<PAGE>   1
                                                           Req. #:_____________

                                STATE OF INDIANA
                            DEPARTMENT OF CORRECTION

                              CONTRACTUAL AGREEMENT


     This AGREEMENT is entered into between the Indiana Department of
Correction, E334 Indiana Government Center-South, Indianapolis, Indiana 46204,
(hereinafter DEPARTMENT), and Prison Health Services, Inc., Suite 300, 105
Westpark Drive, Brentwood, TN 37027, (302) 322-8200, FIN #232108853,
(hereinafter CONTRACTOR) pursuant to the provisions of Indiana Code section
11-8-3-1.

     In consideration of the mutual covenants herein contained, the parties
hereto agree as follows:

     1.   DESCRIPTION OF GOODS AND/OR SERVICES:

          CONTRACTOR agrees to provide the following goods and/or services:

          health services and health service management for thirty-two (32)
          department facilities, together with such additional facilities
          operated by the DEPARTMENT, as may be added by the parties by
          amendment of this AGREEMENT adopted through the formal amendment
          process, where necessary (collectively the "IDOC SITES").

          The DEPARTMENT and the Indiana Department of Administration ("IDOA")
          issued a Request for Proposals (No. F12-6-191) for the provision of
          health services for the IDOC SITES (the "RFP"). The CONTRACTOR
          submitted a proposal dated July 22, 1996, in response to the RFP (the
          "ORIGINAL BID"). At the request of the DEPARTMENT and IDOA, the
          CONTRACTOR submitted the Best and Final Offer, dated September 6, 1996
          ("FINAL OFFER"). Throughout the negotiations, certain provisions of
          all of the above-referenced documents (all such documents hereinafter
          referred to as the "BID DOCUMENTS", and the BID DOCUMENTS together
          with this AGREEMENT and any amendments thereto, which are herein
          incorporated by reference, shall be referred to as the "CONTRACT
          DOCUMENTS") have been modified and clarified to reflect the intent of
          the parties and purpose of the RFP. Such documents shall be taken as a
          whole in interpreting the agreement of the parties, but to the extent
          of any conflict or inconsistency, the following shall be the priority
          of determining resolution of such inconsistencies.

                (i) This AGREEMENT shall be the governing document; then
               (ii) the RFP (to the extent not clearly changed in the BID or 
                    FINAL OFFER; then 
              (iii) the FINAL OFFER); and finally 
               (iv) the BID.

          Notwithstanding the foregoing, it is understood and agreed that there
          shall be from time to time certain determinations made jointly by the
          parties as to changes in procedures and processes in the
          implementation of this AGREEMENT, in accordance with the terms of


<PAGE>   2



          section 36(c) hereof. Any operating memorandum or other written
          understandings reached in accordance with the provisions of that
          section shall thereafter govern those provisions and be included as
          part of the CONTRACT DOCUMENTS.

     2.   CONSIDERATION:

          DEPARTMENT agrees to compensate CONTRACTOR as follows:

               a)   The DEPARTMENT has elected the pricing and services to be
                    provided for the total state (all regions awarded in a
                    single contract), as described in the FINAL OFFER;

               b)   The price set forth in the FINAL OFFER, subject to
                    modification as provided in the CONTRACT DOCUMENTS shall be
                    on a per diem, per capita, offender basis. Offenders shall
                    include only those persons included in the daily official
                    offender count of the DEPARTMENT and shall not include any
                    persons who are transferred to the DEPARTMENT, but held in
                    county or other facilities, or otherwise not submitted to
                    the full custody and control of the DEPARTMENT, and located
                    at the IDOC SITES;

               c)   Pricing shall be subject to annual adjustments as set forth
                    herein. The adjustment dates shall be the annual anniversary
                    of the Initial Implementation Date (as defined in section
                    36(o) hereof); and

               d)   The "Per Diem Rates" shall be as follows:

                              Year                        Rate
                              ----                       ------  
                                1                        $ 3.66
                                2                        $ 3.66
                                3                        $ 3.83
                                4                        $ 3.97

     The total reimbursement to CONTRACTOR under this AGREEMENT is estimated not
     to exceed $97,900,000.00; however, because of the difficulty in projecting
     future offender populations and medical needs, the total reimbursement to
     CONTRACTOR hereunder is subject to adjustment by formal amendment of this
     AGREEMENT between the parties.

     3.   TERM:

          This AGREEMENT shall commence on the Initial Implementation Date, or
          on the date that the services begin following all required signatures
          or as soon as all required signatures have been affixed to this
          AGREEMENT, which ever date occurs last (the "COMMENCEMENT DATE"), and
          shall terminate on the last day of the month which is four (4) years
          after the COMMENCEMENT DATE.




                                        2

<PAGE>   3



     4.   RENEWAL:

                           [INTENTIONALLY LEFT BLANK]

     5.   PAYMENTS:

          ALL payment obligations are subject to the appropriation and/or
          encumbrance of monies and shall be made in arrears in accordance with
          Indiana law and the State of Indiana fiscal policies and procedures.
          CONTRACTOR agrees to execute all necessary forms (including, but not
          limited to, invoices, claim vouchers, time sheets, etc.) not
          inconsistent herewith. CONTRACTOR may not submit claim forms before
          the services have been performed.

          The parties agree that administration of this AGREEMENT shall best be
          facilitated by regular payments to the CONTRACTOR to enable it to
          reimburse such health care providers and contractors as may be
          reasonably necessary for the efficient implementation of this
          AGREEMENT. Therefore, the parties shall, on or before the INITIAL
          IMPLEMENTATION DATE, agree on an estimate for the number of offenders
          to be covered by this AGREEMENT for the first three (3) month period
          ("POPULATION ESTIMATE"). The POPULATION ESTIMATE shall be made in good
          faith, but shall not be less than the current number of offenders.
          Within fifteen (15) days after the first day of each calendar month,
          the DEPARTMENT shall pay to the CONTRACTOR an amount equal to the PER
          DIEM RATE then in effect multiplied by the POPULATION ESTIMATE, which
          is then multiplied by the number of days in the preceding calendar
          month. On a quarterly basis, the parties shall calculate the actual
          number of offenders covered by this AGREEMENT during the preceding
          three (3) month period, and within thirty (30) days after such
          calculation, the DEPARTMENT shall pay CONTRACTOR the amount necessary
          to reimburse for the actual prisoners served, based on the PER DIEM
          RATES. In the event that payment is not timely made, CONTRACTOR shall
          be entitled to late payment penalty on the amount not timely paid as
          provided in section 21 hereof. In the event that the actual amount
          owed is less than the amount paid pursuant to the Population Estimate,
          then upon notice to CONTRACTOR, the DEPARTMENT may deduct the amount
          of such overpayment from the next payment due to CONTRACTOR. The
          parties further agree to revise the POPULATION ESTIMATE for the next
          succeeding quarter at least fifteen (15) days prior to the
          commencement of such quarter, which revised estimate shall not be less
          than the actual number of offenders at the end of the preceding
          quarter. The actual number of offenders shall be based upon the last
          daily count made by the DEPARTMENT at each IDOC SITE.

          The DEPARTMENT shall notify CONTRACTOR as to which offenders included
          in the POPULATION ESTIMATE are remitted temporarily to the custody and
          control of the DEPARTMENT by the counties and commonly known as
          "SAFEKEEPERS". Such SAFEKEEPERS shall be deemed offenders for purposes
          of this AGREEMENT. In addition, all third party payment claims with
          respect to health care services provided to such offenders shall be
          paid by CONTRACTOR and copies of such claims shall be forwarded
          immediately to the DEPARTMENT. The DEPARTMENT shall use its best
          efforts to obtain reimbursement from the county from which such
          offender has been



                                        3

<PAGE>   4



          transferred for all such third party payment claims and shall, on a
          quarterly basis, remit to CONTRACTOR any such reimbursements received
          from a county in excess of the PER DIEM RATE paid by the DEPARTMENT
          hereunder with respect to such offender.

     6.   CANCELLATION:

          This AGREEMENT may be terminated, in whole or in part, by either party
          upon ninety (90) days written notice to the office address of the
          other party, said notice to be sent registered or certified mail,
          return receipt requested. Notwithstanding the foregoing, if the
          DEPARTMENT reasonably determines that an emergency exists, the
          DEPARTMENT may terminate this AGREEMENT upon thirty (30) days' written
          notice to CONTRACTOR. If this AGREEMENT is canceled by either party,
          CONTRACTOR shall be paid for all services provided up to and including
          the date of termination, together with any amounts of reimbursement
          set forth in this AGREEMENT and any extraordinary employee severance
          costs caused by such early termination. The DEPARTMENT shall be liable
          only for payments for services rendered before the effective date of
          termination.

     7.   GOVERNING LAWS:

          This AGREEMENT is subject to all provisions of Indiana law in
          existence at the time of execution and any law subsequently enacted.
          This AGREEMENT shall be construed in accordance with and governed by
          the laws of the State of Indiana and all suits, if any, arising from
          the terms of performance of said AGREEMENT shall be brought in the
          State of Indiana.

     8.   CANCELLATION FOR FUNDING:

          When the Director of the State Budget Agency makes a written
          determination that funds are not appropriated or otherwise available
          to support continuation of performance of this contract, the contract
          shall be canceled. A determination by the Budget Director that funds
          are not appropriated or otherwise available to support continuation of
          performance shall be final and conclusive.

     9.   AUDITS:

          CONTRACTOR shall provide the DEPARTMENT and the State Board of
          Accounts with a copy of its annual audited Financial Statement (Form
          10-k) and shall work with the DEPARTMENT and the State Board of
          Accounts to insure that such audit complies with the reporting
          requirements prescribed by the State Board of Accounts. In the event
          that additional information and audits are required, CONTRACTOR agrees
          to allow, upon request, audits by the State Board of Accounts or its
          designee. Such audits will be performed in accordance with compliance
          guidelines established by the State Board of Accounts. CONTRACTOR
          agrees to comply with reporting requirements prescribed by the State
          Board of Accounts. CONTRACTOR will be charged the actual cost of the
          examination as established by law and rule of the State Board of
          Accounts.



                                        4

<PAGE>   5




     10.  NONDISCRIMINATION:

          Pursuant to Indiana Code section 22-9-1-10, CONTRACTOR, and its Agents
          and subcontractors, if applicable, shall not discriminate against any
          employee, or applicant for employment, to be employed in the
          performance of this AGREEMENT, with respect to his hire, tenure or
          terms, conditions, or privileges of employment, or in any matter
          directly or indirectly related to such employment, because of his
          race, color, religion, sex, disability, national origin, ancestry or
          status as a veteran. CONTRACTOR understands that the DEPARTMENT and
          the State of Indiana are recipients of federal funds. Pursuant to that
          understanding, CONTRACTOR, and its subcontractors, if any, agree that
          if the CONTRACTOR employs 50 or more employees and does at least Fifty
          Thousand Dollars ($50,000.00) worth of business with the State of
          Indiana and is not exempt, CONTRACTOR will comply with the affirmative
          action reporting requirements of 41 CFR 60-1.7. Breach of this
          covenant may be regarded as a material breach of this AGREEMENT. The
          DEPARTMENT and the State of Indiana shall comply with section 202 of
          Executive Order 11246, as amended, 41 CFR 60-250, and 41 CFR 60-741,
          as amended, which are incorporated herein by specific reference.

     11.  CONFIDENTIALITY OF DEPARTMENT INFORMATION:

          CONTRACTOR understands that data, materials and information disclosed
          pursuant to this AGREEMENT may contain confidential and/or protected
          data. CONTRACTOR, therefore, agrees that data, material and
          information gathered, based upon, or disclosed under this AGREEMENT
          shall not be disclosed to others without the DEPARTMENT'S prior
          written approval. The DEPARTMENT agrees that it shall notify
          CONTRACTOR in advance of any information that it deems confidential.
          Notwithstanding the foregoing, it is understood that the patient
          medical records are subject to certain provisions of state and federal
          law and rules of the DEPARTMENT. Such shall not be disclosed or
          released to any person or entity, including the patient, except as
          necessary to provide medical treatment, except in compliance with
          state law and published DEPARTMENT rules and procedures. DEPARTMENT
          shall advise CONTRACTOR in writing of such laws, rules and procedures.

     12.  CONFIDENTIALITY OF DATA, PROPERTY RIGHTS IN PRODUCTS AND 
          COPYRIGHT PROHIBITION:

          CONTRACTOR further agrees that all information, data, findings,
          recommendations, proposals, etc., by whatever name described and by
          whatever form therein, secured, developed, written or produced by the
          CONTRACTOR in furtherance of this AGREEMENT shall be the property of
          the DEPARTMENT and that CONTRACTOR shall take such action as is
          necessary under law to preserve such property rights in and of the
          DEPARTMENT while such property is within the control and/or custody of
          CONTRACTOR and, to the extent that CONTRACTOR cannot convey ownership
          thereof, to grant to the DEPARTMENT a non-exclusive royalty-free,
          non-transferable license to use such work product developed by
          CONTRACTOR. By this AGREEMENT, CONTRACTOR specifically releases to the
          DEPARTMENT any cognizable property right



                                        5

<PAGE>   6



          in the CONTRACTOR to copyright or patent such information, data,
          findings, recommendations, proposals, etc. Notwithstanding the
          foregoing, it is understood that certain materials used by CONTRACTOR
          are subject to applicable copyright, trademark and license agreements.
          To the extent that CONTRACTOR is limited in its ability to assign such
          rights or licenses to the DEPARTMENT, such assignment shall not be
          required hereunder so long as CONTRACTOR uses good faith efforts to
          obtain necessary rights and licenses for the DEPARTMENT. It is further
          understood and agreed that any materials developed by CONTRACTOR for
          general use and not exclusively in furtherance of this AGREEMENT or
          materials used by CONTRACTOR generally and not exclusively in
          furtherance of this AGREEMENT (including, without limitation, TXEN
          claims payment and CONTRACTOR's utilization management system) shall
          not be assigned or licensed to, or become the property of, the
          DEPARTMENT.

