Document:

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                                                                    Exhibit 10.7

                                CONTRACT BETWEEN

                   THE OFFICE OF MEDICAID POLICY AND PLANNING,

              THE OFFICE OF THE CHILDREN'S HEALTH INSURANCE PROGRAM

                                       AND

                   COORDINATED CARE CORPORATION INDIANA, INC.

     This Contract is made and entered into by and between the State of Indiana
(hereinafter "State" or "State of Indiana"), through the Office of Medicaid
Policy and Planning and the Office of Children's Health Insurance Program
(hereinafter "the Offices"), of the Indiana Family and Social Services
Administration, 402 West Washington Street, W382, Indianapolis, Indiana, and
Coordinated Care Corporation Indiana, Inc., doing business as Managed Health
Services, 950 North Meridian, Suite 200, Indianapolis, Indiana., (hereinafter
"Contractor").

     WHEREAS, I.C. 12-15-30-1 and I.C. 12-l7.6 authorize the Offices to enter
into contracts to assist in the administration of the Indiana Medicaid and the
Indiana Children's Health Insurance Program (CHIP), respectively;

     WHEREAS, the State of Indiana desires to contract for services to arrange
for and to administer a risk-based managed care program (RBMC) for certain
Hoosier Healthwise enrollees in Packages A, B and C as procured through BAA
01-28;

     WHEREAS this Contract contains the payment rates under which the Contractor
shall be paid and that these rates have been determined to be actuarially sound
and not in excess of the fee-for-service upper payment limit (FFS-UPL) specified
for risk contracts in 42 CFR 447.361;

     WHEREAS, the Contractor is willing and able to perform the desired services
for Hoosier Healthwise Packages A, B and C;

     THEREFORE, the parties to this Contract agree that the terms and conditions
specified below will apply to services in connection with this contract, and
such terms and conditions are as follows

                           I. TERM AND RENEWAL OPTION

     This Contract is effective from January 1, 2001 through December 31, 2002.
At the discretion of the Offices the term may be extended for up to two
additional years. In no event shall the term exceed December 31, 2004.

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                                 II. DEFINITIONS

     For the purposes of this contract, terms not defined herein shall be
defined as they are in the documents incorporated in and attached to this
document, subject to the order of precedence spelled out in Section V of this
document.

"Contract" means this document and all documents or standards incorporated
herein, expressly including but not limited to the following documents appended
hereto and listed in chronological order and to be given precedence as described
in Section V of this document, entitled "Order of Precedence":

     Attachment 1 - BAA 01-28, released July 31, 2000;

     Attachment 2 - Contractor's response to BAA 0l-28, submitted September
                    25, 2000, excluding the following sections:
                    Section 5.3.8
                    Sections 5.4.3A; 5.4.3D; 5.4.3E; 5.4.3F; 5.4.3G; 5.4.3H;
                    5.4.3I
                    Sections 5.4.4-C; 5.4.4D; 5.4.4H; 5.4.4M; 5.4.4X
                    Sections 5.4.6D; 5.4.6I
                    Sections 5.4.8U; 5.4.8V

     and,

     Any other documents, standards, laws, rules or regulations incorporated by
     reference in the above materials, all of which are hereby incorporated by
     reference.

"Covered Services" means all services required to be arranged, administered,
managed or provided by or on behalf of the Contractor under this contract.

"Effective Date of Enrollment" means:

  .  The first day of birth month of a newborn that is determined by the Offices
     to be an enrolled member;

  .  The fifteenth day of the current month for a member who has, between the
     twenty-sixth day of the previous month and the tenth day of the current
     month, been determined by the Offices to be enrolled member; and,

  .  The first day of the following month for a member who has, between the
     eleventh day and the twenty-fifth day of a month, been determined by the
     Offices to be an enrolled member.

"Enrolled Member", or "Enrollee", means a Hoosier Healthwise-eligible member who
is listed by the Offices on the enrollment rosters to receive covered services
from the Contractor or its subcontractors, employees, agents, or providers, as
of the Effective Date of Enrollment, under this contract.

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"Provider" means a physician, hospital, home health agency or any other
institution, or health or other professional person or entity, which
participates in the provision of services to an enrolled member under BAA 01-28,
whether as an independent contractor, a subcontractor, employee, or agent of the
Contractor.

"Broad Agency Announcement", or "BAA", means BAA 01-28 for providers of
managed care services, released July 31, 200O.

                          III. DUTIES OF THE CONTRACTOR

A.   The Contractor agrees to assume financial risk for developing and managing
     a health care delivery system and for arranging or administering all
     Hoosier Healthwise covered services except, as set out in section 3.4.3 of
                                         ------
     the BAA, dental care, long-term institutional care, services provided as
     part of an individualized education plan (IEP) pursuant to the Individuals
     with Disabilities Education Act (IDEA) at 20 U.S.C. 1400 et seq.,
                                                              ------
     behavioral health, and hospice services, in exchange for a per-enrollee,
     per-month fixed fee, to certain enrollees in Hoosier Healthwise Packages A,
     B and C. Wards of the State, foster children and children receiving
     adoption assistance may enroll on a voluntary basis and will not be subject
     to auto-assignment into the Hoosier Healthwise program. The Contractor
     must, at a minimum, furnish covered services up to the limits specified by
     the Medicaid and CHIP programs. The Contractor may exceed these limits.
     However, in no instance may any covered service's limitations be more
     restrictive than those which exist in the Indiana Medicaid fee-for-service
     program for Packages A and B, and the Children's Health Insurance Program
     for Package C.

B.   The Contractor agrees to perform all duties and arrange and administer the
     provision of all services as set out herein and contained in the BAA as
     attached and the Contractor's responses to the BAA as attached, all of
     which are incorporated into this Contract by reference. In addition, the
     Contractor shall comply with all policies and procedures defined in any
     bulletin, manual, or handbook yet to be distributed by the State or its
     agents insofar as those policies and procedures provide further
     clarification and are no more restrictive than any policies and procedures
     contained in the BAA and any amendments to the BAA. The Contractor agrees
     to comply with all pertinent state and federal statutes and regulations in
     effect throughout the duration of this Contract and as they may be amended
     from time to time.

C.   The Contractor agrees that it will not discriminate against individuals
     eligible to be covered under this Contract on the basis of health status or
     need for health services; and the Contractor may not terminate an
     enrollee's enrollment, or act to encourage an enrollee to terminate his/her
     enrollment, because of an adverse change in the enrollee's health. The
     disenrollment function will be carried out by a State contractor who is
     independent of the Contractor; therefore, any request to terminate an
     enrollee's enrollment must be approved by the Offices.

D.   The Contractor agrees that no services or duties owed by the Contractor
     under this Contract will be performed or provided by any person or entity
     other than the Contractor, except as

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     contained in written subcontracts or other legally binding agreements.
     Prior to entering into any such subcontract or other legally binding
     agreement, the Contractor shall, in each case, submit the proposed
     subcontract or other legally binding agreement to the Offices for prior
     review and approval. Prior review and approval of a subcontract or legally
     binding agreement shall not be unreasonably delayed by the Offices. The
     Offices shall, in appropriate cases and as requested by the Contractor,
     expedite the review and approval process. Under no circumstances shall the
     Contractor be deemed to have breached its obligations under this Contract
     if such breach was a result of the Offices' failure to review and approve
     timely any proposed subcontract or other legally binding agreement. If the
     Offices disapprove any proposed subcontract or other legally binding
     agreement, the Offices shall state with reasonable particularity the basis
     for such disapproval. No subcontract into which the Contractor enters with
     respect to performance under this Contract shall in any way relieve the
     Contractor of any responsibility for the performance of duties under this
     Contract. All subcontracts and amendments thereto executed by the
     Contractor under this Contract must meet the following requirements; any
     existing subcontracts or legally binding agreements which fail to meet the
     following requirements shall be revised to include the requirements within
     ninety (90) days from the effective date of this Contract:

          1.   Be in writing and specify the functions of the subcontractor.

          2.   Be legally binding agreements.

          3.   Specify the amount, duration and scope of services to be provided
               by the subcontractor.

          4.   Provide that the Offices may evaluate, through inspection or
               other means, the quality, appropriateness, and timeliness of
               services performed.

          5.   Provide for inspections of any records pertinent to the contract
               by the Offices.

          6.   Require an adequate record system to be maintained for recording
               services, charges, dates and all other commonly accepted
               information elements for services rendered to recipients under
               the contract.

          7.   Provide for the participation of the Contractor and subcontractor
               in any internal and external quality assurance, utilization
               review, peer review, and grievance procedures established by the
               Contractor, in conjunction with the Offices.

          8.   Provide that the subcontractor indemnify and hold harmless the
               State of Indiana, its officers, and employees from all claims and
               suits, including court costs, attorney's fees, and other
               expenses, brought because of injuries or damage received or
               sustained by any person, persons, or property that is caused by
               any act or omission of the Contractor and/or the subcontractors.
               The State shall not provide such indemnification to the
               subcontractor.

