Document:

<PAGE>   1
                                                                    EXHIBIT 10.3

                                                             RFS NO.: 329.00-011

                                    CONTRACT
                                  BETWEEN THE
                  STATE OF TENNESSEE, DEPARTMENT OF CORRECTION
                                      AND
                               MHM SERVICES, INC.

         THIS CONTRACT, by and between the State of Tennessee, Department of
Correction, hereinafter referred to as the "State" and MHM SERVICES, INC.
hereinafter referred to as the "Contractor", is for the provision of mental
health services as further defined in the "SCOPE OF SERVICES" below.

         WHEREAS, the State provides mental health services to the inmate
population confined within twenty-one (21) Tennessee correctional facilities. It
is projected that there will be twenty-two (22) TDOC facilities operational by
June 1998. These facilities are located in the East, Middle, and West Regions of
Tennessee and are as follows:
<TABLE>
<S>                                    <C>                                      <C>
                 EAST                               MIDDLE                                    WEST
               REGION 1                            REGION 2                                 REGION 3
        *Brushy Mountain State                *Middle Tennessee                     *Cold Creek Correctional
             Penitentiary                      Reception Center                             Facility
       *Carter County Work Camp          *Nashville Community Service                *Lake County Regional
        *Chattanooga Community                      Center                           Correctional Facility
            Service Center               *Riverbend Maximum Security            *Mark Luttrell Reception Center
     *Knoxville Community Service                Institution                      *Northwest Correction Center
                Center                 *Turney Center Industrial Prison             *Wayne County Boot Camp
        *Morgan County Regional                    and Farm                           *West Tennessee High
          Correctional Center            *Tennessee Prison for Women                   Security Facility
    *Northeast Correctional Center      *Tennessee Correction Academy             *Lauderdale County Facility
      *Southeast Tennessee State          *Tennessee Correctional Work             (ANTICIPATED CONSTRUCTION
     Regional Correctional Facility                 Center                                   1997)
</TABLE>

               REGION 4:     LOIS M. DEBERRY SPECIAL NEEDS
                                      FACILITY

         THEREFORE, the State desires to contract with a vendor(s) who are
capable of providing quality mental health care in a cost effective manner. The
State wishes to reduce the number of contracts so as to improve the continuity
of service delivery throughout the correctional system. The State intends to
award an at-risk capitated rate contract for the services outlined in the Scope
of Services (Section A) below.

         WITNESSETH, in consideration of the mutual promises herein contained,
the parties have agreed and do hereby enter into this Contract according to the
provisions set out herein:

         A.       SCOPE OF SERVICES:

                  1.       GENERAL

                           A.   All mental health services provided under this
                                contract shall be in conformance with ALL TDOC
                                policies as they may be amended from time to
                                time. (Only TDOC Mental Health Policies are
                                attached for the

<PAGE>   2

                                                             RFS No.: 329.00-011

                                convenience of the proposer.) Other TDOC
                                Policies may be reviewed through a coordinated
                                effort with the Department's Central Office.

                                1)       Said policies are available for
                                         review in the historical data and
                                         statistics section of this document.

                                2)       The TDOC shall be responsible for
                                         notifying the Contractor in writing
                                         of any policy changes that will
                                         impact the Contractor.

                                3)       At the institutional level, the
                                         Contractor('s) clinicians shall
                                         administratively respond to the TDOC
                                         Warden or Warden's Designee. Clinical
                                         matters are the sole responsibility
                                         of the licensed psychiatrist/
                                         psychologist. The State's Director of
                                         Mental Health shall assist in the
                                         statewide coordination of services,
                                         monitoring and continuous
                                         developmental aspects of the terms
                                         outlined in this contract.

                           B.   The Contractor's service system shall provide a
                                uniform and consistent continuum of quality
                                mental health service delivery statewide. The
                                Contractor shall work in concert with existing
                                TDOC mental and medical professionals, and
                                other contract entities, if applicable, in
                                providing mental health care.

                           C.   The Contractor shall measure various clinical/
                                programmatic mental health outcomes. At a
                                minimum, the State shall require the Contractor
                                to evaluate response to prescribed psychiatric
                                medications, improvement in mental health
                                status, patient functioning/sense of well-
                                being, etc. The State in a cooperative effort
                                shall assist in the development of additional
                                outcome measures. The Contractor shall abide by
                                the following milestone schedule for the
                                development, standardization, and reporting
                                requirements of the outcome measures.

                                Within 90 days from Contract Execution: The
                                Contractor shall propose in writing to the
                                Director of Mental Health Services draft
                                standardized outcome measures to be utilized
                                regionally/state wide.

                                Within 120 days from Contract Execution: The
                                Contractor shall have revised and developed, in
                                consultation with the Director of Mental Health
                                Services, functional outcome measurement
                                instruments that can be used regionally/state
                                wide. The instruments will be applied and data
                                gathered in such a manner as to allow the
                                collection of both time-series and cross-
                                sectional data. The instruments may vary based
                                upon the treatment objectives and geographical
                                location,(i.e. DeBerry Special Needs Facility)
                                but the instrument must be universal enough to
                                report meaningful information to both the
                                Director of Mental Health Services and the
                                Director of Contracts Administration.

                                Failure to meet these milestones will be
                                considered an incident of non-compliance for
                                each week they are not performed. The mechanism
                                outlined in E.15. "Special Terms and
                                Conditions" may be applied in the event the
                                milestones are not met (See Attachment A).

                                       2
<PAGE>   3

                                                             RFS No.: 329.00-011

                           D.   The Contractor shall adhere to the specific
                                performance measures outlined in Attachment A.
                                The State shall reserve the right to expand
                                upon the performance measures denoted in
                                Attachment A. The State's Director of Mental
                                Health Services may solicit the expertise of
                                the Contractor in the development of any new
                                performance measure(s). The State shall
                                commence the assessment of damages as it
                                relates to performance measures 60 days from
                                the date of contract execution.

                                The Contractor shall report to the Director of
                                Mental Health Services and the Director of
                                Contracts Administration the results of any
                                approved and functional performance/outcome
                                measures. The information will be provided in
                                both electronic and paper formats. The utilized
                                for service delivery comparisons such as, but
                                not limited to, effectiveness of service
                                delivery. During the developmental stage, a
                                distinction will be made as to whether the
                                performance measure is determining the outcome
                                of a specific program intervention or the
                                performance expectation of the contractor.

                           E.   Upon approved written consent, conduct or
                                participate in the development of research
                                studies in conjunction with state and/ or any
                                other professional entity deemed appropriate by
                                the TDOC.

                           F.   The contract providers will actively
                                participate, when applicable, with the State's
                                Quality Assurance/Improvement program as it
                                relates to mental health service delivery.

                           G.   When applicable, the appropriately licensed
                                clinician will provide clinical supervision to
                                psychological internship or practicum students.

                           H.   The TDOC shall, when applicable, provide
                                specialized training for sexual offender
                                treatment programs. The contractor shall follow
                                the program philosophy and design standards as
                                presented by the TDOC.

                           I.   The Contractor shall provide technical
                                assistance to the TDOC Director of Mental
                                Health Services in developing a standard anger
                                mmanagement/violent offender treatment program
                                that is to be implemented at selected TDOC
                                sites. Implementation date and treatment sites
                                to be determined.

                           J.   The Contractor shall designate an individual
                                with the overall responsibility for this
                                contract. This person shall be available to
                                consult and coordinate service delivery with
                                the State's Director of Mental Health and/or
                                other designated state officials.

                           K.   When required, the Contractor shall enter
                                specific service delivery information into the
                                Tennessee Offender Management Information
                                System (TOMIS). Training and access to
                                equipment shall be provided by the TDOC.

                           L.   The Contractor shall insure adequate backup
                                coverage to address the clinical service needs
                                of any TDOC facility.

                                       3
<PAGE>   4

                                                             RFS No.: 329.00-011

                  2.       PSYCHIATRIC SERVICES

                           A.   Psychiatric services shall be provided by
                                licensed physicians who are board eligible or
                                board certified in psychiatry. Standards of
                                practice shall be according to those of the
                                community and in compliance with state and
                                federal laws.

                           B.   Evaluate and diagnose in accordance with the
                                current DSM criteria those inmates referred by
                                the Mental Health Treatment Team or other
                                health care staff.

