Document:

Exhibit 10.1

 

Exhibit 10.1

* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

PHARMACY SERVICES AGREEMENT

     This Pharmacy Services Agreement (the “Agreement”) is effective this 1st day of May, 2007 by
and among PRISON HEALTH SERVICES, INC., a Delaware corporation, CORRECTIONAL HEALTH SERVICES, LLC,
a New Jersey limited liability company, whose sole member is Prison Health Services, Inc.
(hereinafter collectively referred to as “PHS”) and MAXOR NATIONAL PHARMACY SERVICES CORPORATION, a
Texas corporation (“Maxor”).

     WHEREAS, PHS is in the business of providing correctional health care services through
contracts with various state and local government entities (“Clients”, as further defined herein);
and

     WHEREAS, Maxor operates a pharmacy licensed in the State of Tennessee and other United States
jurisdictions; and

     WHEREAS, Maxor is in the business of providing Pharmaceuticals (as hereinafter defined) and
pharmaceutical services in correctional settings for various state and local government entities;
and

     WHEREAS, Maxor, Secure Pharmacy Plus, LLC and PHS have entered into an Asset Purchase
Agreement effective as of April 30, 2007 (“Purchase Agreement”), pursuant to which the parties
thereto contemplated the execution of this Agreement; and

     WHEREAS, PHS is in need of Pharmacy Services (as defined herein) from Maxor so PHS may provide
such services to its Clients; and

     WHEREAS, the Parties wish to enter into this Agreement to set out the terms and conditions
under which Maxor will provide Pharmacy Services to PHS.

     NOW THEREFORE, in consideration of the foregoing and the mutual covenants, agreements and
other good and valuable consideration set forth herein, the receipt and sufficiency of which is
hereby acknowledged, the Parties hereby agree as follows:

1.01 Definitions. The following defined terms are used in this Agreement:

	 	(a)	 	“Actual Acquisition Cost” (“AAC”) [ ]*
	 
	 	(b)	 	“Applicable Laws” means, in respect of an activity or undertaking, all laws,
statutes, by-laws, rules, publicly available guidelines and policies, regulations,
orders, notices, ordinances, and judgments of any government, regulatory authority,
governmental department, agency, commission, board, tribunal, court or other law, rule or
regulation-making entity having jurisdiction on behalf of the U.S.
Government or any state or other subdivision thereof, or any municipality, district or
other subdivision thereof, in which such activity or undertaking is carried out.

 

 

	 	 	 	Applicable Laws shall include without limitation: (i) the Prescription Drug Marketing
Act; (ii) the Federal Controlled Substances Act; (iii) the Federal Food, Drug and
Cosmetics Act; (iv) any state laws relating to the dispensing of Pharmaceutical
Products; (v) laws relating to billing or sales practices; and (vi) laws relating to
contracting with governmental entities.
	 
	 	(c)	 	“Clinical Pharmacist” is defined as a registered pharmacist with education,
experience and/or advanced training in clinical pharmacy as required by Applicable Laws.
	 
	 	(d)	 	“Confidential Information” means information which a party considers to be
confidential or proprietary. Confidential Information shall include, without limitation,
information relating to Clients and provider identities; reimbursement procedures; claims
adjudication procedures; software and financial systems; the specific financial sections
and provisions, specific operational aspects, and other information relating to each
party’s business which is not generally available to the public, including pricing and
other terms set forth in Client contracts or bids or other responses to requests for
proposals. Each party’s Confidential Information shall also include confidential
proprietary information which a third party has disclosed to a party, and which such
party is obligated to maintain as confidential.
	 
	 	(e)	 	“Client” means, on any relevant date, a state or local government entity, agency,
political subdivision or privately owned or operated correctional facility that, on such
date, contracts with PHS for the provision of Pharmacy Services.
	 
	 	(f)	 	“Client Agreement” means an agreement between a Client and PHS pursuant to which
PHS provides health care services, including Pharmacy Services, to Inmates in the custody
of the Client.
	 
	 	(g)	 	“Damages” has the meaning set forth in Section 7.02 below.
	 
	 	(h)	 	“Dispensing Fee” means the fee to which Maxor is entitled in connection with the
dispensing of Pharmaceuticals under a patient specific Order, including refills of such,
to Clients or the Client’s clients hereunder, in such amount as the Parties from time to
time agree, and until changed by written agreement between the Parties, the Dispensing
Fee in respect of each Order shall be as set forth in Section 3.01;
	 
	 	(i)	 	“Facility” means those correctional facilities operated by a Client at which PHS
provides health care services under a Client Agreement.
	 
	 	(j)	 	“Formulary” is defined as a list of federal legend medications and over-the-counter
medications developed jointly by Maxor and PHS and published by PHS or a Client for use
at a particular Facility.
	 
	 	(k)	 	“Formulary Medication” is defined as any federal legend medication or
over-the-counter medication listed on a Formulary.

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* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

	 	(l)	 	“Handling Fee” means the fee to which Maxor is entitled in connection with the
dispensing of Pharmaceuticals under a non-patient specific Order as set forth in Section
3.01 below.
	 
	 	(m)	 	“Indemnified Claim” has the meaning set forth in Section 7.03 below.
	 
	 	(n)	 	“Indemnified Parties” has the meaning set forth in Section 7.02 below.
	 
	 	(o)	 	“Indemnifying Party” has the meaning set forth in Section 7.03 below.
	 
	 	(p)	 	“Inmate” is defined as any individual incarcerated at a Facility for which PHS is
responsible for delivering healthcare services, except those individuals for whom PHS
does not have responsibility.
	 
	 	(q)	 	“Invoice Cost” [            ]*
	 
	 	(r)	 	“Medical and Surgical Supplies” shall have the meaning as commonly ascribed in the
healthcare industry. Medical and Surgical Supplies do not include dental supplies
purchased directly from a wholesaler of such supplies.
	 
	 	(s)	 	“Night Locker Medications” are defined as backup medications that are stored in a
secure area at a Facility for emergency and first time “stat” doses.
	 
	 	(t)	 	“Non-Formulary Medication” is defined as any federal legend medication or
over-the-counter medication not listed on a Formulary.
	 
	 	(u)	 	“Order” means verbal, electronic, facsimile or other written communication to Maxor
from a physician or other health care practitioner (or their authorized agent) located at
a Facility, licensed to prescribe Pharmaceuticals under Applicable Law, requesting that
Maxor fill and ship one or more Pharmaceuticals to a Facility.
	 
	 	(v)	 	“Other Party” has the meaning set forth in Section 8.02 below.
	 
	 	(w)	 	“Parties” means, collectively, Maxor and PHS and “Party” refers individually to
either Maxor or PHS.
	 
	 	(x)	 	“Patient Information” has the meaning set forth in Section 6.01 below.
	 
	 	(y)	 	“Patient Specific Order” means an Order for a particular Inmate.
	 
	 	(z)	 	“Pharmaceutical(s)” has the meaning set forth in paragraph 2.02(a)(i) below.
	 
	 	(aa)	 	“Pharmacy and Therapeutics Committee” is defined as a committee comprised of
representatives of Maxor and PHS, which shall meet at least quarterly, or more frequently
as required by Client Agreements, to review formulary issues and

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* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

medication utilization within each Facility and to review new medications that have received approval of the United States
Food and Drug Administration. PHS will determine the composition of the committee and the frequency of the meetings.

	 	(bb)	 	“Pharmacy Services” shall have the meaning set forth in Section 2.02 below.
	 
	 	(cc)	 	“Pharmacist” means a licensed pharmacist engaged or employed by Maxor to provide
pharmacist services in respect of Orders hereunder and for and in respect of whom Maxor
is responsible under this Agreement.
	 
	 	(dd)	 	“Prescription” is defined as a verbal or written order under Applicable Laws, for
the preparation and administration of a medicine of a single strength to an individual
patient. The amount of medication dispensed at any one time will not exceed thirty (30)
days of medication unless otherwise prescribed.
	 
	 	(ee)	 	“Primary Distributor” [            ]*
	 
	 	(ff)	 	[intentionally omitted]
	 
	 	(gg)	 	“Representative” has the meaning set forth in Section 6.02(b) below.
	 
	 	(hh)	 	“Term” has the meaning set out in Section 8.01 below.

PART II — THE SERVICES

	2.01	 	Exclusivity. During the term of this Agreement, PHS will utilize Maxor exclusively to
provide Pharmaceuticals and Medical and Surgical Supplies to PHS in order that PHS may satisfy
its obligations to each of its Clients, except for situations in which:

	 	(i)	 	A Client, in its sole discretion and without any negative
influence from PHS, elects or requires PHS to utilize another pharmacy services
provider;
	 
	 	(ii)	 	A Client or the Applicable Laws specifically prohibit the use
of Maxor as a contractor or sub-contractor;
	 
	 	(iii)	 	PHS and Maxor mutually determine it is in the best interest of
the Parties for PHS to use another pharmacy services provider for a particular
Client;
	 
	 	(iv)	 	If Maxor materially or persistently fails, cannot or chooses
not to perform its duties and obligations or breaches any of its warranties or
representations under this Agreement, and such material or persistent
failure or breach is not cured within thirty (30) days after receipt of
written notice from PHS specifying such material or persistent failure, PHS
shall be permitted to use another pharmacy provider or supplier for any and
all of its Clients for which such failure or breach remains after the cure

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* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

period. PHS’ right to use another provider under this paragraph shall be in
addition to any and all other rights and remedies PHS has under this
Agreement;

	 	(v)	 	In the event Maxor is subject to any of the occurrences
specified in Section 8.02(e) hereunder; or
	 
	 	(vi)	 	Maxor does not or cannot supply within the timeframes required
hereunder the Pharmaceutical or Medical and Surgical Supply item or experiences
a temporary outage of such item, in which case PHS may use a Back-up Pharmacy
(in accordance with Section 2.02(a)(ix)) or supplier, as applicable.