     13.  WORK STANDARDS:

          CONTRACTOR agrees to execute all responsibilities by following and
          applying, at all times, the highest professional and technical
          guidelines and standards. It is understood that such standards are
          those that are consistent with prudent medical treatment and the
          standards set forth in Prison Health Standards, 1992, as amended from
          time to time ("STANDARDS"), of the National Commission on Correctional
          Health Care ("NCCHC"), but, in any event, not less than the services
          set forth in the BID unless otherwise agreed upon by the parties
          hereto; provided, however, that CONTRACTOR's obligations to follow and
          apply any future changes to the STANDARDS which increase CONTRACTOR's
          costs of performance under this AGREEMENT and reimbursement to
          CONTRACTOR of such costs shall be determined by the CONTRACT
          ADMINISTRATION GROUP pursuant to section 36(c) and 36(k) hereof.
          Further, if services hereafter agreed upon are in excess of the
          services set forth in the BID, such shall constitute ADDITIONAL
          SERVICES and the DEPARTMENT shall reimburse CONTRACTOR therefor in
          accordance with section 36(k). If the DEPARTMENT becomes reasonably
          dissatisfied with the work product or the working relationship with
          those individuals assigned to work on the WORKING GROUP or CONTRACT
          ADMINISTRATION GROUP, the DEPARTMENT may request the replacement of
          any or all such individuals, and CONTRACTOR shall use good faith
          efforts to accommodate the requests of the DEPARTMENT.

     14.  OWNERSHIP OF DOCUMENTS AND MATERIALS:

          All documents, data, records, programs, film, tape, articles and other
          material developed pursuant to this AGREEMENT shall be the property of
          the DEPARTMENT. Use of these materials other than related to contract
          performance by the CONTRACTOR without prior written consent of the
          DEPARTMENT is prohibited. During the performance of the services
          specified herein, the CONTRACTOR shall be responsible for any loss or
          damage to these materials developed for or supplied by the DEPARTMENT
          and used to develop or assist in the services provided herein, while
          they are in the possession of the CONTRACTOR and any loss or damage
          thereto shall be restored at the CONTRACTOR'S expense. Full, immediate
          and unrestricted access to the work product of the CONTRACTOR during
          the term of this AGREEMENT shall be available to the



                                        6

<PAGE>   7



          DEPARTMENT and thereafter the CONTRACTOR shall grant the DEPARTMENT a
          non-exclusive, non-transferable license to use such work product. The
          access and ownership of the DEPARTMENT to the work product of the
          CONTRACTOR shall be subject to applicable trademark, copyright and
          license agreements so long as CONTRACTOR uses good faith efforts to
          provide such access.

     15.  PROGRESS REPORTS:

          The CONTRACTOR will submit progress reports to the DEPARTMENT upon
          request. The report will be oral, unless the DEPARTMENT upon receipt
          of the oral report should deem it necessary to have it in written
          form; provided, however, that CONTRACTOR shall deliver periodic
          written progress reports at such times and in such form as determined
          by the WORKING GROUP pursuant to section 36(c); and, provided further,
          that, prior to the FINAL IMPLEMENTATION DATE, CONTRACTOR shall deliver
          oral progress reports on a weekly basis. The progress report shall
          serve the purpose of assuring the DEPARTMENT that work is progressing
          in line with the schedule and the completion can be reasonably assured
          on the scheduled date.

     16.  ACCESS TO RECORDS:

          CONTRACTOR and its subcontractors shall maintain all books, documents,
          papers, accounting records and other evidence pertaining to the cost
          incurred and shall make such materials available at their respective
          offices at all reasonable times during the contract period and for
          three (3) years from the date of final payment under the AGREEMENT,
          for inspection by the DEPARTMENT or any authorized representative of
          the State Government and copies thereof shall be furnished at no cost
          to the DEPARTMENT if requested.

     17.  INDEPENDENT CONTRACTOR:

          Both parties hereto, in the performance of this AGREEMENT, will be
          acting in an individual capacity and not as agents, employees,
          partners, joint venturers or associates of one another. The employees
          or agents of one party shall not be deemed or construed to be the
          employees or agents of the other party for any purposes whatsoever.
          Neither party will assume any liability for any injury (including
          death) to any persons, or any damage to any property arising out of
          the acts or omissions of the agents, employees or subcontractors of
          the other party.

          CONTRACTOR shall be responsible for providing all necessary
          unemployment and worker's compensation insurance for its employees.

     18.  INDEMNIFICATION:

          CONTRACTOR agrees to indemnify, defend and hold harmless the State of
          Indiana and its agents, officers and employees from all claims and
          suits, including court costs,



                                        7

<PAGE>   8



          attorney's fees and other expenses caused by an act or omission of
          CONTRACTOR, and/or its subcontractor, if any. The DEPARTMENT shall not
          provide such indemnification to CONTRACTOR.

     19.  LOSS OF OR DAMAGE TO DOCUMENTS OR MATERIALS:

          During the performance of this AGREEMENT, CONTRACTOR shall be
          responsible for any loss of or damage to the DEPARTMENT'S documents
          and materials utilized in the performance of this AGREEMENT, while
          they are in the possession of the CONTRACTOR, and/or subcontractor if
          applicable, and any loss of or damage thereto shall be restored at
          CONTRACTOR'S expense to the extent reasonably practicable. DEPARTMENT
          shall have unrestricted access to CONTRACTOR'S work product and
          records as they pertain to the performance of this AGREEMENT during
          the term of said AGREEMENT and any renewal thereof.

     20.  TAXES:

          DEPARTMENT is exempt from State, Federal and Local taxes. The
          DEPARTMENT will not be responsible for any taxes levied on the
          CONTRACTOR as a result of this AGREEMENT.

     21.  PENALTIES/INTEREST/ATTORNEY'S FEES:

          DEPARTMENT will in good faith perform its required obligations
          hereunder and does not agree to pay penalties, liquidated damages,
          interest or legal fees of CONTRACTOR, incurred in enforcing this
          AGREEMENT, except as herein provided or otherwise required by Indiana
          law, including, IC 5-17-5-1, et seq., IC 34-2-22-1, et seq., and IC
          34-4-16-6, et seq. In the event that payment is not timely made by the
          DEPARTMENT hereunder, the CONTRACTOR shall be entitled to interest on
          the amount not timely paid at the rate of 1% per month to reimburse it
          for its additional costs incurred by the delay in payment.

     22.  COMPLIANCE WITH LAWS:

          CONTRACTOR agrees to comply with all applicable federal, state and
          local laws, rules, regulations or ordinances and all provisions
          required thereby to be included herein, are hereby incorporated by
          reference. The enactment of any State or Federal statute or the
          promulgation of regulations thereunder after execution of this
          AGREEMENT shall be reviewed by the Attorney General and CONTRACTOR to
          determine whether the provisions of this AGREEMENT require formal
          amendment.

          This provision shall include the possession and maintenance of any
          license, certificate or authorization which may be required by law,
          rule, regulation or ordinance. A copy of such license, certificate or
          authorization shall be presented to DEPARTMENT prior to the
          commencement of this AGREEMENT.




                                        8

<PAGE>   9



     23.  AUTHORITY TO BIND CONTRACTOR:

          Notwithstanding anything in this AGREEMENT to the contrary the
          signatory for the CONTRACTOR represents that he/she has been duly
          authorized to execute contracts on behalf of the CONTRACTOR designated
          above and has obtained all necessary or applicable approval from the
          officers or owners of CONTRACTOR when his/her signature is affixed
          hereto and accepted by the State of Indiana.

     24.  ENTIRETY OF AGREEMENT:

          This AGREEMENT, plus any proper attachments hereto, incorporated by
          reference or otherwise, shall constitute the entire understanding of
          the parties and no additional provisions may be added to this
          AGREEMENT by presumption, inference or intendment.

     25.  BINDING OF AGREEMENT:

          This AGREEMENT shall not be deemed to bind DEPARTMENT absent proper
          execution by all required signatories.

     26.  ASSIGNMENT:

          Subject to the provisions of sections 36(b) and 36(i), CONTRACTOR
          shall not assign or subcontract the whole or any part of the AGREEMENT
          without the DEPARTMENT'S prior written consent, except that CONTRACTOR
          may assign its rights to receive payments to such third parties as the
          CONTRACTOR may desire without the prior consent of DEPARTMENT,
          provided that CONTRACTOR gives written notice (including evidence of
          such assignment) to the DEPARTMENT thirty (30) days in advance of any
          payment so assigned. Any such assignment shall cover all unpaid
          amounts under this AGREEMENT and shall not be made to more than one
          party.

     27.  SUCCESSORS AND ASSIGNEES:

          CONTRACTOR binds his/her successors, executors, administrators and
          assignees to all covenants of this AGREEMENT. Except as set forth,
          CONTRACTOR shall not assign, sublet or transfer its interest in this
          AGREEMENT without the prior written consent of the DEPARTMENT.

     28.  KEY PERSON(S):

          a.   In the event that both parties have designated in an Appendix
               that the individual(s) therein named are essential to the
               services offered pursuant to this AGREEMENT, the parties agree
               that in the event such individual or individuals are no longer
               employed during the term of this AGREEMENT by CONTRACTOR for
               whatever reason, the DEPARTMENT shall have the right to terminate
               this AGREEMENT upon thirty (30) days' prior written notice. It is
               agreed that at the time of execution of this AGREEMENT, no such
               persons have been designated.



                                        9

<PAGE>   10



          b.   In the event that CONTRACTOR is an individual, that individual
               shall be considered a key person and as such essential to the
               AGREEMENT. Substitution of another for CONTRACTOR shall not be
               permitted without express written permission from the DEPARTMENT.

          c.   Nothing in subsections (a) or (b) above shall be construed to
               prevent CONTRACTOR from using the services of others to perform
               tasks ancillary to those tasks which directly require the
               expertise of the key person. Examples of such ancillary tasks
               include secretarial, clerical and common labor duties. CONTRACTOR
               shall at all times remain responsible for the performance of all
               necessary tasks, whether performed by a key person or others.

     29.  CHANGES IN WORK/AUTHORIZATIONS:

          CONTRACTOR and DEPARTMENT shall each designate authorized signatories
          for changes in work, memoranda of understanding, operating and medical
          protocols and other issues, which authorized signatories may vary
          depending on the nature of the issues involved. Neither party may rely
          on a decision which modifies this AGREEMENT without obtaining the
          written authorization of the applicable designated signatories and
          following formal amendment processes, where necessary. The authorized
          signatories and the matters with respect to which each signatory is
          authorized for both CONTRACTOR and DEPARTMENT shall have been
          designated by each party hereto prior to the INITIAL IMPLEMENTATION
          DATE in a separate writing and shall be updated and revised from time
          to time in writing as necessary.

     30.  FORCE MAJEURE; SUSPENSION AND TERMINATION:

          In the event that either party is unable to perform any of its
          obligations under this AGREEMENT or to enjoy any of its benefits
          because of (or if failure to perform the services is caused by)
          natural disaster, actions or decrees of governmental bodies or
          communication line failure not the fault of the affected party
          (hereinafter referred to as a "Force Majeure Event"), the party who
          has been so effected shall immediately give notice to the other party
          and shall do everything possible to resume performance. Upon receipt
          of such notice, all obligations under this AGREEMENT shall be
          suspended immediately. If the period of nonperformance exceeds thirty
          (30) days from the receipt of notice of the Force Majeure Event, the
          party whose ability to perform has not been so affected may, by giving
          written notice, terminate this AGREEMENT.

          In particular, and without limiting the generality of the foregoing,
          labor strife, work slowdown, other circumstances involving labor and
          affecting the services to be provided hereunder and civil
          disturbances, riots or epidemics affecting the services to be provided
          hereunder or the cost thereof, shall be regarded as force majeure
          events and shall be grounds for equitable price adjustments pursuant
          to sections 29, 36(c) and 36(k) hereof.




                                       10

<PAGE>   11



     31.  DEFAULT BY STATE:

          If the DEPARTMENT, after sixty (60) days written notice, fails to
          correct or cure any breach of this AGREEMENT, then CONTRACTOR may
          cancel and terminate this AGREEMENT and collect monies due up to and
          including the date of termination.

