Document:

Ex-10.1 Credit Agreement

 

Exhibit
10.1

Published CUSIP Number: [                    ]

Revolving Credit CUSIP Number: [                    ]

 

$450,000,000

CREDIT AGREEMENT

dated as of December 21, 2007

by and among

CORRECTIONS CORPORATION OF AMERICA,

as Borrower,

the Lenders referred to herein,

BANK OF AMERICA, N.A.,

as Administrative Agent, Swingline Lender and Issuing Lender

and

BANC OF AMERICA SECURITIES LLC,

as Sole Book Manager

BANC OF AMERICA SECURITIES LLC and WACHOVIA CAPITAL MARKETS, LLC

as Joint Lead Arrangers

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Syndication Agent

and

JPMORGAN CHASE BANK, N.A., HSBC BANK USA and SUNTRUST BANK

as Co-Documentation Agents

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	ARTICLE I DEFINITIONS	 	 	1	 
	 
	 

	 	SECTION 1.1
	 	Definitions
	 	 	1	 
	 

	 	SECTION 1.2
	 	Other Definitions and Provisions
	 	 	29	 
	 

	 	SECTION 1.3
	 	Accounting Terms
	 	 	30	 
	 

	 	SECTION 1.4
	 	UCC Terms
	 	 	30	 
	 

	 	SECTION 1.5
	 	Rounding
	 	 	30	 
	 

	 	SECTION 1.6
	 	References to Agreement and Laws
	 	 	30	 
	 

	 	SECTION 1.7
	 	Times of Day
	 	 	30	 
	 

	 	SECTION 1.8
	 	Letter of Credit Amounts
	 	 	30	 
	 

	 	SECTION 1.9
	 	Consolidation of Variable Interest Entities
	 	 	31	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II REVOLVING CREDIT FACILITY	 	 	31	 
	 
	 

	 	SECTION 2.1
	 	Revolving Credit Loans
	 	 	31	 
	 

	 	SECTION 2.2
	 	Swingline Loans
	 	 	31	 
	 

	 	SECTION 2.3
	 	Procedure for Advances of Revolving Credit Loans and Swingline Loans
	 	 	33	 
	 

	 	SECTION 2.4
	 	Repayment and Prepayment of Revolving Credit and Swingline Loans
	 	 	33	 
	 

	 	SECTION 2.5
	 	Permanent Reduction of the Revolving Credit Commitment
	 	 	34	 
	 

	 	SECTION 2.6
	 	Termination of Revolving Credit Facility
	 	 	35	 
	 

	 	SECTION 2.7
	 	Increase in Revolving Credit Facility
	 	 	35	 
	 

	 	SECTION 2.8
	 	Incremental Term Loans
	 	 	37	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III LETTER OF CREDIT FACILITY	 	 	39	 
	 
	 

	 	SECTION 3.1
	 	L/C Commitment
	 	 	39	 
	 

	 	SECTION 3.2
	 	Procedure for Issuance of Letters of Credit
	 	 	40	 
	 

	 	SECTION 3.3
	 	Commissions and Other Charges
	 	 	40	 
	 

	 	SECTION 3.4
	 	L/C Participations
	 	 	41	 
	 

	 	SECTION 3.5
	 	Reimbursement Obligation of the Borrower
	 	 	42	 
	 

	 	SECTION 3.6
	 	Obligations Absolute
	 	 	43	 
	 

	 	SECTION 3.7
	 	Effect of Letter of Credit Application
	 	 	43	 
	 

	 	SECTION 3.8
	 	Appointment and Duties of Additional Issuing Lenders
	 	 	43	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV GENERAL LOAN PROVISIONS	 	 	44	 

-i-  

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	SECTION 4.1
	 	Interest
	 	 	44	 
	 

	 	SECTION 4.2
	 	Notice and Manner of Conversion or Continuation of Loans
	 	 	45	 
	 

	 	SECTION 4.3
	 	Fees
	 	 	46	 
	 

	 	SECTION 4.4
	 	Manner of Payment
	 	 	46	 
	 

	 	SECTION 4.5
	 	Evidence of Indebtedness
	 	 	47	 
	 

	 	SECTION 4.6
	 	Adjustments
	 	 	47	 
	 

	 	SECTION 4.7
	 	Nature of Obligations of Lenders Regarding Extensions of Credit;
Assumption by the Administrative Agent
	 	 	48	 
	 

	 	SECTION 4.8
	 	Changed Circumstances
	 	 	49	 
	 

	 	SECTION 4.9
	 	Indemnity
	 	 	49	 
	 

	 	SECTION 4.10
	 	Increased Costs
	 	 	50	 
	 

	 	SECTION 4.11
	 	Taxes
	 	 	51	 
	 

	 	SECTION 4.12
	 	Mitigation Obligations; Replacement of Lenders
	 	 	53	 
	 

	 	SECTION 4.13
	 	Security
	 	 	54	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE V CONDITIONS OF CLOSING AND BORROWING	 	 	55	 
	 
	 

	 	SECTION 5.1
	 	Conditions to Closing and Initial Extensions of Credit
	 	 	55	 
	 

	 	SECTION 5.2
	 	Conditions to All Extensions of Credit
	 	 	58	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER	 	 	59	 
	 
	 

	 	SECTION 6.1
	 	Representations and Warranties
	 	 	59	 
	 

	 	SECTION 6.2
	 	Survival of Representations and Warranties, Etc
	 	 	66	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII FINANCIAL INFORMATION AND NOTICES	 	 	66	 
	 
	 

	 	SECTION 7.1
	 	Financial Statements and Projections
	 	 	66	 
	 

	 	SECTION 7.2
	 	Officer’s Compliance Certificate
	 	 	68	 
	 

	 	SECTION 7.3
	 	Accountants’ Certificate
	 	 	68	 
	 

	 	SECTION 7.4
	 	Other Reports
	 	 	68	 
	 

	 	SECTION 7.5
	 	Notice of Litigation and Other Matters
	 	 	68	 
	 

	 	SECTION 7.6
	 	Accuracy of Information
	 	 	69	 
	 

	 	SECTION 7.7
	 	Posting of Borrower Materials
	 	 	69	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII AFFIRMATIVE COVENANTS	 	 	70	 
	 
	 

	 	SECTION 8.1
	 	Preservation of Corporate Existence and Related Matters
	 	 	70	 

-ii-  

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	SECTION 8.2
	 	Maintenance of Property
	 	 	70	 
	 

	 	SECTION 8.3
	 	Insurance
	 	 	70	 
	 

	 	SECTION 8.4
	 	Accounting Methods and Financial Records
	 	 	70	 
	 

	 	SECTION 8.5
	 	Payment and Performance of Obligations
	 	 	71	 
	 

	 	SECTION 8.6
	 	Compliance With Laws and Approvals
	 	 	71	 
	 

	 	SECTION 8.7
	 	Environmental Laws
	 	 	71	 
	 

	 	SECTION 8.8
	 	Compliance with ERISA
	 	 	71	 
	 

	 	SECTION 8.9
	 	Compliance With Agreements
	 	 	72	 
	 

	 	SECTION 8.10
	 	Visits and Inspections
	 	 	72	 
	 

	 	SECTION 8.11
	 	Additional Subsidiaries
	 	 	72	 
	 

	 	SECTION 8.12
	 	Designation of Restricted and Unrestricted Subsidiaries
	 	 	73	 
	 

	 	SECTION 8.13
	 	Use of Proceeds
	 	 	74	 
	 

	 	SECTION 8.14
	 	Further Assurances
	 	 	74	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX FINANCIAL COVENANTS	 	 	74	 
	 
	 

	 	SECTION 9.1
	 	Consolidated Total Leverage Ratio
	 	 	74	 
	 

	 	SECTION 9.2
	 	Consolidated Secured Leverage Ratio
	 	 	75	 
	 

	 	SECTION 9.3
	 	Interest Coverage Ratio
	 	 	75	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE X NEGATIVE COVENANTS	 	 	75	 
	 
	 

	 	SECTION 10.1
	 	Limitations on Indebtedness
	 	 	75	 
	 

	 	SECTION 10.2
	 	Limitations on Liens
	 	 	77	 
	 

	 	SECTION 10.3
	 	Limitations on Mergers and Liquidation
	 	 	79	 
	 

	 	SECTION 10.4
	 	Limitations on Asset Dispositions
	 	 	79	 
	 

	 	SECTION 10.5
	 	Restricted Payments
	 	 	82	 
	 

	 	SECTION 10.6
	 	Limitations on Exchange and Issuance of Disqualified Stock
	 	 	86	 
	 

	 	SECTION 10.7
	 	Transactions with Affiliates
	 	 	86	 
	 

	 	SECTION 10.8
	 	Certain Accounting Changes; Organizational Documents
	 	 	87	 
	 

	 	SECTION 10.9
	 	Amendments; Payments and Prepayments of Material Indebtedness
	 	 	87	 
	 

	 	SECTION 10.10
	 	Restrictive Agreements
	 	 	87	 
	 

	 	SECTION 10.11
	 	Nature of Business
	 	 	88	 

-iii-  

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	SECTION 10.12
	 	Impairment of Security Interests
	 	 	88	 
	 