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          9.   Identify and incorporate the applicable terms of this Contract
               and any incorporated documents. The subcontract shall provide
               that the subcontractor agrees to perform duties under the
               subcontract, as those duties pertain to enrollees, in accordance
               with the applicable terms and conditions set out in this
               Contract, any incorporated documents, and all applicable state
               and federal laws, as amended.

E.   The Contractor agrees that, during the term of this Contract, it shall
     maintain, with any in-network provider rendering health care services under
     the BAA, provider service agreements which meet the following requirements;
     any existing provider service agreements which fail to meet the following
     requirements shall be revised to include the requirements within ninety
     (90) days from the effective date of this Contract. The provider service
     agreements shall:

     1.   Identify and incorporate the applicable terms of this Contract and any
          incorporated documents. Under the terms of the provider services
          agreement, the provider shall agree that the applicable terms and
          conditions set out in this Contract, any incorporated documents, and
          all applicable state and federal laws, as amended, govern the duties
          and responsibilities of the provider with regard to the provision of
          services to enrollees.

     2.   Reference a written provider claim resolution procedure as set out in
          section III.Q. below.

F.   The Contractor agrees that all laboratory testing sites providing services
     under this Contract must have a valid Clinical Laboratory Improvement
     Amendments (CLIA) certificate and comply with the CLIA regulations at 42
     C.F.R. Part 493.

G.   The Contractor agrees that it shall:

     1.   Retain, at all times during the period of this Contract, a valid
          Certificate of Authority under applicable State laws issued by the
          State of Indiana Department of Insurance:

     2.   Ensure that, during the term of this Contract, each provider rendering
          health care services under the BAA is authorized to do so in
          accordance with the following:

          a.   The provider must maintain a current Indiana Health Coverage
               Programs (IHCP) provider agreement and must be duly licensed in
               accordance with the appropriate state licensing board and shall
               remain in good standing with said board.

          b.   If a provider is not authorized to provide such services under a
               current IHCP provider agreement or is no longer licensed by said
               board, the Contractor is obligated to terminate its contractual
               relationship authorizing or requiring such to provide services
               under the BAA. The Contractor must

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               terminate its contractual relationship with the provider as soon
               as the Contractor has knowledge of the termination of the
               provider's license or the IHCP provider agreement.

     3.  Comply with the specific requirements for Health Maintenance
         Organizations (HMOs) eligible to receive Federal Financial
         Participation (FFP) under Medicaid, as listed in the State Organization
         and General Administration Chapter of the Health Care Financing
         Administration (HCFA) Medicaid Manual. These requirements include, but
         are not limited to the following:

         a.    The Contractor shall meet the definition of HMO as specified in
               the Indiana State Medicaid Plan.

         b.    Throughout the duration of this Contract, the Contractor shall
               satisfy the Chicago Regional Office of the Health Care Financing
               Authority (hereinafter called HCFA) that the Contractor is
               compliant with the Federal requirements for protection against
               insolvency pursuant to 42 CFR 434.20(c)(3) and 434.50(a), the
               requirement that the Contractor shall continue to provide
               services to Contractor enrollees until the end of the month in
               which insolvency has occurred, and the requirement that the
               Contractor shall continue to provide inpatient services until the
               date of discharge for an enrollee who is institutionalized when
               insolvency occurs. The Contractor shall meet this requirement by
               posting a performance bond pursuant to Section VII, paragraph C,
               of this Contract, and satisfying the statutory reserve
               requirements of the Indiana DepLartment of Insurance.

         c.    The Contractor shall comply with, and shall exclude from
               participation as either a provider or subcontractor of the
               Contractor, any entity or person that has been excluded under the
               authority of Sections 1124A, 1128 or 1128A of the Social Security
               Act or does not comply with the requirements of Section 1128(b)
               of the Social Security Act.

         d.    In the event that the HCFA determines that the Contractor has
               violated any of the provisions of 42 CFR 434.67(a), HCFA may deny
               payment of FFP for new enrollees of the HMO under 42 USC
               1396b(m)(5)(B)(ii). The Offices shall automatically deny State
               payment for new enrollees whenever, and for so long as, Federal
               payment for such enrollees has been denied.

H.   The Contractor shall submit proof, satisfactory to the Offices, of
     indemnification of the Contractor by the Contractor's parent corporation,
     if applicable, and by all of its subcontractors.

I.   The Contractor shall submit proof, satisfactory to the Offices, that all
     subcontractors will hold the State harmless from liability under the
     subcontract. This assurance in no way relieves the Contractor of any
     responsibilities under the BAA or this Contract.

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J.   The Contractor agrees that, prior to initially enrolling any Hoosier
     Healthwise Package A, B or C enrollees, it shall go through and
     satisfactorily complete the readiness review as described in the BAA. The
     required readiness review shall begin before the contract between the
     Contractor and the State is finalized and executed. Within ninety (90) days
     from the effective date of this Contract, the Contractor shall make a good
     faith effort to resolve, to the satisfaction of the Offices, any
     outstanding issues brought to the Contractor's attention by the Offices as
     a result of the readiness review.

K.   The Contractor shall establish and maintain a quality improvement program
     that meets the requirements of 42 CFR 434.34, as well as other specific
     requirements set forth in the BAA. The Offices and the HCFA may evaluate,
     through inspection or other means, including but not limited to, the review
     of the quality assurance reports required under this Contract, and the
     quality, appropriateness, and timeliness of services performed under this
     Contract. The Contractor agrees to participate and cooperate, as directed
     by the Offices, in the annual external quality review of the services
     furnished by the Contractor.

L.   In accordance with 42 CFR 434.28, the Contractor agrees that it and any of
     its subcontractors shall comply with the requirements, if applicable, of
     42 CFR 489, Subpart I, relating to maintaining and distributing written
     policies and procedures respecting advance directives. The Contractor shall
     distribute policies and procedures to adult individuals during the enrollee
     enrollment process and whenever there are revisions to these policies and
     procedures. The Contractor shall make available for inspection, upon
     reasonable notice and request by the Offices, documentation concerning its
     written policies, procedures and distribution of such written procedures to
     enrollees.

M.   Pursuant to 42 C.F.R. 417.479(a), the Contractor agrees that no specific
     payment can be made directly or indirectly under a physician incentive plan
     to a physician or physician group as an inducement to reduce or limit
     medically necessary services furnished to an individual enrollee. The
     Contractor must disclose to the State the information on provider incentive
     plans listed in 42 C.F.R. 4 17.479(h)(l) and 4 17.479(i) at the times
     indicated at 42 C.F.R. 434.70(a)(3), in order to determine whether the
     incentive plan meets the requirements of 42 C.F.R. 417(d)-(g). The
     Contractor must provide the capitation data required under paragraph
     (h)(l)(vi) for the previous calendar year to the State by
     application/contract renewal of each year. The Contractor will provide the
     information on its physician incentive plan(s) listed in 42 C.F.R.
     417.479(h)(3) to any enrollee upon request.

N.   The Contractor must not prohibit or restrict a health care professional
     from advising an enrollee about his/her health status, medical care, or
     treatment, regardless of whether benefits for such care are provided under
     this Contract, if the professional is acting within the lawful scope of
     practice. However, this provision does not require the Contractor to
     provide coverage of a counseling or referral service if the Contractor
     objects to the service on moral or religious grounds and makes available
     information on its policies to potential enrollees and enrollees within
     ninety (90) days after the date the Contractor adopts a change in policy
     regarding such counseling or referral service.

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0.   In accordance with 42 U.S.C. (S) 1396u-2(b)(6), the Contractor agrees that
     an enrollee may not be held liable for the following:

     1.   Debts of the Contractor, or its subcontractors, in the event of any
          organization's insolvency;

     2.   Services provided to the enrollee in the event the Contractor fails to
          receive payment from the Offices for such services or in the event a
          provider fails to receive payment from the Contractor or Offices; or

     3.   Payments made to a provider in excess of the amount that would be owed
          by the enrollee if the Contractor had directly provided the services.

P.   The Offices may from time to time request and the Contractor, and all of
     its subcontractors, agree that the Contractor, or its subcontractors, shall
     prepare and submit additional compilations and reports as requested by the
     Offices. Such requests will be limited to situations in which the desired
     data is considered essential and cannot be obtained through existing
     Contractor reports. The Contractor, and all of its subcontractors, agree
     that a response to the request shall be submitted within thirty (30) days
     from the date of the request, or by the Offices' requested completion date,
     whichever is earliest. The response shall include the additional
     compilations and reports as requested, or the status of the requested
     information and an expected completion date. When such requests pertain to
     legislative inquiries or expedited inquiries from the Office of the
     Governor, the additional compilations and reports shall be submitted by the
     Offices' requested completion date. Failure by the Contractor, or its
     subcontractors, to comply with response time frames shall be considered
     grounds for the Offices to pursue the provisions outlined in Section 3.16.5
     of the BAA. In the event that delays in submissions are a consequence of a
     delay by the Offices or the Medicaid Fiscal Agent, the time frame for
     submission shall be extended by the length of time of the delay.