                           C.   Complete psychiatric evaluations/assessments as
                                necessary and provide an individual treatment
                                plan specific for those patients requiring
                                psychiatric intervention to include medication.

                           D.   Patients shall have a documented physical
                                assessment prior to the prescribing of a
                                psychotropic medication.

                           E    Provide that all medications shall be reviewed,
                                and orders renewed if necessary, at least every
                                thirty days as specified by policy.

                           F.   Patients receiving psychiatric medications
                                shall receive a direct assessment from a
                                psychiatrist prior to ninety (90) days
                                elapsing.

                           G.   Prescribe only those medications approved in
                                the TDOC's formulary, unless otherwise approved
                                as TDOC procedure dictates.

                           H.   Provide consultation to mental health service
                                staff and administrative staff and participatein
                                the treatment team reviews when clinically
                                necessary.

                           I.   Provide accessibility for twenty-four (24)
                                hours per day, seven (7) days per week per
                                calendar year emergency consultation with the
                                mental health and health care staff. Such
                                availability may be by telephone unless
                                circumstances necessitate on-site delivery.

                           J.   Provide a direct assessment to a patient within
                                72 hours from the time a telephone order was
                                given for cases involving restrictive
                                therapeutic dispositions.

                           K.   Provide clinical recommendations/consultations
                                and coordination of patient referrals to other
                                specialized TDOC programs, or designated
                                contract hospitals. The contractor(s) must
                                secure appropriate privileges at the designated
                                hospital to provide services if required. Said
                                services may be provided in a written format
                                and/or visual presentation, role play,
                                teleconferencing medium, etc.

                           L.   Provide an appropriate level of psychiatric
                                monitoring of patients requiring psychotropic
                                medication intervention.

                           M.   When applicable, provide or assist in the
                                provision of a mental health education program
                                to other institutional staff that shall
                                include, but not be limited to, the following:

                                       4
<PAGE>   5

                                                             RFS No.: 329.00-011

                               (1)       Early detection of potential mental
                                         health problems, i.e., signs and
                                         symptoms of mental illness,
                                         retardation, and chemical dependency.

                               (2)       Crisis intervention/suicide precaution
                                         programs.

                               (3)       Said services may be provided in a
                                         written format, audio/visual
                                         presentation, role play,
                                         teleconferencing medium, etc.

                  3.       PSYCHOLOGICAL SERVICES

                           A.   The delivery of doctoral level psychological
                                services shall be provided by psychologists with
                                health service provider designation who are
                                licensed by the State of Tennessee or who have
                                legal reciprocity to practice in the state of
                                Tennessee. Standards of practice shall be
                                according to those of the community and with
                                State and Federal laws.

                           B.   Evaluate and diagnose in accordance with the
                                current DSM criteria those inmates referred by
                                the Mental Health Treatment Team or other health
                                care staff.

                           C.   Complete psychological evaluations/assessments
                                as necessary and provide an individual
                                treatment plan specific for those patients
                                requiring psychological intervention(s).

                           D.   When clinically programmatically deemed
                                appropriate, provide individual and/or group
                                therapy/consultation.

                           E.   Participate in the treatment team reviews when
                                necessary.

                           F.   Be responsible for twenty-four (24) hours per
                                day, seven (7) days per week per calendar year
                                emergency consultation with the health care or
                                other mental health staff. Such availability may
                                be by telephone unless circumstances necessitate
                                on-site delivery.

                           G.   Provide clinical recommendations and
                                coordination of referrals of patients to DeBerry
                                Special Needs Facility or other specialized TDOC
                                treatment units.

                           H.   Provide clinical supervision and/or consultation
                                to institutional psychological examiner(s),
                                mental health program specialist(s), alcohol and
                                drug counselors, and health care staff.

                           I.   The Contractor shall provide or assist in the
                                provision of mental health education programs to
                                other institutional staff that shall include but
                                not be limited to the following:

                               (1)       Early detection of potential mental
                                         health problems, i.e., signs and
                                         symptoms of mental illness,
                                         retardation, and chemical dependency.

                               (2)       Crisis intervention/suicide precaution
                                         programs.

                                       5
<PAGE>   6
                                                             RFS No.: 329.00-011

                               (3)       Provide consultation supervisory
                                         services to mental health staff
                                         involved in special programs. Said
                                         services may be provided in a written
                                         format and/or visual presentation,
                                         role play, teleconferencing medium,
                                         etc.

                           J.   Complete the initial thirty (30) and ninety (90)
                                day mental health staff health assessments on
                                specially segregated inmates as policy dictates.
                                Review findings documented by other licensed
                                professionals.

                           K.   Provide psychological evaluations upon the
                                request of the Board of Paroles.

                           L.   Provide psychological evaluations to all newly
                                hired correctional officer/probation officers
                                with the Tennessee Department of Corrections.
                                Said evaluations shall be,

                                1)       Centrally provided at the Tennessee
                                         Correctional Academy located in
                                         Tullahoma, Tennessee. The TDOC may, in
                                         the future decentralize the evaluation
                                         process.

                                2)       The test battery shall minimally
                                         consist of the MMPI II, but may include
                                         the IPI and a stress management
                                         inventory. Equivalent assessment
                                         measures/inventories may be utilized as
                                         clinically deemed appropriate.

                                3)       The Contractor may utilize
                                         psychological examiners who are
                                         licensed in the State of Tennessee to
                                         assist in providing psychological
                                         evaluations to all newly hired
                                         correctional officers/probation
                                         officers employed with the Tennessee
                                         Department of Correction. Standards of
                                         practice shall be in accordance to
                                         those of the community and with state
                                         and federal laws.

         B.       PAYMENT TERMS AND CONDITIONS:

                  1.       The Contractor shall be compensated based upon the
                           capitated rates as follows:

                           Capitated Annual Rate

                                    July 1997 - December 1997         $129.94

                                    January 1998 - December 1998      $133.19

                                    January 1999 - December 1999      $136.52

                                    January 2000 - December 2000*     $139.93

                                    January 2001 - December 2001*     $143.43

                           * Option Years

                           Each month, the State will provide information to the
                           Contractor regarding inmate population. The
                           Contractor will use TDOC's information to prepare its
                           monthly invoice to the State.

                                       6
<PAGE>   7

                                                             RFS No.: 329.00-011

                  2.       The Capitated Rate in Paragraph 1 of this Section,
                           shall constitute the entire compensation due the
                           Contractor for the Service and all of the
                           Contractor's obligations hereunder regardless of the
                           difficulty, materials or equipment required. The
                           Capitated Rate include, but are not limited to, all
                           applicable taxes, fees, overheads, profit and all
                           other direct and indirect costs incurred or to be
                           incurred, by the Contractor. The cost of medications
                           issued from Central Pharmacy will be deducted from
                           the Capitated Rate Payment.

                  3.       The Capitated Rates in Paragraph 1 of this Section
                           are firm for the duration of the Contract and are
                           not subject to escalation for any reason, unless
                           amended. In the event of changes in the anticipated
                           scope of services, governmental regulations or other
                           circumstances, the State or the Contractor may
                           submit a written request for amendment. If, within
                           thirty (30) days thereafter the parties are unable
                           in good faith to negotiate satisfactory
                           modifications, the party submitting the request may
                           terminate this Contract by giving sixty (60) days
                           notice.

                  4.       The Contractor shall submit all invoices, in a form
                           acceptable to the State with all of the necessary
                           supporting documentation, prior to any reimbursement
                           of allowable costs.

                  5.       The Payment of an invoice by the State shall not
                           prejudice the State's right to object to or question
                           any invoice or matter in relation thereto. Such
                           payment by the State shall neither be construed as
                           acceptance of any part of the work or service
                           provided nor as an approval of any of the costs
                           invoiced therein. Contractor's invoice shall be
                           subject to reduction for amounts included in any
                           invoice or payment theretofore made which are
                           determined by the State, on the basis of audits
                           conducted in accordance with the terms of this
                           contract, not to constitute allowable costs. Any
                           payment shall be reduced for over-payments, or
                           increased for under-payments on subsequent invoices.