     32.  SUBSTANTIAL PERFORMANCE:

          This AGREEMENT shall be deemed to have been substantially performed
          only when fully performed according to its terms and conditions and
          any modifications thereof.

     33.  WAIVER OF RIGHTS:

          No right conferred on either party under this AGREEMENT shall be
          deemed waived and no breach of this AGREEMENT excused, unless such
          waiver or excuse shall be in writing and signed by the party claimed
          to have waived such right.

     34.  DISPUTES:

          Should any disputes arise with respect to this AGREEMENT, CONTRACTOR
          and DEPARTMENT agree to act immediately to resolve such disputes. Time
          is of the essence in the resolution of disputes.

          CONTRACTOR agrees that, the existence of a dispute notwithstanding, it
          will continue without delay to carry out all of its responsibilities
          under this AGREEMENT which are not affected by the dispute. Should
          CONTRACTOR fail to continue without delay to perform its
          responsibilities under this AGREEMENT in the accomplishment of all
          non-disputed work, any additional costs incurred by CONTRACTOR or the
          DEPARTMENT as a result of such failure to proceed shall be borne by
          CONTRACTOR, and CONTRACTOR shall make no claim against the DEPARTMENT
          for such costs. If CONTRACTOR and DEPARTMENT cannot resolve a dispute
          within ten (10) working days following notification in writing by
          either party of the existence of said dispute, then the following
          procedure shall apply:

          The parties agree to resolve such matters through submission of their
          dispute to the Commissioner of the Indiana Department of
          Administration who shall reduce a decision to writing and mail or
          otherwise furnish a copy thereof to CONTRACTOR and DEPARTMENT within
          ten (10) working days after presentation of such dispute for her
          decision. The decision shall be final and conclusive unless CONTRACTOR
          mails or otherwise furnishes to the Commissioner of Administration,
          within ten (10) days after receipt of the Commissioner's decision, a
          written appeal. Within ten (10) working days of receipt, the
          Commissioner may reconsider the decision. If no reconsideration is
          provided within ten (10) working days or a negative reconsideration is
          given, CONTRACTOR may submit the dispute to an Indiana court of
          competent jurisdiction.

          The DEPARTMENT may withhold payments on disputed items pending the
          resolution of the dispute. The non-payment by the DEPARTMENT to
          CONTRACTOR of one or more



                                       11

<PAGE>   12



          invoices in dispute shall not constitute default, however, CONTRACTOR
          may bring suit to collect such monies without following the disputes
          procedure contained herein.

     35.                      [INTENTIONALLY LEFT BLANK]


     36.  ADDITIONAL PROVISIONS:

          Parties agree to be bound by the following additional provisions:

               a)   Nurses/Pharmacists/Medical Staff/Clerical Staff. The ability
                    of the parties to successfully implement the provisions of
                    this AGREEMENT is dependent upon a full nursing, mental
                    health counseling and pharmaceutical staff and the
                    cooperation of DEPARTMENT (and its employees) in the
                    implementation of CONTRACTOR'S managed care guidelines.
                    CONTRACTOR and DEPARTMENT further acknowledge and agree that
                    the nursing staff and pharmacists at the IDOC SITES are and
                    during the term of this AGREEMENT will remain the employees
                    of the DEPARTMENT and that the observance and compliance by
                    all health care personnel with prudent managed care
                    guidelines, health care protocols and the Standards is vital
                    to satisfactory health care services. To that end,
                    CONTRACTOR and the DEPARTMENT agree as follows:

                    (i)  As used in this AGREEMENT, the term "MINIMUM STAFFING
                         STANDARDS" means (A) with respect to the DEPARTMENT,
                         the staffing levels for nursing, mental health
                         counseling and pharmaceutical staff in place at each
                         IDOC SITE as of the date of this AGREEMENT, as such
                         staffing levels may be changed by mutual agreement of
                         CONTRACTOR and the DEPARTMENT from time to time; and
                         (B) with respect to CONTRACTOR, the staffing levels set
                         forth in the FINAL OFFER for each IDOC SITE, as such
                         staffing levels may be changed by mutual agreement of
                         CONTRACTOR and the DEPARTMENT from time to time.

                    (ii) CONTRACTOR shall specify to the DEPARTMENT medical
                         protocol and performance standards it believes are
                         necessary or desirable for the successful
                         implementation of this AGREEMENT. CONTRACTOR and the
                         DEPARTMENT shall reasonably agree upon the medical
                         protocol and performance standards necessary or
                         desirable for the successful implementation of this
                         AGREEMENT. The DEPARTMENT shall adopt such mutually
                         agreed upon standards as the protocol and performance
                         standards applicable to and required of its nursing
                         staff, mental health counselors, pharmacists and any
                         other health care professionals (or other persons
                         involved with the provision of health care services)
                         hereafter employed by or under separate contract with
                         the DEPARTMENT ("DEPARTMENT EMPLOYEES").



                                       12

<PAGE>   13



                   (iii) CONTRACTOR shall supervise all DEPARTMENT EMPLOYEES
                         with respect to all clinical and medical practice
                         matters. CONTRACTOR agrees to provide training to
                         DEPARTMENT EMPLOYEES of the same type and nature as the
                         employees of CONTRACTOR to enable them to meet clinical
                         and medical practice standards established by
                         CONTRACTOR. In addition, CONTRACTOR agrees to provide
                         training to nonmedical employees of the DEPARTMENT as
                         CONTRACTOR determines is necessary to carry out the
                         terms of this AGREEMENT.

                    (iv) The DEPARTMENT shall provide all supervision of
                         DEPARTMENT EMPLOYEES with respect to all administrative
                         matters. CONTRACTOR shall notify the DEPARTMENT of any
                         standards involving DEPARTMENT EMPLOYEES that
                         CONTRACTOR believes are necessary to implement its
                         managed care guidelines, such as scheduling, changes in
                         MINIMUM STAFFING STANDARDS and qualifications and
                         credentials of medical professionals at each IDOC SITE,
                         and may include recommendations for meeting any such
                         standards. CONTRACTOR and the DEPARTMENT shall
                         reasonably agree upon such standards and the DEPARTMENT
                         shall use good faith efforts to meet and satisfy the
                         same, provided, however, that in the event the
                         DEPARTMENT is unable to satisfy any such standards,
                         CONTRACTOR may, subject to the provisions of section
                         36(m) hereof, enter into temporary contracts for the
                         satisfaction thereof to the extent necessary to carry
                         out its obligations under this AGREEMENT, the costs of
                         which shall be reimbursed to CONTRACTOR in accordance
                         with the terms of section 36(k) hereof.

                    (v)  The DEPARTMENT shall provide training to CONTRACTOR and
                         its employees with respect to the terms, conditions and
                         implementation of all union settlement agreements,
                         state personnel rules and procedures and DEPARTMENT's
                         progressive disciplinary system applicable to all
                         DEPARTMENT EMPLOYEES. In addition, the DEPARTMENT shall
                         provide training to all of CONTRACTOR's personnel and
                         all DEPARTMENT EMPLOYEES with respect to the security
                         and custody of offenders at all IDOC SITES.

                    (vi) At the request of the DEPARTMENT, CONTRACTOR shall
                         cooperate in appraisals and evaluations of DEPARTMENT
                         EMPLOYEES and shall notify the DEPARTMENT of any
                         DEPARTMENT EMPLOYEE who fails to comply with the
                         applicable medical protocol and performance standards.
                         CONTRACTOR shall not sign off on any appraisals or
                         evaluations of DEPARTMENT EMPLOYEES.



                                       13

<PAGE>   14



                   (vii) In the event any DEPARTMENT EMPLOYEE fails to comply
                         with CONTRACTOR's medical protocol and performance
                         standards, CONTRACTOR shall notify the DEPARTMENT, and
                         the DEPARTMENT shall resolve such situation as soon as
                         possible. If failure to follow medical protocols and
                         guidelines results in additional cost to CONTRACTOR,
                         such shall be subject to reimbursement pursuant to the
                         provisions of sections 36(h) and 36(k) hereof.
                         CONTRACTOR agrees to cooperate with the DEPARTMENT in
                         connection with any disciplinary procedure involving
                         any DEPARTMENT EMPLOYEE.

                  (viii) CONTRACTOR and the DEPARTMENT agree to cooperate in
                         interviewing personnel for all medical positions and
                         other positions that directly impact the delivery of
                         medical services pursuant to this AGREEMENT. Each
                         employee of the DEPARTMENT and CONTRACTOR shall, at a
                         minimum, satisfy the staffing qualifications applicable
                         to such employee's position as set forth in section
                         3.5(B) of the RFP. All CONTRACTOR and DEPARTMENT
                         personnel shall be recruited and employed in accordance
                         with the terms of this AGREEMENT and sections 3.5(B),
                         (D) and (E) of the RFP

               b)   Current Employees of DEPARTMENT. CONTRACTOR agrees to
                    interview, in good faith, all individuals currently employed
                    by the DEPARTMENT at any of the IDOC SITES who will not
                    remain DEPARTMENT EMPLOYEES after the COMMENCEMENT DATE
                    ("CURRENT EMPLOYEE(S)"). CONTRACTOR and DEPARTMENT hereby
                    acknowledge and agree that the provisions of this subsection
                    (b) shall be in lieu of the provisions of the second
                    paragraph of section 3.5(A) of the RFP. In the event that
                    there is more than one candidate for any given position, the
                    CURRENT EMPLOYEE eligible for such position shall be given
                    the opportunity to fill such position so long as such
                    CURRENT EMPLOYEE is at least as qualified and as well suited
                    for the position as all other candidates for that position
                    (as reasonably determined by CONTRACTOR). CONTRACTOR shall
                    provide health insurance coverage to each CURRENT EMPLOYEE
                    that CONTRACTOR determines to hire, which coverage shall be
                    effective on the first day of such CURRENT EMPLOYEE'S
                    employment by CONTRACTOR. The DEPARTMENT agrees that it
                    shall conduct all background checks on all applicants for
                    employment, whether or not such candidates are CURRENT
                    EMPLOYEES, and shall provide a copy of the results of all
                    such background checks to CONTRACTOR. The DEPARTMENT may
                    refuse access to any IDOC SITE by an employee of CONTRACTOR
                    if the DEPARTMENT reasonably believes that the presence of
                    such employee at an IDOC SITE may threaten the safety or
                    security at such IDOC SITE. The DEPARTMENT further agrees to
                    provide copies of all performance appraisals in its
                    possession with respect to any candidate that is a



                                       14

<PAGE>   15



                    CURRENT EMPLOYEE, subject to such candidate's consent, which
                    may be oral or written. If such consent is not received from
                    a candidate, the DEPARTMENT may nonetheless make such
                    performance appraisals available to CONTRACTOR, in the
                    DEPARTMENT'S sole discretion. In the event CONTRACTOR
                    determines not to hire a CURRENT EMPLOYEE, it shall promptly
                    notify the DEPARTMENT of such determination.

               c)   Modifications and Operational Decisions. It is understood
                    and agreed that there will be changes from time to time
                    necessary to accommodate changing standards of medical
                    practice as well as to clarify and implement the provisions
                    of this AGREEMENT. There shall be appointed by each party a
                    working group (the "WORKING GROUP") to discuss operational
                    issues, which WORKING GROUP shall include health care
                    representatives, human resources representatives and such
                    other persons as either DEPARTMENT or CONTRACTOR shall deem
                    appropriate. Such WORKING GROUP shall not exceed nine (9)
                    persons with representation from both parties, and the
                    identity of those representatives shall be determined by the
                    mutual consent of the parties.

                    In addition, there shall be appointed by each party to this
                    AGREEMENT no more than three (3) representatives each to a
                    contract administration group (the "CONTRACT ADMINISTRATION
                    GROUP") which shall have the authority to recommend
                    clarifications and modifications to this AGREEMENT. The
                    CONTRACT ADMINISTRATION GROUP shall recommend any changes in
                    pricing, performance standards and requests for upgraded or
                    changed services as may be agreed to by the parties,
                    provided that no documents amending this AGREEMENT shall be
                    binding except to the extent that they first pass through
                    the formal amendment process, where necessary, and are
                    signed by parties authorized on behalf of both sides to
                    execute a written agreement. Notwithstanding the foregoing,
                    at all times CONTRACTOR shall use its best efforts to abide
                    by the standards set forth currently by the NCCHC, subject
                    to the provisions of section 36(j) of this AGREEMENT and any
                    modifications implemented pursuant to this subsection of the
                    AGREEMENT of the parties. Notwithstanding the foregoing, it
                    is understood that certain recommended standards and
                    treatments may be modified from time to time and it is
                    intended that the CONTRACT ADMINISTRATION GROUP recommend
                    any appropriate adoption and pricing changes. It is
                    specifically understood that the CONTRACT ADMINISTRATION
                    GROUP will present recommendations regarding additional
                    services or personnel requested by the DEPARTMENT and any
                    changes to the MINIMUM STAFFING STANDARDS requested by
                    either party.



                                       15

<PAGE>   16




               d)   Legal Representation/Indemnification.