	 	SECTION 10.13
	 	Use of Proceeds
	 	 	88	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XI DEFAULT AND REMEDIES	 	 	88	 
	 
	 

	 	SECTION 11.1
	 	Events of Default
	 	 	88	 
	 

	 	SECTION 11.2
	 	Remedies
	 	 	90	 
	 

	 	SECTION 11.3
	 	Rights and Remedies Cumulative; Non-Waiver; etc
	 	 	91	 
	 

	 	SECTION 11.4
	 	Crediting of Payments and Proceeds
	 	 	91	 
	 

	 	SECTION 11.5
	 	Administrative Agent May File Proofs of Claim
	 	 	92	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XII THE ADMINISTRATIVE AGENT	 	 	93	 
	 
	 

	 	SECTION 12.1
	 	Appointment and Authority
	 	 	93	 
	 

	 	SECTION 12.2
	 	Rights as a Lender
	 	 	93	 
	 

	 	SECTION 12.3
	 	Exculpatory Provisions
	 	 	93	 
	 

	 	SECTION 12.4
	 	Reliance by the Administrative Agent
	 	 	94	 
	 

	 	SECTION 12.5
	 	Delegation of Duties
	 	 	94	 
	 

	 	SECTION 12.6
	 	Resignation of Administrative Agent
	 	 	95	 
	 

	 	SECTION 12.7
	 	Non-Reliance on Administrative Agent and Other Lenders
	 	 	96	 
	 

	 	SECTION 12.8
	 	No Other Duties, etc
	 	 	96	 
	 

	 	SECTION 12.9
	 	Collateral and Guaranty Matters
	 	 	96	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIII MISCELLANEOUS	 	 	97	 
	 
	 

	 	SECTION 13.1
	 	Notices
	 	 	97	 
	 

	 	SECTION 13.2
	 	Amendments, Waivers and Consents
	 	 	98	 
	 

	 	SECTION 13.3
	 	Expenses; Indemnity
	 	 	100	 
	 

	 	SECTION 13.4
	 	Right of Set-off
	 	 	102	 
	 

	 	SECTION 13.5
	 	Governing Law
	 	 	102	 
	 

	 	SECTION 13.6
	 	Waiver of Jury Trial
	 	 	103	 
	 

	 	SECTION 13.7
	 	Reversal of Payments
	 	 	103	 
	 

	 	SECTION 13.8
	 	Injunctive Relief; Punitive Damages
	 	 	103	 
	 

	 	SECTION 13.9
	 	Accounting Matters
	 	 	104	 
	 

	 	SECTION 13.10
	 	Successors and Assigns; Participations
	 	 	104	 
	 

	 	SECTION 13.11
	 	Confidentiality
	 	 	108	 

-iv-  

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	SECTION 13.12
	 	Performance of Duties
	 	 	109	 
	 

	 	SECTION 13.13
	 	All Powers Coupled with Interest
	 	 	109	 
	 

	 	SECTION 13.14
	 	Survival of Indemnities
	 	 	109	 
	 

	 	SECTION 13.15
	 	Titles and Captions
	 	 	109	 
	 

	 	SECTION 13.16
	 	Severability of Provisions
	 	 	109	 
	 

	 	SECTION 13.17
	 	Counterparts
	 	 	109	 
	 

	 	SECTION 13.18
	 	Integration
	 	 	109	 
	 

	 	SECTION 13.19
	 	Term of Agreement
	 	 	110	 
	 

	 	SECTION 13.20
	 	Advice of Counsel, No Strict Construction
	 	 	110	 
	 

	 	SECTION 13.21
	 	No Advisory or Fiduciary Responsibility
	 	 	110	 
	 

	 	SECTION 13.22
	 	USA Patriot Act
	 	 	111	 
	 

	 	SECTION 13.23
	 	Inconsistencies with Other Documents; Independent Effect of Covenants
	 	 	111	 

-v-  

 

	 	 	 	 	 
	EXHIBITS	 	 	 	 
	 
	 	 	 	 
	Exhibit A-1

	 	-
	 	Form of Revolving Credit Note
	Exhibit A-2

	 	-
	 	Form of Swingline Note
	Exhibit B

	 	-
	 	Form of Notice of Borrowing
	Exhibit C

	 	-
	 	Form of Notice of Account Designation
	Exhibit D

	 	-
	 	Form of Notice of Prepayment
	Exhibit E

	 	-
	 	Form of Notice of Conversion/Continuation
	Exhibit F

	 	-
	 	Form of Officer’s Compliance Certificate
	Exhibit G

	 	-
	 	Form of Assignment and Assumption
	Exhibit H

	 	-
	 	Form of Subsidiary Guaranty Agreement
	Exhibit I

	 	-
	 	Form of Collateral Agreement

	 	 	 	 	 
	SCHEDULES	 	 	 	 
	 
	 	 	 	 
	Schedule 1.1(a)     

	 	-
	 	Existing Letters of Credit
	Schedule 1.1(b)

	 	-
	 	Existing Loans, Advances and Investments
	Schedule 1.1(c)

	 	-
	 	Book Value of Designated Assets
	Schedule 6.1(a)

	 	-
	 	Jurisdictions of Organization and Qualification
	Schedule 6.1(b)

	 	-
	 	Subsidiaries and Capitalization
	Schedule 6.1(i)

	 	-
	 	ERISA Plans
	Schedule 6.1(1)

	 	-
	 	Material Indebtedness
	Schedule 6.1(m)

	 	-
	 	Labor and Collective Bargaining Agreements
	Schedule 6.1(u)

	 	-
	 	Litigation
	Schedule 10.2

	 	-
	 	Existing Liens
	Schedule 10.7

	 	-
	 	Transactions with Affiliates

vi  

 

     CREDIT AGREEMENT, dated as of December 21, 2007, by and among CORRECTIONS CORPORATION OF
AMERICA, a Maryland corporation (the “Borrower”), the lenders who are or may become a party
to this Agreement (collectively, the “Lenders”) and BANK OF AMERICA, N.A., a national
banking association, as Administrative Agent for the Lenders.

STATEMENT OF PURPOSE

     The Borrower has requested, and the Lenders have agreed, to extend certain credit facilities
to the Borrower on the terms and conditions of this Agreement.

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties hereto, such parties hereby agree as follows:

ARTICLE I

DEFINITIONS

     SECTION 1.1 Definitions. The following terms when used in this Agreement shall have
the meanings assigned to them below:

     “Additional Issuing Lenders” means up to two (2) Revolving Credit Lenders designated
by the Borrower as additional issuers of Letters of Credit pursuant to Section 3.8.

     “Administrative Agent” means Bank of America, in its capacity as Administrative Agent
hereunder, and any successor thereto appointed pursuant to Section 12.6.

     “Administrative Agent’s Office” means the office of the Administrative Agent specified
in or determined in accordance with the provisions of Section 13.1(c).

     “Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

     “Affiliate” means, with respect to any Person, any other Person (other than a
Subsidiary of such Person) which directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such first Person or any of its
Subsidiaries. As used in this definition, the term “control” means (a) the power to vote ten
percent (10%) or more of the securities or other equity interests of a Person having ordinary
voting power, or (b) the possession, directly or indirectly, of any other power to direct or cause
the direction of the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.

     “Agecroft” means Agecroft Prison Management Limited, incorporated in England and
Wales.

     “Agecroft Note” means the Subordinated Loan Agreement among Agecroft, the Borrower and
Sodexho Alliance S.A., dated July 6, 1998, as amended, in the aggregate principal amount of
£6,309,000.

 

 

     “Agreement” means this Credit Agreement, as amended, restated, supplemented or
otherwise modified from time to time.

     “Applicable Law” means all applicable provisions of constitutions, laws, statutes,
ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders
of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators.

     “Applicable Margin” means the corresponding percentages per annum as set forth below
based on the Consolidated Total Leverage Ratio:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Pricing	 	 	 	Commitment	 	 	 	 	 	Base
	Level	 	Consolidated Total Leverage Ratio	 	Fee	 	LIBOR Rate +	 	Rate +
	I

	 	Greater than or equal to 4.50 to 1.00
	 	 	0.300	%	 	 	1.500	%	 	 	0.500	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	II

	 	Greater than or equal to 4.00 to 1.00,
but less than 4.50 to 1.00
	 	 	0.250	%	 	 	1.250	%	 	 	0.250	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	III

	 	Greater than or equal to 3.50 to 1.00
but less than 4.00 to 1.00
	 	 	0.200	%	 	 	1.000	%	 	 	0.000	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	IV

	 	Less than 3.50 to 1.00
	 	 	0.150	%	 	 	0.750	%	 	 	0.000	%

The Applicable Margin shall be determined and adjusted quarterly on the date (each a
“Calculation Date”) ten (10) Business Days after receipt by the Administrative Agent of the
Officer’s Compliance Certificate pursuant to Section 7.2 for the most recently ended fiscal
quarter of the Borrower; provided that (a) the Applicable Margin shall be based on Pricing
Level IV until the first Calculation Date occurring after the Closing Date and, thereafter the
Pricing Level shall be determined by reference to the Consolidated Total Leverage Ratio as of the
last day of the most recently ended fiscal quarter of the Borrower preceding the applicable
Calculation Date, and (b) if the Borrower fails to provide the Officer’s Compliance Certificate as
required by Section 7.2 for the most recently ended fiscal quarter of the Borrower
preceding the applicable Calculation Date, the Applicable Margin from such Calculation Date shall
be based on Pricing Level I until such time as an appropriate Officer’s Compliance Certificate is
provided, at which time the Pricing Level shall be determined by reference to the Consolidated
Total Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Borrower
preceding such Calculation Date. The Applicable Margin shall be effective from one Calculation
Date until the next Calculation Date. Any adjustment in the Applicable Margin shall be applicable
to all Extensions of Credit then existing or subsequently made or issued.