                  6.       The State reserves the right to deduct from amounts
                           which are or shall become due and payable to the
                           Contractor under this or any contract between the
                           parties any amounts which are or shall become due
                           and payable to the State by the Contractor.

                  7.       In no event shall the maximum liability to the State
                           under this contract exceed SEVEN MILLION FOUR
                           HUNDRED SEVENTY-THREE THOUSAND THREE HUNDRED FOUR
                           DOLLARS ($7,473,304.00).

                  8.       The Contractor shall complete and sign an
                           "Authorization Agreement for Automatic Deposits (ACH
                           Credits) Form". This form shall be provided to the
                           Contractor by the State. Once this form has been
                           completed and submitted to the State by the
                           Contractor, all payments to the Contractor, under
                           this or any other contract the Contractor has with
                           the State, shall be made through the State's
                           Automated Clearing House wire transfer system. The
                           Contractor shall not commence work or invoice the
                           State for services until he has completed this form
                           and submitted it to the State. The debit entries to
                           correct errors authorized by the "Authorization
                           Agreement for Automatic Deposits Form" shall be
                           limited to those errors detected prior to the
                           effective date of the credit entry. The remittance
                           advice shall note that a correcting entry was made.
                           All corrections shall be made within two banking
                           days of the effective date of the original
                           transaction. All other errors detected at a later
                           date shall take the form of a

                                       7

<PAGE>   8
                                                             RFS No.: 329.00-011

                           refund, or in some instances, a credit memo if
                           additional payments are to be made

         C.       TERM:

                  This Contract shall be effective for a period of 36 months,
                  commencing on July 1, 1997 and ending on June 30, 2000. The
                  State shall have no obligation for services rendered by the
                  Contractor which are not performed within the specified
                  period. The State shall have the option to renew the contract
                  for two additional one (1) year periods.

         D.       STANDARD TERMS AND CONDITIONS:

                  l.       The State is not bound by this Contract until it is
                           executed by the appropriate parties and is approved
                           by the appropriate State officials as indicated on
                           the signature page of this Contract.

                  2.       This Contract may be modified only by a written
                           amendment which has been executed and approved by the
                           appropriate state officials as indicated on the
                           signature page of this Contract.

                  3.       The State may terminate this Contract by giving the
                           Contractor at least sixty (60) calendar days written
                           notice before the effective termination date. The
                           Contractor shall be entitled to receive equitable
                           compensation for satisfactory authorized services
                           completed as of termination date. Said termination
                           shall not be deemed a breach of contract.

                  4.       If the Contractor fails to properly perform its
                           obligations under this Contract or violates any terms
                           of this Contract, the State shall have the right to
                           immediately terminate the Contract and withhold
                           payments in excess of fair compensation for completed
                           services. The Contractor shall not be relieved of
                           liability to the State for damages sustained by the
                           virtue of any breach of this Contract by the
                           Contractor.

                  5.       The Contractor shall not assign this Contract or
                           enter into a subcontract for any of the services
                           performed under this Contract without obtaining the
                           prior written approval of the State. If such
                           subcontracts are approved by the State, they shall
                           contain, at a minimum, Paragraphs D.6 and D.8 of this
                           Contract.

                  6.       The Contractor warrants that no part of the total
                           Contract amount shall be paid directly or indirectly
                           to any employee or official of the State of Tennessee
                           as wages, compensation, or gifts in exchange for
                           acting as officer, agent, employee, subcontractor, or
                           consultant to the Contractor in connection with any
                           work contemplated or performed relative to this
                           Contract.

                  7.       The Contractor shall maintain documentation for all
                           charges against the State under this Contract. The
                           books, records, and documents of the Contractor,
                          insofar as they relate to work performed or money
                           received under this Contract, shall be maintained for
                           a period of three (3) full years from the date of the
                           final payment, and shall be subject to audit, at any
                           reasonable time and upon reasonable notice, by the
                           State agency or the Comptroller of the Treasury, or

                                       8
<PAGE>   9

                                                             RFS No.: 329.00-011

                           their duly appointed representatives. The Financial
                           Statements shall be prepared in accordance with
                           generally accepted accounting principles.

                  8.       No person on the ground of handicap or disability,
                           age, race, color, religion, sex, national origin, or
                           any other classification protected by Federal and/or
                           Tennessee State constitutional and/or statutory law
                           shall be excluded from participation in, or be denied
                           benefits of, or be otherwise subjected to
                           discrimination in the performance under this
                           Contract, or in the employment practices of the
                           Contractor. The Contractor shall, upon request show
                           proof of such non- discrimination, and shall post in
                           conspicuous places, available to all employees,
                           applicants, visitors and offenders notices of
                           non-discrimination.

                  9.       The Contractor, being an independent Contractor,
                           agrees to carry adequate public liability and other
                           appropriate forms of insurance. The Contractor shall
                           show proof of such insurance coverage.

                 10.       The Contractor agrees to pay all taxes incurred in
                           the performance of this Contract.

                 11.       The State shall have no liability except as
                           specifically provided in the Contract.

                 12.       The Contractor shall comply with all applicable
                           Federal and State laws and regulations in the
                           performance of this Contract.

                 13.       This Contract shall be governed by laws of the State
                           of Tennessee.

         E.       SPECIAL TERMS AND CONDITIONS:

                  l.       Should any of these special terms and conditions
                           conflict with any other terms and conditions of this
                           Contract, these special terms and conditions shall
                           control.

                  2.       Where a term in the Contract differs from the RFP
                           and/or the proposal, the Contract shall rule. Where
                           a term in the RFP differs from the proposal, the RFP
                           shall rule.

                  3.       The Contractor shall maintain confidentiality of all
                           records in acceptance with state and federal law; and
                           TDOC policy.

                  4.       This Contract and any extension of the terms of this
                           Contract are subject to appropriation and
                           availability of State and/or Federal funds. In the
                           event that the funds are not appropriated or are
                           otherwise unavailable, the State reserves the right
                           to terminate this Contract upon written notice to the
                           Contractor. Upon receipt of the written notice, the
                           Contractor shall cease all work associated with the
                           Contract. Should such an event occur, the Contractor
                           shall be entitled to compensation for all authorized
                           services satisfactorily completed as of the
                           termination date.

                  5.       Upon expiration or early termination of this
                           Contract, the Contractor agrees to cooperate with
                           any treatment successor to effect an orderly and
                           therapeutically efficient transition for those
                           patients actively receiving care.

                  6.       The Contractor agrees to indemnify and hold harmless
                           the State as well as its officers, agents and
                           employees from all claims, losses or suits accruing
                           or

                                       9
<PAGE>   10
                                                             RFS No.: 329.00-011

                           resulting to any person, firm, corporation or other
                           entity which may be injured or damaged as a result of
                           acts or omissions of the Contractor relating to this
                           Contract. The State shall give the Contractor written
                           notice of each such claim or suit and full right and
                           opportunity to conduct the Contractor's own defense.

                  7.       The sovereign immunity of the State shall not apply
                           to the Contractor nor any subcontractor, agent,
                           employee, or insurer of the Contractor. Neither
                           Contractor nor any subcontractor, agent, employee, or
                           insurer of the Contractor may plead the defense of
                           sovereign immunity in any action arising out of the
                           performance or failure to perform any responsibility
                           or duty under this Contract.

                  8.       The Contractor shall be responsible for the correct
                           use, maintenance and protection of all equipment
                           furnished by the State under this Contract. Upon
                           termination of this Contract, all equipment furnished
                           shall be returned to the State in good order and
                           condition as when received, reasonable use and wear
                           thereof excepted. Should the equipment be destroyed,
                           lost or stolen, the Contractor shall be responsible
                           to the State for the residual value of the equipment
                           at the time of loss.

                  9.       The Contractor shall document mental health services
                           provided utilizing an approved TDOC format. The
                           Contractor in concert with TDOC institutional staff
                           shall enter service codes into the Tennessee Offender
                           Management Information System (TOMIS). This automated
                           process shall serve as a data collection mechanism
                           for each contract provider.

                 10.       The Contractor shall submit to the institutional
                           Warden or Warden's designee a hard copy of their TDOC
                           Services Provided Encounter Log as supporting
                           documentation.