Q.   The Contractor shall establish a written claim resolution procedure
     applicable to both in-network and out-of-network providers which shall be
     distributed to all in-network providers and shall be available to
     out-of-network providers upon request. The Contractor shall negotiate the
     terms of a written claim resolution procedure with in-network providers;
     but if the Contractor and an in-network provider are unable to reach
     agreement on the terms of such procedure, the out-of-network provider
     claims resolution procedure approved by the Offices under this section
     shall govern the resolution of such in-network provider's claims with the
     Contractor. The written claim resolution procedure for out-of-network
     providers (and in-network providers in the absence of an agreement) must be
     submitted to the Offices for approval within thirty (30) days from the
     effective date of this Contract and must include, at a minimum, the
     following elements:

     I.   A statement noting that providers objecting to determinations
          involving their claims will be provided procedural due
          process through the Contractor's claim resolution procedure.

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     2.  A description of both the informal and formal claim resolution
         procedures that will be available to resolve a provider's objection to
         a determination involving the provider's claim.

     3.  An informal claim resolution procedure which:

         a.   shall be available for the resolution of claims submitted to the
              Contractor by the provider within the allowable claims submission
              time limits under federal and state law.

         b.   shall precede the formal claim resolution procedure;

         c.   shall be used to resolve a provider's objection to a determination
              by the Contractor involving the provider's claim, including a
              provider's objection to:

              (1)   any determination by the Contractor regarding payment for a
              claim submitted by the provider, including the amount of such
              payment; and

              (2)   the Contractor's determination that a claim submitted by the
              provider lacks sufficient supporting information, records, or
              other materials;

         d.   may, at the election of a provider, be utilized to determine the
              payment due for a claim in the event the Contractor fails,
              within thirty (30) days after the provider submits the claim, to
              notify the provider of:

              (1)   its determination regarding payment for the provider's
              claim; or

              (2)   its determination that the provider's claim lacked
              sufficient supporting information, records, or other materials;

         e.   shall be commenced by a provider submitting to the Contractor:

              (1)   within sixty (60) days after the provider's receipt of
              written notification of the Contractor's determination regarding
              the provider's claim, the provider's written objection to the
              Contractor's determination and an explanation of the objection; or

              (2)   within sixty (60) days after the Contractor fails to make
              a determination as described in subparagraph (d), a written notice
              of the provider's election to utilize the informal claims
              resolution procedure under subparagraph (d) above;

         f.   shall allow providers and the Contractor to make verbal inquiries
              and to otherwise informally undertake to resolve the matter
              submitted for resolution by the provider pursuant to Paragraph
              3.e.

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     4.  In the event the matter submitted for informal resolution is not
         resolved to the provider's satisfaction within thirty (30) days after
         the provider commenced the informal claim resolution procedure, the
         provider shall have sixty (60) days from that point to submit to the
         Contractor written notification of the provider's election to submit
         the matter to the formal claim resolution procedure. The provider's
         notice must specify the basis of the provider's dispute with the
         Contractor. The Contractor's receipt of the provider's written notice
         shall commence the formal claim resolution procedure.

     5.  The formal claim resolution procedure shall be conducted by a panel of
         one (1) or more individuals selected by the Contractor. Each panel must
         be knowledgeable about the policy, legal, and clinical issues involved
         in the matter that is the subject of the formal claim resolution
         procedure. An individual who has been involved in any previous
         consideration of the matter by the Contractor may not serve on the
         panel. The Contractor's medical director, or another licensed physician
         designated by the medical director, shall serve as a consultant to the
         panel in the event the matter involves a question of medical necessity
         or medical appropriateness.

     6.  The panel shall consider all information and material submitted to it
         by the provider that bears directly upon an issue involved in the
         matter that is the subject of the formal claim resolution procedure.
         The panel shall allow the provider an opportunity to appear in person
         before the panel, or to communicate with the panel through appropriate
         other means if the provider is unable to appear in person, and question
         the panel in regard to issues involved in the matter. The provider
         shall not be required to be represented by an attorney for purposes of
         the formal claim review procedure.

     7.  Within forty-five (45) days after the commencement of the formal claim
         resolution procedure, the panel shall deliver to the provider the
         panel's written determination of the matter before it. Such
         determination shall be the Contractor's final position in regard to the
         matter. The written determination shall include, as applicable, a
         detailed explanation of the factual, legal, policy and clinical basis
         of the panel's determination.

     8.  In the event the panel fails to deliver to the provider the panel's
         written determination within forty-five (45) days after the after the
         commencement of the formal claim resolution procedure, such failure on
         the part of the panel shall have the effect of a denial by the panel of
         the provider's claim.

     9.  The panel's written determination shall include notice to the provider
         of the provider's right, within sixty (60) days after the provider's
         receipt of the panel's written determination, to submit to binding
         arbitration the matter that was the subject of the formal claim
         resolution procedure. The provider shall also have the right to
         submit the matter to binding arbitration if the panel has failed
         to deliver its written determination to the provider within
         the required forty-five (45) day period.

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10.  Any procedure involving binding arbitration must be conducted in accordance
     with the rules and regulations of the American Health Lawyers Association
     (AHLA), pursuant to the Uniform Arbitration Act as adopted in the State of
     Indiana at I.C. 34-57-2, unless the provider and Contractor mutually agree
     to some other binding resolution procedure. However, any Contractor and
     provider that are subject to statutorily imposed arbitration procedures for
     the resolution of these claims shall be required to follow the statutorily
     imposed arbitration procedures, but only to the extent those procedures
     differ from, or are irreconcilable with, the rules and regulations of the
     American Health Lawyers Association (AHLA), pursuant to the Uniform
     Arbitration Act as adopted in the State of Indiana at I.C. 34-57-2. It is
     the intent of the Offices that the fees and expenses of arbitration be
     borne by the non-prevailing party.

11.  The provider and Contractor may agree, within the requisite sixty (60) day
     time period, to include in a single arbitration proceeding matters from
     multiple formal claim resolution procedures involving the Contractor and
     the provider. If the provider and Contractor are not able to agree, the
     arbitrator, as selected in Paragraph 10 above, shall have the discretion to
     include in a single arbitration proceeding matters from multiple fomlal
     claim resolution procedures involving the Contractor and the provider.

12.  For claims disputed under Paragraph 3. c. (2) above:

     a.   a claim that is finally determined through the Contractor's claim
          resolution procedure (including arbitration) not to lack sufficient
          supporting documentation shall be processed by the Contractor within
          thirty (30) days after such final determination. The processing of the
          claim and the Contractor's determination involving the claim shall be
          subject to Paragraph 3.c. and Paragraph 3. d. and the Contractor's
          formal claim resolution procedure and binding arbitration.

     b.   a claim that is finally determined through the Contractor's claim
          resolution procedure (including arbitration) to lack sufficient
          supporting documentation shall be processed by the Contractor within
          thirty (30) days after the provider submits to the Contractor the
          requisite supporting documentation. The provider shall have thirty
          (30) days after written notice of the final determination establishing
          that the claim lacked sufficient supporting documentation is received
          by the provider to submit the requisite supporting documentation. The
          processing of the claim and the Contractor's determination involving
          the claim shall be subject to Paragraph 3. c. and Paragraph 3. d. and
          the Contractor's formal claim resolution procedure and binding
          arbitration.

13.  A contractor may not include in its claim resolution procedures for out-of-
     network providers (and in-network providers in the absence of an agreement)
     elements that restrict or diminish the claim review procedures, time
     periods or subject matter provided for in paragraphs 1 through 12 above.

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     14.  A Contractor shall maintain a log of all informally and formally filed
          provider objections to determinations involving claims. The logged
          information shall include the provider's name, date of objection,
          nature of the objection, and disposition. The Contractor shall submit
          quarterly reports to the Offices regarding the number and type of
          provider objections.

                                   IV. PAYMENT

A.   In consideration of the services to be performed by the Contractor,
     the Offices agree to pay the Contractor the following amounts per month per
     enrolled member as contained in the Offices' capitation payment listing
     based upon the capitation rates by category as listed below:

          ---------------------------------------------------------------------
                                 CAPITATION RATES
          ---------------------------------------------------------------------
           Category             Packages A and B              Package C
          ---------------------------------------------------------------------
           Newborns                 $334.98                    $129.81
          ---------------------------------------------------------------------
           Preschool                $ 71.62                    $ 83.20
          ---------------------------------------------------------------------
           Children                 $ 58.95                    $ 70.32
          ---------------------------------------------------------------------
           Adolescents              $ 89.75                    $101.66
          ---------------------------------------------------------------------
           Adult Males              $247.73
          ---------------------------------------------------------------------
           Adult Females            $193.81
          ---------------------------------------------------------------------
           Deliveries           $3,281.95/delivery         $3,281.95/delivery
          ---------------------------------------------------------------------

     These capitation rates will be adjusted by the medical component of the
     Consumer Price Index. The initial adjustment will occur in January 2002,
     with subsequent adjustments to occur annually thereafter. In the event that
     the Offices adjust the fee-for-service (FFS) rates, the Offices may, in its
     sole discretion, further adjust the capitation rates in accordance with the
     FFS adjustment, based on the same methodology or percentage change used for
     the FFS adjustment. If the Offices make such an adjustment, it shall apply
     only to the specific service component of the capitation rate that
     corresponds to the FFS adjustment. Any capitation rates adjusted due to a
     change in the FFS program may be further adjusted to ensure actuarial
     soundness. All adjustments are subject to federal regulations that this
     Contract may not exceed the FFS Upper Payment Limit (UPL).