     “Approved Fund” means any Person (other than a natural Person), including, without
limitation, any special purpose entity, that is (or will be) engaged in making, purchasing, holding
or otherwise investing in commercial loans and similar extensions of credit in the ordinary course
of its business; provided, that such Approved Fund must be administered, managed or
underwritten by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an
entity that administers or manages a Lender.

     “Arrangers” means each of BAS and WCM, in their capacity as joint lead arrangers.

2

 

     “Asset Disposition” means the disposition of any or all of the assets (including,
without limitation, the Capital Stock of a Subsidiary or any ownership interest in a joint venture)
of any Credit Party or any Subsidiary thereof whether by sale, lease, transfer or otherwise. The
term “Asset Disposition” shall not include any Equity Issuance.

     “Asset Lien Value” means, with respect to a Lien on assets of the Borrower and its
Restricted Subsidiaries, the greater of (a) the fair market value of the asset(s) subject to such
Lien based on recent appraisals delivered to and reasonably acceptable to the Administrative Agent
and (b) the net book value of such asset(s), in each case determined at the time such Lien is
created.

     “Asset Swap” means an exchange of assets other than cash, Cash Equivalents or Capital
Stock of the Borrower or any Subsidiary by the Borrower or a Restricted Subsidiary of the Borrower
for (a) one or more Permitted Businesses, (b) a controlling equity interest in any Person whose
assets consist primarily of one or more Permitted Businesses and/or (c) one or more real estate
properties.

     “Assignee Group” means two or more Eligible Assignees that are Affiliates of one
another or two or more Approved Funds managed by the same investment advisor.

     “Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is required by
Section 13.10), and accepted by the Administrative Agent, in substantially the form of
Exhibit G or any other form approved by the Administrative Agent.

     “Attributable Indebtedness” means, on any date, (a) in respect of any Capital Lease of
any Person, the capitalized amount thereof that would appear as a liability on a balance sheet of
such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic
Lease, the capitalized amount or principal amount of the remaining lease payments under the
relevant lease that would appear as a liability on a balance sheet of such Person prepared as of
such date in accordance with GAAP if such lease were accounted for as a Capital Lease.

     “Auction Rate Securities” means any debt instruments with a long-term nominal maturity
for which the interest rate is reset through a “dutch auction” process with interest on such
Auction Rate Securities being paid at the end of each such auction period; provided, however, that
such Auction Rate Securities shall have, at the time of purchase, one of the two highest rating
categories obtainable from either Moody’s or S&P.

     “Audited Financial Statements” means the audited Consolidated balance sheet of the
Borrower and its Subsidiaries for the fiscal year ended December 31, 2006, and the related
Consolidated statements of income or operations, stockholders’ equity and cash flows for such
fiscal year of the Borrower and its Subsidiaries, including the notes thereto.

     “Bank of America” means Bank of America, N.A., a national banking association, and its
successors.

     “BAS” means Banc of America Securities LLC, and its successors.

3

 

     “Base Rate” means, at any time, the higher of (a) the Prime Rate and (b) the sum of
the Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take effect
simultaneously with the corresponding change or changes in the Prime Rate or the Federal Funds
Rate.

     “Base Rate Loan” means any Loan bearing interest at a rate based upon the Base Rate as
provided in Section 4.1(a).

     “Borrower” has the meaning assigned thereto in the introductory paragraph hereof

     “Borrower Materials” has the meaning assigned thereto in Section 7.7.

     “Business Day” means (a) for all purposes other than as set forth in clause (b) below,
any day (other than a Saturday, Sunday or legal holiday) on which banks in Chicago, Illinois and
New York, New York, are open for the conduct of their commercial banking business, and (b) with
respect to all notices and determinations in connection with, and payments of principal and
interest on, any LIBOR Rate Loan, any day that is a Business Day described in clause (a) and that
is also a day for trading by and between banks in Dollar deposits in the London interbank market.

     “Calculation Date” has the meaning assigned thereto in the definition of Applicable
Margin.

     “Capital Lease” means any lease of any property by the Borrower or any of its
Restricted Subsidiaries, as lessee, that should, in accordance with GAAP, be classified and
accounted for as a capital lease on a Consolidated balance sheet of the Borrower and its Restricted
Subsidiaries.

     “Capital Stock” (a) in the case of a corporation, capital stock, (b) in the case of an
association or business entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of capital stock, (c) in the case of a partnership, partnership
interests (whether general or limited), (d) in the case of a limited liability company, membership
interests and (e) any other interest or participation that confers on a Person the right to receive
a share of the profits and losses of, or distributions of assets of, the issuing Person.

     “Cash Equivalent” means: (a) Dollars; (b) Government Securities having maturities of
not more than one year from the date of acquisition; (c) readily marketable direct obligations
issued by any state of the United States or any political subdivision thereof having one of the two
highest rating categories obtainable from either Moody’s or S&P with maturities of twelve months or
less from the date of acquisition; (d) Auction Rate Securities; (e) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of acquisition,
bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each
case, with any Lender party to this Agreement or with any domestic commercial bank having capital
and surplus in excess of $500,000,000 and a Thomson Bank Watch Rating of “B” or better; (f)
repurchase obligations with a term of not more than seven days for underlying securities of the
types described in clauses (b) and (c) above entered into with any financial institution meeting
the qualifications specified in clause (e) above; (g) commercial paper having the highest rating
obtainable from Moody’s or S&P and in each case maturing within one year after the date of
acquisition; and (h) money market funds at least 90%

4

 

of the assets of which constitute Cash Equivalents of the kinds described in clauses (a)
through (g) of this definition.

     “Change in Control” means an event or series of events by which (a) any person or
group of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended), shall obtain ownership or control in one or more series of transactions of more than
thirty percent (30%) of the outstanding common stock or thirty percent (30%) of the voting power of
the Borrower entitled to vote in the election of members of the board of directors of the Borrower,
(b) there shall have occurred under any indenture, contract or agreement evidencing any Material
Indebtedness (including, without limitation, any Senior Unsecured Notes) any “change in control” or
similar event (as set forth in the indenture, agreement or other evidence of such Indebtedness)
obligating the Borrower to repurchase, redeem or repay all or any part of the Indebtedness or
Capital Stock provided for therein or (c) a majority of the members of the board of directors of
the Borrower cease to be Continuing Directors.

     “Change in Law” means the occurrence, after the date of this Agreement, of any of the
following, as applicable: (a) the adoption or taking effect of any law, rule, regulation or
treaty, (b) any change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof by any Governmental Authority or (c) the making or issuance
of any request, guideline or directive (whether or not having the force of law) by any Governmental
Authority.

     “Closing Date” means the date of this Agreement or such later Business Day upon which
each condition described in Section 5.1 shall be satisfied or waived in a manner acceptable
to the Administrative Agent, in its sole discretion.

     “Code” means the Internal Revenue Code of 1986, and the rules and regulations
thereunder, each as amended or modified from time to time.

     “Collateral” means the collateral security for the Obligations pledged or granted
pursuant to the Security Documents.

     “Collateral Agreement” means the collateral agreement of even date herewith executed
by the Credit Parties in favor of the Administrative Agent for the benefit of itself and the
Lenders, substantially in the form of Exhibit I, as amended, restated, supplemented or otherwise
modified from time to time.

     “Consolidated” means, when used with reference to financial statements or financial
statement items of any Person, such statements or items on a consolidated basis in accordance with
applicable principles of consolidation under GAAP.

     “Consolidated EBITDA” means, for any period, the Consolidated Net Income of the
Borrower and its Restricted Subsidiaries for such period, plus (a) an amount equal to any
extraordinary loss plus any net loss realized by the Borrower or any of its Restricted Subsidiaries
in connection with an Asset Disposition, to the extent such losses were deducted in computing such
Consolidated Net Income, plus (b) provision for taxes based on income or profits of the
Borrower and its Restricted Subsidiaries for such period, to the extent that such provision for
taxes was deducted in computing such Consolidated Net Income, plus (c) Consolidated
Interest Expense for such period, whether paid or accrued and whether or not capitalized, to the
extent

5

 

that any such expense was deducted in computing such Consolidated Net Income, plus (d)
depreciation, amortization (including amortization of intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any
such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses
in any future period or amortization of a prepaid cash expense that was paid in a prior period) of
the Borrower and its Restricted Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such Consolidated Net Income,
minus (e) non-cash items increasing such Consolidated Net Income for such period, other
than the accrual of revenue in the ordinary course of business, in each case, on a Consolidated
basis and determined in accordance with GAAP. For purposes of this Agreement, Consolidated EBITDA
shall be adjusted on a pro forma basis, in a manner reasonably acceptable to the
Administrative Agent, to include, as of the first day of any applicable period, any Permitted
Acquisitions (if accounted for as a merger or consolidation) and any Asset Dispositions (excluding
any Asset Disposition for an aggregate consideration of $10,000,000 or less) closed during such
period, including, without limitation, adjustments reflecting any non-recurring costs and any
extraordinary expenses of any Permitted Acquisitions and any Asset Dispositions closed during such
period calculated on a basis consistent with GAAP and Regulation S-X of the Securities Exchange Act
of 1934, as amended, or as approved by the Administrative Agent.

