except as specified in paragraph "f" below, all
                            income generated from Provider's escrow deposits
                            shall belong to Provider and shall be paid to
                            Provider as such additional income becomes
                            available.

                     f.     If Provider defaults, or fails to maintain insurance
                            as required under this contract or if at any time
                            the value of the escrow account is below the minimum
                            level required under this contract, then the
                            District may use the funds for the following
                            purposes:

                            (1)    to recover any payments made to Provider;

                            (2)    to cover the cost of care for Provider's
                                   enrollees until such individuals are assigned
                                   to another Provider and such other Provider
                                   assumes financial liability for the care and
                                   services which were the obligation of
                                   Provider, and

                            (3)    to maintain the escrow balance required under
                                   this contract.

                     g.     All funds held in escrow shall be invested only in
                            securities or other investments permitted by
                            District laws that govern the investment of assists
                            that govern the investment of assets that constitute
                            the legal reserves of life insurance.

              5.     Procedures in the Event of a Default by Provider

              Procedures for termination for default and Termination for the
              Convenience of the District are set forth in the Standard Contract
              Provisions For Use In District of Columbia Supply and Service
              Contracts (1999).

                                       10
<PAGE>   43

              6.     Reinsurance

              Provider shall obtain reinsurance at its own expense in the form
              of stop loss protection for itself and to the extent that
              reinsurance is required to comply with federal physician incentive
              plan regulations 42 CFR 479(g)(2), Provider or its subcontracting
              provider shall obtain reinsurance at its own expense in the form
              of stop loss protection.

              7.     Fiduciary Relationship

              Any director, officer, employee or partner of Provider who
              receives, collects, disburses or invests funds in connection with
              the activities of Provider shall be responsible for funds as a
              fiduciary of provider.

              8.     Fidelity Bonds

              Provider shall maintain in force a fidelity bond in an amount of
              not less than one-hundred thousand dollars ($100,000) per persons
              for each officer and employee who has a fiduciary responsibility
              of duty to the organization.

              9.     Liability and Malpractice Insurance

                     a.     Provider shall obtain and maintain professional
                            liability insurance and general liability insurance
                            in an amount that is not less than $1 million for
                            individual incidents and $3 million in annual
                            aggregate to cover all claims that may arise either
                            currently or in the future from Provider's
                            operations under this contract.

                     b.     For any insurance policy required under this
                            contract, the District shall be a named insured
                            listed on the policy.

              10.    Unemployment and workers compensation coverage

                     a.     Provider shall maintain unemployment compensation
                            coverage and workers' compensation insurance in
                            accordance with applicable federal and District law
                            and regulations.

                     b.     In the event that any insurer or carrier notifies
                            Provider of its intent to cancel its workers
                            compensation insurance, Provider shall notify the
                            District within 24 hours.

              11.    Cessation of Operations in the Event of Cancellation

                     a.     If Provider's liability, malpractice, workers'
                            compensation or unemployment compensation insurance
                            is canceled or lapses, Provider shall cease to
                            furnish services to enrollees until the insurance is
                            reinstated or comparable coverage is obtained.

                                       11
<PAGE>   44

                     b.     No payments shall be made by the District for
                            Medicaid Enrollee until coverage is reinstated or
                            obtained and proof is furnished to the District.
                            Provider shall reimburse the District for any
                            payments made by the District during a period in
                            which insurance, which is required under this
                            contract, has lapsed. The District may in its
                            discretion adjust future payments to Provider to
                            recoup the amount of payments made during any period
                            during which Provider operated without the insurance
                            required under this contract. The District may also
                            use escrow account funds to pay for medical care
                            which is the responsibility of Provider until the
                            insurance required under the contract is obtained or
                            reinstated and written proof is submitted to the
                            District.

       E.     REQUIRED INFORMATION

              1.     Information Related to Provider's Response to Solicitation

                     a.     Provider shall furnish the District with changes,
                            updates and revisions to the procedures, policies
                            and documents included in Provider's proposal and
                            BAFO in response to Solicitation No. 7010-AA-NS-2
                            CR, related to the following areas:

                            (1)    Utilization review activities;

                            (2)    Provider procedure manuals;

                            (3)    Quality assurance program;

                            (4)    Access standards; and

                            (5)    Claims payments.

              2.     Provider shall notify District within thirty (30) days of a
                     contract termination involving any member of its network
                     and shall report on whether such termination can be
                     expected to affect provider's performance under this
                     contract.

              3.     Financial Statements

                     Provider shall submit an audited financial statement to the
                     District within 90 days of the close of Provider's fiscal
                     year. The financial statements shall specify the expenses
                     and revenues attributable to Provider's participation in
                     the District's Medicaid Managed Care Program.

                                       12
<PAGE>   45

              4.     Complaints and Grievances

                     Provider shall furnish to the District on a quarterly basis
                     (no later than 90 days following the last date of the
                     applicable calendar quarter) the following information:

                     a.     description of each grievance filed and the status
                            and timing of the resolution. Indicate the
                            grievances that were requests for expedited
                            grievances.

              5.     Quality Assurance-Related Information

                     a.     Provider shall submit to the District the following
                            information relating to the quality assurance
                            activities described in Article II as they occur
                            during the term of the contract:

                            (1)    descriptions of, and results obtained from,
                                   clinical studies and analyses of the quality
                                   and appropriateness of care furnished under
                                   this contract;

                            (2)    copies of the questionnaires used by the
                                   Provider to conduct consumer satisfaction
                                   studies and memoranda and analyses regarding
                                   the results of such studies;

                            (3)    minutes from the Medicaid Advisory Committee
                                   meetings; and

                            (4)    corrective action plans developed for
                                   individual providers concerning care provided
                                   under this contract, and

                            (5)    minutes from the Provider's Quality Assurance
                                   Committee meetings shall be made available
                                   upon request by the District for review at
                                   Provider's site. All such minutes shall be
                                   kept confidential by reviewing parties as
                                   required under the District's Health
                                   Maintenance Organization Act of 1996.

              6.     EPSDT-related Information

                     a.     Provider shall produce summary and enrollee specific
                            data from the claims and medical records of its
                            enrollees on EPSDT services described in 2.a.(9) of
                            Solicitation 7010-AA-NS-2-CR Section H and/or from
                            the EPSDT tracking system described in paragraph 6
                            of Solicitation 7010-AA-NS-2-CR Section I for the
                            District as requested.

                     b.     Provider shall submit aggregate information
                            collected on EPSDT activity in the same format as
                            the annual HCHA416 report, ninety days after the end
                            of each calendar quarter or as requested by the
                            District.

                                       13
<PAGE>   46

              7.     Operational Indicators of Provider Performance and
                     Encounter Data

                     a.     Provider shall provide to the District information
                            on Performance Indicators for HMOs in accordance
                            with the D.C. Commission on Health Care Finance's
                            "Measurement Specifications and Reporting Template
                            for MCO Performance Measures" and Attachment V to
                            this contract.

                            Provider shall furnish the District with the
                            following indicators of Provider's performance under
                            this contract:

                            (1)    Enrollment -- reported monthly, by the 20th
                                   of the month following the month of activity;

                                   (a)    Number of new enrollees automatically
                                          assigned to a PCP;

                                   (b)    Number of new enrollees voluntarily
                                          selecting a PCP;

                                   (c)    Average time between enrollment in MCO
                                          and assignment of a PCP; and

                                   (d)    Number of enrollees who changed PCPs.

                            (2)    Services -- reported quarterly, by the 30th
                                   of the month following the calendar quarter
                                   of activity:

                                   (a)    Number of PCP encounters, by specified
                                          age/sex categories;

                                   (b)    Number of initial PCP encounters, by
                                          specified age/sex categories;

                                   (c)    Average time between enrollment and
                                          first PCP encounter;

                                   (d)    Number of referrals from PCPs to
                                          network Specialists, by type of
                                          Specialist, by specified age/sex
                                          categories;

                                   (e)    Number of Specialist physician
                                          encounters, by type of specialist, by
                                          specified age/sex categories;

                                   (f)    Number of requests for out-of-network
                                          medical services, by type approved,
                                          denied, or pending;

                                   (g)    Average length of time between
                                          requests (report above) and decisions;


                                   (h)    Number of hospital admissions, by
                                          specified age/sex categories;

                                   (i)    Number of paid hospital days, by
                                          specified age/sex categories;

                                   (j)    Number of denied hospital days;

                                   (k)    Number of approved and denied
                                          emergency room visits, and

                                   (l)    Number of prescriptions paid, by
                                          specified age/sex categories.

                                   For EPSDT Services

                                   (m)    Number of individuals eligible for
                                          EPSDT enrolled with the MCO;

                                       14
<PAGE>   47

                                   (n)    Number of individuals receiving at
                                          least one initial or periodic
                                          screening service from the MCO;

                                   (o)    Actual number of initial and periodic
                                          screening services;

                                   (p)    Number of individuals referred for
                                          corrective treatment;

                                   (q)    Number of individuals receiving
                                          corrective treatment;

                                   (r)    Number of individuals receiving vision
                                          assessments;

                                   (s)    Number of individuals receiving dental
                                          assessments;

                                   (t)    Number of individuals receiving
                                          hearing assessments.

                            (3)    For enrollees with HIV/Aids -- reported
                                   quarterly, by the 30th of the month following
                                   the quarter:

                                   (a)    Number of enrollees with HIV/AIDs, at
                                          the end of each calendar quarter;

                                   (b)    Number of pregnant enrollees tested
                                          for HIV, during the calendar quarter;


                                   (c)    Number of pregnant enrollees with
                                          AIDS, at the end of each calendar
                                          quarter;

                                   (d)    Number of child enrollees tested at
                                          birth for HIV, during the calendar
                                          quarter, and

                                   (e)    Number of child enrollees born with
                                          HIV/AIDS.

                                   (f)    Provider's description of its method
                                          for providing the District with
                                          aggregate and outcome measures, as
                                          well as its description of policies
                                          for transmission of data from network
                                          members in response to Sections C.9.2
                                          and C.9.3 of Solicitation
                                          7010-AA-NS-2-CR shall be incorporated
                                          into this contract as performance
                                          specifications.

                                   (g)    Provider shall submit enrollee
                                          specific encounter data at the time
                                          and in the format requested by the
                                          District.

                                   (h)    Provider shall submit additional
                                          aggregate outcome measures, as
                                          requested by the District. The
                                          District in collaboration with the
                                          Provider shall develop these aggregate
                                          outcomes measures during the term of
                                          the contract. Provider and the
                                          District shall mutually agree to all
                                          such outcome measures.

                                   (i)    Each month, Provider shall submit to
                                          the District the names and other
                                          information of all babies that are
                                          born to Provider's enrollees.
                                          Additionally, each quarter, Provider
                                          shall submit individual maternity
                                          information, including outcome data
                                          and prenatal care vistas to the
                                          District on the 30th day after the end
                                          of each calendar quarter for pregnancy
                                          terminations that occurred during the
                                          previous quarter. Formats for both
                                          reports required in this paragraph are
                                          in Attachment II.

                                       15
<PAGE>   48

              8.     Enrollee Information

                     Provider shall notify the District of enrollees for whom
                     accurate addresses or current locations cannot be
                     determined and shall document the activities that have been
                     performed to locate the enrollees. Provider shall notify
                     the District of known deaths of its enrollees.

              9.     Public Health-Related Information

                     a.     Provider shall report to the District and to other
                            District agencies as requested:

                                   (1)    individuals diagnosed with HIV/AIDS;

                                   (2)    persons that meet the District's
                                          definition of developmental delay;

                                   (3)    persons diagnosed as tuberculosis
                                          cases or as tuberculosis-infected
                                          individuals, children and adults with
                                          vaccine-preventable diseases, and
                                          other communicable diseases, and

                                   (4)    descriptions of Provider's health
                                          education programs, including
                                          curriculum, locations, and schedule of
                                          sessions.

                            b.     On a quarterly basis Provider shall report to
                                   the district the proportion of enrollees
                                   under age 2 that are up-to-date on
                                   immunizations as measured by standards
                                   established by the Advisory Committee on
                                   Immunization Practices.

                            c.     Provider is responsible for referring
                                   pregnant and post-partum women and children
                                   up to age 5 who have or are at risk for
                                   nutritional deficiencies or have nutrition
                                   related medical conditions to the Special
                                   Supplemental Food Program for Women, Infants
                                   and Children (WIC) and for furnishing the WIC
                                   agency with the results of tests conducted to
                                   ascertain nutritional status.

                            d.     Provider is responsible for notifying the
                                   District of Health Childhood Lead Poisoning
                                   Prevention Program of any child with an
                                   elevated blood lead level (greater than 10
                                   ug/di) within 72 hours after identification
                                   and for coordinating lead inspection and
                                   abatement services furnished by the District
                                   with services required to treat the exposed
                                   child.

              10.    Physician Incentive Plans

                     Provider shall disclose to the District and, upon request,
                     to the Department of Health and Human Services the
                     information on its provider incentive plans listed in 42
                     C.F.R.

                                       16
<PAGE>   49

                     417.479(h)(1) at the times indicated at 42 C.F.R.
                     434.70(e), in order to determine whether the incentive
                     plan(s) meets the requirements of 42 C.F.R. 417.479(d) --
                     (g) and, as applicable, (I). Provider shall provide the
                     information on its physician incentive plans listed in 42
                     C.F.R. 417.479(h)(3) to any Medicaid client, upon request.

       F.     MARKETING

              1.     Permissible Marketing Activities

                     a.     The following marketing activities shall be
                            permitted under this contract:

                            (1)    general information distributed through mass
                                   media (i.e., newspapers, magazines and other
                                   periodicals, radio, television, the Internet,
                                   and other media outlets):

                            (2)    telephone calls, mailings and home visits in
                                   the case of individuals who are current
                                   enrollees of provider for the sole purpose of
                                   educating current enrollees about services
                                   offered by or available through Provider;

                            (3)    general activities which benefit the entire
                                   community such as health fairs, school
                                   contributions or activity sponsorships, and
                                   health education and promotion programs; and

                            (4)    materials distributed through the District or
                                   its enrollment agent.

              2.     Prior Approval of all Marketing Activities and Materials

                     a.     Prior to undertaking any marketing activities,
                            Provider shall submit for review by the District a
                            detailed description of its marketing plan and all
                            materials that it intends to use, including policies
                            and manuals, advertisement copy, and public service
                            announcements.

                     b.     Prior to modifying any current permissible marketing
                            activities, Provider shall submit for review by the
                            District a detailed description of its proposed
                            modified marketing plan and the materials it intends
                            to use.

                                       17
<PAGE>   50

              3.     Content of Marketing Materials and Information

                     a.     Provider may furnish the following information
                            through the permissible marketing activities
                            described in paragraph 1.a of this section:

                            (1)    an explanation of service available through
                                   Provider;

                            (2)    a description of the service network offered
                                   by Provider (including types of members,
                                   locations of members, and hours);

                            (3)    the availability of services for persons
                                   whose primary language is not English or who
                                   have a disability; and

                            (4)    the availability of transportation services.

                     b.     Written brochures and materials which are intended
                            to encourage enrollees to select Provider and are
                            distributed through the permissible marketing
                            activities described in paragraph l.a. subdivisions
                            2 through 4 of this Article must be written at the
                            5th grade reading level and must at a minimum
                            contain the following information:

                            (1)    a statement that Medicaid beneficiaries can
                                   choose to enroll in any plan that is offered
                                   and that enrollment with Provider is
                                   voluntary;

                            (2)    a listing of covered services and cost
                                   sharing requirements if applicable;

                            (3)    an explanation of beneficiaries' right to
                                   select a primary care provider and to obtain
                                   family planning services from any qualified
                                   family planning provider, including the
                                   qualified family planning agencies that may
                                   not be members of Provider's network;

                            (4)    an explanation of the importance of selecting
                                   a primary care provider from whom or through
                                   all care will be obtained;

                            (5)    an explanation of the availability of
                                   assistance from the District or its agent in
                                   selecting an M.O., and


                                       18
<PAGE>   51

                            (6)    where and how to obtain detailed and specific
                                   information on available members of
                                   Provider's network prior to making a final
                                   plan selection.

              4.     Other Permissible Activities

                     a.     Information distributed by a member of Provider's
                            network directed to the member's current patients is
                            limited to general information about the Medicaid
                            Managed Care Program and notification of the
                            member's inclusion in Provider's network as well as
                            reference participation in every applicable plan.
                            All such information must include a statement that
                            Medicaid beneficiaries can choose to enroll in any
                            plan that is offered and that enrollment with
                            Provider is voluntary.

                     b.     Prior to the distribution of any materials described
                            in paragraph "a" above, Provider shall submit such
                            materials for review by the District. Provider shall
                            be responsible for ensuring that its network members
                            comply with this Article for activities performed by
                            the network members on Provider's behalf.