	2.02	 	The Services. During the term of this Agreement, Maxor will provide the pharmacy services
described herein (collectively, the “Pharmacy Services”) for PHS in order that PHS may satisfy
its obligations to each of its Clients:

	 	(a)	 	Medication Fulfillment Services.

	 	(i)	 	Provide Pharmaceuticals. Source, purchase and provide
Formulary and Non-Formulary Medications (“Pharmaceuticals”) to the Facilities,
to be dispensed in prescribed dosages and otherwise in accordance with Orders.
	 
	 	(ii)	 	Dispense. Dispense Pharmaceuticals as set out in
Orders utilizing one of the following types of packaging: (i) blister cards for
all oral, solid dosage forms (tablets and capsules), including utilization of
Unit Dose packaging where required for the return and re-use of
Pharmaceuticals; (ii) liquid, oral medications will be dispensed in bulk form
unless another format is mandated by the appropriate PHS medical staff and
agreed upon between Maxor and PHS; (iii) injectable medications; and (iv)
special packaging as requested by the appropriate PHS medical staff and agreed
upon by Maxor.
	 
	 	(iii)	 	Use of Generics. Unless otherwise provided for in the
Order or specifically prohibited by Applicable Laws, automatically substitute
the lowest cost, generic medication available in compliance with Applicable
Laws or as otherwise specified by PHS in advance.
	 
	 	(iv)	 	Pill Splitting. [            ]*
	 
	 	(v)	 	Label. Label and package the Pharmaceuticals as
required by Applicable Laws and as consistent with industry practices and
procedures.
	 
	 	(vi)	 	Ship. Provide prepaid delivery to Facilities of all
Ordered Pharmaceuticals properly ordered by [            ]* (by web entry) and

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* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

[            ]* (by fax), Monday through Friday and by [ ]* (web
entry and fax), Saturday, the following business day (except at those
Facilities where Saturday delivery is not available via Maxor’s primary
overnight courier and/or such shipments cannot be received on a Saturday).
Business days shall include every day, Monday through Saturday, but shall
exclude Saturdays at those Facilities where overnight deliveries via Maxor’s
primary overnight courier are unavailable and/or shipments cannot be
received, Sundays and all shipping holidays recognized by Maxor’s primary
overnight courier. For Pharmaceuticals required before they can be
delivered via Maxor’s overnight delivery service in accordance with this
Agreement, Maxor shall provide delivery through a subcontracted, Back-Up
Pharmacy near the Facility. The deadlines imposed in this subparagraph
shall not apply to national shortage items or allocated items. Any such
pharmaceutical items will be shipped when available to Maxor, unless Order
has been previously filled through a Back-up Pharmacy.

	 	(vii)	 	Delivery. After arrival of each delivery of Ordered
Pharmaceuticals, PHS shall promptly notify Maxor in writing of any incorrectly
delivered Pharmaceutical or physical damage which is apparent from a review of
the temperature tales and an external physical review of the packaged
Pharmaceuticals. If PHS fails to give such notice, then such Pharmaceuticals
shall be conclusively presumed to be accepted by PHS and Maxor shall have no
further obligation to PHS in relation to such Pharmaceuticals. Any defect or
damage that is not identifiable from a review of the temperature tales and an
external physical review of the packaged Pharmaceutical shall remain grounds
for rejection of Pharmaceuticals, provided PHS notifies Maxor within 72 hours
of delivery of the Pharmaceuticals, except for defect or damage of
Pharmaceuticals as a result of temperature related issues, in which case
notification must be within 24 hours of delivery. Upon receipt of notification
from PHS of any incorrect delivery, defect or damage in accordance with this
Agreement, Maxor shall supply replacement Pharmaceuticals on a timely basis at
no additional charge to PHS, or if, in the discretion of PHS, the
Pharmaceutical needs to be obtained from a Back-Up Pharmacy, Maxor shall credit
PHS the full amount charged to PHS for the Pharmaceutical, including the
applicable Dispensing or Handling Fee charged to PHS or the Order. Title to,
and risk of loss of, each shipment of Ordered
Pharmaceuticals to PHS under the terms of this Agreement shall pass to PHS
upon the receipt by PHS of the Ordered Pharmaceutical at each Facility.

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* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

	 	(viii)	 	Service Level. Maxor will deliver to PHS properly ordered
Pharmaceuticals within the time requirements specified at least [ ]* %
of the time on all valid Orders placed by PHS. Orders which are incomplete,
illegible or require professional intervention including Non-Formulary
Pharmaceutical Orders and therefore cannot be filled in the professional
judgment of the Pharmacist do not qualify as a valid Order.
	 
	 	(ix)	 	Back-Up Pharmacy Network. Maxor will maintain
a network of subcontracted, local pharmacies near each Facility (hereinafter
referred to as “Back-Up Pharmacies”) to be used by PHS to obtain
Pharmaceuticals in emergent and stat situations in which Pharmaceuticals cannot
be received timely via overnight delivery service in accordance with this
Agreement. Maxor will use a Pharmacy Benefit Manager to manage this network,
manage cost to PHS and gather utilization data; provided, however, PHS must
first enroll each Facility in the PBM. Maxor will work with PHS to ensure
Pharmaceuticals are obtained through the Maxor pharmacy in all instances other
than those which would put patient care at risk. Maxor will provide PHS with a
current list of its Back-Up Pharmacy Network and will update such list as
changes occur.
	 
	 	(x)	 	Clinical Pharmacist Contact Person. Maxor will make
available to the health care staff of each Facility a Clinical Pharmacist for
Pharmaceutical consultation and drug therapy recommendations via telephone,
twenty-four (24) hours per day, each day of the year.
	 
	 	(xi)	 	Tracking of Shipments. Upon written request, provide
PHS with a tracking report detailing the status of each Order that has been
shipped, tracking number and shipping date.
	 
	 	(xii)	 	Drug Regimen Review. Provide a reasonable review in
accordance with all Applicable Laws of an Inmate’s medical record prior to
dispensing each Pharmaceutical Order. The review shall include evaluating the
medical and prescription order for:

1. over-utilization or under-utilization; 

2. therapeutic duplication;

3. drug-disease contraindication;

4. drug-drug interactions;

5. incorrect drug dosage or duration of drug treatment;

6. drug-allergy interactions;

7. clinical abuse/misuse.

Upon recognizing any of the above, the pharmacist shall take appropriate
steps to avoid or resolve the problem.

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	 	(xiii)	 	Night Locker Medications.  Provide and maintain a supply of Night
Locker Medications at each Facility in conformity with Applicable Laws and
Facility requirements.
	 
	 	(xiv)	 	Pedigree Requirements. As required by Applicable
Laws, Maxor will ensure compliance with pedigree requirements, including
sourcing of Pharmaceuticals and maintenance of applicable documentation and
provide the same to PHS in accordance with Applicable Laws or upon reasonable
written request.

(b) Ancillary Services.

	 	(i)	 	Access to Pharmaceutical Information System. Provide
PHS with access to the Pharmaceutical Information System (formerly known as the
“Secure Pharmacy Information Network” or “SPIN”) for the electronic
communication of Orders to Maxor. Parties agree this is the preferred method
of transmission of Orders and agree to work together to take all steps
necessary to ensure such access is implemented and maintained. Parties agree
that at least 80% of all Orders will be transmitted via electronic order entry.
The following Orders will be excluded from the calculation: (a) Orders from
Facilities which have been served by PHS for less than three (3) months (b)
Orders from Facilities that do not have high-speed internet capabilities; (c)
all Orders for scheduled, controlled Pharmaceuticals; and (d) Orders associated
with PHS’s contracts with the County of Alameda CA and Essex Co NJ. Maxor will
be responsible for creation, maintenance and termination of user accounts for
PHS staff to individually access the Pharmacy Information System. PHS will be
responsible for the communication lines, printers and computer work stations
used to access such system at each Facility.
	 
	 	(ii)	 	Training on Pharmaceutical Information System. Maxor
will provide training as necessary to PHS personnel on the proper use of the
Pharmaceutical Information System for purposes of Order entry, electronic MARs
and future enhancements to the system.
	 
	 	(iii)	 	Facsimile and Telephone Lines. Maintain toll-free
incoming facsimile line(s) and telephone lines to communicate with Maxor,
including submission of Orders.
	 
	 	(iv)	 	Facsimile Machines. Provide a facsimile machine to
each Facility to be used for communication of Orders to Maxor on a daily basis.
Title to such facsimile machine will remain with Maxor. Paper and supplies for such
facsimile machine shall be the responsibility of PHS. The facsimile machine
shall be used solely for the provision of services pursuant to this
Agreement.

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	 	(v)	 	Medication Carts and Other Equipment. Maxor will
provide all such medication carts, night locker boxes and double-lock narcotic
boxes as may be needed at each Facility as determined by mutual agreement of
the parties or the terms of PHS’ contracts with Clients.
	 
	 	(vi)	 	Routine Clinical Pharmacist Inspections. Provide a
minimum of one (1) inspection of each Facility by a Clinical Pharmacist every
three months or more frequently if required by Applicable Laws or a PHS
contract with a Client. A report documenting the findings of the inspection
will be provided to PHS’ representative within 15 days of each such inspection
or as required by the Client Agreement.
	 
	 	(vii)	 	Clinical Pharmacist Resource. Maxor will provide a
staff Clinical Pharmacist to review Pharmaceutical information data for patient
safety concerns and cost containment initiatives. This resource will also
assist in analyzing utilization data for health care proposal opportunities.
	 