     “Consolidated Fixed Charge Coverage Ratio” means, for any period, the ratio of
Consolidated EBITDA for such period to the Consolidated Fixed Charges for such period. In the
event that the Borrower or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays,
repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues,
repurchases or redeems preferred stock subsequent to the commencement of the period for which the
Consolidated Fixed Charge Coverage Ratio is being calculated and on or prior to the date as of
which the calculation of the Consolidated Fixed Charge Coverage Ratio is made (the
“Consolidated Fixed Charges Calculation Date”), then the Consolidated Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence, assumption,
guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or
redemption of preferred stock, and the use of the proceeds therefrom, as if the same had occurred
at the beginning of the applicable four-quarter reference period.

     In addition, for purposes of calculating the Consolidated Fixed Charge Coverage Ratio: (i)
acquisitions that have been made by the Borrower or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or prior to the
Consolidated Fixed Charges Calculation Date shall be given pro forma effect as if
they had occurred on the first day of the four-quarter reference period, (ii) the Consolidated
EBITDA attributable to discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Consolidated Fixed Charges Calculation Date,
shall be excluded, and (iii) the Consolidated Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses disposed of prior
to the Consolidated Fixed Charges Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Consolidated Fixed Charges will not be obligations of the
Borrower or any of its Restricted Subsidiaries following the Consolidated Fixed Charges Calculation
Date.

6

 

     For purposes of making the computations referred to above, the pro forma
change in Consolidated EBITDA projected by the Borrower in good faith as a result of reasonably
identifiable and factually supportable cost savings and costs, as the case may be, expected to be
realized during the consecutive four-quarter period commencing after an acquisition or similar
transaction (the “Savings Period”) will be included in such calculation for any reference
period that includes any of the Savings Period; provided that any such pro
forma change to such Consolidated EBITDA will be without duplication for cost savings and
costs actually realized and already included in such Consolidated EBITDA. If since the beginning
of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or
into the Borrower or any Restricted Subsidiary since the beginning of such period) will have made
any Investment, acquisition, disposition, merger or consolidation or discontinued operations that
would have required adjustment pursuant to this definition, then the Consolidated Fixed Charge
Coverage Ratio will be calculated giving pro forma effect thereto for such period
as if such Investment, acquisition, disposition, merger, consolidation or discontinued operation
had occurred at the beginning of the applicable four-quarter period.

     “Consolidated Fixed Charges” means, for any period, the sum of the following
determined on a Consolidated basis, without duplication, for the Borrower and its Restricted
Subsidiaries in accordance with GAAP: (a) Consolidated Interest Expense, whether paid or accrued,
excluding amortization of debt issuance costs and original issue discount and other non-cash
interest payments, plus, (b) the consolidated interest that was capitalized during such
period, plus, (c) any interest expense on Indebtedness of another Person that is a Guaranty
Obligation of the Borrower or one of its Restricted Subsidiaries or secured by a Lien on assets of
the Borrower or one of its Restricted Subsidiaries, whether or not such Guaranty Obligation or Lien
is called upon, plus, (d) the product of (i) all dividends, whether paid or accrued and
whether or not in cash, on any series of preferred stock, other than (1) dividends on Capital Stock
payable in Capital Stock of the Borrower (other than Disqualified Stock) or (2) dividends to the
Borrower or a Restricted Subsidiary of the Borrower, times (ii) a fraction, the numerator of which
is one and the denominator of which is one minus the then current combined federal, state and local
effective cash tax rate of the Borrower, expressed as a decimal.

     “Consolidated Interest Expense” means, with respect to the Borrower and its Restricted
Subsidiaries for any period, the interest expense (including, without limitation, interest expense
attributable to Capital Leases and all net payment obligations pursuant to Hedging Agreements) of
the Borrower and its Restricted Subsidiaries, all determined for such period on a Consolidated
basis, without duplication, in accordance with GAAP.

     “Consolidated Net Income” means, with respect to the Borrower and its Restricted
Subsidiaries, for any period, the aggregate of the Net Income of the Borrower and its Restricted
Subsidiaries for such period, on a Consolidated basis, determined in accordance with GAAP;
provided that: (a) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting will be included only to the
extent of the amount of dividends or distributions paid in cash to the Borrower or a Restricted
Subsidiary, (b) the Net Income of any Restricted Subsidiary will be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that
Net Income is not at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the terms of its

7

 

charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (c) the cumulative effect
of a change in accounting principles will be excluded, and (d) the Net Income or loss of any
Unrestricted Subsidiary will be excluded, whether or not distributed to the Borrower or one of its
Subsidiaries.

     “Consolidated Secured Debt” means as of any date of determination with respect to the
Borrower and its Restricted Subsidiaries on a Consolidated basis without duplication, the sum of
all Indebtedness of the Borrower and its Restricted Subs that is secured by a Lien on any asset or
property of the Borrower or any of its Restricted Subsidiaries.

     “Consolidated Secured Leverage Ratio” means, as of any date of determination, the
ratio of (a) Consolidated Secured Debt as of such date to (b) Consolidated EBITDA for the most
recently ended period of four (4) consecutive fiscal quarters for which financial statements have
been delivered pursuant to Section 7.1 ending on or immediately prior to such date.

     “Consolidated Tangible Assets” means the total assets, less goodwill and other
intangibles, shown on the Borrower’s most recent Consolidated balance sheet, determined on a
Consolidated basis in accordance with GAAP less all write-ups (other than write-ups in connection
with acquisitions) subsequent to the Closing Date in the book value of any asset (except any such
intangible assets) owned by the Borrower or any of its Restricted Subsidiaries.

     “Consolidated Total Indebtedness” means, as of any date of determination with respect
to the Borrower and its Restricted Subsidiaries on a Consolidated basis without duplication, the
sum of all Indebtedness of the Borrower and its Restricted Subsidiaries.

     “Consolidated Total Leverage Ratio” means, as of any date of determination, the ratio
of (a) Consolidated Total Indebtedness on such date to (b) Consolidated EBITDA for the most
recently ended period of four (4) consecutive fiscal quarters for which financial statements have
been delivered pursuant to Section 7.1 ending on or immediately prior to such date.

     “Continuing Directors” means, as of any date of determination, any member of the board
of directors of the Borrower who (i) was a member of such board of directors on the Closing Date or
(ii) was nominated for election or elected to such board of directors with the approval of a
majority of the Continuing Directors who were members of such board of directors at the time of
such nomination or election.

     “Credit Facility” means, collectively, the Revolving Credit Facility, the Swingline
Facility and the L/C Facility.

     “Credit Parties” means, collectively, the Borrower and the Subsidiary Guarantors.

     “Default” means any of the events specified in Section 11.1 that with the
passage of time, the giving of notice or any other condition, would constitute an Event of Default.

     “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the
Revolving Credit Loans, participations in L/C Obligations or participations in Swingline Loans
required to be funded by it hereunder within one Business Day of the date required to be funded

8

 

by it hereunder and such failure continues to exist, (b) has otherwise failed to pay over to
the Administrative Agent or any other Lender any other amount required to be paid by it hereunder
within one Business Day of the date when due and such failure continues to exist, unless such
amount is the subject of a good faith dispute, or (c) has been deemed insolvent or become the
subject of a bankruptcy or insolvency proceeding.