              5.     Prohibited Information and Activities

                     a.     The following information and activities are
                            prohibited in any marketing setting:

                            (1)    materials which mislead or falsely describe
                                   covered or available services;

                            (2)    materials which mislead or falsely describe
                                   network membership, the membership or
                                   availability of network providers, the
                                   qualifications and skills of network members
                                   (including their bilingual skills), or the
                                   hours and locations of network services;

                            (3)    gifts, cash or promotions which are designed
                                   to induce enrollment by individual
                                   beneficiaries;

                            (4)    compensation arrangements with marketing
                                   personnel that utilize any type of payment
                                   structure in which compensation is tied to
                                   the number (or classes) of persons who
                                   enroll, and

                                     19

<PAGE>   52

                            (5)    direct solicitation of prospective enrollees.

       G.     ENROLLMENT, EDUCATION, AND OUTREACH

              1.     Classes of Persons Eligible for Enrollment

                     a.     Except as provided in paragraph "b" of this section,
                            the following persons are eligible for enrollment
                            under this contract:

                            (1)    TANF and TANF-- related individuals;

                            (2)    infants born to women who are enrolled with
                                   Provider shall be automatically enrolled from
                                   the date of birth until disenrolled; and

                            (3)    other actuarially equivalent individuals that
                                   might become eligible for Medicaid through
                                   expansions as allowed by the Balanced Budget
                                   Act of 1997 or through Medicaid waivers.

                     b.     Individuals who meet the requirements of paragraph
                            "a" of this section and are included in one or more
                            of the following categories, are excluded from
                            enrollment under this contract:

                            (1)    individuals whose eligibility is only
                                   retroactive;

                            (2)    foster children, except those who reside in
                                   the District and whose care giver elects to
                                   enroll the child with Provider;

                            (3)    individuals receiving Supplemental Security
                                   Income disability benefits and Social
                                   Security benefits;

                            (4)    individuals who have been restricted to a
                                   specific provider by the District; and

                            (5)    residents of a long-term care facility
                                   (nursing facility, intermediate care facility
                                   for the mentally retarded, residential
                                   treatment center, Hospital for Sick Children
                                   and mental institution).

                                       20
<PAGE>   53

              2.     Voluntary Enrollment and Default Providers

                     a.     Individuals participating in the Medicaid Managed
                            Care Program will select MCOs at their discretion.
                            Enrollment by a person eligible under section "1" of
                            this section with Provider shall be voluntary except
                            for those persons who are automatically enrolled
                            with Provider under paragraph "b" of this section.

                     b.     Persons who do not voluntarily select a Managed Care
                            Organization as required under the conditions of the
                            Medicaid Managed Care Program shall be automatically
                            enrolled with a participating managed Care
                            Organization.

                     c.     Except as described in paragraphs "d" of this
                            Section, Provider shall receive one-seventh of the
                            available automatic assignments made by the District
                            on the fifteenth of each month. The effective date
                            for enrollment for persons automatically assigned to
                            Provider is the first day of the month following the
                            month that the automatic assignment was made.
                            Available automatic assignments shall be defined as
                            persons who received appropriate notice under the
                            conditions of the Health Care Finance
                            Administration's March 19, 1997 letter approving the
                            District's Medicaid Managed Care Program and failed
                            to make a voluntary selection.

                     d.     The District reserves the right to adjust the rate
                            of automatic assignments set forth in paragraph "c"
                            of this section if Provider fails to comply with
                            terms of this contract.

              3.     Acceptance of all enrollees

                     Provider shall accept into its plan all individuals who are
                     enrolled by the District or its agent in the order in which
                     such individuals are enrolled.

              4.     Evidence of coverage and selection of primary care provider

                     a.     Within ten (10) business days of the date on which
                            the District notifies Provider that an individual
                            has been enrolled with Provider, Provider shall
                            issue to each enrollee the following:

                            (1)    a membership card which contains the
                                   effective date of enrollment, the
                                   individual's plan member identification
                                   number, and Provider's general information
                                   and emergency telephone numbers;

                                       21
<PAGE>   54

                     (2)    a Member Handbook written at the 5th grade
                            reading level and containing at a minimum the
                            following information:

                            (a)    covered services, including applicable
                                   limitations and exclusions;

                            (b)    an explanation of the fact that services must
                                   be obtained from or through Provider and its
                                   network in order to have coverage's as well
                                   as the procedures which enrollees must follow
                                   in order to obtain covered primary care and
                                   specialty services covered under the
                                   contract;

                            (c)    an explanation of the enrollee's right to
                                   select and change their PCP;

                            (d)    a clear statement that emergency care is
                                   available 24 hours per day, seven days per
                                   week and instructions on what to do in the
                                   event of an emergency;

                            (e)    identification of the services that are
                                   covered under the District's Medicaid plan
                                   but that are not part of Provider's service
                                   benefit package and that therefore may be
                                   obtained from any participating Medicaid
                                   provider without adhering to Provider's
                                   procedures;

                            (f)    an explanation of enrollees' right to obtain
                                   family planning services covered under this
                                   contract from Provider of their choice
                                   regardless of the family planning provider's
                                   membership in Provider's network;

                            (g)    an explanation of Provider's complaint and
                                   grievance process and telephone numbers for
                                   complaints and inquires;

                            (h)    an explanation of the right to receive
                                   assistance from a personal representative of
                                   the enrollee's choice to initiate a
                                   grievance, and

                            (i)    an explanation of the enrollee's right to
                                   complain, grieve or appeal to the District
                                   and the Office of Fair Hearings:

                            (j)    information of the availability of
                                   transportation and translation services as
                                   required under this contract, and

                            (k)    an explanation of the enrollee's right to
                                   disenroll from Provider and the procedures
                                   for disenrolling.

                                       22
<PAGE>   55
                            (3)    a list of all current network primary care
                                   members with open practices who are available
                                   to enrollees, with their addresses and
                                   telephone numbers.

                            (4)    instructions on how to select a PCP which,
                                   shall include a process for selection by
                                   telephone, which shall include an explanation
                                   that an enrollee may remain with his or her
                                   current PCP if the PCP is a member of
                                   Provider's network. In any case in which the
                                   enrollee is a minor, the materials described
                                   in this section shall be issued to the
                                   child's parent or guardian and shall include
                                   information on how to obtain assistance in
                                   selecting a pediatric provider or remaining
                                   with a current PCP who is a member of
                                   Provider.

                            (5)    a separate brochure explaining the EPSDT
                                   program at a 5th grade reading level which
                                   shall be preapproved by District and which
                                   lists all of the services available to
                                   children, clarifies that services are free,
                                   and that includes a telephone number which
                                   care givers can call to get assistance in
                                   scheduling an appointment and getting
                                   transportation.

              5.     Selection of Primary Care Provider

                     a.     Provider shall allow each enrollee the freedom to
                            choose from among its participating PCPs and change
                            PCPs as requested. Where an enrollee has a
                            preexisting relationship with a member of Provider's
                            primary care network, Provider shall allow that
                            enrollee to remain with his or her existing PCP.

                     b.     If an enrollee does not choose a PCP, Provider shall
                            designate a PCP for the enrollee. When designating
                            PCPs, a Provider shall match enrollees with PCPs who
                            are geographically accessible to the enrollee and
                            assign all children within a single case to the same
                            PCP.

                  6. Automatic Enrollment of Newborns

                     All infants born to an enrollee shall automatically be
                     enrolled with the mother's Provider effective on the date
                     of birth. This automatic enrollment with the mother's
                     Provider shall extend until the child is disenrolled from
                     Provider.

                                       23
<PAGE>   56

              7.     Disenrollment of Members

                     a.     No Provider may disenroll any enrollee.

                     b.     Provider may seek permission to disenroll an
                            individual who has been admitted to a long-term care
                            facility and who is expected to remain in the
                            facility for 30 consecutive days. If approved by the
                            District, disenrollment is not effective until the
                            first day of the first full month following the date
                            of approval.

                     c.     Provider may request disenrollment of a member who
                            is found by the District to have demonstrated a
                            pattern of disruptive or abusive behavior or whose
                            utilization of services is fraudulent or abusive.
                            Provider-initiated disenrollments may occur only in
                            accordance with the following procedures:

                            (1)    Provider must make the request in writing
                                   with supporting documentation of the conduct
                                   which is complained of as well as evidence
                                   that such conduct persisted despite attempts
                                   by Provider to mediate the dispute which led
                                   to Provider's request;

                            (2)    the District will reach a decision on
                                   Provider's request following a notice to the
                                   enrollee in which the enrollee in which the
                                   enrollee is given the opportunity to testify
                                   regarding the nature of the dispute; and the
                                   enrollee has the right to appeal the
                                   Department's determination to the Office of
                                   Fair Hearing.

                     d.     Except as provided in paragraph "b" of this section,
                            no enrollee shall be disenrolled solely due to the
                            health status of the enrollee.

              8.     New Member Orientation Sessions

                     The Plan shall offer culturally appropriate orientation
                     sessions for new members. New member orientation sessions
                     shall be conducted in both Spanish and English, as well as
                     in other languages designated by the District. Orientation
                     sessions can be either in a group setting or individual
                     meetings with new enrollees. The orientation sessions shall
                     include at a minimum, an explanation of EPSDT services and
                     the availability of scheduling and transportation
                     assistance.

                                       24
<PAGE>   57

              9.     Health Education Activities

                     a.     Provider shall conduct regular and culturally
                            appropriate health education programs for members in
                            accessible locations. At a minimum health education
                            programs shall address the following issues:

                            (1)    the importance and availability of preventive
                                   services for children and adults, in
                                   particular EPSDT services for children and
                                   cervical cancer screens and mammograms for
                                   women;

                            (2)    the importance and availability of routine
                                   family planning services, early pregnancy
                                   testing, and early continuous prenatal care;

                            (3)    the importance and availability of testing
                                   for HIV/AIDS and the services available for
                                   treatment of HIV/AIDS;

                            (4)    the importance and availability of early
                                   intervention for infants, toddlers and
                                   school-age children who either have been
                                   diagnosed as having, or who are suspected of
                                   having, a developmental disability or delay;

                            (5)    proper nutrition for pregnant women and
                                   children and the WIC program and how to
                                   obtain benefits, and

                            (6)    the importance of treatment for alcohol and
                                   substance abuse and where and how to obtain
                                   such treatment.

                     b.     Provider shall provide an annual written and oral
                            explanation of EPSDT services to enrollees who are
                            pregnant women, parents, child custodians and sui
                            juris teenagers.

                     c.     Provider shall provide enrollees who are pregnant
                            women, parents, child custodians and sui juris
                            teenagers written material that describes EPSDT
                            services on their first visit and annually
                            thereafter, including a pocket-size card with the
                            schedule for screens, laboratory tests and
                            immunizations.

                                       25
<PAGE>   58

              10.    EPSDT Outreach Activities

                     a.     Provider shall conduct outreach activities to assist
                            enrollees make and keep EPSDT appointments for
                            eligible children. The outreach activities shall
                            include every reasonable effort, including telephone
                            calls, scheduling of appointments for recipients,
                            mailed reminders and personal visits, to contact
                            parents, guardians of children, or the children
                            themselves, if appropriate, based on the child's
                            age, who are due for, or who have failed to keep
                            appointments for, EPSDT screens and laboratory tests
                            set forth in the District's periodicity schedule,
                            immunizations, or follow-up treatment to correct or
                            ameliorate a defect identified during an EPSDT
                            screen or laboratory test, or have otherwise not
                            obtained EPSDT screens, laboratory tests,
                            immunizations, follow-up treatment or other
                            services, in order to assist them to obtain such
                            services.

                     b.     Provider shall offer scheduling and transportation
                            assistance prior to the due date of each eligible
                            child's periodic screening, laboratory tests and
                            immunizations, when this assistance is requested and
                            necessary as required by 42 CFR 440.170.

              11.    EPSDT Education for Members of Provider Network

                     Provider shall train all physicians providing EPSDT, at
                     least annually, about the current requirements for EPSDT
                     and shall develop a monitoring program to ensure, on at
                     least an annual basis, that each physician providing EPSDT
                     services has the necessary equipment and knowledge to
                     perform such services in accordance with standard medical
                     practice.

       H.     COVERAGE AND BENEFITS

              1.     Covered Services

                     a.     This contract provides for coverage and provision by
                            Provider of all medical assistance benefits and
                            services that are listed in Attachment I, which is
                            incorporated herein as part of this contract.

                     b.     In making determinations regarding the minimum
                            amount, duration and scope of coverage with respect
                            to any service definitions and coverage requirements
                            which apply to the District Medicaid program under
                            federal and District law, 42 U.S.C. Section 1396 et.
                            seq.; 42 C.F.R. Section 43 1 et. seq.

                                       26
<PAGE>   59

              2.     Early and Periodic Screening Diagnosis and Treatment
                     Services (EPSDT) for Enrollees Under 21 Years of Age

                     a.     The EPSDT program is the pediatric component of
                            Medicaid and requires coverage of periodic and
                            interperiodic screens, vision, dental, and hearing
                            care, diagnostic services needed to confirm the
                            existence of a physical or mental illness or
                            condition and all medical assistance services that
                            are recognized under Section 1905 of the Social
                            Security Act, even if not offered under the state
                            plan to persons age 21 and older. In operating the
                            EPSDT program, Provider shall be bound by all
                            federal laws applicable to the program (including 42
                            U.S.C. Section 1396a(a)(43), 1396d(a)(4)(B), and
                            1396d(r)).

                            (1)    Provider shall be responsible for coverage
                                   and provision of all periodic screening
                                   services in accordance with the periodicity
                                   schedule set forth in Attachment I, as well
                                   as interperiodic screening services, which
                                   shall be furnished to any child who is
                                   suspected by a health care provider or any
                                   person authorized to make decisions regarding
                                   the child's health of having a physical or
                                   mental health problem.

                            (2)    Provider shall be responsible for coverage
                                   and provision of all EPSDT dental services
                                   set forth in Attachment I.

                            (3)    Provider shall be responsible for coverage
                                   and provision of all EPSDT vision services
                                   set forth in Attachment I.

                            (4)    Provider shall be responsible for coverage
                                   and provision of all EPSDT hearing services
                                   set forth in Attachment I.

                            (5)    Provider shall be responsible for coverage
                                   and provision of all services required to
                                   diagnose a condition other than mental
                                   illness or addiction disorder diagnostic
                                   services. In the case of services required to
                                   diagnose a mental health condition in and
                                   individual under age 21, Provider shall
                                   arrange for such diagnostic services but is
                                   not responsible for the cost of providing
                                   such diagnostic services.

                            (6)    Provider shall be responsible for coverage
                                   and provision of all medically necessary
                                   services recognized under Section 1905(a) of
                                   the Social Security Act, other than mental
                                   illness

                                       27
<PAGE>   60

                                   and addiction disorder services, transplant
                                   services, long term care facilities. Provider
                                   must cover all federally recognized services
                                   regardless of whether such services
                                   regardless of whether such service are
                                   available to enrollees age 21 and older. In
                                   the case of services which are required to
                                   treat a mental illness or addiction disorder
                                   in an individual under age 21, or which are
                                   needed for organ transplants or a condition
                                   that requires institutionalization in a
                                   long-term care facility, Provider shall
                                   arrange for such treatment services but is
                                   not responsible for the cost of providing
                                   such treatment services.

                            (7)    Provider is responsible for provision of
                                   pediatric vaccines in accordance with the
                                   standards established by the Advisory
                                   committee on Immunization Practices. All
                                   members of Provider network who immunize
                                   children shall participate in the Vaccines
                                   for Children Program as a condition of this
                                   contract.

                            (8)    Provider is responsible for the provision of
                                   necessary scheduling and transportation
                                   services requested by a child's family.

                            (9)    Provider is responsible for ensuring the
                                   maintenance of a record for each enrolled
                                   child which contains the following
                                   information:

                                   (a)   the child's periodic screening status,
                                         including specific information on the
                                         child's status with respect to each
                                         element of the screening package;

                                   (b)   the child's immunization statues;

                                   (c)   the child's status with respect to the
                                         receipt of vision, dental and hearing
                                         care covered under this contract;

                                   (d)   the presence of any diagnosed illnesses
                                         or conditions for which the child is or
                                         must be placed under treatment and the
                                         status of such treatment including
                                         treatment for mental illness and
                                         addiction related disorders which are
                                         provided and covered by entities other
                                         that Provider;

                                       28
<PAGE>   61

                                   (e)   all claims or requests for diagnostic
                                         or treatment services made on the
                                         child's behalf, the type of diagnostic
                                         or treatment service requested, the
                                         date of such claims or requests, the
                                         disposition of such claims or requests
                                         (i.e., approved, denied, deferred or
                                         pending) and the date of such
                                         disposition, and

                                   (f)   the status of the child with respect to
                                         WIC referrals and referrals for
                                         abatement services following a
                                         diagnosis of elevated blood lead
                                         levels.

                            (10)   In making medical necessity-related coverage
                                   determinations in the case of children under
                                   21, Provider must authorize coverage if,
                                   taking into account the clinical evidence, as
                                   well as the recommendations of the child's
                                   PCP and other health, educational and social
                                   service professionals caring for the child,
                                   Provider determines that a service covered
                                   under this contract is necessary to:

                                   (a)   correct or ameliorate physical or
                                         mental condition; or

                                   (b)   prevent the onset or worsening of a
                                         disabling or chronic condition.