B.   All payment obligations of the Offices are subject to the encumbrance of
     monies and shall be paid to the Contractor on the first Wednesday after the
     fifteenth of the month.

C.   The capitation payment will be prospective, based upon the number of
     enrollees assigned to the Contractor as of the first of the month.
     The Offices will establish an administrative procedure to allow retroactive
     or other payment adjustments as necessary to implement this contract.

D    The Contractor will be provided a capitation payment listing which includes
     a detailed listing of all enrollees for which the Contractor is receiving a
     capitatiom payment.

                                 Page 12 of 24

<PAGE>

E.   The parties agree that the Offices have the option of renegotiating
     actuarially sound capitation rates annually. Rates revised under this
     provision shall be implemented only after a contract amendment is executed
     and approved. Contractor may submit information for the Offices' review and
     consideration.

F.   It is understood and agreed upon by the parties that all obligations of the
     State of Indiana are contingent upon the availability and continued
     appropriation of State and Federal funds, and in no event shall the State
                                                   ---------------------------
     of Indiana be liable for any payments in excess of available appropriated
     -------------------------------------------------------------------------
     funds.
     -----

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

                             V. ORDER OF PRECEDENCE

Any inconsistency or ambiguity in this Contract shall be resolved by giving
precedence in the following order:

     1)  The express terms of this document;

     2)  Attachment 1 - BAA 0l-28, released July 31, 2000;

     3)  Attachment 2 - the Contractor's response to the BAA;

     4)  Any other documents, standards, laws, rules or regulations
         incorporated by reference in the above materials, all of which are
         hereby incorporated by reference.

                                   VI. NOTICE

A.   Whenever notice is required to be given to the other party, it shall be
     made in writing and delivered to that party. Delivery shall be deemed to
     have occurred if a signed receipt is obtained when delivered by hand or
     according to the date on the return receipt if sent by certified mail,
     return receipt requested. Notices shall be addressed as follows:

<TABLE>
<CAPTION>
     In case of notice to the Contractor:     In case of notice to the Offices:
<S>                                           <C>
     Dr. Michael McKinney, President          Sharon Steadman, Managed Care Director
     Managed Health Services                  Office of Medicaid Policy and Planning
     950 North Meridian, Suite 200            Family and Social Services Administration
     Indianapolis, Indiana 46204              402 W. Washington St. IGCS W382, MS07
                                              Indianapolis, Indiana 46204
</TABLE>

                                 Page 13 of 24

<PAGE>
B.   Said notices shall become effective on the date of delivery or the date
     specified within the notice, whichever comes later. Either party may change
     its address for notification purposes by mailing a notice stating the
     change and setting forth the new address.

                          VII. MISCELLANEOUS PROVISIONS

A.   Entire Agreement. This Contract constitutes the entire agreement between
     ----------------
     the parties with respect to the subject matter; all prior agreements,
     representations, statements, negotiations, and undertakings are superseded
     hereby.

B.   Changes. Any changes to this Contract shall be by formal amendment of this
     -------
     Contract signed by all parties required by Indiana law.

C.   Performance Bond. The Contractor agrees that a performance bond in the
     ----------------
     amount of five hundred thousand dollars ($500,000.00) will be delivered to
     the Indiana Department of Administration (IDOA) within ten (10) calendar
     days of the execution of this contract. Said bond will be in the form of a
     cashier's check, a certified check, or a surety bond executed by a surety
     company authorized to do business in the State of Indiana as approved by
     the Insurance Department of State of Indiana. No other check or surety will
     be accepted. The performance bond shall be made payable to the IDOA and
     shall be effective for the duration of the contract and any extensions
     thereof. The State reserves the right to increase the performance bond
     amount if enrollment levels indicate the need for higher liquidated
     damages.

D.   Access To Records. The Contractor and any subcontractor shall maintain all
     -----------------
     books, documents, papers and records which are directly pertinent to this
     Contract and shall make such materials available at all reasonable times
     during the contract period and for three (3) years from the date of final
     payment under the Contract or until all pending matters are closed,
     whichever date is later, for inspection by the Office, or any other duly
     authorized representative of the State of Indiana or the Federal
     government. Copies thereof shall be furnished at no cost to the State if
     requested.

E.   Assignment. The Contractor shall not assign or subcontract the whole or any
     ----------
     part of this Contract without the State's prior written consent. The
     Contractor may assign its right to receive payments to such third parties
     as the Contractor may desire without the prior written consent of the
     State, provided that the Contractor gives written notice (including
     evidence of such assignment) to the State thirty (30) days in advance of
     any payment so assigned. The assignment shall cover all unpaid amounts
     under this Contract and shall not be made to more than one party.

F.   Authority to Bind Contractor. Notwithstanding anything in this Contract to
     ----------------------------
     the contrary, the signatory for the Contractor represents that he/she has
     been duly authorized to execute contracts on behalf of the Contractor
     designed above, has filed proof of such authority with the Indiana
     Department of Administration, 402 West Washington Street, W469.

                                 Page 14 of 24

<PAGE>
     Indianapolis, Indiana 46204, and has obtained all necessary or
     applicable approval from the home office of the Contractor to make this
     Contract fully binding upon the Contractor when his/her signature is
     affixed and is not subject to home office acceptance hereto and accepted
     by the State of Indiana.

G.   Compliance with Laws. The Contractor agrees to comply with all applicable
     --------------------
     Federal, State, and local laws, rules, regulations, or ordinances, and all
     provisions required thereby to be included herein are hereby incorporated
     by reference. The enactment of any state or federal statute or the
     promulgation of regulations thereunder after execution of this Contract
     shall be reviewed by the State and the Contractor to determine whether the
     provisions of this Contract require formal modification.

H.   Compliance with Civil Rights Laws. The Contractor and its subcontractors
     ---------------------------------
     hereby assure that they will comply with all Federal and Indiana Civil
     Rights Laws, including, but not limited to, I.C. 22-9-1-10 and the Civil
     Rights Act of 1964, to the end that they shall not discriminate against any
     employee or applicant for employment, to be employed in the performance of
     this Contract, with respect to his/her hire, tenure, terms, conditions or
     privileges of employment or any matter directly or indirectly related to
     employment, because of his/her race, color, religion, sex, disability,
     national origin, ancestry or status as a veteran. The Contractor
     understands that the State of Indiana is a recipient of federal funds.
     Pursuant to that understanding, the Contractor, and its subcontractors, if
     any, agree that if the Contractor employs 50 or more employees and does at
     least $50,000 worth of business with the State of Indiana and is not
     exempt, the Contractor wiIl comply with the reporting requirements of
     41 CFR 60-1.7, if applicable. Breach of this covenant may be regarded as
     a material breach of the Contract. The State of Indiana shall comply with
     Section 202 of Executive Order 11246, as amended, and 41 CFR 60-741, as
     amended, which are incorporated herein by specific reference.

I.   Assurance of Compliance with Civil Rights Act of 1964. Section 504 of the
     -------------------------------------------------------------------------
     Rehabilitation Act of 1973 and the Age Discrimination Act of 1975, the
     ----------------------------------------------------------------------
     Americans with Disabilities Act of 1990 and Title IX of the Education
     ---------------------------------------------------------------------
     Amendments of 1972: The Contractor agrees that it, and all of its
     ------------------
     subcontractors and providers, will comply with the following:

     1.   Title VI of the Civil Rights Act of 1964 (Pub. L. 88-352), as
          amended, and all requirements imposed by or pursuant to the Regulation
          of the Department of Health and Human Services (45 C.F.R. Part 80),
          to the end that, in accordance with Title VI of that Act and the
          Regulation, no person in the United States shall on the ground of
          race, color, or national origin, be excluded from participation in, be
          denied the benefits of, or be otherwise subjected to discrimination
          under any program or activity for which the Contractor receives
          Federal financial assistance under this Contract.