     “Designated Asset Contract” means each of the following contracts pursuant to which
the Borrower or any of its Restricted Subsidiaries has granted (a) an option to purchase a
Designated Asset for the Designated Asset Value or (b) a right of reversion of all or a portion of
the Borrower or a Restricted Subsidiary’s ownership in such Designated Assets, in each case as in
effect on the date of this Agreement: (i) Standard Form Lease Agreement, East Mesa Detention
Facility, dated October 30, 1997, between the County of San Diego and Corrections Corporation of
America; (ii) Lease Agreement, dated April 30, 1996, between Huerfano County and Corrections
Corporation of America; (iii) Request for Proposal Number 0467-019-955259 Issued on behalf of the
Georgia Department of Corrections re: Bid of Private Prisons in Coffee and Wheeler Counties; (iv)
Contract No. 467-019-955259-1, dated July 24, 1996, between the Georgia Department of Corrections
and Corrections Corporation of America; (v) Contract No. 467-019-955259-2, dated July 24, 1996,
between the Georgia Department of Corrections and Corrections Corporation of America; (vi)
Agreement, dated October 6, 1998, between the Tallahatchie County Correctional Authority and
Corrections Corporation of America, as amended by that certain Amendment No. 1 to Agreement dated
May 18, 2000, between the Tallahatchie County Correctional Authority and Corrections Corporation of
America; (vii) Contract for Facility Development — Design, Build, dated July 22, 1998, between the
Montana Department of Corrections and Corrections Corporation of America; (viii) Contractual
Agreement, dated July 1, 1997, between the State of Oklahoma Department of Corrections and
Corrections Corporation of America; (ix) Correctional Services Contract, dated July 1, 1998,
between the State of Oklahoma Department of Corrections and Corrections Corporation of America; (x)
Lease Agreement, dated April 15, 1985, between the County of Shelby and Corrections Corporation of
America; (xi) Contract, dated February 25, 1986, between the Tennessee Department of Finance and
Administration and Corrections Corporation of America; (xii) Lease Agreement, dated January 1997,
between the District of Columbia and Corrections Corporation of America; (xiii) Incarceration
Agreement, dated October 23, 2002, between the State of Tennessee, Department of Correction and
Hardeman County, Tennessee and the related Contract for the Lease of Whiteville Correctional
Facility, dated October 9, 2002, between Hardeman County, Tennessee and Corrections Corporation of
America; (xiv) Management Services Contract between Citrus County, Florida and Corrections
Corporation of America, effective October 1, 2005, relating to construction of a 360-bed expansion
to the Citrus County Detention Facility, Lecanto, Florida; and (xv) any contract entered into after
the Closing Date under which the Borrower or any of its Restricted Subsidiaries has granted (a) an
option to purchase a Designated Asset for the Designated Asset Value or (b) a right of reversion of
all or a portion of its ownership in such Designated Asset; provided that such contract is
entered into in the ordinary course of business, is consistent with past practices and is preceded
by a resolution of the board of directors of the Borrower set forth in an officer’s certificate, in
form and substance reasonably satisfactory to the Administrative Agent, certifying that such
contract has been approved by a majority of the members of the board of directors of the Borrower
and the option to purchase or right to reversion in such contract is on terms the board of
directors of the Borrower has determined to be reasonable and in the best interest of the Borrower.

9

 

     “Designated Asset Value” means the aggregate consideration specified in a Designated
Asset Contract to be received by the Borrower or a Restricted Subsidiary upon the exercise of an
option to acquire a Designated Asset pursuant to the terms of a Designated Asset Contract.

     “Designated Assets” means those Prison Facilities owned by the Borrower or any of its
Restricted Subsidiaries that are located in San Diego, California; Walensburg, Colorado; Lecanto,
Florida; Nichols, Georgia; Alamo, Georgia; Tutweiler, Mississippi; Shelby, Montana; Cushing,
Oklahoma; Holdenville, Oklahoma; Memphis, Tennessee; Whiteville, Tennessee; and Washington, D.C.;
and other Prison Facilities acquired by the Borrower or a Restricted Subsidiary after the Closing
Date, in each case so long as, and to the extent that, the Borrower or such Restricted Subsidiary
has granted an option to purchase such Prison Facility (or provided for the reversion of the
Borrower’s (or such Restricted Subsidiary’s) ownership interest in all or a portion of such Prison
Facility) pursuant to a Designated Asset Contract. The book value of each of the Prison Facilities
designated as Designated Assets as of December 31, 2006 is set forth on Schedule 1.1(c).

     “Designated Non-Cash Consideration” means the fair market value of the total
consideration received by the Borrower or any of its Restricted Subsidiaries in connection with an
Asset Disposition that is so designated as Designated Non-Cash Consideration pursuant to an
officer’s certificate of the Borrower, setting forth the basis of such valuation, executed by the
Borrower’s principal executive officer or principal financial officer, less the amount of cash or
Cash Equivalents received in connection with the Asset Disposition, in form reasonably satisfactory
to the Administrative Agent; provided, however, that if the Designated Non-Cash
Consideration is in the form of Indebtedness the total amount of such Designated Non-Cash
Consideration outstanding at one time shall not exceed the greater of (a) $15,000,000 and (b) 2.50%
of Consolidated Tangible Assets.

     “Disputes” means any dispute, claim or controversy arising out of, connected with or
relating to this Agreement or any other Loan Document, between or among parties hereto and to the
other Loan Documents.

     “Disqualified Stock” means any Capital Stock issued by any Credit Party that, by its
terms (or by the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder of the Capital Stock, prior to the date that
is six (6) months after the Revolving Credit Maturity Date. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of
the Capital Stock have the right to require the Borrower to repurchase such Capital Stock upon the
occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the
terms of such Capital Stock provide that the Borrower may not repurchase or redeem any such Capital
Stock pursuant to such provisions unless such repurchase or redemption complies with the provisions
of this Agreement.

     “Dollars” or “$” means, unless otherwise qualified, dollars in lawful currency of the
United States.

10

 

     “Domestic Subsidiary” means any Subsidiary organized under the laws of any political
subdivision of the United States.

     “Eligible Assignee” means any Person that satisfies all of the requirements to be an
assignee under Section 13.10(b)(iii), (iv), (v) and (vi) (subject
to such consents, if any, as may be required under Section 13.10(b)(iii)).

     “Employee Benefit Plan” means (a) any employee benefit plan within the meaning of
Section 3(3) of ERISA that is maintained for employees of any Credit Party or (b) any Pension Plan
or Multiemployer Plan that has at any time within the preceding six (6) years been maintained for
the employees of any Credit Party or any current or former ERISA Affiliate.

     “Environmental Claims” means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, accusations, allegations, notices of
noncompliance or violation, investigations (other than internal reports prepared by any Person in
the ordinary course of business and not in response to any third party action or request of any
kind) or proceedings relating in any way to any actual or alleged violation of or liability under
any Environmental Law or relating to any permit issued, or any approval given, under any such
Environmental Law, including, without limitation, any and all claims by Governmental Authorities
for enforcement, cleanup, removal, response, remedial or other actions or damages, contribution,
indemnification cost recovery, compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to human health or the environment.

     “Environmental Laws” means any and all federal, foreign, state, provincial and local
laws, statutes, ordinances, codes, rules, standards and regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to the protection of the
environment, including, but not limited to, requirements pertaining to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.

     “Equity Issuance” means any issuance by the Borrower or any Restricted Subsidiary to
any Person that is not a Credit Party of (a) shares of its Capital Stock, (b) any shares of its
Capital Stock pursuant to the exercise of options or warrants or (c) any shares of its Capital
Stock pursuant to the conversion of any debt securities to equity.

     “ERISA” means the Employee Retirement Income Security Act of 1974, and the rules and
regulations thereunder, each as amended or modified from time to time.

     “ERISA Affiliate” means any Person who together with the Borrower or any Subsidiary of
the Borrower is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o)
of the Code or Section 4001(b) of ERISA.

     “Eurodollar Reserve Percentage” means, for any day, the percentage (expressed as a
decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%) that is in effect for
such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor)
for determining the maximum reserve requirement (including, without limitation, any

11

 

basic, supplemental or emergency reserves) in respect of eurocurrency liabilities or any
similar category of liabilities for a member bank of the Federal Reserve System in New York City.

     “Event of Default” means any of the events specified in Section 11.1;
provided that any requirement for passage of time, giving of notice, or any other
condition, has been satisfied.

     “Excess Proceeds” has the meaning assigned thereto in Section 10.4(p).

     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any
applicable Issuing Lender or any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income
(however denominated), and franchise and excise taxes imposed on it (in lieu of net income taxes),
by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient
is organized or in which its principal office is located or, in the case of any Lender, in which
its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States
or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in
the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under
Section 4.12(b)), any withholding tax that is imposed on amounts payable to such Foreign
Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office)
or is attributable to such Foreign Lender’s failure or inability (other than as a result of a
Change in Law) to comply with Section 4.11(e), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office
(or assignment), to receive additional amounts from the Borrower with respect to such withholding
tax pursuant to Section 4.11(a).

     “Existing Credit Facility” means that certain Credit Agreement dated as of February 3,
2006, by and among the Borrower, the lenders party thereto and Wachovia Bank, National Association,
as administrative agent, as amended prior to the date hereof.

     “Existing Letters of Credit” means those letters of credit issued by Bank of America
and Wachovia, existing prior to the Closing Date and identified on Schedule 1.1(a).

     “Extensions of Credit” means, as to any Lender at any time, (a) an amount equal to the
sum of (i) the aggregate principal amount of all Revolving Credit Loans made by such Lender then
outstanding, (ii) such Lender’s Revolving Credit Commitment Percentage of the L/C Obligations then
outstanding, (iii) such Lender’s Revolving Credit Commitment Percentage of the Swingline Loans then
outstanding, or (b) the making of any Loan or participation in any Letter of Credit by such Lender,
as the context requires.

     “FDIC” means the Federal Deposit Insurance Corporation, or any successor thereto.

     “Federal Funds Rate” means, the rate per annum (rounded upwards, if necessary, to the
next higher 1/100th of 1%) representing the daily effective federal funds rate as quoted by the
Administrative Agent and confirmed in Federal Reserve Board Statistical Release H.15 (519) or any
successor or substitute publication selected by the Administrative Agent. If, for any reason, such
rate is not available, then “Federal Funds Rate” shall mean a daily rate that is
determined, in the opinion of the Administrative Agent, to be the rate at which federal funds are
being offered

12

 

for sale in the national federal funds market at 9:00 a.m. Rates for weekends or holidays
shall be the same as the rate for the most immediately preceding Business Day.