	 	(viii)	 	Medication Administration Records. Provide printed medication
administration records (“MAR”) to each Facility prior to the end of the current
month for use in the subsequent month. The MAR shall be generated from the
Pharmacy Information System, will contain a record of all current Orders by
Inmate from the previous calendar month and will be in a form acceptable to
PHS. The parties will work cooperatively to make an electronic version of the
MAR available to PHS via web access to the Pharmacy Information System as soon
as practicable.
	 
	 	(ix)	 	Reports. Provide those monthly and year-end standard
reports within the timeframes prescribed by PHS as required for PHS to fulfill
the terms of its Client Agreements relating to services rendered under this
Agreement. Such standard reports shall include, but not be limited to, those
reports listed in resource manual, attached as Schedule II. Additionally,
Maxor will provide ad hoc reports as reasonably requested by PHS or PHS Clients
with prior approval by PHS. Maxor will maintain the necessary resources,
including support services personnel, to ensure all reasonably requested
reports are provided on a timely basis.
	 
	 	(x)	 	Industry Data. Maxor will keep PHS reasonably apprised
from time to time of changes in the pharmaceutical industry that may have an
impact on future pharmacy utilization trends and costs.
	 
	 	(xi)	 	Annual Meeting. The parties agree to meet on an annual
basis to discuss year-to-date and contract-to-date performance as well as
strategic plans for the upcoming year.
	 
	 	(xii)	 	Medical and Surgical Supplies. Maxor will source,
purchase and deliver Medical and Surgical Supplies in a timely manner as
ordered by PHS.

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	 	(xiii)	 	Policies and Procedures. Maxor shall develop, implement and maintain
a pharmacy policy and procedure manual for the use of PHS for each Client. All
such policies and procedures shall be reviewed and approved, in advance, by PHS
and, as required, by Clients. The policies and procedures will be prepared in
a format that can be shared electronically and made available via the internet
where applicable. The policy and procedure manual will be updated
expeditiously as changes occur. The pharmacy policy and procedure manual shall
include, as applicable, but not be limited to, the following:
	 
	 	1.	 	Ordering procedures;
	 
	 	2.	 	Process to be used to deliver Pharmaceuticals from the
time an Order is received, including the identification of the courier
involved;
	 
	 	3.	 	Return-of-goods procedures, including who to call and
how medication is to be returned, forms to be used, and final disposition
of the medication;
	 
	 	4.	 	How non-formulary items are to be issued;

 
	 
	 	5.	 	Process on how to receive Pharmaceuticals;
	 
	 	6.	 	How to distribute Pharmaceuticals including
Keep-On-Person (KOP), direct observed therapy, and stock medications;
	 
	 	7.	 	Controlled Substance policy to include ordering,
distribution, and destruction;
	 
	 	8.	 	Psychotropic medication policy to include ordering,
distribution, and return;
	 
	 	9.	 	Use of and name of emergency contracted pharmacy for
each Facility;
	 
	 	10.	 	How to report sentinel events;
	 
	 	11.	 	Notification of and how to reach the on-call
pharmacist;
	 
	 	12.	 	How a medications “pedigree” will be provided if
requested or required by Applicable Laws;
	 
	 	13.	 	Duties, responsibilities, and general scope of services
for consultant pharmacist and changes to scope of services;
	 
	 	14.	 	How to file, where to file, and length of time all
required paperwork shall be kept including invoices;
	 
	 	15.	 	Disposal and/or destruction of medication to include
vendor to be used if medication cannot be disposed of on-site, who can and
cannot dispose of medication, documentation required, and regulatory
requirements;
	 
	 	16.	 	Ordering, receiving, and monitoring of legend and OTC
stock medications;
	 
	 	17.	 	Drug Exception Request approval/denial process;
	 
	 	18.	 	Process to verify orders are received in appropriate
time frames; and
	 
	 	19.	 	Other aspects of pharmacy management services as may be
required by PHS, its Clients and/or Applicable Laws.

In the event of a new Client Agreement, Maxor will develop and implement a pharmacy
policy and procedure manual for the new Client Facility(ies) within thirty (30) days
of the effective date of the Client Agreement or as quickly thereafter as is
reasonably possible. Maxor will also provide training to PHS staff

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immediately following development of the policies and procedures for the new Client.

	 	(c)	 	Return of Pharmaceuticals for Credit. Maxor shall arrange for the return
of outdated, discontinued, excess, or unusable Pharmaceuticals. Credit equal to the
amount paid by PHS for the Pharmaceutical, excluding any associated and applicable fees,
will be issued on those returned Pharmaceutical items (including, when applicable, the
return of partially-used cards for agreed upon Pharmaceuticals as soon as it is
practicable to do so) that are reusable in accordance with all Applicable Laws and which
also meet the following additional criteria:

	 	(i)	 	Pharmaceuticals must be returned in sealed, unopened,
tamper-evident packaging.
	 
	 	(ii)	 	Pharmaceuticals must be those that Maxor maintains as a part of
its normal inventory (i.e. not an item ordered just to fill the order).
	 
	 	(iii)	 	Pharmaceuticals may not have been released to the inmate
population.
	 
	 	(iv)	 	[            ]*
	 
	 	(v)	 	[            ]*
	 
	 	(vi)	 	[            ]*
	 
	 	(vii)	 	Controlled substances, compounded Pharmaceuticals and
Pharmaceuticals requiring refrigeration.
	 
	 	(viii)	 	[            ]*

	 	(d)	 	Participation in PHS Correctional Healthcare Proposals and Business Development
Activities. The parties agree that they will work together in the preparation and
presentation of PHS healthcare proposals and other business development activities. The
parties further agree that:

	 	(i)	 	Maxor will actively participate with and assist PHS in the
development of new, rebid and other correctional healthcare proposals as they
relate to
Pharmacy Services. Such services shall include the timely provision of
knowledgeable Pharmacy Services subject matter experts for purposes of
writing/editing and reviewing technical correctional healthcare proposal
language in response to Client or potential Client formal or informal
procurement requests and invitations.
	 
	 	(ii)	 	Maxor will also provide the timely provision of pharmacy cost
analysis and utilization cost/projections on PHS correctional healthcare
proposals,

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	 	 	 	as requested; however, PHS will make the final decision on the
estimated cost of Pharmaceuticals and Medical and Surgical Supplies to be
included in such proposals. PHS will make Maxor aware of the timeline required
to complete a timely submission of the proposal and Maxor will use best efforts
to meet all its applicable deadlines in providing technical and cost-related
information and services to PHS.
	 
	 	(iii)	 	Maxor shall provide appropriately qualified/knowledgeable
individual(s) to actively participate in marketing/business development
activities as reasonably requested by PHS, including prebid conferences,
site
visits, oral presentations, proposal development contract implementation and
maintenance and Client/potential Client relations.
	 
	 	(iv)	 	Each party will participate exclusively with the other party on
any bid opportunity for the provision of correctional health care services
containing a Pharmacy Services component for which PHS elects to participate.
Maxor will be free to bid individually or to participate with other providers
of correctional health care services only in the event PHS elects not to bid on
any specific correctional healthcare business opportunity. PHS shall give
Maxor reasonable notice of any such decision so that Maxor will have time to
pursue those opportunities. Maxor, however, shall not disclose any of PHS’
operating procedures, contents of any of its proposals, pricing methodologies
or other confidential or proprietary information to which it may have access to
any other party, including providers of correctional health care or potential
users of PHS services. Nothing in this Agreement should be construed to
restrict or limit Maxor’s ability to bid on pharmacy only opportunities outside
correctional health care or on correctional pharmacy opportunities
independently identified by Maxor and for which PHS is uninvolved. Although
PHS agrees to exclusively use Maxor to provide Pharmaceuticals and Medical and
Surgical Supplies to PHS in accordance with this Agreement, Maxor is not
obligated under this Agreement to exclusively involve PHS when seeking,
participating in or servicing its own correctional pharmacy or management
advisory services business.
	 
	 	(v)	 	PHS may elect to bid a project but decide not to include
Pharmacy Services as a part of its bid. This decision lies solely with PHS in
its absolute discretion. In such cases, Maxor will be timely notified of such
decision and will be free to bid individually or participate with other
providers of correctional health care services in bidding for the project.
However, Maxor shall not disclose any of PHS’ operating procedures, contents
of any of its proposals, pricing methodologies or other confidential or
proprietary information to which it may have access to any other party,
including providers of correctional health care or potential users of PHS
services.

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	 	(vi)	 	Maxor shall also actively collaborate with and support PHS, as
reasonably requested, by participating or coordinating with PHS representatives
in marketing and business development activities at industry tradeshows and
conferences, advertising and other Client/potential client relations
activities.

    (e) Continued Support and Development of the Pharmacy Information System. 

	 	(i)	 	Maxor commits to the continued development of the Pharmacy
Information System to improve patient safety, analytical reporting capabilities
and cost effectiveness. Maxor and PHS will develop a mutually agreeable plan
for the timing and scope of such continued development; such plan will be
modified from time to time as changes in the industry and the Parties require.
Maxor will not be unreasonable in its limitation of future development. PHS
will not be unreasonable in its request for development. Without limiting the
foregoing, Maxor agrees to provide up to [            ]* annual hours of
personnel with relevant training and experience without additional cost to PHS
for the development, testing and implementation activities, enhancements,
modifications and upgrades to the Pharmacy Information System as directed by
PHS; provided, however, that additional costs will be assessed to PHS if more
than [            ]* annual hours of such personnel are required hereunder.
During the first year of this Agreement, Maxor agrees that such enhancement
activities shall include [            ]*.
	 
	 	(ii)	 	Maxor will also provide all necessary support, maintenance and
programming capabilities to ensure the continued functionality and performance
of and access to the Pharmacy Information System. Such support services shall
be performed in a professional and commercially reasonable manner on a timely
basis.
	 