                            (11)   In cases in which an EPSDT service covered
                                   under this contract is requested by any
                                   individual for a child who is receiving
                                   special education services, Provider may deny
                                   coverage only if it finds, consistent with
                                   the requirements of this section, that such
                                   service is not medically necessary.

                            (12)   Provider shall provide case management
                                   services, as described in the HCFA State
                                   Medicaid Manual Section 4302 and as defined
                                   by 42 U.S.C. 1396n(g)(2), to children with a
                                   need for such services under the EPSDT
                                   program.

              3.     Pregnancy-Related Services

                     a.     In accordance with federal law, 42 U.S.C. Section
                            1396a(a)(10), pregnancy-related services, Provider
                            shall cover and provide the following care and
                            services:



                                       29
<PAGE>   62

                            (1)    prenatal care, including services for women
                                   who are identified as having HIV;

                            (2)    delivery services;

                            (3)    post-partum care which continues until the
                                   last day of the month in which the women's
                                   60th post-partum day occurs; and

                            (4)    services related to any condition, which may
                                   complicate pregnancy, other than diagnosis
                                   and treatment services for mental illness or
                                   addiction disorders, transplant services,
                                   long-term facility services.

              4.     Mental Illness and Addiction Disorder Treatment Services

                     a.     Services needed to treat mental illness or addiction
                            disorders other than pharmaceuticals are excluded
                            from the provision and coverage requirements of this
                            contract.

                     b.     Provider is responsible for arranging for mental
                            illness or addiction disorder services if such
                            assistance is requested by the enrollee or by the
                            enrollee's PCP. Provider shall document the
                            provision of such services in enrollees' medical
                            records. Provider shall make available to the member
                            a directory of mental health and substance abuse
                            providers in the District. The District shall
                            furnish a copy of the directory to the Provider.
                            Provider shall assist the member in selecting a
                            mental health and substance abuse provider and
                            making an appointment, when requested and necessary.

              5.     Family Planning Services and Supplies

                     a.     Provider is responsible for coverage of family
                            planning services and supplies identified in
                            Attachment I and for provision of such services if a
                            request for assistance in obtaining such services is
                            made by the enrollee.

                     b.     Provider is responsible for payment of covered
                            family planning services and supplies furnished by a
                            Qualified family Planning Provider regardless of
                            whether Provider is a member of Provider's network.



                                       30
<PAGE>   63

                     c.     Provider may not require enrollees to seek prior
                            authorization for such services.

                     d.     As the agent of the District, Provider is
                            responsible for making payment in accordance with
                            federal requirements governing payment of claims
                            made by participating providers and shall utilize
                            the District's fee schedule in the case of Qualified
                            Family Planning Providers that are not members of
                            Provider's network.

              6.     Services for Children with Developmental Disabilities

                     a.     Provider is responsible for coverage and provision
                            of services other than services necessary for the
                            diagnosis and treatment of mental illness and
                            addiction disorders in the case of children with
                            developmental disabilities, as defined in Article
                            XXII.

                     b.     In making coverage determinations in the case of
                            children with developmental disabilities, Provider
                            shall provide coverage if, taking into consideration
                            the clinical evidence as well as the opinion of
                            health, education and social service professionals
                            furnishing care to such children, Provider
                            determines that the care is necessary, to correct or
                            ameliorate the effects of a developmental
                            disability.

                     c.     Provider shall coordinate with District agencies,
                            including the Public School system and the
                            District's Early Intervention Program that are
                            responsible for services for infants, toddlers,
                            preschool and school age children with developmental
                            disabilities to develop a comprehensive plan of
                            care.

              7.     Services for Persons with HIV or AIDS

                     a.     Provider is responsible for coverage and provision
                            of services necessary to the diagnosis and treatment
                            of persons with HIV and AIDS other than services for
                            mental illness or addictive disorders.

                     b.     Provider is responsible for the provision of case
                            management services, including necessary social
                            services, to persons with HIV or AIDS.



                                       31
<PAGE>   64

              8.     Prescription Drug Services

                     a.     Provider is responsible for the payment of all
                            medically necessary prescription drugs written for
                            its enrollees including prescribed drugs required
                            for the treatment of mental illness and addiction
                            disorders and the treatment related to organ
                            transplants prescribed outside the hospital
                            inpatient stay in which the transplant occurred.

                     b.     In developing a drug formulary and making prescribed
                            drug-related coverage determination Provider shall
                            comply with 42 U.S.C. Section 1396r-8(d) with
                            respect to formularies, prior authorization, and
                            other permissible limitations.

              9.     Services of Advanced Nurse Practitioners and Nurse Midwives

                     Provider shall provide and pay for necessary and
                     appropriate advanced nurse practitioner and nurse midwife
                     services.

              10.    Coverage of Contract Services at the Time of Enrollment

                     a.     Provider is responsible in the case of new enrollees
                            for payment of services covered under this contract
                            and included in any plan of care in effect at the
                            time of enrollment. Such coverage duties will
                            continue until the member is evaluated by his or her
                            network PCP and the plan of care is modified.

                     b.     Provider may cease payment for such care and
                            services under the following circumstances:

                            (1)    the enrollee has either selected or been
                                   assigned to a network PCP, and

                            (2)    either

                                   (a)   an appointment has occurred and the PCP
                                         has modified the treatment plan, or

                                   (b)   the enrollee fails to meet with his or
                                         her PCP after three (3) documented
                                         efforts.

                     c.     Provider is not responsible for the payment of
                            claims for covered services provided during a
                            hospital stay if the date of admission precedes the
                            date of enrollment with the Provider. Provider is
                            responsible for the payment of claims for covered
                            services pro-



                                       32
<PAGE>   65

                            vided during the entire hospital stay if the date of
                            discharge is after the date of disenrollment from
                            the Provider.

              11.    Transplant Surgery

                     a.     Provider is responsible for the coverage of all
                            transplant surgery services, except for those
                            services provided during the inpatient stay in which
                            the transplant surgery takes place.

                     b.     Provider is responsible for arranging for the
                            transplant surgery and obtaining authorization for
                            the transplant surgery from the District. Provider
                            shall be responsible for transplant surgeries when
                            Provider fails to seek authorization for the
                            transplant surgery.

              12.    General Rules on Service Coverage

                     a.     In making coverage determinations under this
                            contract, Provider shall adhere to all applicable
                            federal and district regulations relating to
                            coverage of Medicaid benefits, as well as to
                            specific coverage criteria and procedures set forth
                            in this contract. Decisions must result in a level
                            of coverage that is sufficient to reasonably achieve
                            the purpose, as defined in federal law, of the
                            service or benefit whose necessity is reviewed.
                            Provider may not arbitrarily deny or reduce the
                            amount, duration or scope of a benefit covered under
                            this contract solely because of the diagnosis, type
                            of illness, or condition.

                     b.     Provider may not deny coverage of otherwise covered
                            medically necessary services included in this
                            contract on the grounds that services are excluded
                            because they are:

                            (1)    court-ordered;

                            (2)    included in an individualized education plan
                                   or an individualized family service plan
                                   developed for a child covered by the
                                   Individuals with Disabilities Education Act
                                   (IDEA); or

                            (3)    either recommended or required to be
                                   furnished in a school setting in order to be
                                   appropriate for the child.



                                       33
<PAGE>   66

       I.     SERVICE AND ACCESS

              1.     Network Composition and Capabilities

                     a.     Provider's network shall be sufficient to furnish
                            all services covered under this contract and at a
                            minimum must include the following classes of
                            providers:

                            (1)    primary care providers in sufficient numbers
                                   so that no PCP has more than 2,000 Medicaid
                                   Managed Care Program enrollees in total
                                   across all Providers participating in the
                                   Medicaid Managed Care Program. With regards
                                   to the determination of the sufficient number
                                   of PCP's, the following shall apply:

                                   (a)   The District shall furnish information
                                         to all Providers showing the number of
                                         Medicaid Managed Care Program patients
                                         assigned to each physician who also
                                         participates in one or more health
                                         plans as a PCP;

                                   (b)   In evaluating the capacity of PCPs,
                                         Provider shall take into consideration
                                         both a PCP's existing Medicaid patient
                                         load as well as its total patient
                                         load. Notwithstanding the fact that a
                                         PCP may not have more than 2,000
                                         Medicaid Managed Care Program
                                         patients, Provider shall not assign
                                         additional patients to the PCP unless
                                         it determines that the PCP can accept
                                         additional enrollees and continue to
                                         furnish care of reasonable quality and
                                         accessibility as required under this
                                         contract, and

                                   (c)   If the District determines that the
                                         Provider has exceeded the permissible
                                         patient load for PCPs which is
                                         specified in this contract or assigns
                                         to a PCP more enrollees than the PCP
                                         is capable of managing in light of its
                                         total patient load, the District will
                                         freeze Provider's enrollment.

                            (1)    adult and pediatric medical sub-specialists;

                            (2)    hospitals located in the District of
                                   Columbia; and



                                       34
<PAGE>   67

                            (3)    licensed pharmacies.

              2.     Service Time lines

                     a.     In furnishing care under this contract Provider
                            shall adhere to the following time lines;

                            (1)    emergency services, as defined in Article
                                   XXII, shall be furnished immediately and
                                   without prior authorization;

                            (2)    urgent care services, as defined in Article
                                   XXII, shall be furnished within 24 hours;

                            (3)    initial appointments for pregnant women or
                                   persons desiring family planning services
                                   shall take place within 10 days of the
                                   request;

                            (4)    appointments for the diagnosis and treatment
                                   of health conditions and problems that are
                                   not urgent shall take place within 30 days of
                                   the request;

                            (5)    appointments for asymptomatic health
                                   assessments of adults ages 21 and older shall
                                   take place within 30 days of request;

                            (6)    appointments for periodic EPSDT screening
                                   examinations which are requested on behalf of
                                   a child shall take place within 30 days of
                                   the request;

                            (7)    appointments for non-urgent EPSDT vision
                                   screening, preventive dental services, and
                                   hearing evaluation services shall take place
                                   within 30 days of request;

                            (8)    appointments for initial EPSDT screens shall
                                   be offered to new enrollees within 45 days of
                                   the enrollee's enrollment date with Provider
                                   or at an earlier time if an earlier exam is
                                   needed to comply with the periodicity
                                   schedule and shall be completed within three
                                   months of the member's enrollment date with
                                   Provider, and

                            (9)    EPSDT screens, laboratory tests and
                                   immunization, to be considered timely shall
                                   be furnished within 30 days of the due date
                                   established in the periodicity schedule for
                                   children



                                       35
<PAGE>   68

                                   under 2 years of age and within 60 days of
                                   the due date established in the periodicity
                                   schedule for children over 2 years of age.

                     b.     The average waiting time in a PCP's office, computed
                            on a monthly basis for each PCP, shall be no greater
                            than one hour.

              3.     Geographic Access Requirements

                     a.     All individuals shall have the option to select a
                            PCP who is located within thirty minutes (30) travel
                            time of their place of residence by public
                            transportation.

                     b.     Provider shall include sufficient pharmacies in its
                            network so that at least one pharmacy is available
                            within 15 minutes by public transportation from the
                            recipient's place of residence.

              4.     Translation Requirements

                     a.     All materials furnished to prospective and current
                            enrollees shall be available in English and Spanish,
                            as well as other languages designated by the
                            District.

                     b.     Provider shall offer health education classes in
                            English and Spanish, as well as other languages
                            identified by the District.

                     c.     Provider shall ensure that effective communication
                            is provided for deaf persons in its administrative
                            and medical services, in accordance with Section 504
                            of the Rehabilitation Act of 1973 and Title II of
                            the Americans with Disabilities Act of 1990, 42 USC
                            Section 12112-14, including the availability of
                            qualified sign language interpreters.

              5.     Transportation and Scheduling Assistance Requirements

                     a.     Provider shall furnish all transportation for
                            emergency services as defined in Article XXII.

                     b.     Provider shall furnish all medically necessary
                            transportation for non-emergency situations.

                     c.     Provider shall offer and provide, if requested and
                            necessary, transportation to EPSDT services.



                                       36
<PAGE>   69

                     d.     Provider shall offer and provide, if requested and
                            necessary, assistance with scheduling EPSDT
                            appointments.

              6.     EPSDT Tracking Systems

                     a.     Provider shall operate a system that tracks the
                            following EPSDT activities for each enrollee:

                            (1)    the EPSDT screens, immunizations, and
                                   laboratory tests that the enrollee is due to
                                   receive;

                            (2)    the EPSDT screens, immunization , and
                                   laboratory tests that the enrollee has
                                   received and the dates that the screens,
                                   immunizations and laboratory tests occurred;

                            (3)    whether the enrollee has been referred for
                                   corrective treatment as a result of an EPSDT
                                   screen or laboratory test and the date that
                                   any such referral occurred;

                            (4)    whether the enrollee has received the
                                   corrective treatment and the date that the
                                   corrective treatment occurred; and

                            (5)    the outreach activities described in section
                                   G.10 that have been performed with respect to
                                   the enrollee and the dates that each of the
                                   outreach activities occurred.

              7.     EPSDT Performance Standards

                     a.     Provider shall meet the EPSDT participation ratio ,
                            as defined by the HCFA State Medicaid Manual,
                            Section 5360.B (November 1993) for Provider's
                            enrollees according to the following schedule:

                            (1)    65% for D.C. Fiscal Year 2000; and

                            (2)    70% for D.C. Fiscal Year 2001.

                     b.     If Provider fails to meet or show progress toward
                            meeting the EPSDT performance standards in paragraph
                            "a" of this section or ensure that children have
                            their age-appropriate screens updated for missed
                            opportunities, the District shall take any or all of
                            the following actions (depending on the extent of
                            the failure to comply or to demonstrate progress
                            with the standards):



                                       37
<PAGE>   70

                            (1)    require the Provider to develop and implement
                                   a corrective action plan, that is approved by
                                   the District and is designed to increase
                                   Provider's EPSDT participation ration;

                            (2)    require the Provider to utilize the
                                   Department's EPSDT case management program;
                                   or

                            (3)    withhold an amount from the Provider's
                                   payment, pursuant to Article 11, Section A.3
                                   at a rate of $45 for each enrollee that is
                                   required to be added to the numerator in
                                   Provider's EPSDT participation ratio to
                                   comply with the performance standards in
                                   paragraph "a" of this section.

       J.     ADVANCE DIRECTIVES

              1.     Provider shall comply with the requirements of42 C.F.R. Ch.
                     IV, subpart I of part 489 relating to maintaining written
                     policies and procedures concerning advance directives.

              2.     Provider shall ensure compliance with requirements of State
                     law (whether statutory or recognized by the courts of the
                     State) regarding advance directives. Provider shall inform
                     individuals that complaints concerning the advance
                     directive requirements may be filed with the State survey
                     and certification agency.

              3.     Provider shall provide for education of staff concerning
                     its policies and procedures on advance directives.

       K.     THIRD PARTY LIABILITY

              1.     Provider shall be responsible for identification and
                     collection of third party liability as defined in federal
                     statutes and regulations.

              2.     Provider shall comply with the Health Care Assistance
                     Reimbursement Act of 1984, effective June 14, 1984 (D.C.
                     Law 5-86: D.C. Code Section 3-501 et seq.)

                                       38
<PAGE>   71


ARTICLE II -- QUALITY ASSURANCE AND MANAGEMENT

       A.     GENERAL REQUIREMENTS

              1.     Provider's quality assurance and management program shall:

                     a.     comply with the requirements of HCFA's publication,
                            Internal Quality Assurance Requirements of Managed
                            Care Organizations;

                     b.     include a semi-annual enrollee satisfaction survey;

                     c.     include and enrollee hotline and a system for
                            tracking and reporting enrollee calls to the
                            hotline; and

                     d.     establish methods for monitoring compliance with
                            quality of care guidelines, coverage requirements,
                            and patient care access standards.

              2.     Provider shall implement clinical care standards and
                     practice guidelines that are based on national guidelines,
                     or promulgated by professional medical associations, or
                     other expert committees.

              3.     Providers that have not received an accreditation by the
                     National Committee on Quality Assurance (NCQA) shall
                     conduct focused quality of care studies in the following
                     clinical areas:

                     a.     childhood immunizations;

                     b.     prenatal care and birth outcomes;

                     c.     pediatric asthma and asthma related disease;

                     d.     hypertension;

                     e.     diabetes, and

                     f.     one other area determined by Provider.

              4.     Providers that have received and accreditation by NCQA
                     shall submit their plans for focused quality of care
                     studies to be conducted during the contract term to the
                     District for review and approval.



                                       39
<PAGE>   72

       B.     COMPLIANCE WITH CLIA

              Laboratories performing test on enrollee of Provider must be
              certified under the provisions of the Clinical Laboratory
              Improvement Amendments of 1988 (CLIA).

ARTICLE III -- GRIEVANCE AND COMPLAINT SYSTEM

       A.     Provider shall maintain a complaint and grievance system, which
              complies with the requirements of 42 C.F.R. Section 434.32 with
              reasonable procedures for the prompt resolution of complaints
              initiated by enrollees.