                 11.       If requested by the State, the Contractor must agree
                           to random background checks which shall include
                           fingerprinting by the State's internal affairs
                           department. If requested by the State, the Contractor
                           must submit copies of driver's licenses and/or social
                           security cards to be on file with the State. If
                           background checks are requested, such checks shall be
                           at the expense of the Contractor. Results of such
                           checks shall be provided to the State.

                 12.       The Contractor shall at all times honor the security
                           of the TDOC Tennessee Offender Management Information
                           System (TOMIS) information and shall not misuse,
                           abuse, alter, or attempt to alter the information
                           contained within TOMIS, except as pertains to the use
                           and data entry requirements necessary to fulfill the
                           Contractor's obligations under the terms of this
                           Contract.

                 13.       The Contractor shall be duly licensed to conduct
                           business within the State of Tennessee.

                 14.       The Contractor shall establish a performance bond in
                           the amount of $100,000.00 for regional contracts or
                           $400,000.00 for a statewide contract. Said
                           performance bond shall be in the form of a bond
                           issued by an insurance company or other reputable
                           bonding agent that is acceptable to the State. The
                           following shall be the contractual terms controlling
                           this performance bond.

                           a.   Said performance bond shall be in force for the
                                duration of the Contract.

                                       10
<PAGE>   11
                                                             RFS No.: 329.00-011

                           b.   Should the State terminate this Contract
                                under Section D.3., the Contractor shall
                                continue to fully provide the services required
                                under this Contract during the sixty (60) day
                                termination period as provided by Section D.6.
                                of this Contract in its entirety.

                           c.   Should the Contractor fail to provide these
                                services during the sixty (60) day termination
                                period, then the State shall be entitled to
                                recover actual damages against the performance
                                bond.

                  15.      The State's Director of Mental Health and Director of
                           Contracts Administration shall review mental health
                           performance/outcome measures to determine compliance,
                           effectiveness and quality of service delivery. If
                           services designated to the Contractor are deemed
                           non-compliant, the State's Directors shall submit to
                           the Contractor a written warning citing the specific
                           non-compliant issue(s). If upon reinspection the
                           non-compliant item(s) remain deficient, a stipulated
                           liquidated damages value shall be assessed per
                           non-compliant item(s) for the reporting period
                           identified (See Attachment A). The contractor's
                           payment shall be reduced by the amount of accumulated
                           liquidated damages within thirty (30) days from the
                           point of receiving the second written notice.

                 16.       Prior to the end of the first contract year, the
                           Contractor shall submit for TDOC approval a mental
                           health service delivery recommendation plan. The plan
                           shall be prepared with the assistance of the State's
                           Director of Mental Health. The plan should include a
                           method for determining the types and levels of
                           service needs; a method for determining resource
                           needs; alternative service technology; etc. Upon
                           approval of the plan, the state then reserves the
                           right to renegotiate the Contract provisions with the
                           existing Contractor.

                 17.       The parties agree that due to the complicated nature
                           of the Contractor's obligations under this Contract,
                           it would be difficult to specifically designate a
                           monetary amount for a breach by Contractor designated
                           in Attachment A as said amounts are likely to be
                           uncertain and not easily proven. Contractor hereby
                           represents and convenants that it has carefully
                           reviewed the liquidated damages contained in
                           Attachment A and agree that said amounts are the
                           liquidated damages resulting from agreement between
                           the parties, represent a reasonable relationship
                           between the amount and what might reasonably be
                           expected in the event of breach, and are a reasonable
                           estimate of the damages that would occur from a
                           breach.

                 18.       It is hereby agreed between the parties that the
                           liquidated damages represent solely the damages and
                           injuries sustained by the State in losing the benefit
                           of the bargain with Contractor and do not include any
                           injury or damage sustained by a third party and
                           Contractor agrees that the liquidated damage amount
                           is in addition to any amounts the Contractor may owe
                           the State pursuant to the indemnity provision
                           contained in Section E (6) or otherwise.

                 19.       The State may continue to withhold the liquidated
                           damages or a portion thereof until the Contractor
                           cures the breach or the State terminates the
                           Contract.

                 20.       The State is not obligated to assess liquidated
                           damages before availing itself of any other remedy.

                                       11
<PAGE>   12

                                                             RFS No.: 329.00-011

                 21.       The State agrees to provide Contractor thirty (30)
                           days notice to cure in the event Contractor fails to
                           properly perform its obligations under this Contract
                           or violates any terms of this Contract.

                 22.       The State may choose to discontinue liquidated
                           damages and avail itself of any other remedy
                           available under this Contractor or at law or equity;
                           provided, however, Contractor shall receive a credit
                           for said liquidated damages previously withheld.

                 23.       The Contractor shall not publish any outcomes based
                           on data obtained from the operation of this Contract
                           without prior written consent of the TDOC.

                 24.       The Contractor shall be responsible for the costs of
                           all medications prescribed by the Contractor's
                           providers and said costs shall be a part of the
                           capitated rate. The TDOC will forward to the
                           Contractor a monthly statement itemizing the drugs
                           prescribed by the Contractor's providers and
                           detailing the direct deductions made from the
                           Contractor's payments. The Contractor's providers
                           shall utilize the TDOC formulary for the purpose of
                           prescribing medications. The TDOC central pharmacy
                           shall be responsible for packaging and distribution
                           of psychopharmacological prescriptions. Provided
                           that, with the consent of TDOC, Contractor, at its
                           own cost, may utilize other reasonable alternatives
                           for purchasing, packaging and distribution of
                           psychopharmacological prescriptions, provided that
                           the TDOC pharmacy first shall be given the
                           opportunity to match any alterative proposal for the
                           purchase, packaging and distribution of
                           psychopharmacological prescriptions which Contractor
                           is considering.

                 25.       TDOC may delegate or authorize other parties in
                           writing to perform any of the services or functions
                           specified in this contract as being the
                           responsibility of TDOC. TDOC may, upon written notice
                           to the contractor, delegate or authorize the services
                           of functions to be performed by another party.

                 26.       The State may require the Contractor to modify
                           staffing provisions if, upon review, the provisions
                           of services are deemed unacceptable in meeting the
                           clinical or program needs at any given TDOC facility.

                 27.       The Contract shall be governed by the laws of the
                           State of Tennessee. Any legal proceedings against the
                           State regarding this Contract shall be brought in the
                           State of Tennessee administrative or judicial forum.
                           Request shall be in Davidson County, Tennessee.

                                       12
<PAGE>   13
                                                             RFS No.: 329.00-011

MHM SERVICES, INC.

BY: /s/ MIKE PINKERT
   -----------------------------                               ----------
   MIKE PINKERT, PRESIDENT                                       DATE
        FED I. D. NO.  521223048
                   -----------------

STATE OF TENNESSEE
DEPARTMENT OF CORRECTION

BY: /s/ DONAL CAMPBELL                                          7/2/97
    -----------------------------                              ---------
    DONAL CAMPBELL, COMMISSIONER                                 DATE

APPROVED:
TENNESSEE DEPARTMENT OF FINANCE AND ADMINISTRATION

BY: /s/ JOHN D. FERGUSON     RR                                JUL 11 1997
   ------------------------------                              -----------
   JOHN D. FERGUSON, COMMISSIONER                                 DATE

APPROVED:
COMPTROLLER OF THE TREASURY

BY:/s/ WILLIAM R. SNODGRASS                                      7-15-97
    -----------------------------                              ------------
     WILLIAM R. SNODGRASS, COMPTROLLER                             DATE

                                       13
<PAGE>   14
                            [STATE OF TENNESSEE SEAL]

                               STATE OF TENNESSEE
                            DEPARTMENT OF CORRECTION
                         4TH FLOOR RACHEL JACKSON BLDG.
                             320 SIXTH AVENUE NORTH
                        NASHVILLE, TENNESSEE 37243-0465

October 6, 1998

Mr. Mike Pinkert, President
MHM Services, Inc.
8000 Towers Crescent Drive
Suite 810
Vienna, Virginia 22182

Dear Mr. Pinkert:

RE:      Contract Amendment No. 2
         between the State of Tennessee, Department of Correction
         and MHM Services, Inc.
         CONTRACT NO.: FA-98-12426-02

Enclosed is your fully executed copy of the amendment to the contract between
the State of Tennessee, Department of Correction, and MHM Services, Inc.