                    CONTRACTOR and the DEPARTMENT each shall be solely
                    responsible for the acts and omissions of its respective
                    employees, agents and representatives in connection with the
                    performance of this AGREEMENT and the CONTRACT DOCUMENTS and
                    any judgment or award resulting from the acts or omissions
                    of its respective employees, agents and representatives. In
                    the event of any actual or threatened claim, dispute,
                    litigation, administrative or other action by any third
                    party against the DEPARTMENT, CONTRACTOR and/or either of
                    their respective employees, agents or representatives
                    arising from or in connection with this AGREEMENT and the
                    CONTRACT DOCUMENTS (a "LEGAL ACTION"), the DEPARTMENT and
                    CONTRACTOR shall each retain separate legal counsel and
                    shall be responsible for its own counsel's fees and
                    expenses. However, to the extent feasible, CONTRACTOR and
                    the DEPARTMENT agree to cooperate in good faith to resolve
                    any such LEGAL ACTION, and the DEPARTMENT further agrees to
                    assist CONTRACTOR in coordinating representation by the
                    Indiana Attorney General's Office in connection with any
                    LEGAL ACTION. Notwithstanding the foregoing, CONTRACTOR
                    acknowledges that the provisions of IC 34-4-16.5-2 are not
                    applicable to any of its employees. Nothing in this
                    AGREEMENT shall be construed as preventing the DEPARTMENT
                    from seeking legal representation from the Indiana Attorney
                    General.

               e)   Bonds. CONTRACTOR has previously provided a Bid Bond to IDOA
                    as required by the BID DOCUMENTS, and such shall be returned
                    to CONTRACTOR within fifteen (15) days of the execution of
                    this AGREEMENT. The parties further agree that the
                    Performance Bond required to be furnished to the DEPARTMENT
                    shall be equal to One Million Five Hundred Thousand Dollars
                    ($1,500,000.00). The parties further agree that in the event
                    of termination of this AGREEMENT, all bonds held by the
                    DEPARTMENT or IDOA shall be immediately returned to
                    CONTRACTOR, but in any event not more than thirty (30) days
                    after termination of this AGREEMENT. In the event of a
                    default by CONTRACTOR under this AGREEMENT, the DEPARTMENT
                    may present the Performance Bond to the surety for
                    performance or payment of the DEPARTMENT's actual damages,
                    up to the amount of One Million Five Hundred Thousand
                    Dollars ($1,500,000.00).

               f)   Insurance. CONTRACTOR shall procure and maintain medical
                    malpractice insurance in accordance with the requirements of
                    the RFP or, in the alternative and at its option, CONTRACTOR
                    may satisfy the coverage requirements of Indiana's medical
                    malpractice law (IC 27-12-1-1 et seq.) and contribute to the
                    fund established thereunder.



                                       16

<PAGE>   17



               g)   Equipment and Supplies. The DEPARTMENT shall deliver to
                    CONTRACTOR prior to the INITIAL IMPLEMENTATION DATE a
                    current and complete inventory of all equipment and
                    facilities located at each IDOC SITE, which inventory shall
                    be substantially the same as contained in the Technical
                    Library at the time of issuance of the RFP (the "EXISTING
                    EQUIPMENT"). The DEPARTMENT'S obligations shall be to (i)
                    deliver all EXISTING EQUIPMENT and facilities to CONTRACTOR
                    in good working condition and repair, (ii) provide all
                    equipment and facilities necessary to carry out this
                    AGREEMENT with respect to an expansion of any IDOC SITE,
                    whether resulting from growth in offender population,
                    physical expansion of an IDOC SITE, inclusion of a new
                    facility within the IDOC SITES covered hereunder or
                    otherwise, and (iii) subject to the provisions of section
                    11, make available to CONTRACTOR on a daily basis by data
                    transfer from the DEPARTMENT's MIS offender tracking system
                    such information on each offender included within the PER
                    DIEM RATE as is necessary for CONTRACTOR to fulfill its
                    obligations hereunder, including, without limitation, the
                    name, gender, date of birth of each offender and IDOC SITE
                    to which such offender is currently assigned. Except as
                    otherwise provided in the immediately preceding sentence,
                    CONTRACTOR shall provide all equipment necessary to carry
                    out this AGREEMENT, repair and maintain in good order and
                    condition all equipment, including, without limitation,
                    those items identified in the BID DOCUMENTS (except that,
                    notwithstanding anything in the BID DOCUMENTS to the
                    contrary, CONTRACTOR shall not be required to provide time
                    clocks at any IDOC SITE), and to replace such equipment as
                    is reasonably necessary to meet the STANDARDS of the NCCHC.
                    Notwithstanding the foregoing, any repair or replacement of
                    a piece of EXISTING EQUIPMENT with a replacement cost of
                    Five Thousand Dollars ($5,000.00) or more that becomes
                    necessary within the first six (6) months after the
                    implementation date at the IDOC SITE where such EXISTING
                    EQUIPMENT is operated shall be the responsibility of the
                    DEPARTMENT. Further, to the extent the CONTRACTOR elects to
                    use existing DEPARTMENT hardware and software systems and
                    data bases (such as the pharmacy and portions of the
                    offender tracking system), such shall be repaired and
                    maintained by the DEPARTMENT. All EXISTING EQUIPMENT and any
                    other equipment purchased by the DEPARTMENT shall be the
                    property of the DEPARTMENT. All equipment provided or
                    purchased by CONTRACTOR in furtherance of this AGREEMENT
                    shall be the property of CONTRACTOR unless and until
                    purchased by the DEPARTMENT pursuant to this AGREEMENT.

                    In the event of an emergency, CONTRACTOR may procure any
                    necessary equipment which is otherwise the DEPARTMENT's
                    responsibility, which procurement shall constitute
                    ADDITIONAL SERVICES hereunder, and the DEPARTMENT shall
                    reimburse CONTRACTOR for the cost of such equipment in
                    accordance with the provisions of section 36(k). CONTRACTOR
                    shall provide to the DEPARTMENT, on a quarterly basis, an
                    accounting of all equipment purchased by CONTRACTOR in



                                       17

<PAGE>   18



                    furtherance of this AGREEMENT. At the termination of this
                    AGREEMENT, the DEPARTMENT shall pay to CONTRACTOR an amount
                    sufficient to purchase equipment purchased by CONTRACTOR in
                    carrying out this AGREEMENT and any additional software or
                    computer equipment provided by CONTRACTOR pursuant to the
                    BID DOCUMENTS, based on a straight-line depreciation
                    schedule over the four (4) year term of this AGREEMENT;
                    provided, however, that if such amount is less than One
                    Thousand Dollars ($1,000.00), such equipment shall become
                    the property of the DEPARTMENT at no cost; and provided
                    further, however, that CONTRACTOR shall notify the
                    DEPARTMENT prior to purchasing any piece of equipment with a
                    cost of Five Thousand Dollars ($5,000.00) or more, and any
                    such piece of equipment shall be deemed to be part of the
                    equipment to be purchased by the DEPARTMENT at the
                    termination of this AGREEMENT unless the DEPARTMENT shall
                    object in writing to CONTRACTOR'S purchase thereof within
                    thirty (30) days of such notice, in which case the
                    DEPARTMENT'S obligations to purchase such equipment at the
                    termination of this AGREEMENT shall be determined by the
                    CONTRACT ADMINISTRATION GROUP pursuant to the provisions of
                    section 36(c) hereof.

               h)   Pricing and Adjustments. It is understood and agreed that
                    the pricing set forth herein contemplates that the parties
                    have agreed on a total state coverage for this AGREEMENT.
                    Further, to the extent that additional reimbursements by the
                    DEPARTMENT are established pursuant to the terms of this
                    AGREEMENT, at the DEPARTMENT'S election, such may be
                    reimbursed on a lump sum basis (with no more than a 15%
                    add-on for administration and purchasing), or the parties
                    may agree to an adjustment to the Per Diem Rates sufficient
                    to cover such reimbursement costs, together with other
                    reasonable costs thereof or the parties may agree to other
                    terms for reimbursement pursuant to section 36(k) below.

                    (i)  Notwithstanding the foregoing, it is understood and
                         agreed that the implementation of this AGREEMENT shall
                         be phased-in in accordance with subsection (o) below.
                         CONTRACTOR and the DEPARTMENT agree that, until the
                         FINAL IMPLEMENTATION DATE, "Per Diem Rates" shall mean,
                         for any region, the per diem rates for such region set
                         forth in the FINAL OFFER, and after the FINAL
                         IMPLEMENTATION DATE, Per Diem Rates shall be as set
                         forth herein. CONTRACTOR and the DEPARTMENT agree that,
                         during the phased implementation of this AGREEMENT,
                         CONTRACTOR shall be responsible for the payment of only
                         those third party provider payment claims, or portion
                         thereof, for health services provided to an offender at
                         a time when such offender is included within the Per
                         Diem Rates or for which CONTRACTOR receives
                         reimbursement as an ADDITIONAL SERVICE under section
                         36(k) hereof. The DEPARTMENT shall be responsible for
                         payment of all other third party provider payment
                         claims. In the



                                       18

<PAGE>   19



                         event CONTRACTOR or the DEPARTMENT receives a third
                         party provider invoice or request for payment for
                         health services requested or approved by the other 
                         party hereto, it shall immediately forward to the 
                         other party hereto such invoice or request for 
                         payment. CONTRACTOR and the DEPARTMENT shall each use 
                         good faith efforts to ensure that all third party 
                         provider payment claims for which it is responsible 
                         are paid in a timely manner.

                         (ii) Notwithstanding any other provisions of this 
                              AGREEMENT to the contrary, during the phased 
                              implementation, the DEPARTMENT shall reimburse 
                              CONTRACTOR for overhead expenses pursuant to the 
                              following formula:

                         No. of Offenders not covered by Per Diem Rates X
                         Overhead Expenses Official offender count of the 
                         DEPARTMENT

                              Overhead Expenses shall be determined on a monthly
                              basis and paid in arrears with the next monthly 
                              payment. Reimbursement for partial months shall 
                              be prorated on a daily basis.

                              As used herein, "Overhead Expenses" means all
                              expenses of CONTRACTOR (including employees, 
                              facilities, equipment and materials) attributable 
                              to statewide services under this AGREEMENT and 
                              not attributable directly to specific IDOC SITES 
                              already implemented hereunder.

               i)   Outside Vendors/Providers/Hospitals. The parties understand
                    and agree that the CONTRACTOR shall enter into agreements
                    with certain health service providers, including doctors,
                    ambulance services and others. Notwithstanding the foregoing
                    in the event that the DEPARTMENT notifies the CONTRACTOR in
                    writing that certain providers are providing an unacceptable
                    level of service, the CONTRACTOR shall in good faith work to
                    make such changes as are necessary to accommodate the wishes
                    of the DEPARTMENT. It is also agreed that while certain
                    contractors were identified in the BID DOCUMENTS as being
                    potential subcontractors and providers of services, such is
                    dependent upon the good faith negotiations of certain
                    parties which are not party to this AGREEMENT. Therefore,
                    CONTRACTOR shall not be required to contract with such
                    persons. The DEPARTMENT may refuse access to any IDOC SITE
                    by any of CONTRACTOR's subcontractors or health service
                    providers if the DEPARTMENT reasonably believes that the
                    presence of such subcontractor or health service provider at
                    an IDOC SITE may threaten the safety or security at such
                    IDOC SITE.