       B.     Provider shall maintain an expedited grievance system in the case
              of persons with HIV/AIDS that ensures that any individual
              dissatisfied with Provider's determination of coverage may appeal
              the determination and obtain a resolution with 72 hours of filing
              the request for a grievance. The reviewer shall be an individual
              who was not involved in the initial coverage determination.
              Aggrieved individuals shall have the right to submit additional
              data and to meet with the reviewer prior to a final determination.

ARTICLE IV -- SUBCONTRACTS

       A.     No subcontract shall terminate the legal obligation of Provider to
              ensure that all activities carried out by the subcontractor
              conform to the provisions of this contract. Subject to these
              conditions, any service or function required to be provided by
              Provider may be subcontracted to a qualified organization or
              person.

       B.     Each model subcontract (group and individual PCP and specialist;
              hospital; non-physician practitioner; other health care service
              contract) entered into by Provider for services furnished under
              this contract shall be submitted to the District for approval
              prior to the execution of the subcontract.

       C.     The District shall notify Provider, in writing, of its approval or
              disapproval of the proposed subcontract within fifteen (15)
              business days of receipt of the proposed subcontract and
              supporting documentation required by the District. The District
              shall specify the reasons for any disapproval, which shall be
              based only on District or federal law or regulations.

       D.     Failure to notify Provider of the approval or disapproval of the
              proposed subcontract within the fifteen- (15) day time limit
              referenced in Section C of this Article shall be construed as
              approval of the proposed subcontract.



                                       40
<PAGE>   73

       E.     If a Provider executes a subcontract for services furnished under
              this contract that is materially different from the model
              subcontract approved by the District, the District may freeze
              enrollment or utilize any other remedy which it deems appropriate
              in accordance with the procedures in Article 11.

       F.     The District may require Provider to furnish additional
              information relating to the ownership of the subcontractor, the
              subcontractor's ability to carry out the proposed obligations
              under the subcontract, and procedures to be followed by Provider
              to monitor the execution of the subcontract.

       G.     Subject to the provisions of Section B of this Article, a Provider
              may enter into a subcontract with a health care provider who is
              not enrolled in the Medicaid program but who otherwise meets all
              other federal and District requirements for participation in the
              Medicaid program.

       H.     A Provider shall not enter into a subcontract for Medicaid
              services with a health care provider who has been convicted of any
              crime or who has been the subject of any sanction described in
              Section 1128 of the Social Security Act. The District shall not
              reimburse a Provider for any services provided to a Medicaid
              recipient by a subcontractor who has been convicted of a crime or
              the subject of a sanction described in section 1128 of the Social
              Security Act.

       I.     Each subcontract with a network member reported to the District as
              required by Section E, required Information, paragraph 2 shall be
              in writing, fully executed by both parties, and shall contain, at
              a minimum, the information required in 29 DCMR 5313.10.

       J.     Provider shall periodically review the activities of the
              subcontractor for the purpose of identifying suspected fraud,
              abuse or violations of the terms of this contract and shall take
              prompt corrective actions consistent with the terms of the
              subcontract.

       K.     Provider shall notify the District, in writing, of the termination
              of any subcontract and any arrangements made to ensure
              continuation of the services covered by the terminated subcontract
              not less than thirty (30) days prior to the effective date of the
              termination.

       L.     If the District determines that the termination or expiration of a
              subcontract materially affects the ability of Provider to carry
              out its responsibility under this contract, the under this
              contract, the District may terminate this contract.



                                       41
<PAGE>   74

       M.     Provider shall pay health care providers on a timely basis
              consistent with the claims payment procedures described in Section
              1902(a)(37)(A) of the Social Security Act, unless the health care
              provider and Provider agree to an alternative payment schedule.

ARTICLE V -- NON-DISCRIMINATION

       Provider shall not either directly or through sub-contract, discriminate
       on the basis of race national origin, religion, sex, age, disability,
       sexual orientation, marital status, personal appearance, family
       responsibilities, income, Medicaid status, political affiliation, or
       place residence in the execution of any health care or administrative
       duty under this contract.

ARTICLE VI -- MEDICAID PROGRAM AND RECIPIENTS HELD HARMLESS

       A.     In addition to the obligations set forth in Clause 10, of the
              Standard Contract Provisions, the Provider shall hold harmless the
              District government, the department and the enrollee against any
              loss, damage, expense and liability of any kind that arises from
              any action of the organizations or its subcontractors in the
              performance of this contract.

       B.     Each subcontract shall contain a provision that requires the
              subcontractor to look solely to Provider for payment for services
              rendered.

ARTICLE VII -- CONFIDENTIALITY OF INFORMATION

       A.     Provider and its subcontractors shall protect all information,
              records, and data collected and maintained by Provider or its
              subcontractors that identify enrollees from unauthorized
              disclosure by Provider or the District.

       B.     Except as otherwise provided by federal law or regulation, the use
              or disclosure of information concerning enrollees shall be
              restricted to purposes directly related to administration of the
              Medicaid program in accordance with 42 C.F.R. 431.302.

       C.     The information to be safeguarded shall include all information
              listed in 42 C.F.R. 431.305.

       D.     The District agrees to maintain, and to cause its employees,
              agents or representatives to maintain on a confidential basis
              information concerning the Provider's relations and operations as
              well as any other information compiled or created by Provider
              which is proprietary to Provider and which Provider identifies as
              proprietary to the district in writing. If the District receives a
              request pursuant to the freedom of Information Act, the District
              shall determine what information is


                                       42
<PAGE>   75
              required by law to be released and retain authority over the
              release of that information

       E.     The requirements of Sections A, B, C, and D of this Article shall
              survive the termination or expiration of this contract.

ARTICLE VIII -- ACCESS TO INFORMATION

       A.     The provider and its subcontractors shall maintain all records
              required by this contract, for five (5) years. The records shall
              include all physical records originated or prepared in connection
              with the performance of this contract including but not limited
              to, books, reports, working papers, documents, financial records,
              medical records and charts, and the other documentation pertaining
              to costs, payments received and made, and services provided to
              covered enrollees.

       B.     Provider shall permit authorized personnel of the district, the
              United States Department of Health and Human Services, the
              Controller General of the United States and any of their duly
              authorized representatives full access to the records for audit
              purposes.

       C.     The District may examine the records of Provider and its
              subcontractors that were prepared in the course of carrying out
              Provider's obligation under this contract. The District may
              conduct on-site inspections and periodic medical audits of such
              records of as often as it is necessary to protect the interests of
              the District and the enrollees.

ARTICLE IX -- USE OF INFORMATION AND DATA

       A.     The District shall have a license, free of charge, to use any data
              or information system, including software developed exclusively
              for the Medicaid managed Care Program, documentation and manuals,
              developed solely by Provider pursuant to the requirements of this
              contract.

       B.     Data, information and reports collected or prepared by Provider in
              the course of carrying out its obligations under this contract
              shall not be used by Provider for any purpose not directly related
              to meeting the terms of this contract without the prior written
              permission of the District.

       C.     The District may reproduce, publish and otherwise use and
              authorize others to use for district, state or federal government
              purposes, any material developed by Provider in the course of the
              performance of this contract, subject to Article 7.



                                       43
<PAGE>   76

ARTICLE X -- PAYMENT

       A.     The District shall pay Provider a prospective monthly capitation
              rate for each Medicaid Managed Care Program enrollee that is
              enrolled with the Provider on the first day of each month.

       B.     The District shall pay Provider the following capitation rates for
              each enrollee in each of the five rate categories for each month
              of enrollment with Provider:

<TABLE>
<S>                     <C>                                             <C>
                        1.          Children under one year of age      $ 474.18

                        2.          Children ages 1 through 12          $  70.40

                        3.          Females ages 13 through 18          $ 167.70

                        4.          Females ages 19 through 36          $ 238.44

                        5.          All others                          $ 159.84
</TABLE>

       C.     The District shall provide a remittance advice to the Provider on
              or before the first of the month that shall serve as the basis for
              determining payment for the month.

       D.     Payments to Provider shall not exceed the upper payment limits as
              defined in 42 C.F.R. 447.361.

       E.     In the event that the District, pursuant to the Changes Clause of
              the Standard Contract Provisions, adds, deletes or changes any
              services to be performed by the contractor under the Medicaid
              Managed Care Program, the capitation rates may be equitably
              adjusted (either upwards or downwards), only in the event that the
              changes cause a cumulative increase or decrease of more than three
              (3) percent of the total value of this contract.

       F.     The District reserves the right to withhold capitated payments
              from the Provider for enrollees that the District cannot locate.

       G.     Provider shall not impose co-payment requirements, or other fees
              on enrollees.



                                       44
<PAGE>   77

ARTICLE XI -- SANCTIONS FOR NON COMPLIANCE

       A.     In addition to its rights under the Default Clause of the Standard
              Contract Provisions, if the District determines that Provider has
              failed to comply with terms of this contract or has violated
              applicable federal or District law or regulation, the District may
              after written notice of intent to Provider:

              1.     require submission of a corrective action plan before
                     exercising the right to impose any other sanctions for
                     non-compliance authorized by this section;

              2.     freeze enrollment;

              3.     withhold part of Provider's payment;

              4.     forfeit all or part of the deposit identified in Section D,
                     Financial Requirements, paragraph 4.;

              5.     terminate this contract (with 30 days advance notice to
                     Provider);

              6.     deny payments for new enrollees under 42 C.F.R. 434.42;

              7.     impose a financial sanction as approved by HCFA; and/or

              8.     utilize any other sanctions set forth in 29 D.C.M.R. 5320,
                     et seq., as may be amended from time to time.

       B.     Payments provided for under this contract, shall be denied for new
              enrollees when and for so long as, payment for those enrollees is
              denied by the Health Care Financing Administrations under 42
              C.F.R. 434.67(e).

       C.     Before taking any action described in the Article, the District
              shall provide written notice which shall include at least the
              following:

              1.     a citation to the law or regulation or contract provision
                     that has been violated;

              2.     the sanction to be applied and the date the sanction will
                     be imposed;



                                       45
<PAGE>   78
\
              3.     the basis for the Department's determination the sanction
                     should be imposed; and

              4.     the time frame and procedure for Provider to appeal the
                     Department's determination.

       D.     A Provider's appeal of an action pursuant to this Article shall
              not stay the effective date of the proposed action.

ARTICLE XII -- TERM AND TYPE OF CONTRACT

       A.     Type of Contract

              This is an indefinite quantity contract with payment based on the
              fixed capitation rates set forth in Article X. The District is
              required to order and Provider is required to provide services to
              a minimum of 1 0 enrollees. Provider shall also be required to
              provide service, if and as ordered by the District, to additional
              quantities of enrollees not to exceed a maximum of 80,000
              enrollees.

       B.     Term of Contract

              1.     The term of this contract is twelve months from the date of
                     award, subject to the right of the District to effect a
                     no-cost termination in accordance with subsection 2, below.

              2.     In addition to the right of the District to terminate the
                     contract for convenience, Clause 20, and terminate for
                     default, Clause 9, Standard Contract Provisions, the
                     contracting officer may order a no-cost contract
                     termination. If the contracting officer orders a no-cost
                     termination, the following provisions apply.

                     a.     By signing the contract, the contractor agrees that
                            the contracting officer has the right to terminate
                            this contract at no cost to the District in order to
                            allow the contracting officer to award contracts
                            under a District solicitation for District of
                            Columbia Healthy Families Plans (DCHFP) and Child
                            and Adolescent SSI Plans (CASSIP); and

                     b.     The District shall provide to the Provider a 30-day
                            notice of no-cost termination prior to terminating
                            the contract at no cost. The effective date of the
                            no-cost termination shall be the date of award of
                            the contracts awarded under a District solicitation
                            for District of Columbia Healthy Families Plans
                            (DCHFP) and Child and Adoles-



                                       46
<PAGE>   79

                            cent SSI Plans (CASSIP). The contracting officer
                            shall promptly notify Provider in writing of the
                            date of award of the contracts awarded under a
                            District solicitation for District of Columbia
                            Healthy Families Plans (DCHFP) and Child and
                            Adolescent SSI Plans (CASSIP); and

                     c.     Within 90 days after the effective date of the
                            no-cost termination, Provider shall discharge any
                            outstanding payments, debts due to the District, or
                            other Provider obligations.

       C.     Contract Crossing Fiscal Years

              Continuation of this contract beyond each fiscal year is
              contingent upon future fiscal appropriations.

       D.     Continuity of Services

              It is essential that continuity of services be maintained under
              this contract. Therefore, in the event that the awarded contract
              expires or is terminated for convenience, default or at no-cost,
              the Provider shall cooperate with both the Contracting officer and
              any successor contractor to enable the smooth transition from one
              Provider to another. This cooperation shall include the
              availability of all records regarding each client and of equipment
              purchased with government funds. Provider shall assure that
              his/her program management and staff is available for transition
              meetings and conferences with District staff and the staff of the
              new contractor.

ARTICLE ARTICLE XIII -- PRE-AWARD APPROVAL

       A.     Council Approval

              In accordance with the District of Columbia Financial
              Responsibility and Management Assistance Act of 1995, P.L. 104-8,
              and the Council Contract Approval Emergency Amendment Act of 1995,
              D.C. Code Section 1 - 1181.5a, before the District may award this
              contract, the Council of the District of Columbia must approve the
              contract if the award is over one million dollars.

       B.     Authority Approval

              In accordance with regulations adopted pursuant to the District of
              Columbia Financial Responsibility and Management Assistance Act of
              1995, P.L. 104-8, the District of Columbia Financial
              Responsibility and Management Assistance Authority may elect to
              review this contract prior to its award.



                                       47
<PAGE>   80

ARTICLE XIV -- FIRST SOURCE EMPLOYMENT AGREEMENT

       Provider shall maintain compliance with the terms and conditions of the
       First Source Employment Agreement executed between the District of
       Columbia and Provider throughout the entire duration of the contract.

ARTICLE XV -- CERTIFICATION REGARDING A DRUG-FREE WORKPLACE

       A.     Definitions As Used in This Provision

              1.     "Controlled substance" means a controlled substance in
                     schedules I through V of section 202 of the Controlled
                     Substances Act (21 U.S.C. 812) and as further defined in
                     regulation at 21 CFR 1308.15.

              2.     "Conviction" means a finding of guild (including a plea of
                     nolo contendere) or imposition of sentence, or both, by a
                     judicial body charged with the responsibility to determine
                     violations of the Federal or State criminal drug statutes.

              3.     "Criminal drug statute" means a Federal or non-Federal
                     criminal statute involving the manufacture, distribution,
                     dispensing, possession or use of any controlled substance.

              4.     "Drug-free workplace" means the site(s) for the performance
                     of work done in connection with a specific contract at
                     which employees of Provider are prohibited from engaging in
                     the unlawful manufacture, distribution, dispensing,
                     possession, or use of a controlled substance.

              5.     "Employee" means an employee of a Provider directly engaged
                     in the performance of work under a Government contract.
                     "Directly Engaged" is defined to include all direct cost
                     employees and any other provider employee who has other
                     than minimal impact or involvement in contract performance.

              6.     "Individual" means an offeror/contractor that has no more
                     than one employee including the offeror/provider.

       B.     Provider, no later than 30 calendar days after contract award
              completes the following:



                                       48
<PAGE>   81

              1.     Publish a statement notifying such employees that the
                     unlawful manufacturer, distribution, dispensing, possession
                     or use of a controlled substance is prohibited in
                     Provider's workplace and specifying the actions that will
                     be taken against employees for violations of such
                     prohibition;

              2.     Establish a drug-free awareness program to inform such
                     employees about:

                     a.     the dangers of drug abuse in the workplace;

                     b.     Provider's policy of maintaining a drug-free
                            workplace;

                     c.     Any available drug counseling, rehabilitation and
                            employee assistance programs; and

                     d.     The penalties that may be imposed upon employees for
                            drug abuse violation occurring in the workplace;

              3.     Provide all employees engaged in performance of the
                     contract with a copy of the statement required by paragraph
                     1 of this section;

              4.     Notify such employees in the statement required paragraph 1
                     of this section that, as a condition of continued
                     employment on the contract resulting from this
                     solicitation, the employee will:

                     a.     Abide by the terms of the statement; and

                     b.     Notify the employer of any criminal drug statute
                            conviction for a violation occurring in the
                            workplace no later than five calendar days after
                            such conviction;

              5.     Notify the Contracting Officer in writing within (10) days
                     after receiving notice under paragraph 4.b. of this section
                     from an employee or otherwise receiving actual notice of
                     such conviction. The notice shall include the position
                     title of the employee; and

              6.     Within 30 calendar days after receiving notice under
                     paragraph 4.b. of this section of a conviction, take one of
                     the following actions with respect to any employee who is
                     convicted of a drug abuse violation occurring in the
                     workplace:

                     a.     Take appropriate personnel action against such
                            employee, up to an including termination; or



                                       49
<PAGE>   82

                     b.     Require such employee to satisfactorily participate
                            in a drug abuse assistance or rehabilitation program
                            approved for such purpose by a Federal State, or
                            local health law enforcement, or other appropriate
                            agency.