     “Fee Letters” means, collectively, (i) the letter agreement, dated November 27, 2007,
among the Borrower, the Administrative Agent and BAS and (ii) the letter agreement, dated November
27, 2007, among the Borrower, the Administrative Agent, BAS and WCM.

     “Fiscal Year” means each fiscal year of the Borrower and its Subsidiaries ending on
December 31.

     “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction
other than that in which the Borrower is resident for tax purposes. For purposes of this
definition, the United States, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.

     “Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

     “GAAP” means generally accepted accounting principles, as recognized by the American
Institute of Certified Public Accountants and the Financial Accounting Standards Board,
consistently applied and maintained on a consistent basis for the Borrower and its Subsidiaries
throughout the period indicated and (subject to Section 13.9) consistent with the prior
financial practice of the Borrower and its Subsidiaries.

     “Governmental Approvals” means all authorizations, consents, approvals, permits,
licenses and exemptions of, registrations and filings with, and reports to, all Governmental
Authorities.

     “Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to
government (including any supra-national bodies such as the European Union or the European Central
Bank).

     “Government Securities” means securities issued or directly and fully guaranteed or
insured by the United States government or any agency or instrumentality of the United States
government (provided that the full faith and credit of the United States is pledged in support of
those securities).

     “Guaranty Obligation” means, with respect to the Borrower and its Restricted
Subsidiaries, without duplication, any obligation, contingent or otherwise, of any such Person
pursuant to which such Person has directly or indirectly guaranteed any Indebtedness of any other
Person including, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of any such Person (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness (whether arising by virtue of partnership
arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement condition or otherwise) or (b) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness of the

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payment thereof or to protect such obligee against loss in respect thereof (in whole or in
part); provided, that the term Guaranty Obligation shall not include endorsements for
collection or deposit in the ordinary course of business; provided further that the
term Guaranty Obligations shall not include any Indebtedness of the Borrower under the Forward
Delivery Deficits Agreement, dated as of September 25, 1997, by and between the Borrower and
Wachovia Bank, National Association, as trustee, or under the Debt Service Deficits Agreement,
dated as of January 1, 1997, by and between the Borrower and Hardeman County Correctional
Facilities Corporation, or the Bond Reserve guaranty included in the Residential Services
Agreement, dated as of April 14, 1999, by and between the Borrower and the City of Eden, Texas,
each as in effect on the Closing Date, provided that and for so long as such Indebtedness
is not required to be classified as debt of the Borrower or any Restricted Subsidiary pursuant to
GAAP.

     “Hazardous Materials” means any substances or materials (a) that are or become defined
as hazardous wastes, hazardous substances, pollutants, contaminants, or toxic substances under any
Environmental Law, (b) that are toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise harmful to human health or the environment and are or become
regulated by any Governmental Authority, (c) the presence of which requires investigation or
remediation under any Environmental Law, (d) the discharge or emission or release of which requires
a permit or license under any Environmental Law, (e) that are deemed to constitute a nuisance or a
trespass that pose a health or safety hazard to Persons or neighboring properties under any
Environmental Law, or (f) that contain asbestos, polychlorinated biphenyls, urea formaldehyde foam
insulation, petroleum hydrocarbons, petroleum derived substances or waste, crude oil or nuclear
fuel.

     “Hedging Agreement” means any agreement with respect to any Interest Rate Contract,
forward rate agreement, commodity swap, forward foreign exchange agreement, currency swap
agreement, cross-currency rate swap agreement, currency option agreement or other agreement or
arrangement designed to alter the risks of any Person arising from fluctuations in interest rates,
currency values or commodity prices, all as amended, restated, supplemented or otherwise modified
from time to time.

     “Hedging Obligations” means all existing or future payment and other obligations owing
by the Borrower under any Hedging Agreement (which such Hedging Agreement is permitted hereunder)
with any Person that is a Lender or an Affiliate of a Lender at the time such Hedging Agreement is
executed.

     “Incremental Revolving Credit Commitment Effective Date” means the date, which shall
be a Business Day, on or before the Revolving Credit Maturity Date, but no earlier than thirty (30)
days after the date of delivery of the applicable Incremental Revolving Credit Commitment
Notification (unless a shorter period is agreed to by the affected Lenders), on which each of the
applicable increases to the Revolving Credit Commitment shall become effective pursuant to
Section 2.7.

     “Incremental Revolving Credit Commitment Notification” has the meaning assigned
thereto in Section 2.7.

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     “Incremental Term Loan Agreement” means each agreement executed pursuant to
Section 2.8 by the Borrower and an existing Lender or a Person not theretofore a Lender, as
applicable, and acknowledged by the Administrative Agent and each Subsidiary Guarantor, providing
for an Incremental Term Loan hereunder, acknowledging that any Person not theretofore a Lender
shall be a party hereto and have the rights and obligations of a Lender hereunder, and setting
forth the Incremental Term Loan Commitment of such Lender.

     “Incremental Term Loan Commitment” means (a) as to any Lender, the obligation of such
Lender to make Incremental Term Loans to or for the account of the Borrower hereunder in an
aggregate principal amount not to exceed the amount set forth opposite such Lender’s name on the
Register, as such amount may be increased, reduced or otherwise modified at any time or from time
to time pursuant to the terms hereof and (b) as to all Lenders, the aggregate obligations of all
Lenders to make the Incremental Term Loans, as applicable to the account of the Borrower, as such
amount may be increased, reduced or otherwise modified at any time or from time to time. The
Incremental Term Loan Commitment of all Lenders as of the Closing Date shall be $0.

     “Incremental Term Loan Effective Date” means the date, which shall be a Business Day,
on or before the Revolving Credit Maturity Date, but no earlier than thirty (30) days after the
date of delivery of the applicable Incremental Term Loan Notification (unless a shorter period is
agreed to by the affected Lenders), on which each of the Incremental Term Loan Lenders shall make
Incremental Term Loans to the Borrower pursuant to Section 2.8.

     “Incremental Term Loan Lender” has the meaning assigned thereto in Section
2.8.

     “Incremental Term Loan Notification” has the meaning assigned thereto in Section
2.8(a).

     “Incremental Term Loans” means any incremental term loans made to the Borrower
pursuant to Section 2.8, and all such incremental term loans collectively as the context
requires.

     “Indebtedness” means, with respect to the Borrower and its Restricted Subsidiaries at
any date and without duplication, the sum of the following calculated in accordance with GAAP:

     (a) all liabilities, obligations and indebtedness for borrowed money including, but not
limited to, obligations evidenced by bonds, debentures, notes or other similar instruments of any
such Person;

     (b) all obligations to pay the deferred purchase price of property or services of any such
Person (including, without limitation, all obligations under non-competition, earn-out or similar
agreements), excluding trade payables arising in the ordinary course of business;

     (c) the Attributable Indebtedness of such Person with respect to such Person’s obligations in
respect of Capital Leases and Synthetic Leases;

     (d) all Indebtedness of any other Person secured by a Lien on any asset owned or being
purchased by such Person (including indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall have been assumed by such

15

 

Person or is limited in recourse (but excluding any such Indebtedness arising as a result of a
Lien on the Capital Stock of Agecroft);

     (e) all Guaranty Obligations of any such Person;

     (f) all obligations, contingent or otherwise, of any such Person relative to the face amount
of letters of credit, whether or not drawn, including, without limitation, any Reimbursement
Obligation, and banker’s acceptances issued for the account of any such Person;

     (g) all obligations of any such Person to redeem, repurchase, exchange, defease or otherwise
make payments in respect of Capital Stock of such Person; and

     (h) all Net Hedging Obligations.

     For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture (other than a joint venture that is itself a corporation or limited
liability company) in which such Person is a general partner or a joint venturer, unless such
Indebtedness is expressly made non-recourse to such Person.

     “Indemnified Taxes” means Taxes and Other Taxes other than Excluded Taxes.

     “Information” has the meaning assigned thereto in Section 13.11.

     “Interest Period” has the meaning assigned thereto in Section 4.1(b).

     “Interest Rate Contract” means any interest rate swap agreement, interest rate cap
agreement, interest rate floor agreement, interest rate collar agreement, interest rate option or
any other agreement regarding the hedging of interest rate risk exposure of any Person and any
confirming letter executed pursuant to such agreement, all as amended, restated, supplemented or
otherwise modified from time to time.

     “Investments” means, with respect to any Person, without duplication, all direct or
indirect investments by such Person in other Persons (including Affiliates) in the forms of loans
(including Guaranty Obligations or other obligations), advances or capital contributions (excluding
commission, travel and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness, Capital Stock or
other securities, together with all items that are or would be classified as investments on a
balance sheet prepared in accordance with GAAP.

     “ISP98” means the International Standby Practices (1998 Revision, effective January 1,
1999), International Chamber of Commerce Publication No. 590.