Thank you for your continued interest in providing services for the Tennessee
Department of Correction.

Sincerely,

/s/ LORRAINE M. REA

Lorraine M. Rea
Administrative Services Assistant 3

Enclosure (1)

pc:      Bill Dalton, Assistant Commissioner
         Fred Hix, Director of Budget/Fiscal
         Ray Register, Director/Contracts Administration
         Lenny Lococo, Director/Mental Health Services

<PAGE>   15

                                 AMENDMENT TWO
                           TO CONTRACT FA-98-12426-00

                        BETWEEN THE STATE OF TENNESSEE,
                            DEPARTMENT OF CORRECTION
                                      AND
                               MHM SERVICES, INC.

This Contract, by and between the State of Tennessee, Department of Correction,
hereinafter referred to as the State, and MHM Services, Inc., hereinafter
referred to as the Contractor, is hereby amended as follows:

1.       Delete following Section in its entirety:

         B.1.     The Contractor shall be compensated based upon the capitated
                  rates as follows:

                  Capitated Annual Rate

                        July 1997  - December 1997                    $129.94

                        January 1998 - December 1998                  $133.19

                        January 1999 - December 1999                  $136.52

                        January 2000 - December 2000*                 $139.93

                        January 2000 - December 2001*                 $143.43

                  * Option Years

                  Each month, the State will provide information to the
                  Contractor regarding inmate population. The Contractor will
                  use TDOC's information to prepare its monthly invoice to the
                  State.

and insert the following in its place:

         B.l.     The Contractor shall be compensated based upon the annual
                  fixed capitated rate times the projected inmate population,
                  plus the annual variable capitated rate times the actual
                  inmate population. This sum shall be divided by 12 (twelve) to
                  adjust for monthly payments. The Projected Inmate Population
                  and the Annual Capitated Rates are as follows:

<TABLE>
<CAPTION>
                                                                Annual       Annual      Total
                                                 Projected      Fixed       Variable     Annual
                                                  Inmate       Capitated   Capitated    Capitated
                  Period                         Population      Rate         Rate        Rate
                  ------                         ----------      ----         ----        ----

<S>                                              <C>          <C>          <C>        <C>
                  Jun/97-Dec/97                  14,406        $96.86       38.92      $135.78

                  Jan/98-Dec/98                  15,482        $99.28       39.89      $139.17

                  Jan/99-Dec/99                  15,946       $101.76       40.89      $142.65

                  Jan/00-Dec/00*                 16,425       $104.31       41.91      $146.22

                  Jan/01-Jun/01*                 16,916       $106.92       42.96      $149.88

                  *Option Years
</TABLE>

<PAGE>   16

                  Each month, the State will provide information to the
                  Contractor regarding inmate population. Any excess of the
                  actual inmate population over the projected inmate population
                  shall require the negotiation of a new capitated rate and an
                  amendment to this contract. The Contractor will use TDOC's
                  information to prepare its monthly invoice to the State.

         2.     Delete following Section in its entirety:

                  B.7.     In no event shall the maximum liability of the State
                           under this Contract exceed SEVEN MILLION FOUR HUNDRED
                           SEVENTY-THREE THOUSAND THREE HUNDRED FOUR DOLLARS
                           ($7,473,304.00).

                and insert the following in its place:

                  B.7.     In no event shall the maximum liability of the State
                           under this Contract exceed SIX MILLION SIX HUNDRED
                           EIGHT THOUSAND ONE HUNDRED EIGHTY-TWO DOLLARS
                           ($6,608,181.00).

         3.     Delete following Section in its entirety:

                  E.24.    The Contractor shall be responsible for the costs of
                           all medications prescribed by the Contractor's
                           providers and said costs shall be a part of the
                           capitated rate. The TDOC will forward to the
                           Contractor a monthly statement itemizing the drugs
                           prescribed by the Contractor's providers and
                           detailing the direct deductions made from the
                           Contractor's payments. The Contractor's providers
                           shall utilize the TDOC formulary for the purpose of
                           prescribing medications. The TDOC central pharmacy
                           shall be responsible for packaging and distribution
                           of psychopharmacological prescriptions. Provided
                           that, with the consent of TDOC, Contractor, at its
                           own cost, may utilize other reasonable alternatives
                           for purchasing, packaging and distribution of
                           psychopharmacological prescriptions, provided that
                           the TDOC pharmacy first shall be given the
                           opportunity to match any alternative proposal for the
                           purchase, packaging and distribution of
                           psychopharacological prescriptions which Contractor
                           is considering.

                and insert the following in its place:

                  E.24.    The Contractor shall be responsible for the costs of
                           all medications prescribed by the Contractor's
                           providers and said costs shall be a part of the
                           capitated rate. The TDOC will forward to the
                           Contractor a monthly statement itemizing the drugs
                           prescribed by the Contractor's providers and
                           detailing the direct deductions made from the
                           Contractor's payments. The Contractor's providers
                           shall utilize the TDOC formulary for the purpose of
                           prescribing medications. The TDOC central pharmacy
                           shall be responsible for packaging and distribution
                           of psychopharmacological prescriptions.

         The other terms and conditions of this Contract not amended hereby
         shall remain in full force and effect.
<PAGE>   17

IN WITNESS WHEREOF:
MHM SERVICES, INC.:

/s/ MIKE PINKERT                                                DATE: 8/17/98
----------------------------------                                    --------
Mike Pinkert, President

DEPARTMENT OF CORRECTION:

/s/ DONAL CAMPBELL                                              DATE: 8/18/98
----------------------------------                                    --------
Donal Campbell, Commissioner

APPROVED:

DEPARTMENT OF FINANCE AND ADMINISTRATION:

/s/   JOHN D. FERGUSON                                          DATE: 9/4/98
----------------------------------                                    --------
John D. Ferguson, Commissioner

COMPTROLLER OF THE TREASURY:

/s/ WILLIAM R. SNODGRASS                                        DATE: 9/15/98
----------------------------------                                    --------
 William R. Snodgrass, Comptroller<PAGE>   1
                                                                    EXHIBIT 10.4

                  AGREEMENT TO PROVIDE MENTAL HEALTH SERVICES

                                    BETWEEN

                          PRISON HEALTH SERVICES, INC.

                                      AND

                        MHM CORRECTIONAL SERVICES, INC.

         THIS AGREEMENT, effective April 1, 1999, is by and between PRISON
HEALTH SERVICES, INC., a Delaware corporation (hereinafter "PHS"), and MHM
CORRECTIONAL SERVICES, INC., a Delaware corporation (hereinafter "MHM").

                                    RECITALS

A.       PHS is under contract to the Florida Department of Correction
         (hereinafter the "Client"), to provide comprehensive medical, dental
         and mental health and psychiatric services according to the terms and
         conditions of such contract and the other Contract Documents (as
         defined therein) (collectively, the "Contract") to offenders under the
         jurisdiction of the Client at the Broward Correctional Institute
         ("Site"). A copy of the Contract is attached hereto and made a part of
         this Agreement by reference. The Contract and this Agreement shall be
         taken as a whole in interpreting the agreement of the parties, but to
         the extent of any conflict or inconsistency, the priority of
         determining resolution of such conflict or inconsistency shall be as
         set forth in the Contract, with this Agreement being last. All
         capitalized terms used but not otherwise defined herein shall have the
         meanings given for such terms in the Contract. The Contract determines
         the effective date of this Agreement.

B.       MHM is authorized to do business in the State of Florida and has, or
         will acquire, the professional expertise and require its employees to
         maintain all requisite professional licenses to provide the psychiatric
         and mental health and psychiatric and mental health services required
         under the Contract.

C.       PHS wishes to utilize the services of MHM and, correspondingly, MHM
         wishes to provide such services on behalf of PHS to satisfy the
         obligations to provide psychiatric and mental health services required
         under the Contract.

         NOW, THEREFORE, in consideration of the foregoing and of the
covenants and agreements contained herein, PHS and MHM do hereby agree as
follows:

1.       PHS' UTILIZATION OF MHM'S SERVICES. For the term of this Agreement, PHS
         will utilize the MHM for the provision of psychiatric and mental health
         services to each offender included under the Contract and the Contract
         Documents, defined as the RFP, the PHS response to the RFP and any
         laws, regulations or policies referred in the RFP.