              7.     Make a good faith effort to maintain a drug-free workplace
                     through implementation of paragraphs 1 through 6 of this
                     section.

       C.     Provider, if an individual, agrees by award of the contract or
              acceptance of a purchase order not to engage in the unlawful
              manufacture, distribution, dispensing, possession or use of a
              controlled substance in the performance of this contract.

       D.     In addition to other remedies available to the Government,
              Provider's failure to comply with the requirements of sections B
              or C of this Article, may, pursuant to PAR 23.506 render Provider
              subject to suspension of contract payments, termination of the
              contract for default, and suspension or debarment.

ARTICLE XVI -- CONTRACTING OFFICER/CONTRACT ADMINISTRATOR

       A.     Contracting Officer

              The D.C. Department of Health Contracting Officer who has the
              appropriate contracting authority is the only District official
              authorized to contractually bind the District through signing
              contract documents. All correspondence to the Contracting Officer
              shall be forwarded to the Contracting Officer who shall be:

                                    Chief Procurement Officer or Designee
                                    Office of Contracting and Procurement
                                    441 4th Street, N.W., Suite 800S
                                    Washington, D.C. 20001
                                    Telephone No.: 202-727-0252
                                    Facsimile Number: 202-724-5673

       B.     Contract Administrator

              The Contract Administrator is responsible for general
              administration of the contract and advising the Contracting
              Officer as to the Contractor's compliance or noncompliance with
              the contract. In addition, the contract Administrator is
              responsible for the day-to-day monitoring and supervision of the
              contract. The Contract Administrator shall be:



                                       50
<PAGE>   83

                                    Dr. Herbert H. Weldon, Jr., Director
                                    Medical Assistance Administration
                                    825 North Capitol Street, N.W., 5th Floor
                                    Washington, D.C. 20002
                                    Telephone No. 202-442-9090

       C.     The Contract Administrator (CA) will have the responsibility of
              ensuring that the work conforms to the requirements of the
              contract and such other responsibilities and authorities as may be
              specified in this contract. It is understood and agreed that the
              CA shall not have authority to make changes in the scope or terms
              and conditions of the contract.

       D.     Provider is hereby forewarned that, absent the requisite authority
              of the CA to make any such changes, Provider may be held fully
              responsible for any changes not authorized in advance, in writing,
              by the Contracting Officer, may be denied compensation or other
              relief for any additional work performed that is not so
              authorized, and may also be required, at no additional cost to the
              District, to take all corrective action necessitated by reason of
              unauthorized changes.

ARTICLE XVII -- CANCELLATION CEILING

       In the event of cancellation of the contract because of
       non-appropriation for fiscal year 2001, there shall be a
       cancellation of $0 representing responsible pre-production and
       non-recurring cost, which will be applicable to the items of service
       being furnished and normally amortized over the life of the
       contract.

ARTICLE XVIII -- INCORPORATED DOCUMENTS

       A.     The following documents are incorporated herein by Reference and
              as Attachments where noted:

              1.     Reference: Court Orders and Statutory and Regulatory
                     Provisions; D.C. Civil Action No. 93-452 (GK) (Salazar
                     Court Order of January 22, 1999); Medicaid Managed Care
                     Amendment Act 1992, D.C. Law 9-247, D.C. Code Section 1-
                     359(d) and Mayor's Order No. 93-218; 42 CFR PART 434
                     Subparts C, E, and F.

              2.     Attachment: The Standard Contract Provisions For Use With
                     District of Columbia Government Supply and Services
                     Contracts, dated October 1, 1999 (Attachment IV)

                                       51


<PAGE>   84
              3.     Reference: Solicitation No. 7010-AA-NS-2-CR and amendments
                     thereto.

              4.     Reference: Provider's Proposal and Best and Final Offer
                     (BAFO) in response to Solicitation No. 7010-AA-NS-2-CR,
                     incorporated in Provider's Contract No. 7010-AD-NS-2-CR
                     executed March 10, 1998.

              5.     Attachment: Covered Services (Attachment I) and Report
                     Format (Attachment II)

              6.     Attachment: SCA Wage Determination No. 94-2103, Revision
                     No. 19, dated June 28, 1999(Attachment III).

ARTICLE XIX -- ORDER OF PRECEDENCE

       A.     The following is a list of documents in order of priority to
              resolve any conflicts or inconsistencies among the terms of this
              contract or any contract references. A conflict in language shall
              be resolved by giving precedence to the document in the highest
              order of priority that contains language addressing the issue in
              question. The following documents are incorporated into the
              contract by reference in the following order of priority:

              1.     Court Orders and Statutory and Regulatory Provisions; D.C.
                     Civil Action No. 93-452 (GK) (Salazar Court Order of
                     January 22, 1999); Medicaid Managed Care Amendment Act
                     1992, D.C. Law 9-247, D.C. Code Section 1-359(d) and
                     Mayor's Order No. 93-218; 42 CFR PART 434 Subparts C, E,
                     and F.

              2.     Articles I through XXII of this Contract (including Covered
                     Services (Attachment I) and Report Formats (Attachment
                     IV)).

              3.     Solicitation No. 7010-AA-NS-2-CR and amendments thereto.

              4.     Provider's Proposal and Best and Final Offer (BAFO)
                     submitted in response to Solicitation No. 7010-AA-NS-2-CR.

              5.     SCA Wage Determination No. 94-2103, Revision No. 19, dated
                     June 28, 1999.



                                       52
<PAGE>   85

ARTICLE XX -- INSURANCE

       The Provider shall maintain the following insurance coverage throughout
       the term of this contract:

       A.     Comprehensive General Liability: Insurance against liability for
              personal and bodily injury and property damage insurance in the
              amount of at least one million dollars ($1,000,000.00).

       B.     Workers' compensation: The Provider shall carry worker's
              compensation insurance covering all of its employees employed upon
              the premises and in connection with its other operations
              pertaining to this agreement, and the Provider shall comply at all
              times with the provisions of the workers' compensation laws of the
              District.

       C.     Employer's Liability: The Provider shall carry employer's
              liability of at least one hundred thousand dollars ($100,000.00).

       D.     Comprehensive Automobile Liability: The Provider shall carry
              comprehensive automobile liability insurance applicable to owned,
              non-owned and hired vehicles against liability for bodily injury
              and property damage. The policy covering automobiles shall provide
              coverage of at least two hundred thousand dollars ($200,000.00)
              per person and five hundred thousand ($500,000.00) per occurrence
              for bodily injury and twenty thousand dollars ($20,000.00) per
              occurrence for property damage.

       E.     Umbrella Liability Insurance: The Provider shall carry umbrella
              liability insurance of at least one million dollars
              ($1,000,000.00).

       F.     The Provider shall have or obtain and maintain throughout the term
              of the contract medical malpractice insurance (or other
              appropriate professional liability insurance) for not less than
              one $1 million for individual incidents and $3 million in annual
              aggregate to cover all incidents of malpractice alleged to have
              occurred during the term of the contract. The provider shall
              purchase a "Tail" for the policy: (a) when the Provider cancels or
              fails to renew the policy or (b) when the contract expires,
              whichever occurs first. Failure to maintain malpractice insurance
              at any time during the term of the contract shall be a basis for
              termination of the contract for default. A copy of all
              correspondence between the Provider and its malpractice insurer
              shall be sent the Contract Administrator.



                                       53
<PAGE>   86

       G.     All insurance provided by the Provider as required by this
              section, except comprehensive automobile liability insurance,
              shall set forth the District as an additional insured. All
              insurance shall be written with responsible companies licensed by
              the District with duplicate copies to be delivered to the
              District's Contracting Officer within fourteen (14) days of
              contract award. The policies of insurance shall provide for at
              least thirty- (30) days written notice to the District prior to
              their termination or material alteration.

ARTICLE XXI -- DEFINITIONS

       A.     The term "District" shall mean the Government of the District of
              Columbia.

       B.     The term "Department" shall mean the Department of Health.

       C.     The terms "TANF" and "TANF-related" individuals means persons who
              fall within one of the following eligibility categories under the
              district's Medicaid plan:

              1.     an individual who meets the eligibility requirements for
                     TANF (formerly AFDC) that were in effect as of July 16th,
                     1996, adjusted at the option of the District in accordance
                     with federal law.

              2.     an individual who is eligible for Medicaid because the
                     person is a pregnant woman with an income at or below 185%
                     of poverty as defined in federal regulations; a child under
                     the age of one in a family with an income at or below 185%
                     of poverty; a child between the ages of one and six in a
                     family with an income at or below 133% of poverty; or a
                     child born after September 30, 1983 in a family with an
                     income at or below 100% of poverty.

              3.     an individual who is categorized as TANF-related by the
                     District's State Medicaid Plan or federal law, (including
                     medically needy and transitional Medicaid).

       D.     The term "mental health services" means care and services which
              are covered under the District of Columbia Medicaid plan or that
              are otherwise furnished to District residents pursuant to any
              other program and which are required for the diagnosis and
              treatment of an illness or condition which is classified as a
              mental disorder under the ICD-9 or DSM IV.



                                       54
<PAGE>   87

       E.     The term "substance abuse services" means care and services which
              are covered under the District of Columbia Medicaid plan or that
              are otherwise furnished to District residents pursuant to any
              other program and which are required for the diagnosis and
              treatment of an illness or condition which is classified as an
              addiction-related disorder under the ICD-9 or DSM IV.

       F.     The term "Provider" means a managed care organization
              participating in the district's managed care program for TANF and
              TANF-related persons authorized under D.C. Code sec. 1-359(d).

       G.     The term "PCP" means a primary care provider who may be a FQHC,
              general or family practitioner, internist, pediatrician, advanced
              practice registered nurse, or obstetrician/gynecologist working in
              a private office or in a clinical setting.

       H.     The term "emergency medical condition" means a medical condition
              manifesting itself by acute symptoms of sufficient severity
              (including severe pain) such that a prudent layperson, who
              possesses an average knowledge of health and medicine, could
              reasonably expect the absence of immediate medical attention to
              result in:

              1.     placing the health of the individual (or, with respect to a
                     pregnant woman, the health of the woman or her unborn
                     child) in serious jeopardy,

              2.     serious impairment to bodily functions, or

              3.     serious dysfunction of any bodily organ or part.

       I.     The term "administrative expenses" includes all costs associated
              with the overall management and operation of the plan, including
              compensation, interest expense, occupancy, depreciation and
              amortization directly associated with administrative services,
              marketing and aggregate write-ins for other administrative
              expense.

       J.     The term "net excess or deficit of revenues over expenses" means
              total revenues minus total expenses plus or minus extraordinary
              items and provision for federal income taxes.

       K.     The term "net worth" means total net worth at the start of the
              year plus the increases or decreases in capital, retained
              earnings, reserves and restricted funds, and unassigned surplus.



                                       55
<PAGE>   88

       L.     The term "developmental disability" shall mean a severe, chronic
              disability that (1) is (or suspected of being) attributable to a
              mental or physical impairment or combination of mental and
              physical impairments, (ii) is manifested before the individual
              attains age 22, (iii) is likely to continue indefinitely, and (iv)
              results in functional limitations or impairment of normal growth
              and development (if not treated), and (v) when applied to infants
              and young children with substantial developmental delay or
              specific congenital or acquired conditions, either does or (if not
              treated could) result in developmental disabilities.

       M.     The term "urgent medical condition" shall mean a condition which,
              if not treated within 24 hours could lead to serious impairment of
              bodily function or serious dysfunction of any bodily organ or
              part.

       N.     The term "stabilize" means the provision of treatment necessary to
              assure, within reasonable medical probability, that no material
              deterioration of the condition is likely to result form or occur
              during the transfer of the individual from the facility.

       O.     The term "medically appropriate transfer" means a transfer from a
              hospital, which complies with the requirement of 42 U.S.C. Section
              1395dd(c).

       P.     The term "Early Periodic Screening, diagnosis and Treatment
              (EPSDT)" shall mean the pediatric component of the Medicaid
              program created and implemented by federal statute and
              regulations.

       Q.     The term "enrollee" shall mean a Medicaid Managed Care Program
              recipient who is enrolled with Provider for services under this
              contract.

       R.     The term "Federally Qualified Health Center (FQHC)" shall mean a
              health center as defined in 42 C.F.R. 405.2430-2470.

       S.     The term "Medicaid Managed Care Program" shall mean the program
              established pursuant to the Medicaid Managed Care Amendment Act of
              1992, effective March 17, 1992 (D.C.Law 9-247, D.C. Code Section
              1-359) as amended.

       T.     The term "Qualified Family Planning Provider (QFPP)" shall mean
              any public or not-for-profit health care provider that complies
              with Title X guidelines/standards and receives Title X funding.

       U.     The term "reinsurance" shall mean the insurance protection to be
              obtained by Provider for costs over a certain level incurred by a
              capitated provider for services rendered to an enrollee.



                                       56
<PAGE>   89


       V.     The term "Prepaid Capitated Risk Contract" shall mean a provider
              contract for a scope of services specified in 42 C.F.R. 434.21(b)
              paid on a prepaid per enrollee basis where the exposure to
              financial loss is retained by the provider.

       W.     The term "stop loss reinsurance" shall mean a type of reinsurance
              that limits the financial liability of a Provider for expenses
              incurred for rendering services to an enrollee under this
              contract.

       X.     The term "subcontract" shall mean any written agreement between
              Provider and another party that requires the other party to
              provide services or benefits that Provider must make available
              pursuant to the provisions of this contract.

ARTICLE XXII -- TOTAL AGREEMENT OF THE PARTIES

       This contract, including specifically incorporated documents, constitutes
       the total and entire agreement between the parties. All previous
       discussions, writings, and agreements are merged herein.

                                       57
<PAGE>   90


                                   ATTACHMENT


                                        1

                                 D&F SOLE SOURCE

<PAGE>   91


                        CLASS DETERMINATION AND FINDINGS
                                       FOR
                             SOLE SOURCE PROCUREMENT


AGENCY:  Department of Health, Medical Assistance Administration

CONTRACTORS' NAMES AND ADDRESSES                     CONTRACT NO.
(SEE ATTACHMENT A)                                   (SEE ATTACHMENT A)

CAPTION: Medicaid Managed Care Program, Managed Care Organization (MCO) Services


                                    FINDINGS

1.       AUTHORIZATION:

         Section 305 of the District of Columbia Procurement Practices Act of
         1985, D.C. Code, Section 1-1183.5; 27 DCMR 1207, 1208, 1705

2.       MINIMUM NEED:

         The District must continue the Medicaid Managed Care Program so that
         Medicaid-eligible persons enrolled with seven Managed Care Providers
         will continue to receive medical care. The seven current Managed Care
         Providers are identified in Attachment A. Current contracts with these
         Providers expire March 31, 2000, and the District must award new,
         interim  contracts to continue current MCO services for a term to cover
         the time period before the District can complete a competitive
         reprocurement and award replacement contracts.  Award of the interim
         contracts will meet the needs of current MCO enrollees, enabling them
         to continue to receive medical care from the Medicaid Provider assigned
         by the District or selected by the enrollee under the Medicaid Managed
         Care Program.  The term of the interim, sole-source contracts will be
         one year; however, this term shall be abbreviated and the contracts
         will terminate without cost to the District upon award of replacement
         contracts.

3.       ESTIMATED REASONABLE COST:

         The estimated amount for the interim contracts is $129,717,456.

4.       EXPIRATION DATE OF CLASS DETERMINATION AND FINDINGS:

         This Determination and Findings (D&F) shall expire on March 31, 2001.

5.       FACTS WHICH JUSTIFY SOLE SOURCE PROCUREMENT:

         The contractors identified in Attachment A currently are providing
         managed care services under the Medicaid Managed Care Program. The
         contracts for these services were awarded competitively and will expire
         on March 31, 2000. The Department of Health is developing a new


<PAGE>   92

         Statement of Work and will issue a new solicitation for competitive
         procurement and award of new contracts to Medicaid managed care
         organizations. However, the solicitation, proposal
         preparation/evaluation, source selection, and contract award process
         will take many months and may not be approved by the City Council until
         fiscal year 2001. Because the Medicaid Managed Care Program and the
         health care services it provides are vital to the District and cannot
         be interrupted, it is necessary to enter into sole-source contracts
         with all of the current service  providers for a time period sufficient
         to allow for completion of the new procurement. Accordingly, until such
         time that the District awards the replacement contracts, the Medicaid
         managed care contractors are the only contractors that have the ability
         to continue to provide to the enrollees medical care by the same
         Medicaid provider that the District assigned the enrollees or that the
         enrollees selected under the Medicaid Managed Care Program. The Office
         of Contracting and Procurement did not conduct a market survey since
         the seven contractors are the only sources that are currently servicing
         the Medicaid population and meet the District's minimum needs.


                            CERTIFICATION OF FINDINGS

         I certify that the above findings are correct and complete, that the
         estimated price is fair and reasonable, and that sole-source
         contracting is in the best interest of the District.