     “Issuing Lender” means (a) Bank of America, in its capacity as issuer of any Letters
of Credit, or any successor thereto, (b) Wachovia, in its capacity as issuer of any Letters of
Credit, or any successor thereto and (c) any Additional Issuing Lender, in its capacity as issuer
of any Letters of Credit. If there is more than one Issuing Lender at any time, the term “Issuing
Lender” shall be deemed to refer to each of them individually.

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     “L/C Commitment” means the lesser of (a) One Hundred Million Dollars ($100,000,000)
and (b) the Revolving Credit Commitment.

     “L/C Facility” means the letter of credit facility established pursuant to Article
III.

     “L/C Obligations” means at any time, an amount equal to the sum of (a) the aggregate
undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount
of drawings under Letters of Credit that have not then been reimbursed pursuant to Section
3.5.

     “L/C Participants” means the collective reference to all the Lenders other than the
applicable Issuing Lender.

     “Lender” means each Person executing this Agreement as a Lender (including, without
limitation, the applicable Issuing Lender and the Swingline Lender unless the context otherwise
requires) set forth on the signature pages hereto and each Person that hereafter becomes a party to
this Agreement as a Lender pursuant to Section 2.7, Section 2.8 or Section
13.10.

     “Lender Addition and Acknowledgment Agreement” means each agreement executed pursuant
to Section 2.7 by the Borrower and an existing Lender or a Person not theretofore a Lender,
as applicable, and acknowledged by the Administrative Agent and each Subsidiary Guarantor,
providing for an increase in the Revolving Credit Commitment hereunder, acknowledging that any
Person not theretofore a Lender shall be a party hereto and have the rights and obligations of a
Lender hereunder, and setting forth the Revolving Credit Commitment of such Lender.

     “Lending Office” means, with respect to any Lender, the office of such Lender
maintaining such Lender’s Extensions of Credit.

     “Letter of Credit Application” means an application, in the form specified by the
applicable Issuing Lender from time to time, requesting the applicable Issuing Lender to issue a
Letter of Credit.

     “Letters of Credit” means the collective reference to letters of credit issued
pursuant to Section 3.1 and the Existing Letters of Credit.

     “LIBOR” means, for any Interest Period, the rate per annum equal to the British
Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other
commercially available source providing quotations of BBA LIBOR as designated by the Administrative
Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such
Interest Period) with a term equivalent to such Interest Period. If such rate is not available at
such time for any reason, then “LIBOR” for such Interest Period shall be the rate per annum
determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on
the first day of such Interest Period in same day funds in the approximate amount of the LIBOR Rate
Loans being made, continued or converted by Bank of America and with a term equivalent to such
Interest Period would be offered by Bank of America’s London Branch to

17

 

major banks in the London interbank eurodollar market at their request at approximately 11:00
a.m. (London time) two Business Days prior to the commencement of such Interest Period

     “LIBOR Rate” means a rate per annum (rounded upwards, if necessary, to the next higher
1/100th of 1%) determined by the Administrative Agent pursuant to the following formula:

     “LIBOR Rate Loan” means any Loan bearing interest at a rate based upon the LIBOR Rate
as provided in Section 4.1(a).

     “Lien” means, with respect to any asset, any mortgage, leasehold mortgage, lien,
pledge, charge, security interest, hypothecation or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any
asset that it has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention agreement relating to such asset
and having substantially the same economic effect as any of the foregoing.

     “Loan Documents” means, collectively, this Agreement, each Note, the Letter of Credit
Applications, the Subsidiary Guaranty Agreement, the Security Documents, and each other document,
instrument, certificate and agreement executed and delivered by the Borrower or any Restricted
Subsidiary in connection with this Agreement or otherwise referred to herein or contemplated hereby
(excluding any Hedging Agreement), all as may be amended, restated, supplemented or otherwise
modified from time to time.

     “Loans” means the collective reference to the Revolving Credit Loans and the Swingline
Loans and “Loan” means any of such Loans.

     “Material Adverse Effect” means a material adverse effect on (a) the properties,
business, operations or condition (financial or otherwise) of the Borrower and its Restricted
Subsidiaries, taken as a whole, or (b) the ability of the Borrower and its Restricted Subsidiaries,
taken as a whole, to perform their obligations under the Loan Documents to which they are parties.

     “Material Indebtedness” means (a) any Indebtedness or Guaranty Obligations of the
Borrower or any of its Restricted Subsidiaries involving monetary liability of or to any such
Person in an amount in excess of $20,000,000 per annum, (b) the Senior Unsecured Notes and any
documents related thereto, and (c) the documentation governing any Qualified Trust Indebtedness.

     “Moody’s” means Moody’s Investor Service, Inc.

     “Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of
ERISA to which the Borrower or any ERISA Affiliate is making, or is accruing an obligation to make,
or has accrued an obligation to make contributions within the preceding six (6) years.

     “Net Hedging Obligations” means, as of any date, the Termination Value of any such
Hedging Agreement on such date.

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     “Net Income” means, with respect to the Borrower and its Restricted Subsidiaries for
any period, the net income (loss) of the Borrower and its Restricted Subsidiaries, determined in
accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding,
however: (a) any gain or loss, together with any related provision for taxes on such gain or loss,
realized in connection with: (i) any Asset Disposition; or (ii) the disposition of any securities
by the Borrower or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of
the Borrower or any of its Restricted Subsidiaries (whether by redemption, repurchase, defeasance,
repayment or otherwise), and any related premiums, fees and expenses, (b) any extraordinary gain or
loss, together with any related provision for taxes on such extraordinary gain or loss, (c) any
impairment losses (including, but not limited to, those resulting from impairment of goodwill
recorded on the Consolidated financial statement of the Borrower or a Restricted Subsidiary
pursuant to SFAS No. 142 “Goodwill and Other Intangible Assets” and those resulting from impairment
or disposal of long-lived assets recorded on the Consolidated financial statements of the Borrower
or a Restricted Subsidiary pursuant to SFAS No. 144 “Accounting for the Impairment or Disposal of
Long-Lived Assets,” (d) any loss resulting from the change in fair value of a derivative financial
instrument pursuant to SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities,”
(e) amortization of debt issuance costs and (f) any Capital Stock-based compensation expense.

     “Net Proceeds” means the aggregate cash proceeds received by the Borrower or any of
its Restricted Subsidiaries in respect of any Asset Disposition (including, without limitation, any
cash or Cash Equivalents received upon the sale or other disposition of any non-cash consideration,
including Designated Non-Cash Consideration received in any Asset Disposition and deemed to be cash
pursuant to and in compliance with Section 10.4(p) hereof), net of the direct costs
relating to such Asset Disposition, including, without limitation, legal, accounting and investment
banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset
Disposition, taxes paid or payable as a result of the Asset Disposition, in each case, after taking
into account any available tax credits or deductions and any tax sharing arrangements, and amounts
required to be applied to the repayment of Indebtedness (other than Indebtedness under this
Agreement) secured by a Lien on the asset or assets that were the subject of such Asset Disposition
and any reserve for adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.

     “New Incremental Term Loan Lender” has the meaning assigned thereto in Section
2.8.

     “Notes” means the collective reference to the Revolving Credit Notes and the Swingline
Note.

     “Notice of Account Designation” has the meaning assigned thereto in Section
2.3(b).

     “Notice of Borrowing” has the meaning assigned thereto in Section 2.3(a).

     “Notice of Conversion/Continuation” has the meaning assigned thereto in Section
4.2.

     “Notice of Prepayment” has the meaning assigned thereto in Section 2.4(c).

     “Obligations” means, in each case, whether now in existence or hereafter arising: (a)
the principal of and interest on (including interest accruing after the filing of any bankruptcy or

19

 

similar petition) the Loans, (b) the L/C Obligations, (c) all Hedging Obligations and (d) all
other fees and commissions (including attorneys’ fees), charges, indebtedness, loans, liabilities,
financial accommodations, obligations, covenants and duties owing by the Borrower or any of its
Restricted Subsidiaries to the Lenders or the Administrative Agent, in each case under any Loan
Document, with respect to any Loan or Letter of Credit of every kind, nature and description,
direct or indirect, absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note.

     “OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

     “Officer’s Compliance Certificate” means a certificate of the chief financial officer
or the treasurer of the Borrower substantially in the form of Exhibit F.

     “Operating Lease” means, as to any Person as determined in accordance with GAAP, any
lease of property (whether real, personal or mixed) by such Person as lessee that is not a Capital
Lease.

     “Other Taxes” means all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment made hereunder or
under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement or any other Loan Document.

     “Participant” has the meaning assigned thereto in Section 13.11(d).

     “PBGC” means the Pension Benefit Guaranty Corporation or any successor agency.

     “Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which
is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (a) is
maintained for the employees of the Borrower or any ERISA Affiliates or (b) has at any time within
the preceding six (6) years been maintained for the employees of the Borrower or any of its current
or former ERISA Affiliates.