     2.   Section 504 of the Rehabilitation Act of 1973 (Pub. L. 93-112), as
          amended, and all requirements imposed by or pursuant to the Regulation
          of the Department of Health and Human Services (45 C.F.R. Part 84), to
          the end that, in accordance with Section 504 of that Act and the
          Regulation, no otherwise qualified handicapped individual in

                                 Page 15 of 24

<PAGE>

               the United States shall, solely by reason of his/her handicap, be
               excluded from participation in, be denied the benefits of, or be
               subjected to discrimination under any program or activity for
               which the Contractor receives Federal financial assistance under
               this Contract.

          3.   The Age Discrimination Act of 1975 (Pub. L. 94-135) as amended,
               and all requirements imposed by or pursuant to the Regulation of
               the Department of Health and Human Services (45 C.F.R. Part 91),
               to the end that, in accordance with the Act and the Regulation,
               no person in the United States shall, on the basis of age, be
               denied the benefits of, be excluded from participation in, or be
               subjected to discrimination under any program or activity for
               which the Contractor receives Federal financial assistance under
               this Contract.

          4.   The Americans with Disabilities Act of 1990 (Pub. L. 10l-336), as
               amended, and all requirements imposed by or pursuant to the
               Regulation of the Department of Justice (28 C.F.R. 35.101 et
               seq.), to the end that in accordance with the Act and Regulation,
               no person in the United States with a disability shall, on the
               basis of the disability, be excluded from participation in, be
               denied the benefits of, or otherwise be subjected to
               discrimination under any program or activity for which the
               Contractor receives Federal financial assistance under this
               Contract.

          5.   Title IX of the Education Amendments of 1972, as amended (20
               U.S.C. (S)(S)1681-1683, and 1685-1686), and all requirements
               imposed by or pursuant to regulation, to the end that, in
               accordance with the Amendments, no person in the United States
               shall, on the basis of sex, be excluded from participation in, be
               denied the benefits of, or otherwise be subjected to
               discrimination under any program or activity for which the
               Contractor receives Federal financial assistance under this
               Contract.

         The Contractor agrees that compliance with this assurance constitutes a
         condition of continued receipt of Federal financial assistance, and
         that it is binding upon the Contractor, its successors, transferees and
         assignees for the period during which such assistance is provided. The
         Contractor further recognizes that the United States shall have the
         right to seek judicial enforcement of this assurance.

J.       Conflict of Interest
         --------------------

         1.      As used in this section:

                 "Immediate family" means the spouse and the unemancipated
                 children of an individual.

                 "Interested party" means:

                 a.   The individual executing this Contract;

                                 Page 16 of 24

<PAGE>
               b.   An individual who has an interest of three percent (3%) or
                    more of the Contractor if the Contractor is not an
                    individual; or

               C.   Any member of the immediate family of an individual
                    specified under subdivision a. or b.

               "Department" means the Indiana Department of Administration.

               "Commission" means the State Ethics Commission.

          2.   The Department may cancel this Contract without recourse by the
               Contractor if any interested party is an employee of the State of
               Indiana.

          3.   The Department wi11 not exercise its right of cancellation under
               section 2 above if the Contractor gives the Department an opinion
               by the Commission indicating that the existence of this Contract
               and the employment by the State of Indiana of the interested
               party does not violate any statute or code relating to ethical
               conduct of state employees. The Department may take action,
               including cancellation of this Contract consistent with an
               opinion of the Commission obtained under this section.

          4.   The Contractor has an affirmative obligation under this Contract
               to disclose to the Department when an interested party is or
               becomes an employee of the State of Indiana. The obligation under
               this section extends only to those facts which the Contractor
               knows or reasonably could know.

     K    Confidentiality of Data, Property Rights in Products and Copyright
          -------------------------------------------------------------------
          Prohibition. The Contractor further agrees that all information, data,
          -----------
          findings, recommendations, proposals, etc., by whatever name
          described and by whatever form therein, secured developed, written, or
          produced by the Contractor in furtherance of this Contract, shall be
          the property of the State of Indiana and that the Contractor shall
          take such action as is necessary under law to preserve such property
          rights in and of the State of Indiana while such property is within
          the control and/or custody of the Contractor.

          By this Contract the Contractor specifically waives and/or releases to
          the State of Indiana any cognizable property right in the Contractor
          to copyright or patent such information, data, findings,
          recommendations, proposals, etc. that are developed exclusively in
          furtherance of the Contract and not developed by the Contractor for
          its other lines of business and incidentally applied to its Hoosier
          Healthwise line of business.

     L.   Confidentiality of State of Indiana Information. The Contractor
          -----------------------------------------------
          understands and agrees that data, materials and information disclosed
          to the Contractor may contain confidential and protected data;
          therefore, the Contractor promises and assures that data, material,
          and information gathered, based upon or disclosed to the Contractor
          for the purpose of this Contract will not be disclosed to others or
          discussed with other parties without the prior written consent
          of the State of Indiana.

                                 Page 17 of 24

<PAGE>

M.   Conveyance of Documents And Continuation of Existing Activity: Should the
     -------------------------------------------------------------
     Contract for whatever reason, (i.e. completion of a contract with no
     renewal, or termination of service by either party), be discontinued and
     the activities as provided for in the Contract for services cease, the
     Contractor and any subcontractors employed by the terminating Contractor in
     the performance of the duties of the Contract shall promptly convey to the
     State of Indiana, copies of all vendor working papers, data collection
     forms, reports, charts, programs, cost records and all other material
     related to work performed on this Contract.

     The Contractor and the Office shall convene immediately upon notification
     of termination or non-renewal of the Contract to determine what work shall
     be suspended, what work shall be completed, and the timeframe for
     completion and conveyance. The Office will then provide the Contractor with
     a written schedule of the completion and conveyance activities associated
     with termination. Documents/materials associated with suspended activities
     shall be conveyed by the Contractor to the State of Indiana upon five days'
     notice from the State of Indiana. Upon completion of those remaining
     activities noted on the written schedule, the Contractor shall also convey
     all documents and materials to the State of Indiana upon five days' notice
     from the State of Indiana.

N.   Disputes. Should any disputes arise with respect to this Contract, the
     --------
     Contractor and the State of Indiana agree to act immediately to resolve any
     such disputes. Time is of the essence in the resolution of disputes.

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

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

     2.   The State of Indiana may withhold payments on disputed items pending
          resolution of the dispute. The non-payment by the State of Indiana to
          the

                                 Page 18 of 24

<PAGE>

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

O.        Drug-Free Workplace
          -------------------

          1.   The Contractor hereby covenants and agrees to make a good faith
               effort to provide and maintain during the term of this Contract a
               drug-free workplace. Contractor will give written notice to the
               Office and the Indiana Department of Administration within ten
               (10) days after receiving actual notice that an employee of the
               Contractor has been convicted of a criminal drug violation
               occurring in the Contractor's workplace.

          2.   In addition to subparagraph (l), if the total amount set forth in
               this Contract is in excess of twenty-five thousand dollars
               ($25,000.00), the Contractor hereby further agrees that this
               Contract is expressly subject to the terms, conditions, and
               representations contained in the Drug-Free Workplace
               Certification. The Certification is hereby executed by the
               Contractor in conjunction with this Contract and set forth in
               this Contract.

          3.   It is further expressly agreed that the failure of the Contractor
               to in good faith comply with the terms of subparagraph (1) above,
               or falsifying or otherwise violating the terms of the
               certification referenced in subparagraph (2) above shall
               constitute a material breach of this Contract, and shall entitle
               the State of Indiana to impose sanctions against the Contractor
               including, but not limited to, suspension of contract payment,
               termination of this Contract and/or debarment of the Contractor
               from doing further business with the State of Indiana for up to
               three (3) years.

P.        Drug-Free Workplace Certification
          ---------------------------------

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

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

          1.   Publishing and providing to all of its employees a statement
               notifying them that the unlawful manufacture, distribution,
               dispensing, possession or use of a controlled

                                 Page 19 of 24

<PAGE>

          substance is prohibited in the Contractor's workplace and specifying
          the actions that will be taken against employees for violations of
          such prohibition.

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

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

     4.   Notify the State in writing within ten (10) days after receiving
          notice from an employee under subdivision (3)(B) above, or otherwise
          receiving actual notice of such conviction.

     5.   Within thirty (30) days after receiving notice under subdivision
          (3)(B) above of a conviction, imposing the following sanctions or
          remedial measures on any employee who is convicted of drug abuse
          violations occurring in the workplace: (A) take appropriate personnel
          action against the employee, up to and including termination; or (B)
          require such employee to satisfactorily participate in a drug abuse
          assistance or rehabilitation program approved for such purposes by a
          Federal, State, or local health, law enforcement, or other appropriate
          agency.

     6.   Making a good faith effort to maintain a drug-free workplace through
          the implementation of subparagraphs (1) through (5).