<TABLE>
<S>                                                                                  <C>
         [illegible signature]                                                          3/14/00
         ------------------------------------------                                     ---------------
         Ivan C.A. Walks, M.D.                                                          Date
         Director


         /s/ Emma C. Fair                                                               3/15/2000
         ------------------------------------------                                     ---------------
         Emma C. Fair                                                                   Date
         Interim Agency Chief Contracting Officer
</TABLE>


                                       2
<PAGE>   93


                                  DETERMINATION

Based on the findings, and in accordance with D.C. Code Section 1-1183.5(a)
and 27 DCMR Sections 1705.1 and 1010.2, it is hereby determined that the
services should be procured from the class of contractors identified herein
by use of the sole source method of procurement. It is further determined
that this procurement action is in the best interests of the District of
Columbia, and that the costs are fair and reasonable.

<TABLE>
<S>                                                                                  <C>
/s/ Elliot b. Branch                                                                    3/16/2000
-------------------------------------                                                   -----------------
Elliott B. Branch                                                                       Date
Director
Office of Contracting and Procurement
</TABLE>


                                       3
<PAGE>   94


ATTACHMENT A
CLASS D&F FOR MEDICAL ASSISTANCE ADMINISTRATION


<TABLE>
<CAPTION>
      VENDOR                                      ADDRESS                                           CONTRACT AMOUNT
<S>                                      <C>                                                 <C>
Advantage Healthplan, Inc.                P0 Box 9596                                        $         5,063,904.00
Contract No. HCOCO 139343                 Washington D.C. 20016

Americaid Community Care                  857 Elkridge Landing Rd                            $        20,113,044.00
Contract No. HC0C0139344                  Linthicum, Maryland 21090
                                          Suite 300

American Preferred Provider Plan          1501 M Street, N.W.                                $         7,214,460.00
Contract No. HC0C0139345                  Washington, D.C. 20005
                                          5th Floor

Capital Community Health Plan             750 First Street, N.E.                             $        39,145,956.00
Contract No. HC0C0139347                  Washington, D.C. 20002
                                          Suite 1120

D.C. Chartered Health Plan, Inc.          820 First Street, N.E.                             $        43,683,972.00
Contract No. HCOCO 139346                 Washington, D.C. 20002
                                          Suite 100

George Washington University              2150 Pennsylvania Ave., N.W.                       $         8,243,088.00
Health Plan                               Washington, D.C. 20009
Contract No. HCOCO 139350

Health Right, Inc.                        3020 14th Street, N.W.                             $         6,253,032.00
Contract No. HCOCO 139349                 Washington, D.C. 20009
Total                                                                                        $       129,717,456.00
</TABLE>


                                       4
<PAGE>   95



                                   ATTACHMENT


                                        2

                                  D&F CONTRACT
                                 RESPONSIBILITY


<PAGE>   96




                           DETERMINATION AND FINDINGS
                          FOR CONTRACTOR RESPONSIBILITY


AGENCY:  DEPARTMENT OF HEALTH (DOH)


AMERICAID ( AMERIGROUP)
857 ELKRIDGE LANDING ROAD
LINTHICUM, MARYLAND

                                                       CONTRACT NO. :HC0CO139344
                                                       CAPTION: HMO MANAGED
                                                       MEDICAID CARE PROGRAM


                                    FINDINGS

1.       AUTHORIZATION:

         27 DCMR section 2200.

2.       MINIMUM NEED:

         The District must continue the Medicaid Managed Care Program so that
         Medicaid eligible persons enrolled with seven Managed Care Providers
         will continue to receive medical care. The seven current Managed Care
         Providers are identified in Attachment A. Current contracts with these
         providers expire March 31, 2000, and the District must award new,
         interim contracts to continue current MCO services for a term to cover
         the time period before the District can complete a competitive
         reprocurement and award replacement contracts. Award of interim
         contracts will meet the needs of current MCO enrollees, enabling them
         to continue to receive medical care from the Medicaid managed Care
         Program. The term of the interim, sole-source contracts will be one
         year, however, this term shall be abbreviated and the contracts will
         terminate without cost to the District upon award of replacement
         contracts.

         The base period of the contract shall be from date of award to twelve
         (12) months

3.       ESTIMATED REASONABLE COST:

         The estimated cost for this contract is $ 20,113,044.00

4.       FACTS WHICH JUSTIFY CONTRACTOR'S RESPONSIBILITY

         A.       The Contractor's financial resources are adequate to perform
                  the contract.

         B.       The contractor's performance of similar services for the
                  Maryland Central Registry located in the School of Health has
                  been satisfactory.

<PAGE>   97

         C.       A satisfactory record of integrity and business ethics.

         D.       The necessary organizational, experience, accounting and
                  operational control, technical skill, equipment and
                  facilities; and

         E.       Compliance with the applicable District licensing and
                  corporate registration requirements. Contacted the Office of
                  Tax and Revenue to determine their complicity


                                  DETERMINATION


         Based on the findings in accordance with DCMR 27 section 2200, it is
         hereby determined that the contractor is responsible. It is further
         determined that the award action is in the best interest of the
         District of Columbia.


<TABLE>
<S>                                                              <C>
         --------------------                                    ----------------------------------------
         Date                                                          Interim Agency Contracting Officer
</TABLE>


                                       2
<PAGE>   98

                                   ATTACHMENT


                                        3

                                    D&F PRICE
                                 REASONABLENESS



<PAGE>   99
                           DETERMINATION AND FINDINGS
                            FOR PRICE REASONABLENESS

AGENCY:  DEPARTMENT OF HEALTH (DOH)

AMERICAID (AMERIGROUP)
857 ELKRIDGE LANDING RD.
LINTHICUM, MARYLAND

                                                       CONTRACT NO.: HCOCO139344
                                                       CAPTION: HMO MANAGED
                                                       MEDICAID PROGRAM

                                    FINDINGS

1.       AUTHORIZATION:

         27 DCMR section 1804.3 et seq.

2.       MINIMUM NEED:

         The Department of Health, Medical Assistance Administration (MAA) has
         continuing need for a contractor to provide adequate network of Health
         service providers and agencies which is sufficient to meet the health
         needs of the Medicaid enrollees and which meet their specifications. To
         maintain accurate and current information with supporting
         documentation, provide complete, accurate and current written
         information on its providers network membership and the new patient
         capabilities of each primary care provider within the network to any
         prospective and current enrollee, provide or arrange services which are
         covered under the Medicaid Managed Care Programs District of Columbia
         Healthy Families Plans (DCHFP) and Child and Adolescent SSI Plans
         (CASSIP).

         The base period of the contract shall be from date of award to twelve
         (12) months thereafter.

3.       ESTIMATED REASONABLE COST:

         The estimated cost for this contract is $20,113,044.00

4.       FACTS WHICH JUSTIFY CONTRACTOR'S PRICE REASONABLENESS

         a.       Services, including face to face counseling meeting with
                  eligible receipts to assist in the selection of a MCO and PCP
                  for approximately 80,000 Medicaid Managed Care recipients
                  would be disrupted by a break in service.

         b.       The success of the MMCP depends on the ability of the
                  recipients continue their care without interruption.
















<PAGE>   100

                  1.       Looses the savings from enrollments into MCOs
                           (estimated at $300,000.) It costs the District more
                           per member in Medicaid's Fee-for service system than
                           in a MCO.

                  2.       risks are compliance with Salazar Court Order for
                           provision of preventive and corrective health care
                           services (EPSDT) for children. The District's
                           strategy for increasing the number of children who
                           participate in (EPSDT) program to comply with Court
                           Order is through enrollment of children in MCOs.

                  3.       Risks claims from the MCOs for lost net revenues for
                           declines in enrollments that could be leveled in the
                           thousands of dollars.

                  4.       Contractors are maintaining a 4.7% increase pursuant
                           to Contracts signed in March of 1997. There was
                           resistance from the contractors to hold the 4.7 %,
                           but an agreement was met for the lifetime of this one
                           (1) year sole source contract. The 4.7% was the rate
                           of the previous contract signed in March 1997.
                           According to the Bureau of Labor Statistics  D.C.
                           Health Care Index that  represent the average  annual
                           index, the annual rate is now 8.6%.  Therefore, the
                           rate of increase for this procurement action is
                           reasonable.

         c.       It is essential to maintain continuity of services in order to
                  avoid harm to the health and well being of District residents.


                                  DETERMINATION

         Based on the findings in accordance with DCMR 27 section 804.3, et seq
         it is hereby determined that the price is fair and reasonable.  It is
         further determined that the award action is in the best interest of the
         District of Columbia.

<TABLE>
<S>                                                                   <C>
         3.16.00                                                       [illegible signature]
         --------------------                                          --------------------------------------
         Date                                                          Interim Agency Contracting Officer
</TABLE>


                                       2
<PAGE>   101


                                   ATTACHMENT


                                        4

                                  FIRST SOURCE
                                   EMPLOYMENT


<PAGE>   102

GOVERNMENT OF THE DISTRICT OF COLUMBIA            [LOGO]DEPARTMENT OF EMPLOYMENT
--------------------------------------------------------------------------------
  - Employment Security Building - 500 C Street, N.W. - Washington, D.C. 20001
--------------------------------------------------------------------------------

         MEMORANDUM

         To:      Emma C. Fair
                  Interim Agency Contracting Officer
                  Office of Contracting and Procurement

From:    Susan O. Gilbert, Chief
                Office of Employer Services

Date:    MAR 15 2000

Subject:      Review of First Source Employment Agreement
--------------------------------------------------------------------------------

The Department of Employment Services (DOES) has reviewed the following
contractual document for compliance with Mayor's Order 83-265 and D.C. Law 5-93:

         CONTRACTOR: Americaid Community Care

         CONTRACT NUMBER:  HCOCO- 139344

In reviewing the document, DOES has determined the following:

___X____ The contractor has signed a First Source Employment Agreement
(attached). Therefore, the contract has satisfied all criteria established by
DOES pursuant to Mayor's Order 83-265 and D.C. Law 5-93.

________ The contractor did not sign a First Source Employment Agreement, and
therefore, the contract does not comply with the mandates of Mayor's Order
83-265 nor D.C. Law 5-93. In order for this contract to satisfy the criteria
established by this agency, the contractor must enter into a First Source
Employment Agreement with DOES.

         Other (specify):
--------------------------------------------------------------------------------

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

If you need additional information regarding the First Source Employment
Agreement, please contact Vernell Jordan on (202) 724-7377.

Attachment

--------------------------------------------------------------------------------
JOB
SERVICE LOGO "HELPING PEOPLE HELP THEMSELVES"


                                       4
<PAGE>   103


                        FIRST SOURCE EMPLOYMENT AGREEMENT


         Contract Number:      HCOCO139344
                         ------------------------------------------------
         Contract Amount:      $20,113,044 EST
                         ------------------------------------------------
         Project Name:         Medicaid Managed Care Program MCO Services
                         -------------------------------------------------------
         Project Address:                                         Ward:
                         ------------------------------------          ---------

This Employment Agreement, in accordance with D.C. Law 5-93 and Mayor's Order
83-265 for recruitment, referral, and placement of D.C. residents, is between
the District of Columbia, Department of Employment Services, hereinafter
referred to as DOES, and AMERICAID COMMUNITY CARE, hereinafter, referred to as
EMPLOYER. Under this Employment Agreement, the EMPLOYER will use DOES as its
first source for recruitment, referral and placement of new hires or employees
for the new jobs created by this project and will hire 51% D.C. residents for
all new jobs created, as well as 51% of apprentices employed in connection with
the project shall be District residents registered in programs approved by the
District of Columbia Apprenticeship Council.





 I.      General Terms

         A.       The EMPLOYER will use DOES as its first source for the
                  recruitment, referral and placement of employees.

         B.       The EMPLOYER shall require all contractors and subcontractors
                  with contracts totaling $100,0000 or more to enter into a
                  First Source Employment Agreement with DOES.

         C.       DOES will provide recruitment, referral and placement services
                  to the EMPLOYER subject to the limitations set out in this
                  Agreement.

         D.       DOES participation in this Agreement will be carried out by
                  the Office of the Director, with the Office of Employer
                  Services, which is responsible for referral and placement of
                  employees, or such other offices or divisions designated by
                  DOES.

         E.       This Agreement shall take effect when signed by the parties
                  below and shall be fully effective for the duration of the
                  contract and extension or modifications to the contract.

         F.       This Agreement shall not be construed as an approval of the
                  EMPLOYER'S bid package, bond application, lease agreement,
                  zoning application, loan or contract/subcontract.

         G.       DOES and the EMPLOYER agree that for purposes of this
                  Agreement, new hires and jobs created (both union and
                  nonunion) include all EMPLOYER'S job openings and vacancies in
                  the Washington Metropolitan Area created as a result of
                  internal promotions, terminations and expansions of the
                  EMPLOYER'S workforce, as a result of this project, including
                  loans, lease agreements, zoning applications, bonds, bids and
                  contracts.

<PAGE>   104

         H.       For purposes of this Agreement, apprentices as defined in D.C.
                  Law 2-156, are included.

         I.       The EMPLOYER shall register an apprenticeship program with the
                  D.C. Apprenticeship Council for construction or renovation
                  contracts or subcontracts totaling $500,000 or more. This
                  includes any construction or renovation contract or
                  subcontract, signed as the result of a loan, bond, grant,
                  Exclusive Right Agreement, street or alley closing, or a
                  leasing agreement of real property for 1 year or more.

II.      Recruitment

         A.       The EMPLOYER will complete the attached Employment Plan which
                  will indicate the number of new jobs projected, salary range,
                  hiring dates and union requirements. The EMPLOYER will notify
                  DOES of its specific need for new employees as soon as that
                  need is identified.

         B.       Notification of specific needs, as set forth in Section II.A.,
                  must be given to DOES at least five (5) business days (Monday
                  - Friday) before using any other referral source, and shall
                  include, but need not be limited to, the number of employees
                  needed by job title, qualification, hiring date, rate of pay,
                  hours of work, duration of employment and work to be
                  performed.

         C.       Job openings to be filled by internal promotion from the
                  EMPLOYERS'S current workforce need not be referred to DOES for
                  placement and referral.

         D.       The EMPLOYER will submit to DOES, prior to starting work on
                  the project, the names, and social security numbers of all
                  current employees, Including apprentices, trainees and laid
                  off workers who will be employed on the project.

III.     Referral

         A.       DOES will screen and refer applicants according to the
                  qualifications supplied by the EMPLOYER.

IV.      Placement

         A.       DOES will notify the EMPLOYER prior to the anticipated  hiring
                  dates, of the number of applicants DOES will refer as agreed.
                  DOES will make every reasonable effort to refer at least two
                  qualified applicants for each job opening.

         B.       The EMPLOYER will make all decisions on hiring new employees
                  but will in good faith use reasonable efforts to select its
                  new hires or employees from among the qualified persons
                  referred by DOES.

                                       2
<PAGE>   105

         C.       In the event DOES cannot refer the qualified personnel
                  requested, within five (5) business 5 days (Monday - Friday)
                  from the date of notification, the EMPLOYER will be free to
                  directly fill remaining positions for which no qualified
                  applicants have been referred. In this event, the EMPLOYER
                  will still be required to meet the 51% goal.

         D.       After the EMPLOYER has selected its employees, DOES will not
                  be responsible for the employees' actions and the EMPLOYER
                  releases DOES from any liability for employees' actions.

V.       Training

         DOES and the EMPLOYER may agree to develop skills training and
         on-the-job training programs; the training specifications and cost for
         such training will be mutually agreed upon by the EMPLOYER and DOES and
         covered in a separate Training Agreement.

VI.      Controlling Regulations and Laws

         A.       If this Agreement conflicts with any labor laws or
                  governmental regulations, the laws or regulations shall
                  prevail.

         B.       DOES will work within the terms of all collective bargaining
                  agreements to which the EMPLOYER is a party.

         C.       The EMPLOYER will provide DOES with written documentation that
                  the EMPLOYER has provided the representative of any involved
                  collective bargaining unit with a copy of this Agreement and
                  has requested comments or objections. If the representative
                  has any comments or objections the EMPLOYER will provide them
                  to DOES.

VII.     Agreement Modifications, Renewal, and Monitoring

         A.       If, during the term of this Agreement, the EMPLOYER should
                  transfer possession of all or a portion of its business
                  concerns affected by this Agreement to any other party by
                  lease, sales, assignment or otherwise, the EMPLOYER as a
                  condition of transfer shall:

                  1.       Notify the party taking possession of the existence
                           of the EMPLOYER'S Agreement.

                  2.       Notify the party taking possession that full
                           compliance with this Agreement is required in order
                           to avoid termination of the project.

                  3.       EMPLOYER shall, additionally, advise DOES within
                           seven (7) days of the transfer. This advice will
                           include the name of the party taking possession and
                           the name and telephone of that party's
                           representative.

                                       3
<PAGE>   106

         B.       DOES shall monitor EMPLOYER'S performance under this
                  Agreement. The EMPLOYER will cooperate in DOES' monitoring
                  effort and will submit a Contract Compliance Form to DOES
                  monthly.

         C.       To assist DOES in the conduct of the monitoring review, the
                  EMPLOYER will make available payroll and employment records
                  for the review period indicated.