                    The CONTRACTOR shall seek in good faith to negotiate
                    reasonable agreements with such hospitals and other off-site
                    providers as may be

                                    

                                       19

<PAGE>   20



                    suggested by the DEPARTMENT. Further, so long as the current
                    locked patient units at Wishard Memorial Hospital
                    (Indianapolis), Memorial Hospital (Michigan City) and Mary
                    Sherman Hospital (Sullivan) are available to the CONTRACTOR
                    at the current per diem and physician reimbursement rates
                    available to the DEPARTMENT (or such other rates as are
                    satisfactory to CONTRACTOR) and are in compliance with
                    CONTRACTOR's Utilization Management Processes, the
                    CONTRACTOR agrees that it shall use such hospital facilities
                    for at least the first six (6) months of the term of this
                    AGREEMENT. Thereafter, the CONTRACTOR shall work with the
                    DEPARTMENT to insure that satisfactory arrangements are
                    made.

               j)   Accreditation. The parties agree to work in good faith
                    toward accreditation pursuant to the STANDARDS of the NCCHC
                    ("ACCREDITATION") of those IDOC SITES where on-site health
                    care service is provided, as listed in Exhibit A attached
                    hereto. Such ACCREDITATION shall occur as soon as
                    practicable but in any event within twenty-four (24) months
                    of the FINAL IMPLEMENTATION DATE of this AGREEMENT (as
                    hereinafter defined). The parties further agree to work in
                    good faith thereafter to continuously operate each IDOC SITE
                    at NCCHC operating standards. It is understood and agreed
                    that the DEPARTMENT believes that ACCREDITATION is an
                    important provision of this AGREEMENT. However, the parties
                    also agree that certain provisions of ACCREDITATION rely
                    integrally on the DEPARTMENT, the DEPARTMENT's STANDARDS,
                    and the cooperation of the DEPARTMENT and employees,
                    especially nurses and other health care professionals, under
                    the direction and control of the DEPARTMENT. The parties
                    further acknowledge and agree that the MINIMUM STAFFING
                    STANDARDS for some of the IDOC SITES are or may be
                    inconsistent with NCCHC standards and therefore preclude
                    ACCREDITATION of those IDOC SITES. Notwithstanding anything
                    contained herein or in the RFP or other BID DOCUMENTS to the
                    contrary, CONTRACTOR shall not be required to obtain or
                    maintain ACCREDITATION of any IDOC SITE for which the
                    MINIMUM STAFFING STANDARDS are inconsistent with NCCHC
                    standards. Further, if ACCREDITATION is required under this
                    AGREEMENT and is not obtained or maintained due to no
                    failure by CONTRACTOR to perform its obligations hereunder,
                    such shall not be a default hereunder and the DEPARTMENT
                    shall pay any additional costs associated with obtaining
                    such ACCREDITATION (fees, survey costs, etc.). However, if
                    ACCREDITATION required by this AGREEMENT is not obtained on
                    or before twenty-four (24) months after the FINAL
                    IMPLEMENTATION DATE, and such failure to obtain required
                    ACCREDITATION is due solely to the responsibility of the
                    CONTRACTOR, then the CONTRACTOR agrees that it shall pay
                    liquidated damages to the DEPARTMENT in the amount of One
                    Hundred Thousand Dollars ($100,000.00) for each such IDOC
                    SITE for which required ACCREDITATION is not obtained and/or
                    maintained, and shall

 

                                      20

<PAGE>   21



                    continue to work toward ACCREDITATION as expeditiously as
                    possible. In the event that the CONTRACTOR is unable to
                    obtain required ACCREDITATION and pays the liquidated
                    damages amount, and thereafter the CONTRACTOR is able to
                    obtain such ACCREDITATION, the CONTRACTOR shall receive a
                    refund of the pro rata share of such liquidated damages from
                    the DEPARTMENT, based upon a fraction whereby the number of
                    days elapsed since the FINAL IMPLEMENTATION DATE is the
                    numerator, and the number of days from the FINAL
                    IMPLEMENTATION DATE to the final termination of this
                    AGREEMENT is the denominator.

               k)   Special Reimbursements. In the event the DEPARTMENT changes
                    existing medical directives or the mutually agreed formulary
                    dated April 4, 1997, and such change impacts CONTRACTOR's
                    costs of performing under this AGREEMENT, adjustments in
                    compensation to CONTRACTOR, whether upwards or downwards,
                    shall be determined in accordance with the provisions of
                    sections 36(c), 36(h) and 36(k) hereof. CONTRACTOR shall not
                    commence the additional work or change the scope of the work
                    until authorized in writing by the DEPARTMENT and no claim
                    for additional compensation in connection with such changes
                    in medical directives or formulary shall be made in the
                    absence of a prior written approval executed by all
                    signatories hereto amending this AGREEMENT by formal
                    amendment process, where necessary. In addition, CONTRACTOR
                    has agreed, at the DEPARTMENT's request and subject to the
                    terms of this subparagraph, to provide certain health
                    services more particularly described in Exhibit B attached
                    hereto which are not contemplated by or included in the BID
                    DOCUMENTS (the "ADDITIONAL SERVICES"). The DEPARTMENT shall
                    reimburse CONTRACTOR monthly for the amounts agreed upon for
                    such ADDITIONAL SERVICES or, if no amount for reimbursement
                    has been agreed upon, the actual cost of providing
                    ADDITIONAL SERVICES, provided that the DEPARTMENT shall have
                    no obligation to reimburse CONTRACTOR for that portion of
                    its actual costs which exceed the usual and customary
                    charges for such services by other health care providers in
                    the area. Further, the DEPARTMENT may request, and
                    CONTRACTOR may agree, to provide other ADDITIONAL SERVICES
                    in the future, or it may become necessary, due to emergency
                    or other unforeseeable circumstances, for CONTRACTOR to
                    provide ADDITIONAL SERVICES not otherwise identified herein.
                    The DEPARTMENT and CONTRACTOR agree that provision of any
                    such future ADDITIONAL SERVICES and the reimbursement by the
                    DEPARTMENT to CONTRACTOR therefor shall, to the extent
                    possible, be determined by good faith negotiations of the
                    CONTRACT ADMINISTRATION GROUP pursuant to section 36(c) of
                    this AGREEMENT. Notwithstanding the foregoing, CONTRACTOR
                    shall not be responsible for providing or supervising the
                    provision of substance abuse counseling unless otherwise
                    specifically agreed. Additionally, the DEPARTMENT represents
                    that, to its knowledge, as of the date of execution of this
                    AGREEMENT, there is no offender located at any IDOC



                                       21

<PAGE>   22



                    SITE for whom an organ transplant is or foreseeably may
                    become medically necessary. However, should an organ
                    transplant become medically necessary for an offender
                    included within the PER DIEM RATE during the term hereof,
                    such organ transplant shall be included in the services to
                    be provided by CONTRACTOR under this AGREEMENT; provided,
                    however, that the services to be provided by CONTRACTOR
                    hereunder shall not include any services or costs with
                    respect to or incurred by or in connection with any organ
                    donor.

               l)   Mental Health. It is understood and agreed that the
                    CONTRACTOR shall not be responsible for substance abuse
                    disorder treatment. However, the parties agree to work
                    cooperatively to establish standards for a determination as
                    to which offenders shall meet the definitions in the mental
                    health coverage that is required under this AGREEMENT.

               m)   Vacancies. CONTRACTOR shall use all reasonable efforts to
                    fill any personnel vacancies as expeditiously as possible.
                    In the event a vacancy in a position which is included in
                    the MINIMUM STAFFING STANDARDS is not filled within thirty
                    (30) days after becoming vacant, the DEPARTMENT may setoff
                    against the next monthly reimbursement due to CONTRACTOR an
                    amount equal to one hundred thirty percent (130%) of
                    CONTRACTOR's statewide average salary for such vacant
                    position for the period of time it is vacant; provided,
                    however, that if CONTRACTOR's failure to fill such vacancy
                    within thirty (30) days is due, in whole or in part, to the
                    DEPARTMENT's clearance and preapproval procedures or an
                    agreed upon change in MINIMUM STAFFING STANDARDS, no such
                    penalty shall be assessed or be payable.

                    The DEPARTMENT shall use all reasonable efforts to fill any
                    DEPARTMENT EMPLOYEE (as defined in section 36(a)(i))
                    vacancies as expeditiously as possible. CONTRACTOR shall
                    promptly notify the DEPARTMENT upon becoming aware of any
                    such vacancy and, in the event the DEPARTMENT has not filled
                    such vacancy within forty-five (45) days after such notice,
                    and CONTRACTOR and the DEPARTMENT mutually agree, in good
                    faith, CONTRACTOR may contract on a temporary basis to fill
                    such vacancy; provided, however, that CONTRACTOR may
                    contract on a temporary basis as necessary to fill a vacancy
                    in a position included within the MINIMUM STAFFING STANDARDS
                    or as otherwise necessary to comply with state and federal
                    law immediately after notice to the DEPARTMENT's medical
                    director. Resolving any DEPARTMENT EMPLOYEE vacancy on a
                    temporary contract basis shall constitute ADDITIONAL
                    SERVICES under this AGREEMENT and the DEPARTMENT shall
                    reimburse CONTRACTOR for all costs associated therewith in
                    accordance with section 36(k) of this AGREEMENT. Such
                    temporary contracting pursuant to this section shall be
                    subject to the same background checks and employment
                    conditions and standards as other DEPARTMENT EMPLOYEES.



                                       22

<PAGE>   23



               n)   Existing Legal Actions. The parties hereto acknowledge that
                    there are certain legal orders, agreed entries, consent
                    decrees and other matters which may affect the services
                    provided hereunder (collectively "JUDICIAL ORDERS"), and
                    those which currently exist are as follows:

                    (i)  an Agreed Entry in the matter of Anderson v. Orr (Civil
                         Action No. 583-0481), dated ____________ ___, 1988,
                         relating to Westville Correctional Center;

                    (ii) an Entry of Agreed Order in the matters of Wellman v.
                         Faulkner (Cause No. 579-32), Adams v. Duckworth (Cause
                         No. 577-35) and Hendrix v. Bowen (Cause No. 576-187),
                         dated October 11, 1985, relating to the Indiana State
                         Prison;

                   (iii) the decision of the Seventh Circuit Court of Appeals
                         in French v. Owens (Cause Nos. 83-2280 and 85-1065),
                         decided November 26, 1985 relating to the Indiana State
                         Prison;

                    (iv) the Amended Order of the Federal Court of the Southern
                         District of Indiana in French v. Owens (Civil Action
                         No. IP-75-677-C), dated December 14, 1984, relating to
                         the Pendleton Reformatory;

                    (v)  the Agreed Entry in Cox v. Orr (Cause No. IP-82-477-C),
                         dated February 18, 1986, relating to the State Farm;

                    (vi) the Entry of the United States District Court for the
                         Northern District of Indiana in Taifa v. Bayh (Civil
                         Action No. 3:92-CV-429AS), dated January 3, 1994,
                         including an Agreed Entry relating to the Maximum
                         Control complex; and

                   (vii) Stipulation to Enter Consent Decree in the United
                         States District Court for the Southern District of
                         Indiana in W.C. & T.P. v. Aiken & Cline (Civil Action
                         No. IP-90-40-C), dated _______ ___, 19__, relating to
                         the Boys School.

                    While it is agreed that CONTRACTOR shall abide by the terms
                    of the existing JUDICIAL ORDERS, it is also understood that
                    such shall not bind CONTRACTOR to the extent the JUDICIAL
                    ORDERS relate to matters outside the scope of this AGREEMENT
                    (such as non-medical matters), or which are expressly
                    excluded from this AGREEMENT (such as over-the-counter
                    pharmaceuticals). To the extent requested by the DEPARTMENT,
                    CONTRACTOR and the DEPARTMENT shall negotiate in good faith
                    to modify this AGREEMENT to comply with any additional
                    JUDICIAL ORDERS and to comply with the terms of any
                    additional JUDICIAL ORDERS. To the extent that such
                    modification and/or compliance would result in additional
                    cost to CONTRACTOR, and such additional JUDICIAL ORDERS do
                    not result from a failure by CONTRACTOR to perform
                    hereunder, such modification and/or



                                       23

<PAGE>   24



                    compliance shall constitute ADDITIONAL SERVICES under this
                    AGREEMENT and the DEPARTMENT shall reimburse CONTRACTOR for
                    all costs associated therewith in accordance with section
                    36(k) of this AGREEMENT. Further, the parties shall
                    cooperate in seeking to obtain modification or release from
                    the existing JUDICIAL ORDERS to the extent that such are
                    inconsistent with prudent managed care practices.

               o)   Implementation Timing. At the request of the DEPARTMENT, the
                    CONTRACTOR has agreed to a phased implementation process. It
                    is agreed that on or before sixty (60) days after all
                    required signatures have been affixed to this AGREEMENT
                    ("INITIAL IMPLEMENTATION DATE"), the CONTRACTOR shall
                    implement the services at the Correctional Industrial
                    Facility located at Pendleton, Indiana, and the Pendleton
                    Correctional Facility located at Pendleton, Indiana (both
                    sites as identified in the BID DOCUMENTS). Not earlier than
                    sixty (60) days, nor later than ninety (90) days thereafter,
                    the CONTRACTOR shall commence implementation of services at
                    the other IDOC SITES delineated in the RFP, according to the
                    implementation schedule attached hereto as Exhibit C, with
                    final implementation at all IDOC SITES as therein indicated
                    ("FINAL IMPLEMENTATION DATE"). The parties shall use good
                    faith efforts to comply with such implementation schedule.
                    CONTRACTOR shall use its best efforts to notify the
                    DEPARTMENT of the IMPLEMENTATION DATE for each IDOC SITE
                    thirty (30) days in advance of such IMPLEMENTATION DATE, if
                    possible, or on the earliest date as is reasonably feasible.

               p)   Co-Payment Procedures. There are certain co-payment
                    procedures which are currently being established by the
                    DEPARTMENT. The CONTRACTOR agrees to be bound thereby and to
                    use good faith efforts to implement such co-payment
                    procedures. The intended co-payment procedures are set forth
                    in the attached Exhibit D, and to the extent of such a
                    change, the parties will work together in good faith to
                    agree on any changes thereto.

               q)   Cooperation with Facilities. It is understood and agreed
                    that there are certain statutory authorities designated to
                    the superintendents of each facility as set forth in
                    applicable law. The parties hereby agree to cooperate in
                    implementing the services hereby and facilitating the
                    statutory obligations of the superintendents. Further,
                    CONTRACTOR shall cooperate with internal DEPARTMENT
                    procedures on monitoring and disciplining offenders,
                    including the Conduct Adjustment Board, and shall report to
                    the DEPARTMENT any violations of such procedures by
                    offenders.

               r)   Additional Facilities. To the extent that if additional
                    correctional facilities are placed in service by the
                    DEPARTMENT during the term of this AGREEMENT, the DEPARTMENT
                    may by memorandum of understanding adopted through the
                    formal amendment process, where




                                       24

<PAGE>   25



                    necessary, bring such facilities under the terms of this
                    AGREEMENT as an IDOC SITE.