Q.   Environmental Standards. If the contract amount set forth in this Contract
     -----------------------
     is in excess of $100,000, the Contractor shall comply with all applicable
     standards, orders, or requirements issued under section 305 of the Clean
     Air Act (42 USC 7606), section 508 of the Clean Air Act (33 USC 1368),
     Executive Order 11738, and Environmental Protection Agency regulations (40
     CFR Part 15), which prohibit the use under non-exempt Federal contracts of
     facilities included on the EPA List of Violating Facilities. The Contractor
     shall report any violations of this paragraph to the State of Indiana and
     to the United States Environmental Protection Agency Assistant
     Administrator for Enforcement.

R.   Force Majeure; Suspension and Termination. In the event either party is
     -----------------------------------------
     unable to perform any of its obligations under this Contract or to enjoy
     any of its benefits because of (or if failure to perform the service is
     caused by) natural disaster, actions or decrees of governmental bodies, or
     communication line failure not the fault of the affected party (hereinafter
     referred to as a "Force Majeure Event"), the party who has been so affected
     shall immediately give notice to the other-party and shall take reasonable
     measures to resume performance. Upon receipt of such notice, all
     obligations under this Contract shall

                                 Page 20 of 24

<PAGE>

     be immediately suspended. If the period of non-performance exceeds thirty
     (30) days from the receipt of notice of the Force Majeure Event, the party
     whose ability to perform has not been so affected may, by giving written
     notice, terminate this Contract.

S.   Governing Laws. This Contract shall be construed in accordance with and
     --------------
     governed by the laws of the State of Indiana and suit, if any, must be
     brought in the State of Indiana.

T.   Indemnification. The Contractor agrees to indemnify, defend, and hold
     ---------------
     harmless the State of Indiana and its agents, officers, and employees from
     all claims and suits including court costs, attorney's fees, and other
     expenses caused by any act or omission of the Contractor and/or its
     subcontractors, if any. The State shall not provide such indemnification
                                             ---
     to the Contractor.

U.   Independent Contractor. "The Office and the Contractor acknowledge and
     ----------------------
     agree that in the performance of this contract, the Contractor is an
     independent contractor and both parties will be acting in an individual
     capacity and not an as agents, employees, partners, joint venturers,
     officers, or associates of one another. The employees or agents of one
     party shall not be deemed or construed to be the employees or agents of the
     other party for any purposes whatsoever. Neither party will assume any
     liability for any injury (including death) to any persons, or any property
     arising out of the acts or omissions of the agents, employees or
     subcontractors of the other party.

     The Contractor shall be responsible for providing all necessary
     unemployment and worker compensation insurance for the Contractor's
     employees.

V.   Lobbying Activities. Pursuant to 31 U.S.C. 1352, and any regulations
     -------------------
     promulgated thereunder, the Contractor hereby assures and certifies that no
     federally appropriated funds have been paid. or will be paid, by or on
     behalf of the Contractor, to any person for influencing or attempting to
     influence an officer or employee of any agency, a member of Congress, an
     officer or employee of Congress, or an employee of a member of Congress, in
     connection with the awarding of any federal contract, the making of any
     federal grant, the making of any federal loan, the entering into of any
     cooperative contract, and the extension, continuation, renewal, amendment,
     or modification of any federal contract, grant, loan or cooperative
     contract. If any funds other than federally appropriated funds have been
     paid or will be paid to any person for influencing or attempting to
     influence an officer or employee of any agency, a member of Congress, an
     officer or employee of Congress, or an employee of a member of Congress in
     connection with this Contract, the Contractor shall complete and submit
     Standard Form-LLL, "Disclosure Form to Report Lobbying", in accordance with
     its instructions.

W.   Ownership of Documents and Materials. All documents, records, programs,
     ------------------------------------
     data, film, tape, articles, memoranda, and other materials developed under
     this Contract will be the property of the State of Indiana. Use of these
     materials other than related to contract performance by the Contractor
     without the prior written consent of the State of Indiana is prohibited.
     During the performance of the services specified herein, the Contractor
     shall be responsible for any loss or damage to these materials developed
     for or supplied by the State of Indiana and used

                                 Page 21 of 24

<PAGE>

     to develop or assist in the services provided herein, while they are in the
     possession of the Contractor, and any loss or damage thereto shall be
     restored at the Contractor's expense. Full, immediate and unrestricted
     access to the work product of the Contractor during the term of this
     Contract shall be available to the State of Indiana. The Contractor will
     give to the State of Indiana, or the State of Indiana's designee, all
     records of other materials described in this section, after termination of
     the Contract and upon five (5) days notice of a request from the State of
     Indiana.

X.   Penalties/Interest/Attorney's Fees. The State will in good faith perfom
     ----------------------------------
     its required obligations hereunder and does not agree to pay any penalties,
     liquidated damages, interest, or attorney's fees, except as required by
     Indiana law, in part, I.C. 5-17-5-1 et seq, I.C. 34-54-8-2 et seq, and I.C.
                                         ------                 ------
     34-13-1-1 et seq.
               ------

Y.   Severability. The invalidity in whole or in part of any provision of this
     ------------
     Contract shall not void or affect the validity of any other provision.

Z.   Successors and Assignees. The Contractor binds its successors, executors,
     ------------------------
     assignees, and administrators, to all covenants of this Contract. Except as
     set forth above, the Contractor shall not assign, sublet, or transfer the
     Contractor's interest in this Contract without the prior written consent of
     the Office.

AA.  Termination. The Offices may, without cause, cancel and terminate this
     -----------
     Contract in whole or in part upon sixty (60) days' prior written notice.
     The Contractor will be reimbursed for services performed prior to the date
     of termination consistent with the terms of the Contract. The Offices will
     not be liable for services performed after notice of termination, but
     before the date of termination, without written authorization from the
     Offices. In no event will the Offices be liable for services performed
     after the termination date.

     In the event that the Offices request that the Contractor perform any
     additional services associated with the transition or turnover of this
     Contract, the Offices agree to pay reasonable costs for those additional
     services specifically requested by the Offices.

BB.  Waiver of Breach. No waiver of breach of any provision of this Contract
     ----------------
     shall constitute, a waiver of any other breach or of such provision.

     Failure of the Office to enforce at any time any provision of this
     Contract shall not be construed as a waiver thereof. The remedies herein
     reserved shall be cumulative and additional to any other remedies in law
     or equity.

CC.  Work Standards. The Contractor agrees to execute its respective
     --------------
     responsibilities by following and applying at all times the highest
     professional and technical guidelines and standards. If the State becomes
     dissatisfied with the work product or the working relationship with those
     individuals assigned to work on this Contract, the State may request in
     writing the replacement of any or all such individuals.

                                 Page 22 of 24

<PAGE>

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

        /// The remainder of this page is left intentionally blank. ///

                                 Page 23 of 24

<PAGE>

In Witness Whereof, Coordinated Care Corporation Indiana, Inc. and the State of
Indiana have, through duly authorized representatives, entered into this
agreement. The parties having read and understand the foregoing terms of the
Contract do by their respective signatures dated below hereby agree to the terms
thereof.

<TABLE>
<CAPTION>
For the Contractor:                           For the State of Indiana:
<S>                                           <C>
/s/ Dr. Michael McKinney                      /s/ Kathleen D. Gifford
-----------------------------------           ---------------------------------
Dr. Michael McKinney, President               Kathleen D. Gifford
Coordinated Care Corporation Indiana, Inc.    Assistant Secretary
                                              Office of Medicaid Policy & Planning

Date:  12/11/2000                             Date:  12/11/2000
      -------------                                 ----------------

                                              /s/ Nancy Cobb
                                              ---------------------------------
                                              Nancy Cobb, Director
                                              Children's Health Insurance Program

                                              Date:  12/11/2000
                                                    ----------------

APPROVED:                                     APPROVED:

/s/ [ILLEGIBLE]                               /s/ Jay D. McQueen for
-----------------------------------           ---------------------------------
Betty Cockrum, Director                       Glenn R. Lawrence, Commissioner
State Budget Agency                           Department of Administration

Date:  1/10/01                                Date:  Jan 4, 2001
      -------------                                 ----------------

APPROVED AS TO FORM AND LEGALITY

/s/ James F. Schmitt
-----------------------------------
Stephen Carter
Deputy of
Attorney General of Indiana

Date:  2/21/01
      -------------
</TABLE>

                                 Page 24 of 24<PAGE>

                                                                    Exhibit 10.8
                                1994 STOCK PLAN
                                ---------------

     1.   Purpose.  The purpose of this 1994 Stock Plan (the "Plan") is to
          -------
advance the interests of Coordinated Care Corporation, a Wisconsin corporation
(the "Company"), by strengthening the ability of the Company to attract, retain
and motivate key employees, consultants and other individual contributors of or
to the Company or any present or future parent or subsidiary of the Company (the
"Company Group") by providing them with an opportunity to purchase or receive as
bonuses stock of the Company and thereby permitting them to share in the
Company's success. It is intended that this purpose will be effected by
granting: (i) incentive stock options ("Incentive Options") which are intended
to qualify under the provisions of Section 422 of the Internal Revenue Code of
1986, as heretofore and hereafter amended (the "Code"), and non-statutory stock
options ("Nonqualified Options") which are not intended to meet the requirements
of Section 422 of the Code and which are intended to be taxed under Section 83
of the Code (both Incentive Options and Nonqualified Options shall be
collectively referred to as "Options"); (ii) stock purchase authorizations
("Purchase Authorizations"); and (iii) stock bonus awards ("Bonuses").