         D.       If additional information is needed during the review, the
                  EMPLOYER will provide the requested information to DOES.

         E.       The EMPLOYER and DOES, or such other agent as DOES may
                  designate, may mutually agree to modify this Agreement.

         F.       The project may be terminated because of the EMPLOYER'S
                  non-compliance with the provisions of this Agreement.

Dated this               9              day of     March           2000
          ---------------------------------------------------------------


  Signed:
<TABLE>
<S>                                                         <C>
  /s/  Susan O. Silbert                                        illegible signature
-------------------------------                               -------------------------
DEPARTMENT OF EMPLOYMENT                                      SIGNATURE OF EMPLOYER
SERVICES                                                      Amerigroup Maryland, Inc.
                                                              Amerigroup Community Care
                                                              -------------------------
                                                              NAME OF COMPANY

                                                              514 10th st., NW, wdc 20004
                                                              -------------------------
                                                              ADDRESS

                                                              202-783-8100
                                                              -------------------------
                                                              TELEPHONE
</TABLE>


                                       4

<PAGE>   107


                                 EMPLOYMENT PLAN
<TABLE>
<CAPTION>
Name of Firm:              AMERIGROUP Maryland, Inc., A Managed Care Organization
<S>                        <C>                              <C>
Address:                   514 10th Street, NW, Suite 500
                           Washington, DC 20004

Telephone Number:          202-783-8100                       Federal Identification No.: 510387398

Contact Person:            Jane Thompson                      Title:  COO, Washington DC

Type of Business:          Managed Care

Originating District Agency:

Type of Project:                                              Funding Amount:

Projected Start Date:                                         Project Duration:
</TABLE>

NEW JOB CREATION PROJECTIONS:

<TABLE>
<CAPTION>
                                                  # OF          SALARY            UNION             PROJECTED
                      JOB TITLE                   JOBS          RANGE             MBRSHP            HIRE DATE
--------------------------------------------------------------------------------------------------------------------
<S>     <C>                                       <C>     <C>                     <C>               <C>
A       Admin Assistant (Secretary I)              1       $13.25-17.77            N/A                4/1/00
--------------------------------------------------------------------------------------------------------------------
        Receptionist/Admin Asst                    1       $13.25-17.77            N/A                4/1/00
B       (Secretary I)
--------------------------------------------------------------------------------------------------------------------
C       Quality Mgt Coordinator                    1       $16.83-22.61            N/A                4/1/00
--------------------------------------------------------------------------------------------------------------------
D       Health Promotions Assoc                    1       $13.25-17.77            N/A                5/1/00
--------------------------------------------------------------------------------------------------------------------
E       Provider Relations Rep                     1       $16.11-21.64            N/A                6/1/00
--------------------------------------------------------------------------------------------------------------------
        OB Case Manager                            1       $21.63-29.08            N/A                5/1/00
F       (Reg Nurse II, Spec)
--------------------------------------------------------------------------------------------------------------------
        Concurrent Review Nurse                    1       $19.23-25.84            N/A                5/1/00
G       (Reg Nurse I)
--------------------------------------------------------------------------------------------------------------------
H       Social Worker                              1       $16.83-22.61            N/A                5/1/00
--------------------------------------------------------------------------------------------------------------------
</TABLE>




<PAGE>   108



                                CURRENT EMPLOYEES


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
         LAST NAME                   FIRST NAME             MI        SOCIAL SECURITY
------------------------------------------------------------------------------------------
<S>                         <C>                           <C>         <C>
Butler                      Lashone                         D                 ###-##-####
------------------------------------------------------------------------------------------
Cooper                      Clodeaner                                         ###-##-####
------------------------------------------------------------------------------------------
Downs                       Beverly                         A                 ###-##-####
------------------------------------------------------------------------------------------
Glenn                       Zina                                              ###-##-####
------------------------------------------------------------------------------------------
Hemphill                    Duane                           P                 ###-##-####
------------------------------------------------------------------------------------------
Johnson                     Jerri                           J                 ###-##-####
------------------------------------------------------------------------------------------
Munford                     Shirley                                           ###-##-####
------------------------------------------------------------------------------------------
Robinson                    Lamar                                             ###-##-####
------------------------------------------------------------------------------------------
Thompson                    Jane                            E                 ###-##-####
------------------------------------------------------------------------------------------
Warwick                     Lisa                            M                 ###-##-####
------------------------------------------------------------------------------------------
</TABLE>









Signature                                                    Date
         ---------------------                                   ---------------

<PAGE>   109



<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
         LAST NAME                   FIRST NAME             MI        SOCIAL SECURITY
------------------------------------------------------------------------------------------
<S>                      <C>                               <C>        <C>
Butler                      Lashone                         D                 ###-##-####
------------------------------------------------------------------------------------------
Cooper                      Clodeaner                                         ###-##-####
------------------------------------------------------------------------------------------
Downs                       Beverly                         A                 ###-##-####
------------------------------------------------------------------------------------------
Glenn                       Zina                                              ###-##-####
------------------------------------------------------------------------------------------
Hemphill                    Duane                           P                 ###-##-####
------------------------------------------------------------------------------------------
Johnson                     Jerri                           J                 ###-##-####
------------------------------------------------------------------------------------------
Munford                     Shirley                                           ###-##-####
------------------------------------------------------------------------------------------
Robinson                    Lamar                                             ###-##-####
------------------------------------------------------------------------------------------
Thompson                    Jane                            E                 ###-##-####
------------------------------------------------------------------------------------------
Warwick                     Lisa                            M                 ###-##-####
------------------------------------------------------------------------------------------
</TABLE>




Signature [illegible signature]                              Date 3/14/2000
          -------------------------------------                  ---------------
          COO Americaid Community Corp.



                                       2

<PAGE>   110


                                   ATTACHMENT



                                        5

                             OFFICE OF TAX & REVENUE




                                       3

<PAGE>   111




<TABLE>
<CAPTION>
<S>                                                                                                                              <C>
------------------------------------------------------------------------------------------------------------------------------------
                              FR-500                                            [LOGO] DISTRICT OF COLUMBIA GOVERNMENT
                COMBINED REGISTRATION APPLICATION                                  DEPARTMENT OF FINANCE AND REVENUE
------------------------------------------------------------------------------------------------------------------------------------
                                                   PART I -- GENERAL INFORMATION
------------------------------------------------------------------------------------------------------------------------------------
 1. Federal employer's identification number [ ][ ][ ]-[ ][ ][ ][ ][ ][ ][ ]                  2.Business code/SIC number[ ][ ][ ][ ]
------------------------------------------------------------------------------------------------------------------------------------
 3. Reasons for applying:                                          4.  Type of ownership      [ ]   Household domestic
   [ ] New business                [ ]   Utility company             [ ]  Sole proprietor     [ ]   Limited liability company
   [ ] Street vendor               [ ]   Additional location         [ ]  General partnership [ ]   Other (specify)
   [ ] Merger (attach merger       [ ]   Purchased existing bus.     [ ]  Limited partnership
       agreement)                  [ ]   Household/domestic          [ ]  Limited liability
   [ ] Name change                 [ ]   Special event (complete          partnership
       (attached corporation             Parts I & IV) No. of        [ ]  Joint Venture
       amendment)                        Participants _______        [ ]  Corporation
   [ ] Legal form change           [ ]   Heating oil company
   [ ] Other (describe)            [ ]   Address change
                                                                          State Inc.:  Mo. _____ Day _____ Yr. ______
------------------------------------------------------------------------------------------------------------------------------------
 5. Business name (individual partnership, corporation or special event name)

------------------------------------------------------------------------------------------------------------------------------------
 6. Trade name or promoter (if different from Line 5)

------------------------------------------------------------------------------------------------------------------------------------
 7. Business address (P.O. Box not acceptable unless located in a Rural Area)

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


------------------------------------------------------------------------------------------------------------------------------------
 8. Mailing address

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


------------------------------------------------------------------------------------------------------------------------------------
 9. Local business phone number      10. Main office phone number  10.a.  FAX number              11. Date present business (Month,
     (area code) (   )                    (area code) (   )                (   )                       Day, Year)
                                                                                                       commenced in D.C.
------------------------------------------------------------------------------------------------------------------------------------
12. NAME, TITLE, HOME ADDRESS, SOCIAL SECURITY NUMBER OF PROPRIETOR, PARTNERS OR PRINCIPAL OFFICERS
------------------------------------------------------------------------------------------------------------------------------------
Name and title                       Home address                                      Zip code        Social security number

------------------------------------------------------------------------------------------------------------------------------------
Name and title                       Home address                                      Zip code        Social security number

------------------------------------------------------------------------------------------------------------------------------------
Name and title                       Home address                                      Zip code        Social security number

------------------------------------------------------------------------------------------------------------------------------------
                                               PART II -- FRANCHISE TAX REGISTRATION
------------------------------------------------------------------------------------------------------------------------------------
13. Indicate your profession, principal business activity or service (for example, retail grocery, wholesale auto parts,
    barber shop, doctor, contractor, landscaper, etc.)
------------------------------------------------------------------------------------------------------------------------------------
14. Do you or will you have an office, warehouse, or other place of business in D.C., or representative with a District of
    Columbia location?                                                                              [ ]  Yes    [ ]  No
------------------------------------------------------------------------------------------------------------------------------------
15. Do you or will you have merchandise stored in a public or private warehouse in D.C.?            [ ]  Yes    [ ]  No
------------------------------------------------------------------------------------------------------------------------------------
16. Do you or will you perform in D.C. personal services (medical, accounting, consulting); or other services such as
    electrical, heating, construction, etc., or installations or repairs of any type?               [ ]  Yes    [ ]  No
------------------------------------------------------------------------------------------------------------------------------------
17. Do you or will you derive any business related income from D.C. sources?                        [ ]  Yes    [ ]  No
------------------------------------------------------------------------------------------------------------------------------------
18. Do you or will you have rental property in D.C.          [ ] Yes     [ ] No    19. Date converted to rental property
------------------------------------------------------------------------------------------------------------------------------------
20. Date your taxable year ends: Month ______________________ and day ___________________
------------------------------------------------------------------------------------------------------------------------------------
21. Describe full ALL your current or expected business activities within D.C.





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



                               Page 1 of 3 Pages
<PAGE>   112
<TABLE>
<S>                                                                                                                              <C>
------------------------------------------------------------------------------------------------------------------------------------
                                        PART III -- EMPLOYER'S WITHHOLDING TAX REGISTRATION
------------------------------------------------------------------------------------------------------------------------------------
22. Estimated total number of employees                         23. Number of D.C. resident employees subject to D.C. withholding
                                                                    tax:
------------------------------------------------------------------------------------------------------------------------------------
24. Date you began to employ D.C. resident(s)    ____ - _____-_____
                                                  mo.    day   yr.

    Date you began to withhold D.C. tax from resident employees

                      ____ - _____ - ____                       25. Estimated amount of D.C. tax to be withheld monthly from D.C.
                        mo.  day      yr.                           resident employees:
                                                                --------------------------------------------------------------------
                                                                26. Will you have employee(s) working within D.C.?
                                                                              [ ] Yes   [ ]  No
------------------------------------------------------------------------------------------------------------------------------------
                                               PART IV -- SALES AND TAX REGISTRATION
------------------------------------------------------------------------------------------------------------------------------------
                                                                28. Date sales began in D.C.:  _____ - _____ - _____
27. Check applicable blocks(s) below:                                                           mo.      day    yr.
------------------------------------------------------------------------------------------------------------------------------------
  [ ]  Reporting sales tax on retail sales or rentals.
  [ ]  Reporting use tax on items purchased tax free inside/outside D.C.
  [ ]  Purchasing in D.C. items for resale outside of D.C. (Attach photocopy of state/county sales tax registration)
  [ ]  Purchasing in D.C. cigarettes for resale outside of D.C. (Attach photocopy of state/county cigarette/tobacco license)
  [ ]  Making no taxable sales and tax is paid to vendors on all taxable purchases.
  [ ]  Making exempt sales where a certificate of resale is issued.
------------------------------------------------------------------------------------------------------------------------------------
29. If you have more than one place of business where you collect taxable sales in the District of Columbia,
    do you wish to file a consolidated sales tax return for all locations?                                          [ ] Yes   [ ] No
------------------------------------------------------------------------------------------------------------------------------------
                                             PART V -- HOTEL OCCUPANCY TAX REGISTRATION
------------------------------------------------------------------------------------------------------------------------------------
30. Are you engaged in the rental of rooms or suite of rooms?                                                       [ ] Yes   [ ] No
------------------------------------------------------------------------------------------------------------------------------------
31. How many rooms are available for rent?                      32. How may rooms are rented to permanent residents?
------------------------------------------------------------------------------------------------------------------------------------
    NOTE:  Permanent residents are defined as persons who have occupied a room for
           ninety (90) consecutive days or more. Occupancy for the first eighty-nine
           (89) days is taxable.
------------------------------------------------------------------------------------------------------------------------------------
                                               PART VI -- HOTEL OCCUPANCY TAX REGISTRATION
------------------------------------------------------------------------------------------------------------------------------------
Describe the type of personal property at each location (Ex.; furniture, fixtures, machinery equipment and supplies)

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

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

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

------------------------------------------------------------------------------------------------------------------------------------
I declare under penalties as provided by law that this application (including accompanying schedules and statements) has been
examined by me and to the best of my knowledge and belief is a true, correct and complete application.

-----------------------------------------------      ---------------------------------------------   ---------------------------
                  Signature                                                     Title                                      Date

                         COMPLETED APPLICATIONS MUST BE SIGNED BY EITHER OWNER, PARTNER OR PRINCIPAL OFFICER
                                    OF CORPORATION, OR AGENT (Power of Attorney must be attached)
------------------------------------------------------------------------------------------------------------------------------------
                                                          OFFICIAL USE ONLY
------------------------------------------------------------------------------------------------------------------------------------
  Type      Lis.
  Tax      began      Cycle     Method   Remarks
------------------------------------------------------------------------------------------------------------------------------------
   H
------------------------------------------------------------------------------------------------------------------------------------
   J
------------------------------------------------------------------------------------------------------------------------------------
   W
------------------------------------------------------------------------------------------------------------------------------------
   S
------------------------------------------------------------------------------------------------------------------------------------
   R
------------------------------------------------------------------------------------------------------------------------------------
   P
------------------------------------------------------------------------------------------------------------------------------------
              Review/Date
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
       Date Data Entered/Initials
------------------------------------------------------------------------------------------------------------------------------------

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


                               Page 2 of 3 Pages

<PAGE>   113
<TABLE>
<S>                                                                                                                              <C>
------------------------------------------------------------------------------------------------------------------------------------
Date first wages were paid to employees permitting services in D.C. (write N/A          This space for official use only
if there were no services performed in D.C.)

Mo.                     Day:                                        Year:
------------------------------------------------------------------------------------------------------------------------------------
FOR EMPLOYERS OF DOMESTIC HELP ONLY. Have you or will you have for an individual or local
college club, college fraternity or sorority, a total payroll of $500 or more in D.C. during
any calendar year:  [ ]  Yes [ ]  No                                                               Account number
                                                                                                             -----------------------
If yes, indicate the earliest quarter and calendar year. Quarter:   Year:                      Date
-----------------------------------------------------------------------------------------------    ---------------------------------
Number of workers employed in D.C. (including officers)                                        Signature
------------------------------------------------------------------------------------------------------------------------------------
List all places of business in D.C.
------------------------------------------------------------------------------------------------------------------------------------
          BUSINESS NAME                                 LOCATION ADDRESS                               CITY, STATE, ZIP CODE
------------------------------------------------------------------------------------------------------------------------------------

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

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

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

------------------------------------------------------------------------------------------------------------------------------------
If the reason for registering is due to the purchase of a going business, merger, reorganization, or change of legal
entity, provide the following information including percent of assets acquired (if needed, attach additional
explanation of transaction).

Nature of transfer (check appropriate box):

[ ] Purchase        [ ]  Merger or consolidation              [ ]  Foreclosure          [ ]  Receivership
[ ] Lease           [ ]  Corporate reorganization             [ ]  Bankruptcy           [ ]  Assignment
[ ] Partnership reorganization (admission or withdrawal of one or more partners).
[ ] Other (specify in detail):
                              ------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
Per      of assets acquired:     %    Date of transfer: Mo.          Day:            Year:
------------------------------------------------------------------------------------------------------------------------------------
Predecessor's name                                                                             Predecessor's account number

------------------------------------------------------------------------------------------------------------------------------------
Address

------------------------------------------------------------------------------------------------------------------------------------
Trade name under which transferred business was operated

------------------------------------------------------------------------------------------------------------------------------------
COMPLETE THIS PART IF YOU ARE A NON-PROFIT ORGANIZATION
------------------------------------------------------------------------------------------------------------------------------------
19a. Are you covered by the Federal Unemployment Tax Act?
         [ ]  Yes [ ]  No                                      19b.   Are you a non-profit organization as described in Section
                                                                       501(c)(3) of the United States Internal Revenue Code which
       If NO, are you exempt under Section 3306(c)(8) of the          is exempt from income tax under Section 501(a) of such code?
       Federal                                                        (Please attach a copy of you Section 501(c)(3) exemption):
       Unemployment Tax Act?
         [ ]  Yes [ ]  No                                             [ ]  Yes [ ]  No
------------------------------------------------------------------------------------------------------------------------------------
Elect option to finance unemployment insurance coverage (see instructions)            [ ]  Contributions [ ]  Reimbursement of trust
                                                                                                              fund
------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATION. I declare under penalties as provided by law that Part VII (including accompanying schedules and statements)
has been examined by me and to the best of my knowledge and belief is true, correct and complete.