2.       TERM OF THIS AGREEMENT. This Agreement shall be for the term of the
         Contract Term under the Contract; provided, however, that this
         Agreement may be terminated in accordance with the
<PAGE>   2

         provisions hereof. PHS may terminate this agreement on one hundred
         eighty (180) days written notice without cause or shall end on the date
         the Contract is terminated.

3.       EXTENT OF SERVICE. During the term of this Agreement, MHM agrees to
         provide the psychiatric and mental health services required by the
         Client as more specifically described in the Contract (more
         particularly described on pages 15-17 [subsections w-ac]of the
         Contract, but MHM will be responsible for all requirements under the
         Contract which may relate to mental health such as, but not limited to,
         SOAP format medical records), as the Contract may be amended or
         modified from time to time by mutual agreement of PHS and the Client
         pursuant to the terms of the Contract. In the event of a modification
         of the Contract affecting psychiatric and mental health services, this
         Agreement may be subject to corresponding modification as mutually
         agreed by the parties. Any failure by MHM to provide the psychiatric
         and mental health services in accordance with this Agreement shall be
         deemed a breach of this Agreement. This Agreement shall only be
         effective if the Contract is effective.

         MHM agrees that the psychiatric and mental health services will be
         provided by qualified, trained and licensed psychiatric and mental
         health staff appropriate and qualified to perform the same. All
         providers, employees and psychiatric and mental health staff of MHM
         shall satisfy all qualifications and other requirements and shall be
         subject to all background checks and performance standards and other
         terms and conditions set forth in the Contract applicable to PHS
         employees. PHS shall receive copies of all applications received from
         persons who are retained by MHM to perform services under the Contract
         and this Agreement and shall have access to all materials relating to
         the credentials of such applicants.

         The credentialing process of MHM must be satisfactory to PHS, and if it
         is not satisfactory, PHS shall require that such providers complete its
         credentialing process. MHM shall not hire or retain a person if PHS
         determines that the person's credentials are insufficient or that the
         person's prior contacts with the Client have been unsatisfactory.

         MHM further agrees to recruit, hire and maintain employment of
         psychiatric and mental health staff sufficient to fill the positions
         specified in the Contract and reimbursed in accordance with the
         Contract and subject to the approval of PHS and the client. PHS and the
         client may give MHM notice to terminate any staff member who either PHS
         or client so requests of MHM. Any failure by MHM to hire or maintain
         sufficient staff to comply with the Contract shall be deemed a breach
         of this Agreement. The initial minimum staffing provided by MHM shall
         be at the levels as set forth in the Contract. . In addition, any
         vacancy in a psychiatric and mental health staff position which is
         included in the Minimum Staffing Standards (as defined in the Contract)
         which is not filled within 10 days after becoming vacant and upon
         notice of the Client that such vacancy will result in damages under
         section III, M (page 33) of the Contract, shall constitute a default
         under this Agreement, enabling PHS to immediately terminate this
         Agreement; provided, however, that if MHM' failure to fill such vacancy
         within 30 days is due, in whole or in part, to the Client's ofr

                                       2
<PAGE>   3

         PHS's clearance and pre-approval procedures or an agreed upon change in
         Minimum Staffing Standards, PHS shall not terminate this Agreement.

         Any fees, costs, expenses, payments, charges, fines, penalties or
         liquidated damages payable to the Client under the Contract or
         otherwise incurred by PHS, together with any and all interest on such
         amounts, as the result of any failure by MHM to (i) provide and
         maintain staffing in accordance with the Contract, (ii) comply or
         enable PHS to comply with the standards set forth in the Contract
         documents as and when required by the Contract, or (iii) to promptly
         fill any personnel vacancy, shall be the sole responsibility of MHM,
         and MHM shall indemnify and hold PHS harmless therefrom. MHM shall not
         terminate any employee, provider or psychiatric and mental health staff
         without prior notice to PHS, where reasonably practical (but in all
         cases, MHM shall notify PHS immediately after any such termination) and
         using best efforts to first consult with PHS.

         MHM shall provide all office supplies and equipment necessary for its
         delivery of the psychiatric and mental health services to be performed
         hereunder. MHM shall maintain and repair all such supplies and
         equipment, maintain proper written records of periodic maintenance and
         repairs and provide written notice of the purchase of any additional
         equipment according to the Contract.

         MHM shall perform psychiatric and mental health services that include,
         but are not limited to, special mental health programs for problems
         including potential suicide and mental health disorders; conduct of a
         sex-offender management program, including a psychosocial education
         program and relapse prevention services; ambulatory mental health
         services, such as crisis intervention services, individual and group
         counseling, post-admission and evaluation reports, and treatment
         referrals and formal treatment plans; and inpatient mental health
         services and as listed in the Contract Documents.. MHM shall also
         ensure that at least one psychiatrist is on call 24 hours a day, 7 days
         a week, to meet any mental health emergency situation.

         MHM shall perform all routine counseling and procedures, any and all
         referrals for offsite hospitalization and specialist services,
         including mental health services, testing and drugs.

         If the Client should change the scope of the psychiatric and mental
         health services required under the Contract, PHS and MHM agree to
         renegotiate in good faith which services are covered under this
         Agreement and reimbursement in connection therewith.

         MHM also agrees to:

         (a)      assist in the development of procedures and policies as they
                  pertain to the responsibility of MHM;

         (b)      monitor and evaluate the quality and appropriateness of
                  psychiatric and mental health care provided;

                                       3
<PAGE>   4

         (c)      provide professional assistance on mental health issues to the
                  PHS HSA on an as needed basis;

         (d)      provide in-service education and training for staff members on
                  mental healthon an as needed basis;

         (e)      review, approve and support the treatment protocols,
                  formularies (with input by MHM) and policies established by
                  PHS, including compliance with current prudent clinical
                  documentation standards as they relate to accreditation and
                  regulatory agency requirements;

         (f)      utilize the formulary established by PHS (with input by MHM)
                  and the Client in prescribing medications;

         (g)      maintain unencumbered State licenses and credentials for
                  professional services to be rendered by employees or
                  contractors of MHM under this Agreement. A copy of all such
                  licenses shall be submitted to PHS;

         (h)      make no additional charges to PHS, offenders at the Site, or
                  other third party payors for services rendered except as
                  agreed pursuant to this Agreement.

         (i)      make appropriate referrals to mental health care providers who
                  have a knowledge of PHS and its program and have a cooperative
                  working relationship with PHS;

         (j)      attend administrative meetings on an as needed basis and where
                  appropriate when required by PHS;

         (k)      support and adhere to PHS procedures and policies, including
                  but not limited to, quality improvement, risk management and
                  utilization review and the protocol and performance standards
                  established by and pursuant to the Contract and provided by
                  PHS;

         (l)      perform in compliance with the Contract, the RFP for Contract
                  #C1599, standards required by the Contract and other relevant
                  national and local standards and the general delivery of
                  correctional health care;

         (m)      exercise independent professional judgment in the provision of
                  appropriate psychiatric and mental health care; and

         (n)      provide to PHS monthly reports of psychiatric and mental
                  health services provided pursuant to this Agreement during the
                  prior month for the Site.

         MHM agrees to abide by the provisions and requirements of the Contract,
         as they may be applicable.

                                       4
<PAGE>   5

         MHM agrees not to discriminate in any manner against an employee or
         applicant for employment because of race, color, religion, creed, age,
         sex, marital status, national origin, ancestry or physical or mental
         handicap.

4.       WORKERS' COMPENSATION. MHM agrees to provide and maintain workers'
         compensation insurance if and to the extent required by law, for its
         psychiatric and mental health employees.

5.       TAXES AND UNEMPLOYMENT INSURANCE. MHM is responsible for any tax
         payments due to federal, state or local authorities as a result of this
         Agreement. PHS shall not withhold any taxes from payments made to MHM
         under this Agreement, nor shall PHS be responsible for providing
         unemployment insurance coverage for MHM's officers, directors or
         employees.

6.       PEER REVIEW. As independent medical professionals, the services
         rendered by officers, directors, employees or contractors of MHM are
         subject to review by the appropriate committee appointed by PHS to
         review the services provided by professionals such as MHM.