	 	(iii)	 	Maxor will be responsible for creating and maintaining
electronic interface with PHS and Client information technology systems, [            ]*.
	 
	 	(iv)	 	Maxor will provide PHS with access to the reporting environment
(this includes Microsoft Reporting Services or other reporting applications and
the Pharmacy Information System reporting database). The reporting environment
will be updated on a daily basis by Maxor.

2.03 Covenant Not To Compete.

	 	(a)	 	PHS (including and on behalf of all entities under its control, management or
direction, and its owners, affiliates, subsidiaries and related entities), including all
successors and assigns thereof, hereby agrees not to, directly or indirectly, alone or

13

 

	 	 	 	with others, either as an employee, owner, partner, agent, contractor, stockholder,
member, manager, director, officer, or otherwise, enter into or engage in the business of
operating pharmacies that provide Pharmacy Services in correctional settings which in any
manner competes, directly or indirectly, with Maxor within the Non-Compete Area (as
defined below) throughout the duration of this Agreement. PHS (including the entities
affiliated with PHS as described above) agrees that in the event of the breach of this
covenant, Maxor may protect its rights by injunction or otherwise, such remedies being
cumulative and not exclusive. The covenant described in this Section shall not be
construed to prohibit or in any way limit PHS’ rights to use other pharmacy vendors,
including Back-up Pharmacies, as may otherwise be permitted under Section 2.01 and 2.02
of this Agreement. The term “Non-Compete Area” as used in this Agreement, shall mean any
location in the United States or its territories.
	 
	 	(b)	 	The covenant not to compete contained in Section 2.03(a) above shall not apply in
the event PHS (including the entities affiliated with PHS as described above), purchases
or otherwise acquires (i) a beneficial ownership interest in, (ii) the assets of, or
(iii) merges with, an entity, a component, affiliate or subsidiary of which is in the
business of operating pharmacies that provide Pharmacy Services in correctional settings
to its correctional clients. In the event of such acquisition transaction, PHS will have
the right to continue operating the pharmacies of the acquired entity for the provision
of Pharmacy Services to the acquired entity’s existing customers. In no event will PHS
have the right to offer such Pharmacy Services to new customers.
	 
	 	(c)	 	Maxor (including and on behalf of all entities under its control, management or
direction, and its owners, affiliates, subsidiaries and related entities), including all
successors and assigns thereof, hereby agrees not to, directly or indirectly, alone or
with others, either as an employee, owner, partner, agent, contractor, stockholder,
member, manager, director, officer, or otherwise, enter into or engage in the business of
providing correctional health services (excluding Pharmacy Services) in any manner which
competes, directly or indirectly, with PHS within the Non-Compete Area throughout the
duration of this Agreement. Maxor (including the entities affiliated with Maxor as
described above) agrees that in the event of the breach of this covenant, PHS may protect
its rights by injunction or otherwise, such remedies being cumulative and not exclusive.
	 
	 	(d)	 	The covenant not to compete contained in Section 2.03(c) above shall not apply to
Maxor’s current and future arrangements with the California Department of Corrections and
California Prison Receivership, Inc. for the provision of management advisory services
and with Denver Health Care for correctional health care services.
	 
	 	(e)	 	If a court of competent jurisdiction should declare Sections 2.03(a) or 2.03(c) or
any provision thereof, unenforceable because of any unreasonable restriction of scope,
duration and/or geographical area, then the parties hereby acknowledge and agree that
such court shall have the express authority to reform this Agreement to provide for
reasonable restrictions and/or grant the party seeking enforcement of the

14

 

* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

covenant such other relief at law or in equity, reasonably necessary to protect its
interests.

	 	(f)	 	In the event PHS (including the entities affiliated with PHS as described above),
purchases or otherwise acquires (i) a beneficial ownership interest in, (ii) the assets
of, or (iii) merges with, an entity that contracts with other entities for the provision
of Pharmacy Services to its correctional clients, PHS will have the right of continuing
the acquired entity’s contractual arrangements for the provision of Pharmacy Services.
Notwithstanding the foregoing, PHS will use reasonable business efforts to transition
such contracted Pharmacy Services to Maxor as soon as legally and contractually
practicable.

	2.04	 	Right of First Offer. In the event PHS desires and has the authority to sell or
otherwise divest the pharmacy business it has acquired in a transaction as described under
Section 2.03(b) above, PHS shall first deliver. by written notice to Maxor, a bona fide offer
stating the price, terms, and conditions of the proposed transaction (the “Offer”). Within a
reasonable time period not to exceed fifteen (15) days after Maxor’s receipt of the Offer,
Maxor shall notify PHS of whether it has an interest in such transaction in accordance with
the terms of the Offer. In the event Maxor expresses such interest in the Offer, Maxor will
have thirty (30) days to enter into a definitive agreement with PHS to purchase the pharmacy
business. If Maxor does not so notify PHS within the fifteen (15) day times period or enter
in a definitive written agreement within the thirty (30) day time period, PHS shall be free to
sell or otherwise divest the pharmacy business to any other third party under the same terms
and conditions as specified in the Offer or continue operating the pharmacy as described in
Section 2.03(b).

PART III -PRICING AND BILLING

	3.01	 	Pricing The price charged to PHS by Maxor will be calculated as follows:

	 	(a)	 	Pharmaceuticals under Patient Specific Orders. [            ]*
	 
	 	 	 	The Dispensing Fee will be set at [            ]* for the first three month period of
the term of this Agreement. After the first three months of the term of this
Agreement, the annualized volume for that three month period will be used to set

15

 

* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

the fee for the next three month period. The fee will be reset each three month
period in a similar manner.

For purposes of calculating the number of Orders to be used in this calculation, all
Orders under Sections 3.01 (a) and (b) pursuant to which Maxor earns a fee that is
paid by PHS will be used in the calculation.

	 	(b)	 	Pharmaceuticals not under Patient Specific Orders. [            ]*
	 
	 	(c)	 	Profile-Only Orders. PHS will not be charged an additional fee for
profile-only Orders in the event the number of Pharmaceutical Orders under Section
3.01(b) above does not exceed [            ]* % of the total number of Pharmaceutical
Orders. In the event the [            ]* % threshold described in this Section is
exceeded, then for every profile-only Order exceeding [            ]* % of the total
Pharmaceutical Orders, a “professional profiling fee” in the amount of [            ]*
shall be paid to Maxor.
	 
	 	(d)	 	Price Escalator. The Dispensing Fee, Handling Fee, professional profiling
fee and PBM fee described under this Section 3.01 will be adjusted on each anniversary of
the commencement date of the Term this Agreement in accordance with percentage change in
the consumer price index (“CPI”) during the immediately preceding one-year period. As
used herein CPI shall mean the Consumer Price index-All Urban Consumers (CPI-U) All Items
(1982-1984 = 100) as published by the United States Department of Labor, or any
comparable successor index, for the metropolitan area in which Maxor’s principal pharmacy
supplying PHS is located.
	 
	 	(e)	 	Medical and Surgical Supplies. [            ]* % plus any applicable sales
and use taxes.
	 
	 	(f)	 	Pharmacy Benefits Management. Except as described below, Back-up Pharmacy
charges will be billed to PHS at the amount billed to Maxor by the back-up pharmacy plus
a [            ]* per transaction PBM (Pharmacy Benefits Management)
fee. In the event a Back-up Pharmacy must be used as a result of Maxor’s failure to
deliver a Pharmaceutical to a Facility within the timeframes specified under this
Agreement, Maxor will be responsible for the Back-up Pharmacy invoice amount for those
Pharmaceuticals to the extent such invoice amount exceeds the amount PHS would have
paid for the Pharmaceuticals if purchased from Maxor in accordance with the pricing
described under Section 3.02(a)-(c) above. In such instances, Maxor will invoice PHS
the amount which would have been charged as calculated in accordance with Sections
3.02(a)-(c) above and not the amount charged by the Back-up Pharmacy. Notwithstanding
the foregoing, in no event will Maxor be responsible for Back-up Pharmacy invoice
amounts in the event the delay filling and delivering the medication was not the
result of Maxor’s actions or inactions.

16

 

	 	(g)	 	Return of Outdated and Unusable Pharmaceuticals. Maxor shall arrange, at
its cost, for the return of outdated and/or unusable Pharmaceuticals and destroy such
Pharmaceuticals in accordance with Applicable Laws.

	3.02	 	Unless otherwise specifically set forth in this Agreement, the amounts paid by PHS under the
terms Invoice Cost, AAC, Dispensing Fee, Handling Fee, PBM fee, professional profiling fees
and any applicable sales and use taxes represent total payment for the Pharmacy Services.
Additional fees for other services not contemplated by this Agreement will be agreed to in
writing by the Parties prior to the commencement of such services.

	3.03	 	In all cases, the net price at which Pharmaceuticals and Medical and Surgical Supplies are
sold to PHS will be equal to or better than the net price charged to any customer of Maxor
that is a competitor of PHS (including university systems) in the area of correctional health
services. The net price would include the cost of the item and the applicable fee. It would
also include any other rebate or other payment or credit given to the customer even if not
shown on the face of the invoice to the customer. The foregoing shall not apply to the direct
sale of Pharmaceuticals or Medical Supplies by Maxor to public correctional agencies.

	3.04	 	Audit. PHS, at its sole cost and expense, shall have the right to audit all books
and records of Maxor reasonably related to the provision of services hereunder, including but
not limited to those books and records relating to Invoice Cost or Actual Acquisition Cost and
8.02 (e) annually. The audit can include a recalculation of the cost using manual or
electronic means. Any such audit shall be performed during normal business hours at Maxor’s
offices and scheduled by mutual agreement at least one month in advance. The audit may be
conducted by PHS personnel and/or by consultants or auditors retained by PHS on its behalf.
Maxor regards the data made the subject of any such audit as “Confidential Information.” PHS
agrees to keep all information gathered, acquired or generated during or from any such audit
confidential.