------------------------------------        ---------------------------         -----------------         --------------------------
Signature                                   Title                               Date                      Telephone number
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

   COMPLETED PART VII MUST BE SIGNED BY OWNER, PARTNER OR PRINCIPAL OFFICER OF
                            THE CORPORATION, OR AGENT
                      (Power of attorney must be attached)

                               Pages 3 of 3 Pages
<PAGE>   114
                     GOVERNMENT OF THE DISTRICT OF COLUMBIA
                      OFFICE OF CONTRACTING AND PROCUREMENT

                         OFFICE OF THE DIRECTOR[LOGO]


                            Americaid Community Care
                      857 Elkridge Landing Road, 3rd Floor
                     Linthicum, MD 21090 February 25, 2000
                           Attn: Mr. Don Gilmore, CEO

Subject: Sole Source extension of Contract UCOCO 139344 Dear Mr. Gilmore,

The District of Columbia extends an invitation to Americaid Community Care, to
continue providing Medicaid Managed Care services to its subscribers under
contract number HCOCO 139344 attached. This sole source contract to your
organization will allow for the continued provision of services while the Office
of Contracts and Procurement (OCP) issues solicitations for award of a permanent
Medicaid Managed Care services contract.

The attached sole source contract will become effective April 1, 2000 and expire
on March 31, 2001 unless an award under the RFP is made sooner, in which case
your sole source contract will be terminated for convenience as allowed for in
the District s Standard Contract Provisions that is a part of this contract.

Please be advised that this contract will feature several non-negotiable
provisions. Specifically, (1) the contract will allow a 4.7% increase in the
capitation rate; (2) it adds the latest DOL Wage Determination No. 94-2103,
Revision No. 19, dated June 28, 1999; (3) it must adhere to the U.S. District
Court's May 6, 1997 Order in Salazar et al. v. D.C. et al. DC Civil Action No.
93-452 (GK) as modified by order dated January 22, 1999; and (4) it includes a
Program Integrity clause.


Please note that the enclosed EEO and District Tax compliance documents must be
completed and returned immediately under separate cover. Also, please send any
questions and comments by 2pm, March 1, 2000, to:

Mr. Lorenzo Brown, Interim Deputy ACCO
Office of Contracts and Procurement
441 4th Street, NW, Suite 800S
Washington, DC 20001
(202) 727-0252


<PAGE>   115


If Americaid Community Care, accepts this contract, with its terms and
conditions, it is imperative that you return to this office a signed copy that
is executed on behalf of your organization no later than 2PM, MARCH 3, 2000 to
me Mr. Brown at the above mentioned address.

Sincerely Yours,

Lorenzo Brown
Interim Deputy ACCO

Encl.

cc:  Sue Fitzgerald
     Emma Fair


                                       2
<PAGE>   116


                     GOVERNMENT OF THE DISTRICT OF COLUMBIA
                      OFFICE OF CONTRACTING AND PROCUREMENT

OFFICE OF THE DIRECTOR               [LOGO]



                                                  March 10, 2000

VIA FACSIMILE

Don Gillmore
Chief Operating Officer
Americaid Community Care
857 Elkridge Landing Road, Third Floor
Linthicum, Maryland 21090

Subject:          Contract # HCOC0139344, MMCP MCO Services

Dear Sir:

The District recognizes that the subject contract document must be revised to
exclude many outdated reporting requirements in Article I, Section E, paragraphs
6 and 7, pages 11-15. This letter is to advise you that the necessary revisions
will be made as soon as possible, and the revised reporting requirements will be
consistent with modification number 1 of your current contract, Attachment V of
the subject contract, and the Salazar Court Order of January 22, 1999.

With this assurance, please sign and return the subject contract on Monday,
March 13, 2000, so that we may submit the contract to the Office of the Mayor
and the Council of the District of Columbia for review and approval.

Sincerely,


Lorenzo Brown
Contracting Officer



                                       3
<PAGE>   117


                                   AMERIGROUP
                                   Corporation

VIA FACSIMILE (202) 727-3229


March 16, 2000

Mr Lorenzo Brown, Interim Deputy ACCO.
Office of Contracts and Procurement
441 4th Street, NW, Suite 800S
Washington, DC 20001

Re:      AMERIGROUP Maryland, Inc, a Managed Care Organization
         FEIN: 51-0387398

Dear Mr Brown:

At your request, I am providing you with information regarding the
organizational status of AMERIGROUP Maryland, Inc, a Managed Care Organization,
d/b/a AMERICAID Community Care. AMERIGROUP Maryland, Inc (hereafter referred to
as "AMERIGROUP") is a Delaware corporation authorized to operate as a foreign
corporation in the State of Maryland on November 20, 1998 and the District of
Columbia on November 19, 1998.

AMERIGROUP operates offices in the District of Columbia and the State of
Maryland to serve District of Columbia and Maryland Medicaid recipients enrolled
in AMERICAID Community Care, our Medicaid managed care product. AMERIGROUP was
authorized to transact business as a Health Maintenance Organization by the
issuance of a Certificate of Authority from the Department of Insurance and
Securities Regulation commencing on July 22, 1999. AMERIGROUP's approval as a
Managed Care Organization in the State of Maryland was received on April 27,
1999 for a June 1, 1999 operational date. AMERIGROUP received approval from the
District of Columbia to participate in the District's Medicaid Managed Care
Program on June 29, 1999 for an August 1 participation date.

AMERIGROUP Maryland, Inc. is one of several wholly owned subsidiaries of
AMERIGROUP Corporation. All organizations are private, for-profit entities.
Attached is an organizational chart identifying the corporate relationship
between AMERIGROUP Corporation and all health plan subsidiaries.

Should you have additional questions regarding the organizational status of
either AMERIGROUP Maryland, Inc. or AMERIGROUP Corporation, please contact
Sharon Brumley, Regulatory Director, at (757) 473-2737, ext. 2581.

Sincerely,

David Ford
President and Chief Executive Officer


                                       4

<PAGE>   118

                            CORPORATE RELATIONSHIPS

                                   AMERIGROUP
                                  CORPORATION

                               BOARD OF DIRECTORS

                            -  Jeffrey L. McWaters
                            -  C. Sage Givens
                            -  Charles W. Newhall III
                            -  Carlos A. Ferer
                            -  William J. McBride
                            -  Kay Coles James

<TABLE>
<CAPTION>
   AMERICAID                          AMERIGROUP                                AMERIGROUP
  Texas, Inc.                       New Jersey, Inc.                           Maryland, Inc.
BOARD OF DIRECTORS                 BOARD OF DIRECTORS                        BOARD OF DIRECTORS
<S>                              <C>                                       <C>
- James D. Donovan Jr., MPH       - Jeffrey L. McWaters                      - Jeffrey L. McWaters
- Jeffrey L. McWaters             - Norine Yukon                             - Theodore M. Willie
- Theodore M. Willie              - Theodore M. Willie                       - Lorenzo Childress Jr., MD
- Stanley F. Baldwin, Esq.        - Stanley F. Baldwin, Esq.
- Lorenzo Childress Jr., MD       - Lorenzo Childress Jr., MD
</TABLE>



<TABLE>
<CAPTION>
        AMERICAID
      Illinois, Inc.
    BOARD OF DIRECTORS
<S> <C>
    - Jeffrey L. McWaters
    - Dwight Jones, MD
    - Theodore M. Willie
    - Stanley F. Baldwin, Esq.
    - Lorenzo Childress Jr., MD
</TABLE>


                                        5

              WHOLLY OWNED SUBSIDIARIES OF AMERIGROUP CORPORATION

<PAGE>   119

                                    AMERICAID
                                 Community Care

March 17, 2000

Mr. Robert Bausch
Office of Contracts and Procurement
441 4th Street, NW, Suite 800S
Washington, DC 20001

Subject: Sole Source extension of Contract HCOCO 139344

Dear Mr. Bausch:

At your request, I am clarifying the use of the term "Mid-Atlantic" in the title
of David Ford, CEO and President, Mid-Atlantic. This is an internal designation
that refers to the Maryland and District of Columbia combined operations.

As stated in our March 16, 2000 letter to Mn Lorenzo Brown, AMERIGROUP
Corporation owns four subsidiary corporations. One of the subsidiaries,
AMERIGROUP Maryland, Inc. operates offices in the District of Columbia and the
State of Maryland to serve District of Columbia and Maryland Medicaid
recipients. While AMERIGROUP Maryland, Inc. is the corporation's legal name, the
Mid-Atlantic health plan is the company's designation for these same operations.

Please feel free to call me if you need additional information.

Sincerely,
Jane E. Thompson
Chief Operating Officer














 514 10TH STREET, N.W,, SUITE 500, WASHINGTON, DC. 20004 TEL: 202 783 8100
                               FAX: 202 783 8207


                                       6
<PAGE>   120


                                                          District of Columbia
                                                          Medical Assistance
                                                          Administration
                                                          Office of Managed Care


MEMO

To:      Emma Fair, Interim Contracting Officer, Office of Contracts and
         Procurement

From:    Maude Holt, Managed Care Administrator

Cc:      Herbert H. Weldon, Jr., Executive Deputy Director

Date:    03/17/00

Re:      Seven Sole Source Contracts

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

Please consider this memorandum official notification that the funding to be
utilized for the seven HMO Sole Source Contracts is Medicaid funding. The
contractors are paid out of the Medicaid Management System, therefore these
funds do not need to be encumbered by the Chief Financial Officer.

If you should need any additional information, please feel free to contact me at
202-442-9074.





/s/ Joyce Jeter                                                        3/17/2000
---------------------------------------------                          ---------
Joyce Jeter, Controller, Department of Health                             Date



                                       7

<PAGE>   121


                     GOVERNMENT OF THE DISTRICT OF COLUMBIA
                      OFFICE OF CONTRACTING AND PROCUREMENT

OFFICE OF THE DIRECTOR               [LOGO]



                                                     March 10, 2000

VIA FACSIMILE

Don Gillmore
Chief Operating Officer
Americaid Community Care
857 Elkridge Landing Road, Third Floor
Linthicum, Maryland 21090

Subject:  Contract # HCOC0139344, MMCP MCO Services

Dear Sir:

The District recognizes that the subject contract document must be revised to
exclude many outdated reporting requirements in Article I, Section E, paragraphs
6 and 7, pages 11-15. This letter is to advise you that the necessary revisions
will be made as soon as possible, and the revised reporting requirements will be
consistent with modification number 1 of your current contract, Attachment V of
the subject contract, and the Salazar Court Order of January 22, 1999.

With this assurance, please sign and return the subject contract on Monday,
March 13, 2000, so that we may submit the contract to the Office of the Mayor
and the Council of the District of Columbia for review and approval.

Sincerely,


Lorenzo Brown
Contracting Officer

                                       8

<PAGE>   122




                                   ATTACHMENT


                                        6

                            DEPARTMENT OF EMPLOYMENT
                                    SERVICES



                                       9
<PAGE>   123

                        DEPARTMENT OF EMPLOYMENT SERVICES
                        TAX VERIFICATION RESPONSE - DOES


CONTRACT SPECIALIST: LORENZO BROWN
                     -----------------------------------------------------------
AGENCY:      OFFICE OF CONTRACTING AND PROCUREMENT
             -------------------------------------------------------------------
VENDOR NAME: AMERICAID COMMUNITY CARE
             -------------------------------------------------------------------

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

            TO BE COMPLETED BY THE DEPARTMENT OF EMPLOYMENT SERVICES
                                  TAX DIVISION


THE DEPARTMENT OF EMPLOYMENT SERVICES CERTIFIES THAT:

       [ ]        The prospective contractor IS IN COMPLIANCE with the tax
                  filing and payment requirements of the District of Columbia
                  Unemployment Tax Laws or is in compliance with an established
                  payment plan.

       [ ]        The prospective contractor IS NOT LIABLE for the tax filing or
                  payment requirements of the District of Columbia Unemployment
                  Tax Laws.

       [ ]        The prospective Contractor IS NOT IN COMPLIANCE with the tax
                  filing and payment requirements of the District of Columbia
                  Unemployment Tax Laws. The contractor may obtain details of
                  the tax deficiency and make arrangements to correct this
                  deficiency by contacting the tax enforcement officer whose
                  name and telephone number follow:

                  Name:                               Phone #
                       ----------------------              ---------------------

       [X]        The prospective Contractor IS NOT REGISTERED with the
                  Unemployment Tax Division. To register, Part VII of the FR-500
                  (Combined Registration Application) must be completed and
                  returned to the Unemployment Tax Division. Please contact the
                  Registration Section at (202) 724-7473 for more information.

<TABLE>
<S>             <C>                                                                  <C>
                  /s/ T. Rosa Morales                                                     March 16, 2000
                  ---------------------------------------------------                   --------------------------
                                   SIGNATURE                                                  DATE

                  Supervisor, Tax Enforcement Branch                                      724-7710
                  ---------------------------------------------------                   --------------------------
                                     TITLE                                                  TELEPHONE NUMBER
</TABLE>


<PAGE>   124


                        DEPARTMENT OF EMPLOYMENT SERVICES
                        TAX VERIFICAT1ON RESPONSE - DOES


CONTRACT SPECIALIST:             LORENZO BROWN
                    ------------------------------------------------------------
AGENCY:               OFFICE OF CONTRACTING AND PROCUREMENT
                    ------------------------------------------------------------
VENDOR NAME:          AMERIGROUP MARYLAND, INC.
                    ------------------------------------------------------------

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

            TO BE COMPLETED BY THE DEPARTMENT OF EMPLOYMENT SERVICES
                                  TAX DIVISION

THE DEPARTMENT OF EMPLOYMENT SERVICES CERTIFIES THAT:

       [X]        The prospective contractor IS IN COMPLIANCE with the tax
                  filing and payment requirements of the District of Columbia
                  Unemployment Tax Laws or is in compliance with an established
                  payment plan.

       [ ]        The prospective contractor IS NOT LIABLE for the tax filing
                  or payment requirements of the District of Columbia
                  Unemployment Tax Laws.

       [ ]        The prospective Contractor IS NOT IN COMPLIANCE with the tax
                  filing and payment requirements of the District of Columbia
                  Unemployment Tax Laws. The contractor may obtain details of
                  the tax deficiency and make arrangements to correct this
                  deficiency by contacting the tax enforcement officer whose
                  name and telephone number follow:
                  Name:                                Phone #
                       ------------------------             --------------------

       [ ]        The prospective Contractor IS NOT REGISTERED with the
                  Unemployment Tax Division. To register, Part VII Of the FR-500
                  (Combined Registration Application) must be completed and
                  returned to the Unemployment Tax Division. Please contact the
                  Registration Section at (202) 724-7473 for more information.


<TABLE>
<S>              <C>                                      <C>
                  /s/_T. Rosa Morales                            March 16, 2000
                  -----------------------------------     -------------------------------
                                   SIGNATURE                          DATE

                  Supervisor, Tax Enforcement Branch                724-7710
                  -----------------------------------     -------------------------------
                                     TITLE                       TELEPHONE NUMBER
</TABLE>


                                       2
<PAGE>   125





                                   ATTACHMENT


                                        7

                           DEPARTMENT OF HUMAN RIGHTS


<PAGE>   126

                     GOVERNMENT OF THE DISTRICT OF COLUMBIA
                      OFFICE OF LOCAL BUSINESS DEVELOPMENT



                                     [LOGO]



                               M E M O R A N D U M




TO:           Ivan C.A. Walks, M.D.
              Director
              Department of Health
              Attn: Emma Fair

FROM:         Jacquelyn A. Flowers
              Director

DATE:         March 16, 2000

SUBJECT:      Affirmative Action Program (CB-l)
              Americaid Community Care
              IFB No.: HCOCO-139344
              CCB No.: DOH-00-243


We have received and reviewed the referenced Affirmative Action Program
submitted on March 14, 2000 and find it in conformity with the requirements of
Mayor's Order 85-85.

In connection with future contracts, the contractor should submit updated EEO
information, particularly with respect to current work force statistics and
goals and timetables.

If your Agency has any questions, contact Margaret Wright, Manager, Contract
Compliance Division on 727-3900. ALL QUESTIONS FROM THE CONTRACTOR SHOULD BE
DIRECTED TO THE APPROPRIATE DEPARTMENT OF HEALTH REPRESENTATIVE.


DOH1/JAF/nw/031600



 441 4TH STREET, N.W., SUITE 970N - WASHINGTON, D.C. 20001 - (202) 727-3900 -
                               FAX (202) 724-3786