     37.  MAINTAINING A DRUG-FREE WORKPLACE:

          Pursuant to Executive Order No. 90-5, CONTRACTOR covenants and agrees
          to the following:

               a)   CONTRACTOR agrees to make a good faith effort to provide and
                    maintain during the term of this AGREEMENT a drug-free
                    workplace, and that it will give written notice to the
                    DEPARTMENT and the Indiana Department of Administration
                    within ten (10) days after receiving actual notice that an
                    employee of CONTRACTOR has been convicted of a criminal drug
                    violation occurring in CONTRACTOR'S workplace.

               b)   In addition to the provisions of subparagraph (a) above, if
                    the total amount set forth in this AGREEMENT is in excess of
                    Twenty-Five Thousand Dollars ($25,000.00), CONTRACTOR hereby
                    further agrees that this AGREEMENT is expressly subject to
                    the terms, conditions and representations contained in the
                    "Drug-Free Workplace Certification" executed by CONTRACTOR
                    in conjunction with this AGREEMENT and which is set forth in
                    section 38 of this AGREEMENT.

               c)   It is further expressly agreed that the failure of
                    CONTRACTOR to comply in good faith with the terms of
                    subparagraph (a) above, or falsifying or otherwise violating
                    the terms of the certification referenced in subparagraph
                    (a) above, or falsifying or otherwise violating the terms of
                    the certification referenced in subparagraph (b) above,
                    shall constitute a material breach of this AGREEMENT, and
                    shall entitle the State of Indiana to impose sanctions
                    against the CONTRACTOR including, but not limited to,
                    suspension of contract payments, termination of this
                    AGREEMENT and/or debarment of the CONTRACTOR from doing
                    further business with the State of Indiana for up to three
                    (3) years.

     38.  DRUG-FREE WORKPLACE CERTIFICATION:

          This certification is required by Executive Order No. 90-5, April 12,
          1990, issued by the Governor of Indiana. Pursuant to its delegated
          authority, IDOA is requiring the inclusion of this certification in
          all contracts with and grants from the State of Indiana in excess of
          Twenty-Five Thousand Dollars ($25,000.00). No award of a contract
          shall be made, and no contract, purchase order or agreement, the total
          amount of which exceeds Twenty-Five Thousand Dollars ($25,000.00),
          shall be valid unless and until this certification has been fully
          executed by CONTRACTOR and made a part of the AGREEMENT as part of the
          CONTRACT DOCUMENTS. False certification or violation of the
          certification may result in sanctions including, but not limited to,
          suspension of contract payments, termination of AGREEMENT and/or
          debarment of contracting opportunities with the State of Indiana for
          up to three (3) years.



                                       25

<PAGE>   26



     CONTRACTOR certifies and agrees that it will provide a drug-free workplace
by:

     a)   Publishing and providing to all of its employees a statement notifying
          employees that the unlawful manufacture, distribution, dispensing,
          possession or use of a controlled substance is prohibited in
          CONTRACTOR's workplace and specifying the actions that will be taken
          against employees for violations of such prohibition;

     b)   Establishing a drug-free awareness program to inform employees of (1)
          the dangers of drug abuse in the workplace; (2) CONTRACTOR's policy of
          maintaining a drug-free workplace; (3) any available drug counseling,
          rehabilitation, and employee assistance programs; and (4) the
          penalties that may be imposed upon an employee for drug abuse
          violations occurring in the workplace;

     c)   Notifying all employees in the statement required by subparagraph (a)
          above that as a condition of continued employment the employee will
          (1) abide by the terms of the statement; and (2) notify the employer
          of any criminal drug statute conviction for a violation occurring in
          the workplace no later than five (5) days after such conviction;

     d)   Notifying in writing the DEPARTMENT and IDOA within ten (10) days
          after receiving notice from an employee under subparagraph (c)(2)
          above, or otherwise receiving actual notice of such conviction;

     e)   Within thirty (30) days after receiving notice under subparagraph
          (c)(2) above of a conviction, imposing the following sanctions or
          remedial measures on any employees who is convicted of drug abuse
          violations occurring in the workplace: (1) take appropriate personnel
          action against the employee, up to and including termination; or (2)
          require such employee to satisfactorily participate in a drug abuse
          assistance or rehabilitation program approved for such purposes by a
          federal, state or local health, law enforcement, or other appropriate
          agency; and

     f)   Making a good faith effort to maintain a drug-free workplace through
          the implementation of subparagraphs (a) through (e) above.

     39.  NON-COLLUSION AND ACCEPTANCE:

          The undersigned attests under penalties of perjury that he is the
          contracting party, or that he is the representative, agent, member or
          officer of the contracting party, that he has not, nor has any other
          member, employee, representative, agent or officer of the firm,
          company, corporation or partnership represented by him, directly or
          indirectly, to the best of his knowledge, entered into or offered to
          enter into any combination, collusion or agreement to receive or pay,
          and that he has not received or paid, any sum of money or other
          consideration for the execution of this AGREEMENT other than that
          which appears on the face of the AGREEMENT.

          The parties having read and understand the foregoing terms of the
          AGREEMENT do by their respective signatures dated below hereby agree
          to the terms thereof, including, if this




                                       26

<PAGE>   27



          AGREEMENT is in excess of Twenty-Five Thousand Dollars ($25,000.00),
          paragraph 38, Drug-Free Workplace Certification.


     IN WITNESS WHEREOF, the parties hereunto affixed their signatures:

For CONTRACTOR:                                For DEPARTMENT:

PRISON HEALTH SERVICES, INC.                   Attested By: /s/ Edward L. Cohn
                                                            -------------------
                                               Printed Name: Edward Cohn
                                               Title:        Commissioner
By:                                            Date:         4-18-97
     ------------------------
     (authorized signature)


     ------------------------
Name:    (print or type)

         Chairman
      -------------------- 
Title or Official Capacity: (print or type)

Date:   4/18/97

APPROVED:                                      APPROVED AS TO LEGALITY AND FORM:

STATE BUDGET AGENCY


/s/ David A. Dukes, Jr.                        /s/ Emily S. Rosko, Deputy
--------------------------                     ---------------------------- 
Peggy Boehm                                    Jeffrey Modisett
Director                                       Attorney General of Indiana

Date:  5/8/97                                  Date:   5-8-97

APPROVED:

INDIANA DEPARTMENT OF ADMINISTRATION


/s/ Jay D. McQueen, Jr.
-------------------------------
Betty Cockrum
Commissioner

Date:  May 1, 1997






                                       27

<PAGE>   28



                                    EXHIBIT A


                     IDOC FACILITIES TO BE NCCHC ACCREDITED


<TABLE>
<S>                                          <C>
ADP INDIANA      (as of July 1996)           NOW KNOWN AS:
-----------                                  ------------

Central
Indiana State Reformatory                    Pendleton Correctional Facility
Correctional Industrial Complex              Correctional Industrial Facility
Indiana Women's Intake Unit
Indianapolis Women's Work Release            Indianapolis Women's Work Release Center
Indiana Women's Prison
Reception Diagnostic
Indiana Youth Center                         Plainfield Correctional Facility
Indiana Boys' School                         Plainfield Juvenile Correctional Facility
Indiana Girls' School                        Indianapolis Juvenile Correctional Facility

Southern
Indiana State Farm                           Putnamville Correctional Facility
Henryville Correctional Unit                 Henryville Correctional Facility
Madison Correctional Unit                    Madison Correctional Facility
Rockville Training Center                    Rockville Correctional Facility
Wabash Valley Correctional                   Wabash Valley Correctional Facility
Branchville Training Center                  Branchville Correctional Facility

Northern
Indiana State Prison
Lakeside Correctional Center                 Lakeside Correctional Facility
North Central Juvenile Facility              North Central Juvenile Correctional Facility
Medaryville Correctional Unit                Medaryville Correctional Facility
Maximum Control Complex                      Maximum Control Facility
Westville Correctional Center/Psych          Westville Correctional Facility
Westville Transition Unit                    Westville Transitional Facility

</TABLE>






<PAGE>   29



                                    EXHIBIT B



1.   Vaccines for offenders in addition to those required by IC 20-8.1-7-9.5,
     for which CONTRACTOR shall be reimbursed at cost.

2.   Periodic routine physicals (excluding psychiatric evaluations) provided at
     the IDOC SITES for DEPARTMENT EMPLOYEES, for which CONTRACTOR shall be
     reimbursed in the amount agreed upon by the parties.

3.   Emergency health care services outside of the offender care services
     anticipated by the CONTRACT DOCUMENTS with respect to which CONTRACTOR
     incurs additional significant costs. CONTRACTOR agrees to consult with the
     medical director of the applicable IDOC SITE or superintendent at the
     applicable IDOC SITE, to the extent possible, before providing emergency
     health care services outside of the offender care services anticipated by
     the CONTRACT DOCUMENTS; provided, however, that CONTRACTOR will not refuse
     to provide first response emergency care as necessary.




<PAGE>   30


                                    EXHIBIT C

                      IDOC SITES AND PROJECTED START DATES
<TABLE>
<CAPTION>

CENTRAL                                            ADP        PHASE I            PHASE II        PHASE III
-------                                           -----       -------            --------        --------- 
<S>                                               <C>         <C>                <C>             <C>                 
Pendleton Correctional Facility                   1,592       *60 DAYS
Correctional Industrial Facility                  1,250        60 DAYS
Indianapolis Men's Work Release Center               31                           75 DAYS
Plainfield Juvenile Correctional Facility           380                           90 DAYS
Indianapolis Juvenile Correctional Facility         193                           90 DAYS
Reception Diagnostic Center                         650                          120 DAYS
Plainfield Correctional Facility                  1,276                          120 DAYS
Indiana Women's Intake Unit                         380                                           165 DAYS
Indianapolis Women's Work Release Center             18                                           165 DAYS
Indiana Women's Prison                              113                                           165 DAYS
                                                    ---
         TOTAL                                    5,883

SOUTHERN
Atterbury Correctional Facility                      74                           75 DAYS
Edinburgh Correctional Facility                      99                           75 DAYS
Henryville Correctional Facility                    106                           75 DAYS
Madison Correctional Facility                       180                           90 DAYS
Rockville Correctional Facility                     388                           90 DAYS
Bloomington Juvenile Correctional Facility           54                           75 DAYS
Putnamville Correctional Facility                 1,645                          105 DAYS
Branchville Correctional Facility                   836                          105 DAYS
Wabash Valley Correctional Facility                 907                          120 DAYS
                                                    ---
         TOTAL                                    4,289

NORTHERN
Northeast Juvenile Correctional Facility             47                                           135 DAYS
Ft. Wayne Juvenile Correctional Facility             40                                           135 DAYS
Chain O'Lakes Correctional Facility                 100                                           135 DAYS
South Bend Work Release Center                       72                                           135 DAYS
South Bend Juvenile Correctional Facility            43                                           135 DAYS
Camp Summit                                          44                                           135 DAYS
Lakeside Correctional Facility                      313                                           150 DAYS
Logansport Juvenile Intake/Diag. Facility            79                                           150 DAYS
North Central Juvenile Correctional Facility        126                                           150 DAYS
Medaryville Correctional Facility                   121                                           150 DAYS
Indiana State Prison                              1,721                                           180 DAYS
Maximum Control Facility                             53                                           180 DAYS
Westville Correctional Facility                   2,744                                           180 DAYS
Westville Transition Facility                       194                                           180 DAYS
                                                    ---
         TOTAL                                    5,697

GRAND TOTAL                                      15,869
</TABLE>


*Days after contract finally executed


<PAGE>   31

                                  EXHIBIT D

                     TITLE 210 DEPARTMENT OF CORRECTION

                                   FINAL RULE
                           LSA Document #96-64 (F)

                                   DIGEST

          Adds 210 IAC 7 concerning the administration of offender health care
co-payments. This article complies with IC 11-10-3-5: (1) provides that an
inmate committed to the department may be required to make a co-payment for
health care related services provided during the inmate's confinement; (2)
provides for certain exceptions; and (3) requires money collected to be used to
reimburse the department of correction. Effective 30 days after filing with the
secretary of state.