	3.05	 	Billing. Maxor will bill PHS within five (5) days following month-end for shipments
made during the month, net of credit for any returns. Adjustments to prior invoices shall be
reflected in the next invoicing cycle or as soon as possible thereafter. The invoice will
be in a form acceptable to PHS to enable it to properly invoice its Clients. Billing
information will also be made available in detail tables electronically by PHS Client
Agreement in a manner acceptable to bill its Clients. In addition, Maxor will send to PHS
electronic copies of the individual packing slips (in Excel format or other agreed upon
format) sent with shipped Orders on a daily basis beginning as soon as practicable, but no
later than July 1, 2007.

PART IV -PHS’ OBLIGATIONS

	4.01	 	PHS’ Obligations. During the term of this Agreement, PHS will:

17

 

	 	(a)	 	Order Information. Timely furnish all legally required Order information
to Maxor on any Formulary and Non-Formulary Medications prescribed for Inmates of a
Facility. Prescription information shall include the Inmate’s name, Inmate number,
prescriber’s name, drug name, route of administration, strength, dosage, frequency, and
the existence of any known Inmate allergies to any medication(s). All prescriptions will
be properly authorized by an authorized prescriber and otherwise conform to the
requirements of a valid drug prescription. Prescriptions shall be sent to Maxor in
conformity with all Applicable Laws.
	 
	 	(b)	 	[intentionally omitted].
	 
	 	(c)	 	Payment of Fees. In consideration for Maxor providing the Pharmacy
Services in connection with the Pharmacy Services rendered, PHS will pay Maxor invoices
according to the following:

	 	(i)	 	Remit 50% of the amount due for the current month to Maxor
within five (5) days of the receipt of the invoice.
	 
	 	(ii)	 	Remit any remaining amount due after consideration of the
amount paid in paragraph (i) above for that month to Maxor within twenty-five
(25) days of the receipt of the invoice.
	 
	 	(iii)	 	Pay all invoices and other payments due to Maxor via wire to
Maxor.
	 
	 	(iv)	 	If PHS believes that it is entitled to an adjustment to the
amount invoiced, including credit for returned items, PHS shall promptly notify
Maxor in writing of such claim for an adjustment and provide to Maxor
reasonable support for any such claim. Maxor and PHS will promptly address and
attempt to resolve in good faith any claims as to charges, credits or other
aspects of the invoices. Credits and adjustments that became effective during
the period covered by the invoice shall be applied on the first invoice
following PHS’ eligibility therefor.
	 
	 	(v)	 	PHS shall pay Maxor interest on all undisputed payments under
Section 4.01(c) that are not paid when due. Interest shall accrue from the
date the
original payment was due at a rate of one and one half percent (1.5%) per
month until the payment is made in full.

PART V -REPRESENTATIONS, WARRANTIES AND COVENANTS

	5.01	 	Representations and Warranties of Maxor. Acknowledging that PHS is relying on such
representations and warranties in entering into this Agreement, Maxor makes the following
representations and warranties to PHS which shall be true at signing and shall remain true at
all times throughout the term of this Agreement:

	 	(a)	 	Maxor is a corporation, duly organized, validly existing and in good standing under
the laws of Texas. Maxor has the corporate power and authority necessary to own

18

 

	 	 	 	and
operate its properties and to carry on its business as now conducted. Maxor is qualified
to do business as a foreign corporation in every jurisdiction in which the nature of its
business and/or its ownership of property requires it to be so qualified.
	 
	 	(b)	 	Maxor is a licensed pharmacy in Tennessee and California or has in place approved
temporary licenses in such states and has in place and will maintain any and all other
valid licenses, permits, authorizations and approvals required under Applicable Laws to
provide the Services contemplated by this Agreement.
	 
	 	(c)	 	The personnel engaged by Maxor to provide services hereunder shall be licensed,
certified and/or registered, as applicable for their respective positions, in accordance
with Applicable Laws.
	 
	 	(d)	 	Maxor will employ purchasing practices and agreements that will enable it to
provide Pharmaceuticals and Medical Supplies to PHS under this Agreement at a cost that
will not put PHS at a competitive disadvantage to its competitors in the correctional
health services industry.
	 
	 	(e)	 	The execution, delivery, and performance of this Agreement and the provision of the
services contemplated hereby are within its corporate powers. All requisite authority
necessary to enter into this Agreement has been obtained, and Maxor has duly and validly
executed and delivered this Agreement. Assuming this Agreement constitutes the valid and
binding agreement of PHS, this Agreement constitutes a valid and binding agreement of
Maxor enforceable against Maxor in accordance its terms.
	 
	 	(f)	 	Maxor is not a party to, bound by or subject to, any indenture, mortgage, lease,
agreement, instrument, charter or by-law provisions, statute, regulation, order,
judgment, decree or law which would be violated, contravened or breached by, or under
which any default would occur as a result of the execution and delivery by Maxor of this
Agreement or the performance by Maxor of any of the terms hereof.
	 
	 	(g)	 	The execution, delivery and performance of this Agreement does not, and the
provision of the services contemplated hereby will not: (a) conflict with the Articles
of Incorporation or Bylaws of Maxor; (b) conflict with or violate any laws
applicable to Maxor or by which any of its properties is bound or affected; or (c)
result in any breach of or constitute default (or an event that with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the creation of
a lien or encumbrance on any of the properties or assets of Maxor pursuant to any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Maxor is a party, or by which
Maxor or any of its properties is bound or affected.
	 
	 	(h)	 	All technical and pricing information provided by Maxor in connection with PHS
healthcare proposals and business development activities shall be true, complete and
accurate, to the best of Maxor’s knowledge.

19

 

	 	(i)	 	Clients. Maxor specifically represents and warrants that it will not
throughout the term of this Agreement discourage any Client or prospective Client from
doing business with PHS nor will it encourage, directly or indirectly, such Client or
prospective Client to elect any correctional health services provider other than PHS in
the future throughout the term of this Agreement.
	 
	 	(j)	 	Disclosure. The representations and warranties of Maxor in this Agreement,
and all representations, warranties and statements of Maxor contained in any instrument
ancillary hereto or in connection herewith prior to or at the signing of this Agreement
by all parties hereto, do not omit to state a material fact necessary in order to make
the representations, warranties or statements contained herein or therein not misleading,
in light of the circumstances existing at the time such representations, warranties or
statements were made. Maxor has furnished to PHS complete and accurate copies of all
documents and information requested by PHS.

Maxor will immediately notify PHS in writing in the event any of its ongoing representations
and warranties described in this Section can no longer be met.

	5.02	 	Compliance with Applicable Laws. Each party shall abide by all Applicable Laws. In
addition, each party shall promptly inform the other of any regulatory issues that come to its
attention affecting its business activities as they relate to this Agreement or the Pharmacy
Services.

	5.03	 	Representations and Warranties of PHS. Acknowledging that Maxor is relying on such
representations and warranties in entering into this Agreement, PHS makes the following
representations and warranties to Maxor which shall be true at signing and shall remain true
at all times throughout the term of this Agreement:

	 	(a)	 	Organization and qualification. PHS is a corporation, duly organized,
validly existing and in good standing under the laws of Delaware. PHS has the corporate
power and authority necessary to own and operate its properties and to carry on its
business as now conducted. PHS is qualified to do business as a foreign corporation in
every jurisdiction in which the nature of its business and/or its ownership of property
requires it to be so qualified.
	 
	 	(b)	 	Corporate authorization. The execution, delivery, and performance of this
Agreement and the provision of the services contemplated hereby are within its corporate
powers. All requisite authority necessary to enter into this Agreement has been
obtained, and PHS has duly and validly executed and delivered this Agreement. Assuming
this Agreement constitutes the valid and binding agreement of Maxor, this Agreement
constitutes a valid and binding agreement of PHS enforceable against PHS in accordance
its terms.
	 
	 	(c)	 	No conflict; required filings and consents. The execution, delivery and
performance of this Agreement does not, and the provision of the services contemplated
hereby will not: (a) conflict with the Articles of Incorporation or Bylaws of PHS; (b)
conflict with or violate any laws applicable to PHS or by which

20

 

	 	 	 	any of its properties is
bound or affected; or (c) result in any breach of or constitute default (or an event that
with notice or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of PHS pursuant to
any note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which PHS is a party, or by which PHS or
any of its properties is bound or affected.
	 
	 	(d)	 	Required licenses and other approvals. PHS has all licenses or other
approvals, if any, required under Applicable Laws for the performance by PHS of any of
the terms hereof.
	 
	 	(e)	 	Clients. PHS specifically represents and warrants that it has not (and
will not throughout the term of this Agreement) discouraged any Client or prospective
Client from doing business with Maxor nor will it encourage, directly or indirectly, such
Client or prospective Client to elect any other pharmacy services provider or
pharmaceutical provider other than Maxor in the future throughout the term of this
Agreement.
	 
	 	(f)	 	Disclosure. The representations and warranties of PHS in this Agreement,
and all representations, warranties and statements of PHS contained in any instrument
ancillary hereto or in connection herewith prior to or at the signing of this Agreement
by all parties hereto, do not omit to state a material fact necessary in order to make
the representations, warranties or statements contained herein or therein not misleading,
in light of the circumstances existing at the time such representations, warranties or
statements were made. PHS has furnished to Maxor complete and accurate copies of all
documents and information requested by Maxor.

PHS will immediately notify Maxor in writing in the event any of its ongoing representations
and warranties described in this Section can no longer be met.