     2.   Effective Date.  This Plan was adopted by the Board of Directors of
          --------------
the Company (the "Board") on September 27, 1994 (the "effective date" of the
Plan).

     3.   Stock Covered by the Plan.  Subject to adjustment as provided in
          -------------------------
Sections 9 and 10 below, the shares that may be made subject to Options,
Purchase Authorizations or Bonuses under this Plan (the "Shares") shall not
exceed in the aggregate 100,000 shares of Series A common stock, $0.01 par
value, of the Company (the "Common Stock"). Any Shares subject to an Option or
Purchase Authorization which for any reason expires or is terminated unexercised
as to such Shares and any Shares reacquired by the Company pursuant to
forfeiture or a repurchase right hereunder may again be the subject of an
Option, Purchase Authorization or Bonus under the Plan. The Shares purchased
pursuant to Purchase Authorizations or the exercise of Options under this Plan
or issued as Bonuses may, in whole or in part, be either authorized but unissued
Shares or issued Shares reacquired by the Company.

     4.   Administration.  This Plan shall be administered by the Board, whose
          --------------
construction and interpretation of the Plan's terms and provisions shall be
final and conclusive. The Board shall have authority, subject to the express
provisions of the Plan, to construe the Plan and the respective Options,
Purchase Authorizations, Bonuses and related agreements, to prescribe, amend and
rescind rules and regulations relating to the plan, to determine the terms and
provisions of the respective Options, Purchase Authorizations, Bonuses and
related agreements, and to

<PAGE>

make all other determinations in the judgment of the Board necessary or
desirable for the administration of the Plan. The Board may correct any defect
or supply any omission or reconcile any inconsistency in the Plan or in any
Option, Purchase Authorization, Bonus, or related agreement in the manner and to
the extent it shall deem expedient to carry the Plan into effect, and it shall
be the sole and final judge of such expediency. No director shall be liable for
any action or determination made in good faith. The Board may, to the full
extent permitted by law, delegate any or all of its powers under the Plan to a
committee (the "Committee") appointed by the Board, and if the Committee is so
appointed and to the extent such powers are delegated, all references to the
Board in the Plan shall mean and relate to such Committee.

     5.   Eligible Recipients.  Options, Purchase Authorizations and Bonuses may
          -------------------
be granted to such key employees, consultants or other individual contributors
of or to the Company Group, including without limitation members of the Board
and members of any advisory boards, as are selected by the Board (a
"Participant"); provided, that only employees of the Company Group shall be
eligible for grant of an Incentive Option.

     6.   Duration of the Plan.  This Plan shall terminate ten (10) years from
          --------------------
the effective date hereof, unless terminated earlier pursuant to Section 13
below, and no Options, Purchase Authorizations or Bonuses may be granted or made
thereafter.

     7.   Terms and Conditions of Options, Purchase Authorizations and Bonuses.
          --------------------------------------------------------------------
Options, Purchase Authorizations and Bonuses granted or made under this Plan
shall be evidenced by agreements in such form and containing such terms and
conditions as the Board shall determine; provided, however, that such agreements
shall evidence among their terms and conditions the following:

          (a)  Price. The purchase price per Share payable upon the exercise of
               -----
each Option or the purchase pursuant to each Purchase Authorization granted or
made hereunder shall be determined by the Board at the time the Option or
Purchase Authorization is granted or made. Subject to the condition of paragraph
7(j)(i), if applicable, the purchase price per Share payable upon the exercise
of each Incentive Option granted hereunder shall not be less than one hundred
percent (100%) of the fair market value per Share on the day the Incentive
Option is granted. Fair market value shall be determined in accordance with
procedures to be established in good faith by the Board. Bonus Shares shall be
issued in consideration of services previously rendered, which shall be valued
for such purposes by the Board.

                                      -2-

<PAGE>

          (b)  Number of Shares.  Each agreement shall specify the number of
               ----------------
Shares to which it pertains.

          (c)  Exercise of Options.  Each Option shall be exercisable for the
               -------------------
full amount or for any part thereof and at such intervals or in such
installments as the Board may determine at the time it grants such Option;
provided, however, that no Option shall be exercisable with respect to any
Shares later than ten (10) years after the date of the grant of such Option (or
five (5) years in the case of Incentive Options to which paragraph 7(j)(ii)
applies). An Option shall be exercisable only by delivery of a written notice to
the Company's Treasurer, or any other officer of the Company designated by the
Board to accept such notices on its behalf, specifying the number of Shares for
which the Option is exercised and accompanied by either (i) payment or (ii) if
permitted by the Board, irrevocable instructions to a broker to promptly deliver
to the Company full payment in accordance with subparagraph (ii) of the first
sentence of paragraph 7(d) below of the amount necessary to pay the aggregate
exercise price. With respect to an Incentive Option, the permission of the Board
referred to in clause (ii) of the preceding sentence must be granted at the time
the Incentive Option is granted.

          (d)  Payment.  Payment shall be made in full: (i) at the time the
               -------
Option is exercised; (ii) promptly after the Participant forwards the
irrevocable instructions referred to in paragraph 7(c)(ii) above to the
appropriate broker, if exercise of an Option is made pursuant to paragraph
7(c)(ii) above; or (iii) at the time the purchase pursuant to a Purchase
Authorization is made. Payment shall be made either: (a) in cash; (b) by check;
(c) if permitted by the Board (with respect to an Incentive Option, such
permission to have been granted at the time of the Incentive Option grant), by
delivery and assignment to the Company of shares of Company stock having a fair
market value (as determined by the Board) equal to the exercise or purchase
price; (d) if permitted by the Board, stated in the agreement evidencing the
Option or Purchase Authorization, and to the extent permitted by any applicable
law, by the Participant's recourse promissory note, which note must be due and
payable not more than five (5) years after the date the Option or Purchase
Authorization is exercised and otherwise be on such terms as the Board approves;
or (e) by a combination of the methods permitted pursuant to clauses (a), (b),
(c) and/or (d) hereof. If shares of Company stock are to be used to pay the
exercise price of an Incentive Option, the Company (prior to such payment) must
be furnished with evidence satisfactory to it that the acquisition of such
shares and their transfer in payment of the exercise price satisfy the
requirements of Section 422 of the Code and other applicable laws.

                                      -3-

<PAGE>

                   (e)   Withholding Taxes; Delivery of Shares. The Company's
                         -------------------------------------
 obligation to deliver Shares upon exercise of an Option or upon purchase
 pursuant to a Purchase Authorization or issuance pursuant to a Bonus shall be
 subject to the Participant's satisfaction of all applicable federal, state and
 local income and employment tax withholding obligations. Without limiting the
 generality of the foregoing, the Company shall have the right to deduct from
 payments of any kind otherwise due to the Participant any federal, state or
 local taxes of any kind required by law to be withheld with respect to any
 Shares issued upon exercise of Options or purchased or issued pursuant to
 Purchase Authorizations or Bonuses. The Participant may elect to satisfy such
 obligation(s), in whole or in part, by (i) delivering to the Company a check
 for the amount required to be withheld or (ii) if the Board in its sole
 discretion approves in any specific or general case, having the Company
 withhold Shares or delivering Company stock, having a value equal to the amount
 required to be withheld, as determined by the Board.

                   (f)   Non-Transferability. No Option or Purchase
                         -------------------
 Authorization shall be transferable by the Participant otherwise than by will
 or the laws of descent or distribution, and each Option or Purchase
 Authorization shall be exercisable during the Participant's lifetime only by
 the Participant.

                   (g)   Termination of Options and Purchase Authorizations.
                         --------------------------------------------------
Each Purchase Authorization shall terminate and may no longer be exercised if
the Participant ceases for any reason to provide services to a member of the
Company Group. Except to the extent the Board provides specifically in an
agreement evidencing an Option for a lesser period (or a greater period, in the
case of Nonqualified Options only), each Option shall terminate and may no
longer be exercised if the Participant ceases for any reason to provide services
to a member of the Company Group in accordance with the following provisions:

                     (i)      if the Participant ceases to perform services for
                              any reason other than death or disability (as
                              defined in Section 22(e)(3) of the Code), the
                              Participant may, at any time within a period of
                              one month after the date of such cessation of the
                              performance of services, exercise the Option to
                              the extent that the Option was exercisable on the
                              date of such cessation;

                     (ii)     if the Participant ceases to perform services
                              because of disability (as defined in Section
                              22(e)(3) of the Code), the Participant may, at any
                              time within a period of three months after

                                      -4-

<PAGE>

                              the date of such cessation of the performance of
                              services, exercise the Option to the extent that
                              the Option was exercisable on the date of such
                              cessation; and

                     (iii)    if the Participant ceases to perform services
                              because of death, the Option, to the extent that
                              the Participant was entitled to exercise it on the
                              date of death, may be exercised within a period of
                              three months after the Participant's death by the
                              person or persons to whom the Participant's rights
                              under the Option pass by will or by the laws of
                              descent or distribution;

provided, however, that no Option or Purchase Authorization may be exercised to
any extent by anyone after the date of its expiration; and provided, further,
that Options and Purchase Authorizations may be exercised only as to Vested
Shares (as defined in the applicable agreement with the Participant) after the
Participant has ceased to perform services for any member of the Company Group.