210 IAC 7

          SECTION 1. 210 IAC 7 IS ADDED TO READ AS FOLLOWS:

          ARTICLE 7. OFFENDER HEALTH CARE CO-PAYMENT PROCEDURES

          RULE 1.  GENERAL PROVISIONS; APPLICABILITY

210 IAC 7-1-1 DEFINITIONS; APPLICABILITY
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 1. THE DEFINITIONS IN THIS RULE APPLY THROUGHOUT THIS ARTICLE.
(Department of Correction; 210 IAC 7-1-1)

210 IAC 7-1-2 "CHRONICALLY PRESCRIBED MEDICATION" DEFINED
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 2. "CHRONICALLY PRESCRIBED MEDICATION" MEANS A DRUG OR
SUBSTANCE PRESCRIBED REPEATEDLY OVER A PROLONGED PERIOD OF TIME, USUALLY IN THE
TREATMENT OF A CHRONIC ILLNESS. (Department of Correction; 210 IAC 7-1-2)

210 IAC 7-1-3 "CO-PAYMENT" DEFINED
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 3. "CO-PAYMENT" MEANS THE SHARE OF THE COSTS OF PROVIDING HEALTH
CARE RELATED SERVICES OR GOODS PAID BY AN OFFENDER. (Department of Correction;
210 IAC 7-1-3)

                                       1
<PAGE>   32

210 IAC 7-1-4 "DEPARTMENT" DEFINED
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 4. "DEPARTMENT" MEANS DEPARTMENT OF CORRECTION. (Department of
Correction; 210 IAC 7-1-4)

210 IAC 7-1-5 "HEALTH CARE SERVICES" DEFINED
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 5. "HEALTH CARE SERVICES" MEANS ANY SERVICES, INCLUDING MEDICAL,
DENTAL, EYE OR HEARING CARE, OR PHARMACY PROVIDED BY THE DEPARTMENT TO
OFFENDERS. THESE SERVICES MAY BE PROVIDED EITHER BY DEPARTMENT STAFF, THROUGH A
CONTRACT, OR BY A PRIVATE PROVIDER SELECTED BY THE DEPARTMENT. MENTAL HEALTH
SERVICES AND THE PRESCRIPTION OF PSYCHOTROPIC OR NEUROLEPTIC MEDICATIONS ARE
NOT INCLUDED IN THESE SERVICES. (Department of Correction; 210 IAC 7-1-5)

210 IAC 7-1-6 "HEALTH CARE SERVICES STAFF" DEFINED
          AUTHORITY: IC 11-10-3-5
          AFFECTED IC 11-10-3

          SEC. 6. "HEALTH CARE SERVICES STAFF" MEANS HEALTH CARE PROFESSIONALS
INCLUDING:
          (1) PHYSICIANS;
          (2) NURSES;
          (3) DENTISTS;
          (4) OPTOMETRISTS; AND 
          (5) SPECIALISTS;
WHO ARE EITHER STAFF OR PROVIDE SERVICES TO THE DEPARTMENT AT THE REQUEST OF
THE DEPARTMENT. (Department of Correction; 210 IAC 7-1-6)

210 IAC 7-1-7 "NEUROLEPTIC MEDICATION" DEFINED
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 7. "NEUROLEPTIC MEDICATION" MEANS PSYCHOTROPIC MEDICATION
UTILIZED TO CONTROL PSYCHOTIC THINKING OR BEHAVIOR. (Department of Correction;
210 IAC 7-1-7)

210 IAC 7-1-8 "OFFENDER" DEFINED
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 8. "OFFENDER" MEANS ANY PERSON COMMITTED TO THE DEPARTMENT AND
WHO IS HOUSED IN A DEPARTMENT FACILITY.  (Department of Correction; 210 IAC
7-1-8)

                                      2
<PAGE>   33

210 IAC 7-1-9 "PSYCHOTROPIC MEDICATION" DEFINED
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3-5

          SEC. 9. "PSYCHOTROPIC MEDICATION" MEANS A DRUG OR SUBSTANCE WHICH
EXERTS AN EFFECT UPON THE MIND AND IS CAPABLE OF MODIFYING MENTAL ACTIVITY.
(Department of Correction; 210 IAC 7-1-9)

210 IAC 7-1-10 APPLICABILITY OF ARTICLE
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 10. (A) THIS ARTICLE IS APPLICABLE TO ALL OFFENDERS COMMITTED TO
THE DEPARTMENT, EXCEPT THOSE OFFENDERS WHO:
          (1) MAINTAIN A POLICY OF HEALTH CARE INSURANCE FROM A PRIVATE COMPANY
THAT WILL BE IN EFFECT DURING THE OFFENDER'S INCARCERATION AND WILL COVER:
                      (A) MEDICAL CARE;
                      (B) DENTAL CARE;
                      (C) EYE CARE; OR
                      (D) ANY OTHER HEALTH CARE RELATED SERVICE; OR
          (2) ARE WILLING AND ABLE TO PAY FOR THEIR OWN MEDICAL
CARE.

          (B) ALL OTHER OFFENDERS NOT COVERED IN SUBSECTION (A) WHO ARE
COMMITTED TO THE DEPARTMENT SHALL BE REQUIRED TO MAKE A CO-PAYMENT FOR COVERED
HEALTH CARE SERVICES UNLESS:
          (1) THE OFFENDER DOES NOT HAVE FUNDS IN THE INMATE TRUST FUND ACCOUNT
          AT THE TIME THE SERVICE IS PROVIDED;
          (2) THE OFFENDER DOES NOT HAVE FUNDS IN THE INMATE TRUST FUND ACCOUNT 
          WITHIN THIRTY (30) DAYS AFTER THE SERVICE IS PROVIDED;
          (3) THE SERVICE IS PROVIDED IN AN EMERGENCY;
          (4) THE SERVICE IS PROVIDED AS A RESULT OF AN INJURY RECEIVED WHILE 
          IN THE CUSTODY OF THE DEPARTMENT; OR (5) THE SPECIFIC SERVICES ARE
          PROVIDED AT THE REQUEST OF THE FACILITY HEAD OR DESIGNEE.
(Department of Correction; 210 IAC 7-1-10)

          RULE 2. HEALTH CARE SERVICES

210 IAC 7-2-1 ACCESS
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 1. (A) ALL OFFENDERS SHALL BE ENTITLED TO THE FOLLOWING: 
          (1) MEDICAL CARE, MEDICAL PERSONNEL, AND MEDICAL FACILITIES OF A 
          QUALITY COMPLYING WITH APPLICABLE STATE LICENSING REQUIREMENTS.
          (2) FIRST-AID OR EMERGENCY TREATMENT ON A TWENTY-FOUR (24) HOUR BASIS.
          (3) MENTAL HEALTH CARE BY A PSYCHIATRIST, A PSYCHOLOGIST, OR ANOTHER
          MENTAL HEALTH PROFESSIONAL.

                                       3
<PAGE>   34

          (B) ONLY THOSE HEALTH CARE SERVICES AUTHORIZED BY THE DEPARTMENT, AND
IN ACCORDANCE WITH DEPARTMENT PROCEDURES AND HEALTH CARE DIRECTIVES, SHALL BE
AVAILABLE TO OFFENDERS. OFFENDERS SEEKING HEALTH CARE SERVICES SHALL BE
REQUIRED TO OBTAIN THE AUTHORIZED SERVICES FROM HEALTH CARE PROFESSIONALS
DESIGNATED BY THE DEPARTMENT. OFFENDERS SHALL NOT BE ALLOWED TO CHOOSE EITHER
THE HEALTH CARE PROFESSIONAL OR THE LOCATION WHERE SUCH SERVICES ARE PROVIDED.

          (C) NO OFFENDER SHALL BE DENIED HEALTH CARE SERVICES BY ANYONE OTHER
THAN A QUALIFIED HEALTH CARE PROFESSIONAL WHO HAS MADE A DETERMINATION, BASED
UPON PROFESSIONAL JUDGEMENT, THAT THE REQUESTED SERVICES ARE NOT APPROPRIATE.

          (D) NO OFFENDER SHALL BE DENIED HEALTH CARE SERVICES DUE TO A LACK OF
SUFFICIENT FUNDS IN THE INMATE TRUST FUND ACCOUNT TO MAKE THE REQUIRED
CO-PAYMENT.

          (E) ALL OFFENDERS WHO HAVE BEEN COMMITTED TO THE DEPARTMENT, BUT WHO
ARE HOUSED IN A COUNTY JAIL, SHALL BE SUBJECT TO THE RULES OF THE COUNTY JAIL
IN WHICH THEY ARE HOUSED. ANY CO-PAYMENT FOR HEALTH CARE SERVICES SHALL BE AS
DETERMINED BY THE RULES OF THE COUNTY JAIL. (Department of Correction; 210 IAC
7-2-1)

210 IAC 7-2-2 COVERED HEALTH CARE SERVICES
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 2. UNLESS SPECIFICALLY EXEMPTED FROM THIS CHAPTER, ALL HEALTH
CARE SERVICES PROVIDED BY THE DEPARTMENT SHALL REQUIRE AN OFFENDER CO-PAYMENT.
CO-PAYMENTS SHALL NOT BE REQUIRED FOR THE FOLLOWING:
          (1) MENTAL HEALTH SERVICES.
          (2) SUBSTANCE ABUSE SERVICES.
          (3) STAFF-INITIATED CONTACTS, SUCH AS THE FOLLOWING:
                      (A) INITIAL HEALTH CARE SCREENINGS.
                      (B) TRANSFER SCREENINGS.
                      (C) ANNUAL OR AGE APPROPRIATE SCREENINGS.
                      (D) WRITTEN REFERRALS FROM ONE (1) HEALTH CARE
                      PROFESSIONAL TO ANOTHER.
                      (E) FOLLOW-UP APPOINTMENTS WITH SPECIALISTS OR DESIGNATED 
                      HEALTH CARE PROFESSIONALS.

          (4) IMMUNIZATIONS AND TESTS, SUCH AS TUBERCULOSIS SKIN TESTS, AND 
          OTHER TREATMENTS INSTITUTED BY THE DEPARTMENT FOR PUBLIC HEALTH 
          REASONS.
          (5) ANCILLARY SERVICES, SUCH AS LAB WORK OR X-RAYS.
          (6) ADMISSION TO A HOSPITAL OR EMERGENCY ROOM SERVICES.
          (7) HEALTH CARE SUPPLIES, SUCH AS THE FOLLOWING:
                      (A) BRACES.
                      (B) STOCKINGS.
                      (C) OSTOMY SUPPLIES.
                      (D) DENTURES.

                                       4
<PAGE>   35

               (E) EYE GLASSES.
          (8) REVIEW OF CHARTS OR MEETINGS WITH OFFENDERS FOR INTER-FACILITY 
TRANSFERS. (Department of Correction; 210 IAC 7-2-2)

210 IAC 7-2-3 AMOUNT OF CO-PAYMENTS
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 3. (A) THE AMOUNTS CHARGED FOR COVERED HEALTH CARE SHALL BE AS
FOLLOWS:
          (1) FOR ALL OFFENDER-INITIATED CONTACT WITH A COVERED HEALTH CARE 
          PROFESSIONAL (INCLUDING PHYSICIANS, NURSES, DENTISTS, OPTOMETRISTS,
          AND SPECIALISTS IN THE MEDICAL, DENTAL, OR OPTOMETRIC FIELDS), FIVE
          DOLLARS ($5) 
          (2) FOR ALL INITIAL PRESCRIPTIONS OF MEDICATIONS OR MEDICATIONS  
          PROVIDED, AT A SINGLE VISIT, WITH THE EXCEPTION OF PSYCHOTROPIC AND  
          NEUROLEPTIC MEDICATIONS, FIVE DOLLARS ($5).

          (B) THERE SHALL BE NO CO-PAYMENT FOR RENEWAL OF CHRONICALLY
PRESCRIBED MEDICATION FOLLOWING THE INITIAL PRESCRIPTION OF THE MEDICATION.
ADDITIONALLY, THERE SHALL BE NO CO-PAYMENT FOR RENEWAL OF MEDICATION THAT IS
PRESCRIBED AS A PART OF A TREATMENT PROGRAM THAT WILL REQUIRE A FOLLOW-UP
EVALUATION REQUESTED BY THE HEALTH CARE SERVICES STAFF. (Department of
Correction; 210 IAC 7-2-3)

210 IAC 7-2-4 REQUEST FOR HEALTH CARE SERVICES; OFFENDER-INITIATED
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 4. (A) ANY OFFENDER MAY REQUEST HEALTH CARE SERVICES AT ANY
TIME. AN OFFENDER SHALL NOT BE DENIED ACCESS TO HEALTH CARE SERVICES DUE TO THE
INABILITY TO MAKE THE REQUIRED CO-PAYMENT. ADDITIONALLY, ONLY HEALTH CARE STAFF
SHALL MAKE THE DECISION THAT AN OFFENDER DOES NOT NEED TO SEE A HEALTH CARE
PROFESSIONAL.

          (B) AN OFFENDER DESIRING TO SEE A HEALTH CARE PROFESSIONAL SHALL
OBTAIN STATE FORM 45913, "REQUEST FOR HEALTH CARE'" FROM A DESIGNATED SOURCE.
THE OFFENDER SHALL COMPLETE THE OFFENDER PORTION OF THE FORM INDICATING THE
TYPE OF REQUEST AND THE NATURE OF THE COMPLAINT OR REQUEST. THE OFFENDER SHALL
BE REQUIRED TO SIGN AND DATE STATE FORM 45913. AN OFFENDER WHO REFUSES TO SIGN
OR DATE STATE FORM 45913 SHALL BE PROVIDED ACCESS TO THE HEALTH CARE STAFF.
THE STAFF PERSON RECEIVING THE FORM SHALL SIGN THE FORM INDICATING THAT THE
OFFENDER REFUSED TO SIGN. REFUSAL TO SIGN THE FORM SHALL NOT PREVENT THE
DEPARTMENT FROM WITHDRAWING THE APPROPRIATE CO-PAYMENT FROM THE OFFENDER'S
INMATE TRUST FUND ACCOUNT.