PART VI -CONFIDENTIALITY

	6.01	 	Patient Information. The Parties agree to keep and maintain any and all Patient
Information, including all identifiable Inmate health and demographic information
(collectively, “Patient Information”), in strict confidence and not to disclose, disseminate,
or divulge, directly or indirectly, the Patient Information to any third party except as
expressly required by law or by this Agreement. Maxor agrees that all Patient Information
provided to Maxor by PHS belongs exclusively to the Clients and that PHS is only a custodian
of the Patient Information. Without limiting the foregoing, Maxor agrees that it will:

	 	(a)	 	treat all Patient Information as part of a medical record for such Patient and
protect all Patient Information according to all Applicable Laws and all relevant medical
and legal standards;

21

 

	 	(b)	 	if required by law to divulge Patient Information to a legal authority, immediately
notify PHS and take all steps possible to divulge only the portion of Patient Information
necessary to comply with the law compelling the disclosure; and
	 
	 	(c)	 	if required by PHS or a Client, execute a business associate agreement with PHS or
the Client, as defined under the privacy and security regulations of the Health Insurance
Portability and Accountability Act of 1996 (HIPAA).

	6.02	 	Confidential and Proprietary Information. In fulfilling the objectives of this
Agreement, PHS and Maxor may provide to each other or learn (directly or indirectly) certain
“Confidential Information”. Notwithstanding the foregoing, PHS and Maxor acknowledge the other
party’s obligation to provide its pharmaceutical manufacturers and customers with information
generally regarding this Agreement and consistent with the foregoing agrees that such parties
may disclose generally the terms of this Agreement.

	 	(a)	 	Neither party shall have any obligation to disclose its Confidential Information to
the other party, unless such an obligation is set forth elsewhere in this Agreement.
	 
	 	(b)	 	Each party agrees to maintain the secrecy of and not to use or disclose the other
party’s Confidential Information, except as required in order for a party to perform
under this Agreement. A party may disclose the other party’s Confidential Information
only to the receiving party’s directors, officer, employees, agents and duly authorized
representatives (collectively, the “Representatives”), but only if a Representative needs
to know the Confidential Information in order for the receiving party to perform under
this Agreement. The parties agree to inform their Representatives of the confidential
nature of the disclosing party’s Confidential Information, and each party shall require
any Representative, who is not an employee of the receiving party to sign an appropriate
confidentiality agreement to protect the disclosing party’s Confidential Information from
unauthorized use or disclosure. Each party shall direct its Representatives to treat the
other party’s Confidential Information confidentially, and not to use it, other than to
perform under this Agreement. Each party shall be responsible for its Representatives’
use and disclosure of the other party’s Confidential Information.
	 
	 	(c)	 	The restriction in this Section 6.02 shall not apply to: (i) information which is
or becomes generally available to the public, other than as a result of a disclosure by
the receiving party; (ii) information a party obtains from a third party which has no
obligation to keep the information confidential; (iii) information which is independently
developed by a party without reference to the Confidential Information disclosed by the
other party; or (iv) information required to be disclosed by law, subject to compliance
with Section 6.02(d).
	 
	 	(d)	 	The parties agree that if a party is required by subpoena, civil investigative
demand (or similar process) to disclose the other party’s Confidential Information, the
disclosing party shall notify the other party of the request or requirement so the other
party may seek an appropriate protective order or waive compliance with the sections or
provisions of this Agreement. The parties agree to exercise their

22

 

	 	 	 	commercially reasonable
efforts to assist each other in obtaining a protective order or other reliable assurance
that confidential treatment will be accorded the Confidential Information.
	 
	 	(e)	 	Upon termination of this Agreement each party will immediately discontinue use of
the other party’s Confidential Information, and shall return the other party’s
Confidential Information to it, or (at the request of the other party) destroy the other
party’s Confidential Information in its possession or control. However, each party may
retain the other party’s Confidential Information to the extent such Confidential
Information is required to be kept by law or has been used in or integrated into reports,
studies, analyses, compilations or other documents in the receiving party’s possession or
control. Any oral Confidential Information will continue to be subject to the terms of
this Agreement. The parties agree that the Confidentiality obligations of this Section
6.02 shall survive termination of this Agreement.

PART VII -RELEASE AND INDEMNIFICATION

	7.01	 	Liabilities.

	 	(a)	 	Maxor shall be responsible for any errors or omissions made by Maxor or its
Representatives in connection with its performance of its obligations pursuant to this
Agreement. PHS shall be responsible for any errors or omissions made by PHS and its
Representatives in connection with its performance of its obligations pursuant to this
Agreement.
	 
	 	(b)	 	[intentionally omitted]
	 
	 	(c)	 	Each party shall be responsible for liabilities arising from errors or omissions
made by it in the transmission of information to the other party, and each party shall be
entitled to assume the accuracy of all information transmitted to it by the other party,
and to rely on such information, for all purposes under this Agreement.

	7.02	 	Indemnified Parties. Maxor and PHS each shall protect, defend, indemnify and hold
harmless the other and its divisions, its affiliates and its officers, directors, employees,
representatives and agents (the “Indemnified Parties”) from and against (a) any and all
liabilities, costs, judgments, penalties, expenses, obligations, losses, or damages
resulting from claims and actions made by a Third Party, including, but not limited to, any
obligation or liability which may be imposed upon any of the Indemnified Parties as a matter
of law, constituting, or in any way based upon, resulting from or arising out of (i) any
material breach by Maxor or PHS, as applicable, of any agreement or covenant made by such
party in this Agreement or (ii) caused by the negligent, reckless or intentional acts or
omissions of Maxor or PHS, and (b) any cost or expense (including, but not limited to,
reasonable legal fees and out-of-pocket expenses) reasonably incurred by any of the
Indemnified Parties (and their counsel) in investigating, preparing for, defending against
or otherwise taking any action in connection with any of the foregoing (collectively
“Damages”).

23

 

	7.03	 	Indemnified Claims. If any claim, demand, assessment or liability, or cost incidental
thereto (collectively, an “Indemnified Claim”), is asserted against an Indemnified Party in
respect of which the Indemnified Party proposes to demand indemnification from the
Indemnifying Party pursuant to Section 7.02, such Indemnified Party will promptly notify Maxor
or PHS as the case may be (the “Indemnifying Party”), in writing. No failure of an
Indemnified Party to so notify the Indemnifying Party shall relieve the Indemnifying Party
from the obligation to indemnify the Indemnified Party unless and to the extent the
Indemnifying Party is actually prejudiced by such failure. Such Indemnified Party will accord
the Indemnifying Party the opportunity to assume entire control of the defense using counsel
of its own choice, and compromise or settle any such Indemnified Claim through its own counsel
and at its own expense; provided that no such compromise or settlement shall include any
non-monetary terms and conditions applicable to such Indemnified Party without the consent of
the Indemnified Party; and provided further, that the Indemnified Parties may retain their own
counsel at the Indemnifying Party’s expense (the Indemnifying Party shall only be liable for
the cost of one such counsel for all Indemnified Parties) if (i) the Indemnifying Party,
within thirty (30) days after notice of any Indemnified Claim, fails to assume the defense of
such Indemnified Claim or (ii) the representation of both the Indemnifying Party and the
Indemnified Party would, in the reasonable judgment of the parties, be inappropriate due to
actual or potential conflicting interests between them. If the Indemnifying Party does not
assume entire control of the defense, compromise or settlement of such Indemnified Claim, the
Indemnified Party may compromise or settle any such Indemnified Claim. Maxor and PHS each
agree to cooperate fully with respect to the defense of any Indemnified Claim.

PART VIII -TERM AND TERMINATION

	8.01	 	Term. The term (the “Term”) of this Agreement shall commence at 12:01 a.m. on May 1,
2007 and, unless terminated earlier in accordance with the provisions hereof, shall continue
until midnight, October 31, 2014. Notwithstanding any other provision in this Agreement to
the contrary, this Agreement shall be null and void and of no force and effect in the event
the parties fail to close the transaction contemplated under the Purchase Agreement by close
of business May 3, 2007.

	8.02	 	Termination. Either Party (the “Notifier”) may terminate this Agreement at any time
upon notice to the other Party (the “Other Party”) in the event that:

	 	(a)	 	the Other Party fails to materially comply with any of the terms of Sections 2, 3,
4, 6, 7, or 9 of this Agreement and does not cure such breach after having been given
thirty (30) days prior written notice and an opportunity to cure such breach;
	 
	 	(b)	 	the Other Party breaches any warranty, covenant or representation in this Agreement
and the Other Party fails to cure such breach after having been given thirty (30) days
prior written notice and an opportunity to cure such breach;
	 
	 	(c)	 	a fortuitous or unforeseeable circumstance (including passage of legislation by
competent authority that renders continuation of PHS’ or Maxor’s business illegal or
impossible) that frustrates or makes this Agreement impossible to perform;

24

 

	 	(d)	 	statutory or regulatory provisions come into force that make it impossible or
impractical for the Notifier to perform this Agreement;
	 
	 	(e)	 	the Other Party (i) generally fails to pay, or admits in writing its inability
generally to pay, debts as they become due; (ii) applies for, consents to, or acquiesces
in the appointment of a trustee, receiver or other custodian for any substantial part of
its property, or makes a general assignment for benefit of creditors; (iii) in the
absence of such application, consent, or acquiescence, permits or suffers to exist the
appointment of a trustee, receiver or other custodian for a substantial part of its
property; (iv) permits or suffers to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under an bankruptcy or
insolvency law or any dissolution, winding up or liquidation proceeding, in respect
thereof; or (v) takes any action authorizing, or in furtherance of, any of the foregoing;
or
	 
	 	(f)	 	the Parties agree in writing to terminate the Agreement.