7.       SUBCONTRACTOR STATUS. During the term of this Agreement, MHM will act
         as a subcontractor to PHS in performing the duties and responsibilities
         described in this Agreement. PHS will act as the primary contractor to
         the Client. As the primary contractor, nothing in this Agreement is
         intended to relieve PHS from its contractual obligations to the Client
         in the provision of psychiatric and mental health services at each
         Client Facility.

         The administration of psychiatric and mental health services shall at
         all times remain under the ultimate control and direction of PHS. The
         policies and standards of PHS shall govern the provision of such
         services. PHS shall monitor the services performed by MHM and direct
         MHM, through its designated representatives under this Agreement as it
         deems necessary. Directions and communication shall generally be from
         the PHS HSA through MHM's clinical coordinator, who shall direct the
         daily activities of psychiatric and mental health staff. In the absence
         of the clinical coordinator, or if PHS for other reasons determines
         such action to be necessary, PHS may directly communicate with the
         psychiatric and mental health staff as needed. However, PHS shall not
         interfere or in any way or direct the exercise of professional judgment
         or the professional practice of MHM's psychiatric and mental health
         staff. The services provided by MHM pursuant to this Agreement shall
         satisfy Contract Documents, as required by the Contract, or other
         standards established by PHS.

8.       INSURANCE. MHM and each individual psychiatrist or doctorate-level
         psychologist employed or retained to perform services under this
         Agreement shall maintain professional liability insurance, or satisfy
         the coverage requirements of Florida's medical malpractice law and
         contribute to any fund established thereunder, in either case in
         accordance with and in the minimum amounts required by the Contract.
         All such insurance shall be written with minimal deductibles and shall
         provide coverage on a per-occurrence basis, and not on a claims-made
         basis, shall specifically provide primary coverage, and shall not be
         altered, amended or cancelled without 30 days prior written

                                       5
<PAGE>   6

         notice to PHS. MHM agrees that PHS shall have the right to review its
         operations and offer suggestions to decrease its liability exposure.
         MHM agrees to report to PHS all incidents that are reasonably likely or
         probable to result in litigation as soon as such an incident occurs. In
         addition, any written or verbal claims for compensation due to acts or
         omissions of MHM or any of its employees, contractors or agents
         performing services under this Agreement, as well as any lawsuits filed
         against MHM or such individuals will be immediately reported to PHS.
         MHM further agrees to cooperate fully with PHS and its representatives
         in investigating and defending any such claims that may be filed
         against it.

         PHS shall have the right to insist that MHM comply with all Quality
         Improvement and Utilization Review programs that PHS may conduct.

         MHM agrees to meet periodically with representatives of PHS at its
         request to discuss matters relating to potential liability exposure and
         other concerns.

         MHM will cause PHS to receive a copy of the professional liability
         insurance policies and of certificates of insurance naming, to the
         extent possible, PHS as an additional insured and indicating coverage
         and inclusion in such policies of MHM and of the individual
         psychiatrists and doctorate-level psychologists performing under this
         Agreement.

9.       FEES. MHM shall be compensated for the psychiatric and mental health
         services to be provided pursuant to this Agreement at the following
         rates: as specified in the Contract on page 29 for CSU, TCU and S-3.

         Offenders shall include only those persons included in the Client's
         daily official offender count and shall not include any persons who are
         not included in the Per Diem under the Contract.

         MHM understands and agrees that it shall be entitled to receive
compensation for psychiatric and mental health services under this Agreement if
and only if the offender to whom such psychiatric and mental health services are
provided is, at the time of such psychiatric and mental health services, located
at the Site.

         Payments shall be in arrears commencing on the thirtieth day (30) after
         the effective date hereof, and shall be made within five (5) business
         days after PHS receives payment from the Client pursuant to the
         Contract (provided MHM has provided to PHS all documentation required
         hereunder with respect to such payment), and shall be adjusted, as
         necessary. If charges are not fully earned, appropriate deductions will
         be made from subsequent payments.

         The compensation provided for herein is intended to cover all inpatient
         and out patient mental health services, all medication prescribed by an
         MHM practitioner, and any medication or off site treatment prescribed
         by the attending physician upon the admission of an offender to the
         Site for emergency treatment and/or management of any mental health
         condition until such offender can be treated by a MHM practitioner. The
         designated MHM practitioner shall be notified by PHS as soon as

                                       6
<PAGE>   7

         practicable after any emergency mental health treatment is initiated by
         a non-MHM physician or staff member. The actual cost of all such
         medications shall be deducted from amounts due to MHM hereunder.

         Notwithstanding any other provision of this Agreement to the contrary,
         payments from PHS to MHM shall be adjusted to the extent any
         adjustments are made by the Client in payments to PHS under the
         Contract due to the acts or omissions of MHM or its officers,
         employees, contractors or agents, including but not limited to any
         adjustments for penalties or liquidated damages imposed by the Client
         pursuant to the Contract. The last payment of the Agreement will be
         withheld until all pending adjustments have been determined and
         reconciled.

10.      REPRESENTATIONS AND WARRANTIES.

         a.       MHM'S REPRESENTATIONS AND WARRANTIES.

                  MHM represents and warrants (1) that it will comply with all
                  Florida, federal and local laws and licensing requirements and
                  that its compliance shall continue in full force and effect
                  during the term of this Agreement. If, at any time, any
                  license held by MHM or any of its members, employees or
                  contractors, is terminated, qualified, suspended or in any
                  other way detrimentally affected, MHM shall immediately notify
                  PHS, and its failure to do so shall constitute a material
                  breach of this Agreement; (2) that its duly authorized
                  representative signing this Agreement has the necessary
                  authority to enter into this Agreement on behalf of MHM; and
                  (3) that MHM is a Delaware corporation duly organized,
                  existing and in good standing, and is qualified to do business
                  in the State of Florida.

         b.       PHS REPRESENTATIONS AND WARRANTIES.

                  PHS represents and warrants (1) that it will comply with all
                  Florida, federal and local laws and licensing requirements and
                  that its compliance shall continue in full force and effect
                  during the term of this Agreement. If, at any time, any
                  license held by PHS is terminated, qualified, suspended or in
                  any other way detrimentally affected, PHS shall immediately
                  notify MHM; (2) that its duly authorized representative
                  signing this Agreement has the necessary authority to enter
                  into this Agreement on behalf of PHS; and (3) that PHS is
                  qualified to do business in the State of Florida.

11.      NOTICES. All notices or other writings required under this Agreement
         shall be deemed to have been made when sent by certified mailed to the
         following:

                  To MHM:       MHM Correctional Services, Inc.
                                8000 Towers Crescent Drive, Suite 810
                                Vienna, Virginia 22182

                                       7
<PAGE>   8

                  To PHS:           Prison Health Services, Inc.
                                    105 Westpark Drive, Suite 300
                                    Brentwood, TN 37027
                                    Attn: Gerard Boyle, President

                  With a Copy to:   Prison Health Services, Inc.
                                    105 Westpark Drive, Suite 300
                                    Brentwood, TN 37027
                                    Attn: General Counsel

12.      REPRESENTATIVES. MHM hereby designates Steven Wheeler or his/her
         successor, to be available to service this Agreement and resolve any
         problems that relate thereto. Similarly, PHS designates the PHS
         Regional Vice President to represent it in all matters relating to this
         Agreement. Either party may change the designated representative upon
         notification to the other party.

13.      ASSIGNMENT. Neither party may assign, sell or transfer, either directly
         or indirectly, any of its rights or responsibilities under this
         Agreement without the prior written consent of the other party;
         provided however, that PHS may assign all of its rights and
         responsibilities under this Agreement to America Service Group, Inc.,
         its affiliates and subsidiaries. PHS agrees to provide MHM with written
         notice of any such assignment. Such assignment shall include a change
         in ownership or control (normal public stock trading shall not trigger
         this provision) of any party.