          (C) IN THE CASE WHERE AN OFFENDER CANNOT COMPLETE STATE FORM 45913
DUE TO ILLITERACY OR PHYSICAL INABILITY, A STAFF PERSON SHALL COMPLETE THE FORM
FOR THE OFFENDER. WHEN A STAFF PERSON COMPLETES

                                       5
<PAGE>   36

THE FORM ON BEHALF OF THE OFFENDER, THE REQUEST SHALL BE CONSIDERED AS AN
OFFENDER-INITIATED REQUEST. THE STAFF PERSON ASSISTING THE OFFENDER SHALL
ENSURE THAT THE OFFENDER PORTION OF STATE FORM 45913 IS COMPLETED AND THAT IT
IS FORWARDED TO THE HEALTH CARE SERVICES STAFF.

          (D) EACH FACILITY SHALL ENSURE THAT SUFFICIENT COPIES OF STATE FORM
45913 ARE AVAILABLE FOR OFFENDER USE.  COPIES OF STATE FORM 45913 SHALL BE MADE
AVAILABLE, AT A MINIMUM, AT THE FOLLOWING LOCATIONS:
          (1) IN CONTROL POSTS, HOUSING UNITS, AND WORK OR PROGRAM ASSIGNMENT
          AREAS; AND 
          (2) THROUGH THE OFFENDER COUNSELORS. 
OFFENDERS SHALL HAVE ACCESS TO THESE FORMS AT ANY TIME.

          (E) UPON COMPLETION OF THE FORM, THE OFFENDER SHALL SUBMIT STATE FORM
45913 IN ACCORDANCE WITH THE ESTABLISHED PROCEDURES OF THE FACILITY. THE STAFF
PERSON RECEIVING THE FORM SHALL ENSURE THAT THE FORM IS FORWARDED TO THE
APPROPRIATE HEALTH CARE SERVICES STAFF AS QUICKLY AS POSSIBLE AND IN ACCORDANCE
WITH FACILITY PROCEDURES.

          (F) HEALTH CARE STAFF SHALL REVIEW THE FORM TO DETERMINE WHETHER IT
IS COMPLETED CORRECTLY AND TO MAKE A PRELIMINARY DETERMINATION AS TO WHAT
ACTION SHALL BE TAKEN. IT THE REQUEST IS DETERMINED TO BE APPROPRIATE, THE
HEALTH CARE STAFF SHALL MAKE THE NECESSARY ARRANGEMENTS TO SEE THE OFFENDER AND
FOLLOW THE APPLICABLE DEPARTMENT PROCEDURES AND HEALTH CARE SERVICES
DIRECTIVES.

          (G) DESIGNATED HEALTH CARE SERVICES STAFF SHALL COMPLETE THE HEALTH
CARE SERVICES STAFF PORTION OF STATE FORM 45913. HEALTH CARE SERVICES STAFF
SHALL INDICATE WHETHER THE PROVIDED SERVICE IS A CO-PAYMENT AUTHORIZED SERVICE
AND SHALL SO INDICATE ON THE FORM. A COPY OF THIS FORM SHALL BE FILED IN THE
OFFENDER'S HEALTH CARE RECORD. IF A CO-PAYMENT IS TO BE CHARGED, THE REMAINING
COPIES OF THE FORM SHALL BE FORWARDED TO FACILITY BUSINESS OFFICE. (Department
of Correction; 210 IAC 7-2-4)

210 IAC 7-2-5 REQUEST FOR HEALTH CARE SERVICES; STAFF-INITIATED
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 5. (A) IN CERTAIN CASES, STAFF MAY DETERMINE THAT AN OFFENDER IS
IN NEED OF SERVICES PROVIDED BY HEALTH CARE PROFESSIONALS. THESE CASES MAY
INCLUDE THOSE TIMES INDICATED IN SECTION 2 OF THIS RULE AND WHEN STAFF FEEL
THAT AN OFFENDER MAY REQUIRE IMMEDIATE OR EMERGENCY CARE.

          (B) WHEN STAFF INITIATE AN OFFENDER'S HEALTH CARE SERVICES CONTACT,
THE STAFF PERSON MAKING THE REQUEST SHALL CONTACT THE FACILITY'S HEALTH CARE
SERVICES STAFF. THE STAFF PERSON SHALL

                                       6
<PAGE>   37

INDICATE THAT THE CONTACT IS STAFF-INITIATED AND EXPLAIN THE APPARENT NEED FOR
THE SERVICES. HEALTH CARE SERVICES STAFF SHALL DETERMINE WHETHER IT WILL BE
NECESSARY FOR THE OFFENDER TO BE SEEN.

          (C) HEALTH CARE SERVICES STAFF SHALL COMPLETE STATE FORM 45913 AT THE
TIME THAT THE SERVICES ARE PROVIDED. THE COMPLETED STATE FORM 45913 SHALL BE
DISTRIBUTED AS NECESSARY. (Department of Correction; 210 IAC 7-2-5)

210 IAC 7-2-6 PAYMENT FOR SERVICES
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 6. (A) THE PROCESSING OF REQUESTS OF CO-PAYMENT SHALL BE DONE ON
THE SAME CYCLE AS COMMISSARY PURCHASES.  HEALTH CARE SERVICES CO-PAYMENTS SHALL
BE POSTED TO THE INMATE TRUST FUND ACCOUNT PRIOR TO THE PROCESSING OF
COMMISSARY ORDERS. WITHDRAWALS FROM THE INMATE TRUST FUND FOR CO-PAYMENT OF
HEALTH CARE SERVICE SHALL BE MADE PRIOR TO ANY OTHER WITHDRAWAL, EXCEPT FOR
THOSE WITHDRAWALS MANDATED BY STATUTE, COURT ORDER, OR DEPARTMENT DISCIPLINARY
ACTIONS. AN OFFENDER SHALL NOT BE AUTHORIZED TO MAKE ANY PURCHASES OR OBTAIN
ANY MONIES FROM THE INMATE TRUST FUND UNTIL SUCH TIME AS ALL OUTSTANDING HEALTH
CARE SERVICES CO-PAYMENTS HAVE BEEN WITHDRAWN FROM THE ACCOUNT.

          (B) AFTER THE REQUESTED SERVICES HAVE BEEN PROVIDED, THE DESIGNATED
HEALTH CARE SERVICES STAFF SHALL ENSURE THAT THE HEALTH CARE STAFF PORTION OF
STATE FORM 45913 IS COMPLETED. HEALTH CARE STAFF SHALL INDICATE WHETHER A
CO-PAYMENT IS REQUIRED AND, IF SO, THE AMOUNT THAT IS TO BE WITHDRAWN FROM THE
OFFENDER'S  ACCOUNT. THE HEALTH CARE SERVICES STAFF PERSON COMPLETING THE FORM
SHALL SIGN AND DATE THE FORM.

          (C) FOLLOWING THE COMPLETION OF THE DESIGNATED PORTION OF STATE FORM
45913, HEALTH CARE SERVICES STAFF SHALL FORWARD THE TWO (2) COPIES OF THE FORM
TO THE FACILITY'S BUSINESS OFFICE, WHEN THE SERVICES REQUIRE AN OFFENDER
CO-PAYMENT. THE FACILITY SHALL DESIGNATE A STAFF PERSON IN THE BUSINESS OFFICE
TO RECEIVE THESE FORMS. THIS PERSON SHALL HAVE ACCESS TO THE INMATE TRUST FUND.

          (D) UPON RECEIPT OF STATE FORM 45913, THE DESIGNATED BUSINESS OFFICE 
STAFF SHALL REVIEW THE FORM AND DETERMINE THE AMOUNT OF CO-PAYMENT THAT IS TO
BE WITHDRAWN FROM THE OFFENDER'S ACCOUNT. FOLLOWING THIS REVIEW, THE BUSINESS
OFFICE STAFF PERSON SHALL REVIEW THE OFFENDER'S INMATE TRUST FUND ACCOUNT. A
DETERMINATION SHALL BE MADE AS TO WHETHER THE OFFENDER HAS SUFFICIENT FUNDS
AVAILABLE IN THE TRUST FUND ACCOUNT TO MAKE THE INDICATED CO-PAYMENT.  IF THERE
ARE SUFFICIENT FUNDS AVAILABLE TO MAKE THE INDICATED CO-PAYMENT, THE STAFF
PERSON SHALL WITHDRAW THAT AMOUNT FROM THE OFFENDER'S ACCOUNT. A NOTATION SHALL
BE MADE ON THE STATE

                                       7
<PAGE>   38

FORM 45913 INDICATING THE AMOUNT WITHDRAWN FROM THE OFFENDER'S ACCOUNT AND THE
DATE. THE STAFF PERSON MAKING THE WITHDRAWAL SHALL SIGN THE FORM. A COPY SHALL
BE RETURNED TO THE OFFENDER AND A COPY FILED IN THE DESIGNATED FILE.

          (E) WHEN A CO-PAYMENT IS REQUIRED AND THE OFFENDER DOES NOT HAVE
SUFFICIENT MONIES IN THE INMATE TRUST FUND, THE STAFF PERSON SHALL PLACE AN
ADMINISTRATIVE HOLD ON THE OFFENDER'S ACCOUNT. THIS HOLD SHALL BE DATED AND
SHALL REMAIN IN EFFECT FOR A PERIOD OF THIRTY (30) DAYS. DURING THE THIRTY (30)
DAY PERIOD, IF THE OFFENDER RECEIVES ANY FUNDS IN THE INMATE TRUST FUND, THE
CO-PAYMENT SHALL BE MADE PRIOR TO ANY OTHER OFFENDER INITIATED WITHDRAWALS AND
THE HOLD RELEASED. THE PAYMENT OF THE HEALTH CARE SERVICES CO-PAYMENT SHALL
TAKE A PRIORITY OVER ANY OTHER WITHDRAWALS FROM THE OFFENDER'S ACCOUNT, EXCEPT
THOSE MANDATED BY STATUTE, COURT ORDER OR DEPARTMENT DISCIPLINARY ACTION.

          (F) IN THOSE CASES WHERE AN OFFENDER DOES NOT RECEIVE SUFFICIENT
FUNDS TO COVER THE CO-PAYMENT WITHIN THE THIRTY (30) DAY PERIOD OF THE HOLD,
THE AMOUNT AVAILABLE IN THE ACCOUNT WILL BE DEDUCTED AND THE HOLD REMOVED FROM
THE ACCOUNT. PRIOR TO THE END OF THE THIRTY (30) DAY HOLD, THE DESIGNATED
BUSINESS OFFICE STAFF PERSON SHALL REVIEW THE OFFENDER'S INMATE TRUST FUND
ACCOUNT TO DETERMINE THE BALANCE OF THE ACCOUNT. IF SUFFICIENT FUNDS ARE NOT
AVAILABLE TO COVER THE ENTIRE COST OF THE HEALTH CARE SERVICES CO-PAYMENT, THE
STAFF PERSON SHALL WITHDRAW WHATEVER AMOUNT IS AVAILABLE IN THE ACCOUNT AND
APPLY IT TOWARD THE CO-PAYMENT. THE AMOUNT DEDUCTED FROM THE OFFENDER'S
ACCOUNT SHALL BE CONSIDERED FULL PAYMENT OF THE HEALTH CARE SERVICES
CO-PAYMENT. AFTER THE THIRTY (30) DAY PERIOD OF THE HOLD, THE HOLD ON THE
ACCOUNT SHALL BE REMOVED AND THE DEBT SHALL BE CONSIDERED RETIRED. THE
FACILITY SHALL NOT GO BEYOND THIRTY (30) DAYS FROM THE DATE OF THE SERVICE IN
ORDER TO TRY TO RECOVER THE CO-PAYMENT. THE FACILITY'S BUSINESS OFFICE OR
DESIGNATED STAFF SHALL BE RESPONSIBLE FOR ENSURING THAT THE HOLD IS REMOVED AT
THE END OF THE THIRTY (30) DAY PERIOD.

          (G) THE DESIGNATED STAFF PERSON SHALL ENSURE THAT THE BUSINESS OFFICE
PORTION OF STATE FORM 45913 IS COMPLETED. THE STAFF PERSON SHALL INDICATE THE
TOTAL AMOUNT OF FUNDS DEDUCTED FROM THE OFFENDER'S ACCOUNT. A COMPLETED COPY OF
THE STATE FORM 45913 SHALL BE RETURNED TO THE OFFENDER AND A COPY FILED IN THE
DESIGNATED FILE. (Department of Correction; 210 IAC 7-2-6)

210 IAC 7-2-7 GRIEVANCES
          AUTHORITY: IC 11-10-3-5
          AFFECTED: IC 11-10-3

          SEC. 7. AN OFFENDER MAY CHALLENGE ANY ORDER FOR HEALTH CARE SERVICES
CO-PAYMENT OR ANY ACTION RELEVANT TO PAYMENT FOR HEALTH CARE SERVICES IN
ACCORDANCE WITH THE PROCEDURES FOR POLICY 00-02-301, "THE OFFENDER GRIEVANCE
PROCESS". (Department of Correction; 210 IAC 7-2-7)

                                       8