	8.03	 	Obligations upon Termination. Upon termination of this Agreement for any reason,
Maxor will be entitled to be paid for all Services rendered prior to such termination. Maxor
will have the right to complete Orders received by it prior to such termination and ship those
Orders to Clients and receive payment as provided herein from PHS in respect thereof. The
provisions of Sections 3.04, 3.05, 4.01(c), 6.01, 6.02, 7.01 to 7.03, 8.04, 9.01 to 9.09,
10.07, 10.08 and 10.12 shall survive the expiration or termination of this Agreement.

	8.04	 	Right to Seek Damages. The right of either party to invoke termination under Section
8.02(a), (b) or (e) above, is cumulative to any and all other right and remedies a party has
under this Agreement and shall not preclude a party from invoking any other right or remedy it
is allowed at law or in equity.

PART IX -INSURANCE

	9.01	 	Maxor will at its own cost maintain throughout the period of this Agreement and for a period
of not less than five (5) years following its termination, general liability insurance in
minimum amounts of $1 million per occurrence and $2 million in the aggregate.

	9.02	 	Maxor will at its own cost maintain throughout the period of this Agreement and for a period
of not less than five (5) years following its termination, professional liability and
professional liability insurance in minimum amounts of $1 million per occurrence and $3
million in the aggregate.

	9.03	 	Maxor will, at its own cost, maintain throughout the period of this Agreement and for a
period of not less than five (5) years following its termination, automobile liability
insurance, including hired and non-owned liability coverage, with limits of $1 million
combined single limit per accident for bodily injury and property damage.

25

 

	9.04	 	Maxor will, at its own cost, maintain throughout the period of this Agreement and for a
period of not less than five (5) years following its termination, statutory workers
compensation insurance, including employers liability insurance with limits of $1 million.

	9.05	 	Maxor will, at its own cost, maintain throughout the period of this Agreement, property
insurance coverage, as per their required values and exposures in Maxor’s sole discretion.

	9.06	 	Nothwithstanding the foregoing, from time to time PHS Clients require limits under the
required professional liability or other insurance policies to be in amounts greater than the
limits listed in 9.01 above. In such cases and upon sufficient advance notice by PHS that
such increased limits are required of PHS’ provider of Pharmaceutical Services, Maxor will use
its best efforts to procure and maintain insurance with such limits and in such amounts as is
required by the Client.

	9.07	 	Maxor agrees to waive all rights of subrogation against PHS, its Clients, their respective
officers, directors, officials and employees for losses arising from work performed by Maxor
under this Agreement.

	9.08	 	All insurance policies required by Sections 9.01, 9.02 and 9.03 above shall name PHS as an
additional insured (the “Additional Insured”). Each insurance policy required hereunder shall
be endorsed to state that coverage shall not be suspended, voided, canceled by either party,
or reduced in coverage or in limits except after thirty (30) days’ written notice delivered to
PHS. For those liabilities and claims for which Maxor is responsible under Section 7.01 or
7.02, Maxor’s insurance shall be primary insurance with respect to the Additional Insured.
Any insurance or self-insurance maintained by the Additional Insured shall sit in excess of
Maxor’s insurance and shall not be required to contribute to any loss or claim. Maxor shall
furnish, (i) prior to commencing services at a particular Facility; (ii) upon renewal of the
relevant policy; and (iii) upon request of PHS with Certificates of Insurance with the
endorsements and information required above for each insurance policy, signed by a person
authorized by the respective insurer to bind coverage on its behalf.

	9.09	 	All insurance policies required by this Agreement shall be placed with insurers with a Best’s
rating of no less than A-IX.

PART X -GENERAL

	10.01	 	Notices. Any notice required or permitted to be given by one Party to the other
will be deemed to have been properly and effectively given if sent by facsimile or delivered
personally or sent by registered pre-paid mail or electronic mail to the Party to whom notice
is to be given at the following addresses:

	 	(a)	 	to Maxor at both :
	 
	 	 	 	416 Mary Lindsay Polk Drive, Suite 515

Franklin, TN 37067

26

 

	 	 	 	Facsimile:
	 
	 	 	 	And
	 
	 	 	 	Attn: Jerry Hodge and John Ward

320 S. Polk, Suite 100

Amarillo, Texas 79101

Facsimile: 806.324.5495
	 
	 	 	 	With a copy to:
	 
	 	 	 	Walter T. Price IV

Irwin Merritt Hogue & Price, P.C.

320 S. Polk, Suite 500

Amarillo, Texas 79101

Facsimile: 806.322.1441
	 
	 	(b)	 	to PHS at:
	 
	 	 	 	105 Westpark Drive, Suite 200

Brentwood, Tennessee 37027

Attention: President
	 
	 	 	 	With a copy to:
	 
	 	 	 	105 Westpark Drive, Suite 200

Brentwood, Tennessee 37027

Attention: General Counsel

Any such notice will be deemed to have been received on the same day, if delivered or if
sent by electronic mail; on the next business day if sent by facsimile; and on the fifth
(5th) business day if sent by mail. Either Party may, at any time, give written
notice to the
other of a change of address of the Party giving the notice and from and after that giving
of such notice, the address specified will be deemed to be the address of such Party for the
giving of notices hereunder.

	10.02	 	Waiver/Forbearance. A term or condition of this Agreement can be waived or modified
only by the written consent of both Parties. Forbearance or indulgence by either Party in any
regard does not constitute a waiver of the term or condition to be performed, and either Party
may invoke any remedy available under the Agreement or by law despite the forbearance or
indulgence.

	10.03	 	Severability. If any provision of this Agreement shall be invalid or unenforceable,
either in its entirety or by virtue of its scope or application to given circumstances, such
provision shall be deemed modified to the extent necessary to render the same valid, or as not
applicable to given circumstances, or to be excised from this Agreement, as the

27

 

	 	 	

	 	 	situation may
require, and this Agreement shall be construed and enforced as if such provision had been
included herein as so modified in scope or application, or had not been included herein, as
the case may be, it being the stated intention of the Parties that had they known of such
invalidity or unenforceability at the time of entering into this Agreement, they would have
nevertheless contracted upon the terms contained herein, either excluding such provisions, or
including such provisions only to the maximum scope and application permitted by law, as the
case may be. In the event such total or partial invalidity or unenforceability of any
provision of this Agreement exists only with respect to the laws of a particular jurisdiction,
this paragraph shall operate upon such provision only to the extent that the laws of such
jurisdiction are applicable to such provision.
	
	
	
	

	
	
	
	

	10.04	 	Headings. The headings used in this Agreement are for convenience of reference only
and have no legal effect.

	10.05	 	Relationship of the Parties. Each party is and shall remain an independent
contractor. This Agreement does not constitute and will not be construed as constituting a
partnership, joint venture or principal-agency relationship between the Parties, and neither
Party nor any of its employees or agents will have any power, authority or right to obligate
or bind the other Party in any manner whatsoever, except as expressly provided herein or by
the other Party. Without limiting the foregoing, the Parties acknowledge, covenant and agree
as follows:

	 	(a)	 	neither Party will represent itself to be the agent, joint venturer, partner or
employee of the other Party, or to be related to the other Party, other than as expressly
provided hereunder;
	 
	 	(b)	 	no representations will be made or acts taken by either Party which could establish
any apparent relationship of agency, joint venture, partnership or employment with the
other Party, and neither Party will be bound in any manner whatsoever, by any agreement,
warranties or representations made by the other Party to any other person, nor with
respect to any other action of the other Party; and
	 
	 	(c)	 	neither Party will establish any bank account, make any purchase, apply for a loan
or credit, or incur or permit any obligation to be incurred in the name or on the credit
of the other Party.

	10.06	 	Entire Agreement. This Agreement constitutes the entire agreement between the
Parties pertaining to the subject matter hereof and supersedes all prior formal and informal
agreements, proposals, promises, inducements, representations, conditions, warranties,
understandings, negotiations and discussions, whether oral or written, of the Parties with
respect thereto.

	10.07	 	Governing Law. This Agreement and any modification hereof shall be construed,
interpreted and enforced under the laws of the State of Tennessee, without regard to its
choice of law principles.

28

 

	10.08	 	Dispute Resolution. Any and all disputes, controversies, or claims arising out of
or relating to this agreement, including without limitation, claims based on contract, tort,
or statute, shall be determined by arbitration. The arbitration will be administered by the
American Arbitration Association (AAA) in accordance with AAA commercial arbitration rules,
except as modified by this Agreement. An arbitrator will be chosen by mutual agreement of the
parties. Such arbitrator shall be duly qualified and experienced in the area of healthcare
laws. If the parties fail to reach agreement within thirty (30) days of service of the demand
for arbitration, the arbitrator will be chosen by the AAA. The costs of the arbitrator and
the arbitration proceedings shall be borne equally by the parties. Each party will be
responsible for its own costs. Unless otherwise agreed by the parties and the arbitrator, the
arbitration hearings will be conducted in New York, New York. The arbitrator may, in his or
her discretion, award reasonable attorney fees to the prevailing party. Judgment on
the award rendered by the arbitrator may be entered in any court having jurisdiction. 

	10.09	 	Assignment. This Agreement and any rights or obligations hereunder are not
assignable by either Party without the prior written consent of the other Party. A change in
control of either Party shall be deemed an assignment under this Section. For purposes of
this Section only, “control” means (a) to possess, directly or indirectly, the power to direct
the management or policies of an entity, whether through ownership of voting securities, by
contract relating to voting rights or corporate governance or otherwise, or (b) to own,
directly or indirectly, fifty percent (50%) or more of the outstanding voting securities or
other ownership interest of such entity.

	10.10	 	Amendments. This Agreement may only be amended, changed or modified in writing,
containing signatures of each Party hereto.

	10.11	 	No Rights Conferred on Third Parties. The provisions hereof are for the sole
benefit of the Parties hereto and will not be construed as conferring any rights on any other
person.