                     (h)   Rights as Stockholder. A Participant shall have no
                           ---------------------
rights as a stockholder with respect to any Shares covered by an Option,
Purchase Authorization or Bonus until the date of issuance of a stock
certificate in the Participant's name for such Shares. Certificates shall be
issued as soon as practicable after the due exercise of an Option,
purchase pursuant to a Purchase Authorization or receipt of Shares as a Bonus.

                     (i)   Repurchase of Shares by the Company. Any Shares
                           -----------------------------------
purchased or acquired upon exercise of an Option or pursuant to a Purchase
Authorization or Bonus may in the discretion of the Board be subject to
repurchase by or forfeiture to the Company if and to the extent and at the
repurchase price, if any, specifically set forth in the option, purchase or
bonus agreement pursuant to which the Shares were purchased or acquired.
Certificates representing Shares subject to such repurchase or forfeiture may be
subject to such escrow and stock legending provisions as may be set forth in the
option, purchase or bonus agreement pursuant to which the Shares were purchased
or acquired.

                     (j)   10% Stockholder. If any Participant to whom an
                           ---------------
Incentive Option is granted pursuant to the provisions of the Plan is on the
date of grant the owner of stock (as determined under Section 424(d) of the
Code) possessing more than 10% of the total combined voting power or value of
all classes of stock of the Company, its parent, if any, or subsidiaries, then
the following special provisions shall be applicable:

                                      -5-

<PAGE>

                     (i)   The exercise price per Share subject to such Option
                           shall not be less than 110% of the fair market value
                           of each Share on the date of grant; and

                     (ii)  The Option shall not have a term in excess of five
                           years from the date of grant.

                    (k)  Shareholder Aqreement. In addition to any other
                         ---------------------
restrictions on the transfer of Shares contained in any option, purchase or
bonus agreement pursuant to which such Shares were issued, each Participant, and
all Shares subject to Options, Purchase Authorizations or Bonuses, shall be
bound by and entitled to the benefits of all of the terms and conditions
(including, but not limited to restrictions on transfer of shares) contained in
that certain Shareholder Agreement, dated July 29, 1993, as may from time to
time be amended, by and among the Company and its shareholders (the "Shareholder
Agreement") to the same extent as though such Participant were a party thereto;
provided, however, that any Participant entitled under the Shareholder Agreement
to exercise the co-sale right, registration right or right of refusal on future
financings set forth in Sections l(d), 4 and 6, respectively, of the Shareholder
Agreement shall be entitled to exercise such rights only with respect to Vested
Shares and any computation of the nsumber of Shares with respect to such
Participant's entitlement to exercise such rights shall be based only upon the
number of Vested Shares held by such Participant.

                    (l)  Confidentiality and Non-Solicitation Agreements. Each
                         -----------------------------------------------
Participant shall execute, prior to or contemporaneously with the grant of any
Option, Purchase Authorization or Bonus hereunder, the Company's then standard
form of agreement relating to nondisclosure of confidential information, non-
solicitation and related matters.

               8.   Restrictions on Incentive Options. Incentive Options granted
                    ---------------------------------
under this Plan shall be specifically designated as such and shall be subject to
the additional restriction that the aggregate fair market value, determined as
of the date the Incentive Option is granted, of the Shares with respect to which
Incentive Options are exercisable for the first time by a Participant during any
calendar year shall not exceed $100,000. If an Incentive Option which exceeds
the $100,000 limitation of this paragraph 8 is granted, the portion of such
Option which is exercisable for shares in excess of the $100,000 limitation
shall be treated as a Nonqualified Option pursuant to Section 422(d) of the
Code. In the event that such Participant is eligible to participate in any other
stock incentive plans of the Company, its parent, if any, or a subsidiary which
are also intended to comply with the provisions of Section 422 of the Code, such
annual

                                      -6-

<PAGE>

limitation shall apply to the aggregate number of shares for which options may
be granted under all such plans.

          9.  Stock Dividends; Stock splits; Stock Combinations;
              -------------------------------------------------
 Recapitalizations. Appropriate adjustment shall be made by the Board in the
 -----------------
 maximum number of Shares subject to the Plan and in the number, kind, and
 exercise or purchase price of Shares covered bY outstanding Options and
 Purchase Authorizations granted hereunder to give effect to any stock
 dividends, stock splits, stock combinations, recapitalizations and other
 similar changes in the capital structure of the Company after the effective
 date of the Plan.

          10. Merger; Sale of Assets. In the event of a change of the Common
              ----------------------
Stock resulting from a merger or similar reorganization as to which the Company
is the surviving corporation, the number and kind of Shares which thereafter may
be purchased pursuant to an Option or Purchase Authorization under the Plan and
the number and kind of Shares then subject to Options or Purchase Authorizations
granted hereunder and the price per Share thereof shall be appropriately
adjusted in such manner as the Board may determine equitable to prevent dilution
or enlargement of the rights available or granted hereunder. Except as otherwise
determined by the Board, a merger or a similar reorganization which the Company
does not survive, or a sale of all or substantially all of the assets of the
Company, shall cause every Option and Purchase Authorization hereunder to
terminate, to the extent not then exercised, unless any surviving entity agrees
to assume the obligations hereunder; provided, however, that, in the case of
such a merger or similar reorganization, or such a sale of all or substantially
all of the assets of the Company, if there is no such assumption, the Board may
provide that some or all of the unexercised portion of any one or more of the
outstanding Options or Purchase Authorizations and some or all of the Unvested
Shares (as defined in the applicable agreement with the Participant) acquired
upon exercise of any one or more of such Options or Purchase Authorizations or
acceptance of any one or more of the outstanding Bonuses shall be immediately
exercisable and Vested or no longer subject to repurchase rights as of such date
prior to such merger, similar reorganization or sale of assets as the Board
determines.

          11. Investment Representations; Transfer Restrictions Restrictive
              -------------------------------------------------------------
Legend. The Company may require Participants, as a condition of purchasing
------
Shares pursuant to the exercise of an Option or pursuant to a Purchase
Authorization or receipt of shares as a Bonus, to give written assurances in
substance and form satisfactory to the Company to the effect that such person is
acquiring the Shares for the Participant's own account for investment and not
with any present intention of selling or

                                      -7-

<PAGE>

otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate (including without limitation confirmation that the
Participant is aware of any applicable restrictions on transfer of the Shares,
as specified in the articles of incorporation or by-laws of the Company, in any
agreement among its shareholders, or otherwise) in order to comply with federal
and applicable state securities laws. Certificates representing the Shares shall
bear an appropriate legend regarding restrictions on transferability.

          12. Definitions.
              -----------

              (a)  The term "employee" shall have, for purposes of this Plan,
the meaning ascribed to employee" under Section 3401(c) of the Code and the
regulations promulgated thereunder.

              (b)  The term "parent" shall have, for purposes of this Plan, the
meaning ascribed to it under Section 424(e) of the Code and the regulations
promulgated thereunder.

              (c)  The term "subsidiary" shall have, for all purposes under this
Plan, the meaning ascribed to it under Section 424(f) of the Code and the
regulations promulgated thereunder.

          13. Termination or Amendment of Plan. The Board may at any time
              --------------------------------
terminate the Plan or make such changes in or additions to the Plan as it deems
advisable without further action on the part of the stockholders of the
Company, provided that:

              (a)  no such termination or amendment shall adversely affect or
impair any then outstanding Option, Purchase Authorization, Bonus or related
agreement without the consent of the Participant holding such Option, Purchase
Authorization, Bonus or related agreement; and

              (b)  no such amendment which (i) increases the maximum number of
Shares subject to this Plan (except to the extent provided in Section 3), (ii)
materially increases the benefits accruing to Participants, or (iii) materially
modifies the requirements as to eligibility for participation in the Plan may be
made without obtaining, or being conditioned upon, shareholder approval.

          With the consent of the Participant affected, the Board may amend
outstanding Options, Purchase Authorizations, Bonuses or related agreements in a
manner not inconsistent with the Plan. The Board shall have the right to amend
or modify the terms and provisions of the Plan and of any outstanding Incentive
Options granted under the Plan to the extent necessary to qualify any or all
such Options for such favorable federal income tax treatment

                                      -8-

<PAGE>

(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code.

                                      -9-

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