14.      TERMINATION. This Agreement shall terminate immediately: (1) upon the
         termination or dissolution of MHM; (2) if MHM loses the authority to do
         business in the State of Florida; (3) upon cancellation, termination,
         or reduction of insurance coverage required by this Agreement; (4) upon
         the expiration or earlier termination by the Client of the Contract;
         (5) upon notice by PHS of a material breach of this Agreement
         (including, without limitation, a material breach of the Contract) by
         MHM, including but not limited to the commission of malpractice, gross
         misconduct, or the continuing failure after notice by PHS to perform
         required duties property, which is not cured within ten (10) business
         days of such notice from PHS, except to the extent such breach creates
         an emergency situation in which event no such notice from PHS shall be
         required nor shall any cure period be provided; (6) upon request of the
         Client in accordance with the Contract (24 hour notice per section VI C
         of the Contract).

15.      MHM AS INDEPENDENT CONTRACTOR. The parties acknowledge that MHM is
         providing the services contemplated hereunder as an independent
         contractor and is neither an agent, employee, officer, director nor
         joint venturer of or with PHS.

16.      INDEMNIFICATION. MHM covenants and agrees that it will indemnify and
         hold harmless PHS and all of PHS' officers, agents, or employees from
         any claim, loss, damage, cost, charge or expense arising out of or in
         connection with any act, action, neglect or omission by MHM or any of
         its agents, members, representatives or employees in connection with
         the performance of this

                                       8
<PAGE>   9

         Agreement, whether direct or indirect. PHS shall have no responsibility
         or liability resulting from any criminal or intentional acts or
         omissions of MHM or any of its agents, members, representatives or
         employees. PHS covenants and agrees that it will indemnify and hold
         harmless MHM and all of MHM' officers and employees from any claim,
         loss, damage, cost, charge or expense arising out of or arising out of
         or in connection with any act, action, neglect or omission by PHS or
         any of its agents, members, representatives or employees in connection
         with the performance of this Agreement, whether direct or indirect. MHM
         shall have no responsibility or liability resulting from any criminal
         or intentional acts or omissions of PHS or any of its agents, members,
         representatives or employees. PHS shall have no responsibility or
         liability resulting from any acts or omissions of any third party,
         including, without limitation, the Client or any subcontractor or
         independent contractor or any employees, officers, agents,
         representatives or members of the Client, subcontractor, independent
         contractor or any other third party.

17.      AMENDMENT TO AGREEMENT. No amendment to this Agreement shall be valid
         or enforceable unless in writing and executed by duly authorized
         representatives of both parties.

18.      THIRD-PARTY BENEFICIARIES. The parties agree that they have not entered
         into this Agreement for the benefit of any third person or persons and
         it is their express intention that the Agreement is for their
         respective benefits only and not for the benefit of others who might
         otherwise be deemed to constitute third-party beneficiaries thereof.

19.      SEVERABILITY. The terms and conditions of this Agreement shall be
         deemed to be severable. Consequently, if any clause, term or condition
         hereof shall be held to be illegal or void, such determination shall
         not affect the validity or legality of the remaining terms and
         conditions hereunder.

20.      CAPTIONS. The captions appearing in the paragraphs in this Agreement
         are for convenience only. They are not a part of this Agreement and do
         not, in any way, limit or amplify the terms and provisions of the
         Agreement.

21.      COUNTERPARTS. This Agreement may be executed simultaneously or in two
         or more counterparts each of which shall be deemed an original, but all
         of which shall constitute one and the same instrument.

22.      GOVERNING LAW. This Agreement is governed by the laws of the State of
         Florida and any disputes that arise herefrom shall be determined
         exclusively within the Florida courts. Each party consents to the
         Florida court's jurisdiction.

23.      CONFIDENTIAL INFORMATION. Both PHS and MHM agree not to disclose or in
         any way use, or allow any other person to disclose or use confidential
         information of or concerning the Client or the other party to this
         Agreement either during or after the term of this Agreement without the
         other party's or the Client's prior express written consent.
         Confidential information includes, but is not limited

                                       9
<PAGE>   10

         to, cost and pricing data, legal or claim data, financial data, methods
         of operation, and policies and procedures. Neither PHS nor MHM shall
         copy or remove any of the other party's documents for its own use or
         for the use of others, nor make use of or allow or assist any other
         person or company to make use of any the other party's procedure or
         program, including but not limited to those relating to Utilization
         Review or Quality Improvement, except as authorized in writing by the
         other party hereto. Neither PHS nor MHM shall disclose, or allow others
         to disclose, the terms of this Agreement, except as it is necessary to
         perform this Agreement or to obtain accounting, legal or tax advice
         from professional advisors. Both PHS and MHM acknowledge and agree to
         comply with all terms and provisions of the Contract concerning
         ownership and confidentiality of information.

24.      RELINQUISHMENT OF RECORDS. Upon termination of this Agreement, MHM
         shall promptly return to PHS all files, data and materials belonging to
         or relating to the operations and business of the Contract and shall
         deliver to PHS copies of all files, data and materials of MHM relating
         to this Agreement which relate to the Contract and the provision of
         services by MHM hereunder. PHS agrees to allow MHM reasonable access,
         upon at least 24 hours prior notice, to PHS' files and records relating
         to this Agreement and the provision of services hereunder for purposes
         of MHM' defense of claims, MHM' submission and collection of third
         party payment for services rendered, and other reasonable purposes
         approved by PHS.

25.      NON-SOLICITATION AND NON-COMPETITION COVENANT. During the term of this
         Agreement and for a one (1) year period following the expiration or
         earlier termination of this Agreement, MHM agrees not to solicit for
         employment, attempt to employ, employ or otherwise engage the services
         of any person who has been employed by PHS or retained in any way by
         PHS in connection with providing services to the Client during the
         preceding one (1) year period

         MHM agrees that during the term of this Agreement and for a one (1)
         year period following the expiration or earlier termination of this
         Agreement, unless acting with the prior written consent of PHS, MHM
         will not directly or indirectly, whether individually or as owner,
         partner, shareholder, member, joint venturer, manager, agent,
         consultant, contractor, subcontractor, formal or informal advisor or in
         any other capacity, propose, offer to provide, provide or engage in the
         management or administration of medical or mental health (including,
         without limitation, sexual offender and substance abuse treatment)
         services to the Site.

         During the term of this Agreement, unless acting with the prior written
         consent of MHM, PHS will not directly provide or engage any third party
         to provide the services to be provided by MHM under this Agreement,
         except for temporary emergency situations, to cure a default of MHM, or
         at the direction of the Client. PHS agrees not to hire employees of MHM
         who MHM recruited to the Site , who did not previously work at the Site
         for a period of one year after the termination of this Agreement.

         MHM and PHS each acknowledge and agree that any violation or threatened
         violation of the confidentiality, non-solicitation and non-competition
         provisions of this Agreement will cause irreparable harm, the damage
         resulting from which would be incapable of precise measurement, and

                                       10
<PAGE>   11

         as a result, the remedies at law will be inadequate to redress the harm
         caused by such violation or threatened violation. Therefore, in the
         event of such violation or threatened violation, MHM and PHS each agree
         that a party shall be entitled to obtain temporary and permanent
         injunctive relief against the other party with respect to any such
         violation or threatened violation of such provisions without any
         requirement for posting a bond or other security. However, nothing
         stated in this Agreement shall be construed as prohibiting either PHS
         or MHM from pursuing any other remedies available at law or in equity,
         and PHS and MHM shall be entitled to recover its attorneys' fees and
         all out-of-pocket costs and disbursements in enforcing the
         confidentiality, non-solicitation and non-competition provisions of
         this Agreement. Each specific restriction in the confidentiality, non-
         solicitation and non-competition provisions of this Agreement shall be
         construed as an agreement independent of any other provision of this
         Agreement, and the existence of any claim or cause of action which a
         party may have against the other party, whether based on this Agreement
         or otherwise, shall not constitute a defense to the enforcement of the
         confidentiality, non-solicitation and non-competition provisions of
         this Agreement.

26.      BUSINESS ETHICS PROGRAM. MHM agrees to conduct its operations hereunder
         in compliance with the America Service Group, Inc.'s Business Ethics
         Program and hereby acknowledges receipt of the Business Ethics Program
         Policy Manual.

         IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of that commencement date documented above.

PRISON HEALTH SERVICES, INC.            MHM CORRECTIONAL SERVICES, INC.
By:      [SIG]                          By:              [SIG]
   ---------------------------               -----------------------------
Date:                                   Date:         3/24/99
    --------------------------                ----------------------------

                                       11

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}]]