	10.12	 	Press Release; Publicity. Neither Party shall issue press releases or make public
announcements relating to this Agreement without the other Party’s prior written
approval, which approval shall not be unreasonably withheld or delayed; provided, however,
that nothing in this Section shall impair either Party’s compliance with law or regulations
generally or with any requirements of the Securities and Exchange Commission or the national
securities exchange or other stock market on which such Party’s securities are traded. In
connection with any filing by either Party of a copy of this Agreement with the Securities
and Exchange Commission (or the national securities exchange or other stock market on which
such Party’s securities are traded), the filing Party shall endeavor to obtain confidential
treatment of economic and trade secret information. Reasonably in advance of filing, if
possible, the filing Party shall provide to the other Party a copy of the proposed filing
and the Parties shall work cooperatively in good faith, taking into consideration the other
Party’s suggestions, regarding the information for which the filing Party will seek to
obtain confidential treatment.

29

 

	10.13	 	Force Majeure. Neither Party shall be held responsible for any delay or failure in
performance (other than payment obligations) to the extent that such delay or failure is
caused by fire, flood, explosion, war, strike, labor action, terrorism, embargo, government
regulation, riot, civil or military authority, acts of God, acts or omissions of carriers or
other similar causes beyond its control.

	10.14	 	Counterparts/Facsimile Signatures. This Agreement may be executed by the Parties in
separate counterparts (including by facsimile transmission), each of which, when so executed
and delivered, shall be deemed to constitute an original, but all of which together shall
constitute one and the same Agreement.

Signature Page to Follow

30

 

IN WITNESS WHEREOF this Agreement has been executed by the Parties effective as of the date first
above written.

	 	 	 	 	 	 	 	 	 
	PRISON HEALTH SERVICES, INC	 	 	 	MAXOR NATIONAL PHARMACY SERVICES

CORPORATION
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Michael W. Taylor
 

	 	 	 	By: 	/s/ John Ward	
	 
	 	 	 	 	 	 	 	 
	Its:

	 	Senior Vice President, Chief

Financial Officer
	 	 	 	Its:	 Chief Executive Officer	 

31

 

* CONFIDENTIAL INFORMATION CONSISTING OF 2 PAGES HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.

Schedule I

[                      ]*

32

 

* CONFIDENTIAL INFORMATION CONSISTING OF 24 PAGES HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.

Schedule II

[                      ]*

33EX-10.2

 

EXHIBIT 10.2

AMERICA SERVICE GROUP INC.

1999 AMENDED AND RESTATED INCENTIVE STOCK PLAN

STOCK GRANT CERTIFICATE

This Stock Grant Certificate evidences a Stock Grant made pursuant to the America Service Group
Inc. (the “Company”) Amended and Restated 1999 Incentive
Stock Plan (the “Plan”) of ___ shares
of restricted Stock to ___, who shall be referred to as “Director.” This Stock Grant is
granted effective as of ___, 20___, which shall be referred to as the “Grant Date.”

	 	 	 	 	 
	 	AMERICA SERVICE GROUP INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

TERMS AND CONDITIONS

     § 1. Plan and Stock Grant Certificate. This Stock Grant is subject to all of the
terms and conditions set forth in this Stock Grant Certificate and in the Plan. If a determination
is made that any term or condition set forth in this Stock Grant Certificate is inconsistent with
the Plan, the Plan shall control. All of the capitalized terms not otherwise defined in this Stock
Grant Certificate shall have the same meaning in this Stock Grant Certificate as in the Plan. A
copy of the Plan will be made available to Director upon written request to the corporate Secretary
of the Company.

     § 2. Stockholder Status. Director shall have the right under this Stock Grant to
receive cash dividends on all of the shares of Stock subject to this Stock Grant and to vote such
shares until Director’s right to such shares is forfeited or becomes nonforfeitable. If Director
forfeits any shares under § 3, Director shall at the same time forfeit Director’s right to vote
such shares and to receive cash dividends paid with respect to such shares. Any Stock dividends or
other distributions of property made with respect to shares that remain subject to forfeiture under
§ 3 shall be held by the Company, and Director’s rights to receive such dividends or other property
shall be forfeited or shall be nonforfeitable at same time the shares of Stock with respect to
which the dividends or other property are attributable are forfeited or become nonforfeitable.
Except for the rights to receive cash dividends and vote the shares of Stock subject to this Stock
Grant which are described in this § 2, Director shall have no rights as a Stockholder with respect
to such shares of Stock until Director’s interest in such shares has become nonforfeitable.

     § 3. Vesting and Forfeiture.

	 	(a)	 	Vesting. Subject to § 3(b), Director’s interest in the Stock subject
to this Stock Grant shall become nonforfeitable as follows:

1. his interest in the first one-third of the shares of Stock subject to
this Stock Grant (rounding down to the nearest whole number) shall become

 

 

nonforfeitable only if he remains a member of the Board through the first
anniversary of the Grant Date,

2. his interest in the second one-third of the shares of Stock subject to
this Stock Grant (rounding down to the nearest whole number) shall become
nonforfeitable only if he remains a member of the Board through the second
anniversary of the Grant Date, and

3. his interest in the balance of the shares of Stock subject to this Stock
Grant shall become nonforfeitable only if he remains a member of the Board
through the third anniversary of the Grant Date.

	 	(b)	 	Forfeiture. If the Director’s status as a director terminates for any
reason, except as set forth below, before his or her interest in the shares shall have
become nonforfeitable (as set forth in § 3(a) above), then he or she shall forfeit all
of the shares of Stock subject to this Stock Grant except those shares in which he or
she has (pursuant to § 3(a)) a nonforfeitable interest on the date his or her status as
a Director terminates. Notwithstanding the foregoing, the shares shall become fully
nonforfeitable prior to the dates set forth in § 3(a) above if any of the following
occur:

1) If there is Change in Control of America Service Group Inc., the shares
shall become fully nonforfeitable immediately upon the occurrence of the
event causing the Change in Control. For purposes of this Agreement, the
term Change in Control shall have the meaning ascribed to it in Section 2 of
the Plan.

2) If the Director’s status as a director of the Company is
discontinued due to the death of the Director, the shares shall
become fully nonforfeitable upon the date of death.

     § 4. Stock Certificates. Company shall issue a stock certificate for the shares of
Stock subject to this Stock Grant in the name of Director upon Director’s execution of the
irrevocable stock power in favor of Company attached as Exhibit A. The Secretary of
Company shall hold such stock certificate representing such shares and any distributions made with
respect to such shares (other than cash dividends) until such time as his or her interest in such
shares have become nonforfeitable or have been forfeited. As soon as practicable after each date
as of which his or her interest in any shares becomes nonforfeitable under § 3(a), Company shall
issue to Director a stock certificate reflecting the shares in which his or her interest has become
nonforfeitable on such date (together with any distributions made with respect to the shares that
have been held by Company). If shares are forfeited, the shares (together with any distributions
made with respect to the shares that have been held by Company) automatically shall revert back to
Company.

     § 5. Nontransferable. No rights, other than nonforfeitable rights, granted under this
Stock Grant Certificate shall be transferable by Director, other than by will or by the laws of
descent and distribution. The person or persons, if any, to whom this Stock Grant is transferred

2

 

by will or by the laws of descent and distribution shall be treated after Director’s death the same
as Director under this Stock Grant.

     § 6. Other Laws. Company shall have the right to refuse to transfer shares of Stock
subject to this Stock Grant to Director if Company acting in its absolute discretion determines
that the transfer of such shares might violate any applicable law or regulation.

     § 7. No Right to Continue Service. Neither the Plan, this Stock Grant Certificate,
nor any related material shall give Director the right to be nominated or elected as a member of
the Board.

     § 8. Governing Law. The Plan and this Stock Grant Certificate shall be governed by
the laws of the State of Delaware.

     § 9. Binding Effect. This Stock Grant Certificate shall be binding upon Company and
Director and their respective heirs, executors, administrators and successors.

     § 10. Headings and Sections. The headings contained in this Stock Grant Certificate
are for reference purposes only and shall not affect in any way the meaning or interpretation of
this Stock Grant Certificate. All references to sections in this Stock Grant Certificate shall be
to sections of this Stock Grant Certificate unless otherwise expressly stated as part of such
reference.

     § 11. Tax Withholding. This Stock Grant has been granted subject to the condition
that Director consents to whatever action the Company directs to satisfy the minimum statutory
federal and state withholding requirements, if any, which the Company determines are applicable.

3

 

Exhibit A

IRREVOCABLE STOCK POWER

     As
a condition to the issuance to the undersigned of a stock certificate for the ___ shares
of Stock which were granted to the undersigned as a Stock Grant under the America Service Group
Inc. 1999 Amended and Restated Incentive Stock Plan in the Stock Grant Certificate dated ___,
the undersigned hereby executes this Irrevocable Stock Power in order to sell, assign and transfer
to America Service Group Inc. the shares of Stock subject to such Stock Grant for purposes of
effecting any forfeiture called for under § 3(b) of the Stock Grant Certificate and does hereby
irrevocably give America Service Group Inc. the power (without any further action on the part of
the undersigned) to transfer such shares of Stock on its books and records back to America Service
Group Inc. to effect any such forfeiture. This Irrevocable Stock Power shall expire automatically
with respect to the shares of Stock on the date such shares of Stock are no longer subject to
forfeiture under § 3(b) of such Stock Grant Certificate or, if earlier, immediately after such a
forfeiture has been effected with respect to such shares of Stock.

	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Signature 	 
	 	 	 

	 	 	 	 	 
	 	 	 
	 	
 	 
	 	[Print Name] 	 
	 	 	 

	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Date 	 
	 	 	 
	 

4

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