     “Permitted Acquisition” means any investment by the Borrower or any Restricted
Subsidiary in the form of acquisitions of all or substantially all of the business or a line of
business (whether by the acquisition of capital stock, assets or any combination thereof) of any
other Person if such acquisition meets all of the following requirements:

     (a) the Person or business to be acquired shall be engaged primarily in a Permitted Business;

     (b) if such transaction is a merger or consolidation, the Borrower or a Restricted Subsidiary
shall be the surviving Person and no Change of Control shall have been effected thereby;

     (c) the Borrower shall deliver to the Administrative Agent such documents reasonably requested
by the Administrative Agent pursuant to Section 8.11 to be delivered at the time required
pursuant to Section 8.11;

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     (d) in the case of any acquisition with an aggregate purchase price greater than $50,000,000,
no later than five (5) Business Days prior to the proposed closing date of such acquisition, the
Borrower (A) shall have delivered to the Administrative Agent promptly upon the finalization
thereof copies of substantially final Permitted Acquisition Documents, which shall be in form and
substance reasonably satisfactory to the Administrative Agent, and (B) shall have delivered to, or
made available for inspection by, the Administrative Agent substantially complete Permitted
Acquisition Diligence Information, which shall be in form and substance reasonably satisfactory to
the Administrative Agent;

     (e) no Default or Event of Default shall have occurred and be continuing both before and after
giving effect to such acquisition; and

     (f) the Borrower shall provide such other documents and other information as may be reasonably
requested by the Administrative Agent in connection with the acquisition.

     “Permitted Acquisition Diligence Information” means with respect to any acquisition
proposed by the Borrower or any Restricted Subsidiary, to the extent applicable, all material
financial information, all material contracts, all material customer lists, all material supply
agreements, and all other material information, in each case, reasonably requested to be delivered
to the Administrative Agent in connection with such acquisition (except to the extent that any such
information is (a) subject to any confidentiality agreement, unless mutually agreeable arrangements
can be made to preserve such information as confidential, (b) classified or (c) subject to any
attorney-client privilege).

     “Permitted Acquisition Documents” means with respect to any acquisition proposed by
the Borrower or any Restricted Subsidiary, final copies or substantially final drafts if not
executed at the required time of delivery of the purchase agreement, sale agreement, merger
agreement or other material agreement evidencing such acquisition, including, without limitation,
all legal opinions and each other material document executed, delivered, contemplated by or
prepared in connection therewith and any amendment, modification or supplement to any of the
foregoing.

     “Permitted Business” means the business conducted by the Borrower and its Restricted
Subsidiaries on the Closing Date and businesses reasonably related thereto or ancillary or
incidental thereto or a reasonable extension thereof, including the privatization of governmental
services.

     “Permitted Investments” means:

     (a) any Investment in the Borrower or in a Restricted Subsidiary of the Borrower;

     (b) any Investment in cash or Cash Equivalents;

     (c) any Permitted Acquisition;

     (d) any Investment made as a result of the receipt of non-cash consideration (including
Designated Non-Cash Consideration) from an Asset Disposition that was made pursuant to and in
compliance with Section 10.4 hereof;

21

 

     (e) any acquisition of assets solely in exchange for the issuance of Capital Stock (other than
Disqualified Stock) of the Borrower;

     (f) any Investments received in compromise of obligations of trade creditors or customers that
were incurred in the ordinary course of business, including pursuant to any plan of reorganization
or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer;

     (g) Hedging Obligations;

     (h) other Investments in any other Person having an aggregate fair market value (measured on
the date each such Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this subsection (h), not to exceed
$35,000,000;

     (i) payroll, travel and similar advances to cover matters that are expected at the time of
such advances ultimately to be treated as expenses for accounting purposes and that are made in the
ordinary course of business;

     (j) loans or advances to employees made in the ordinary course of business of the Borrower or
any Restricted Subsidiary in an aggregate principal amount not to exceed $5,000,000 outstanding at
any one time;

     (k) stock, obligations or securities received in settlement of debts created in the ordinary
course of business and owing to the Borrower or any Restricted Subsidiary or in satisfaction of
judgments or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of a debtor;

     (l) Investments in existence on the Closing Date and set forth on Schedule 1.1(b);

     (m) Guaranty Obligations issued in accordance with Section 10.1 hereof;

     (n) Investments that are made with Capital Stock of the Borrower (other than Disqualified
Stock of the Borrower);

     (o) any Investment by the Borrower or any Restricted Subsidiary of the Borrower in joint
ventures in a Permitted Business, when taken together with all other Investments made pursuant to
this subsection (o), not to exceed $15,000,000 outstanding at any one time; and

     (p) any Investment in any Person that is not at the time of such Investment, or does not
thereby become, a Restricted Subsidiary in an aggregate amount (measured on the date such
Investment was made and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (p) since the Closing Date (but, to the
extent that any Investment made pursuant to this clause (p) since the Closing Date is sold or
otherwise liquidated for cash, minus the lesser of (i) the cash return of capital with respect to
such Investment (less the cost of disposition, if any) and (ii) the initial amount of such
Investment) not to exceed ten percent (10%) of Consolidated Tangible Assets; provided that,
the Borrower or a Restricted Subsidiary has entered, or concurrently with any such Investment

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enters, into a long-term lease or management contract with respect to assets of such Person
that are used or useful in a Permitted Business.

     “Permitted Liens” means the Liens permitted pursuant to Section 10.2.

     “Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, governmental authority or other entity.

     “PMI Notes” means those certain 4.0% convertible subordinated notes due February 28,
2005 issued pursuant to that certain Note Purchase Agreement, dated as of December 31, 1998, as
amended on June 30, 2000, March 5, 2001 and April 28, 2003, between the Borrower and PMI Mezzanine
Fund, L.P.

     “Prime Rate” means, at any time, the rate of interest per annum publicly announced
from time to time by Bank of America as its prime rate. Each change in the Prime Rate shall be
effective as of the opening of business on the day such change in such prime rate occurs. The
parties hereto acknowledge that the rate announced publicly by Bank of America as its prime rate is
an index or base rate and shall not necessarily be its lowest or best rate charged to its customers
or other banks.

     “Prison Facility” means any prison, correctional, detention or juvenile facilities
owned or operated by the Borrower or any of its Restricted Subsidiaries.

     “Public Lender” has the meaning assigned thereto in Section 7.7.

     “Purchase Notes” means notes or other obligations received by any Credit Party in
connection with an Asset Disposition of an Unoccupied Prison Facility that is otherwise permitted
pursuant to Section 10.4.

     “Qualified Trust” means a trust or other special purpose vehicle formed for the sole
purpose of, and which is limited by its charter or other organizational documents to conduct no
business other than, issuing Qualified Trust Preferred Stock and lending the proceeds from such
issuance to the Borrower.

     “Qualified Trust Indebtedness” means Indebtedness of the Borrower or its Restricted
Subsidiaries to a Qualified Trust (a) in an aggregate principal amount not exceeding the amount of
funds raised by such trust from the issuance of Qualified Trust Preferred Stock and (b) that by its
terms (or by the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the Qualified Trust or the holder of any Qualified
Trust Preferred Stock), or upon the happening of any event, does not mature and is not mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the
Qualified Trust or any holder of the Qualified Trust Preferred Stock, in whole or in part, on or
prior to the date that is 91 days after the Revolving Credit Maturity Date; provided that
such Qualified Trust Indebtedness may be redeemed pursuant to its terms upon a change of control of
the Borrower if the terms of such Qualified Trust Indebtedness (a) define a “change of control” in
a manner that is not more expansive or inclusive than the change of control definition contained in
this Agreement and (b) explicitly provide that no payment shall be made with

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respect to such Indebtedness upon a “change of control” unless such payment is permitted by
the provisions of this Agreement.

     “Qualified Trust Preferred Stock” means a preferred stock or preferred interest in a
Qualified Trust the net proceeds from the issuance of which are used to finance Qualified Trust
Indebtedness and that, by its terms (or by the terms of any security into which it is convertible,
or for which it is exchangeable, in each case at the option of the holder of the Qualified Trust
Preferred Stock), or upon the happening of any event, does not mature and is not mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the
holder of the Qualified Trust Preferred Stock, in whole or in part, on or prior to the date that is
91 days after the Revolving Credit Maturity Date.

     “Refinancing Indebtedness” has the meaning assigned thereto in Section
10.1(k).

     “Register” has the meaning assigned thereto in Section 13.10(c).

     “Reimbursement Obligation” means the obligation of the Borrower to reimburse the
applicable Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of
Credit.

     “Related Parties” means, with respect to any Person, such Person’s Affiliates and the
directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

     “Required Lenders” means, at any date, any combination of Lenders whose Revolving
Credit Commitments aggregate more than fifty percent (50%) of the Revolving Credit Commitment or,
if the Revolving Credit Commitments have been terminated pursuant to Section 11.2, any
combination of Lenders holding more than fifty percent (50%) of the aggregate Extensions of Credit;
provided that the Revolving Credit Commitment of, and the portion of the Extensions of
Credit, as applicable, held or deemed held by, any Defaulting Lender shall be excluded for purposes
of making a determination of Required Lenders.

     “Responsible Officer” means the chief executive officer, president, chief financial
officer, controller, assistant controller, treasurer or assistant treasurer of a Credit Party, or
any other officer of a Credit Party reasonably acceptable to the Administrative Agent. Any
document delivered hereunder that is signed by a Responsible Officer of a Credit Party shall be
conclusively presumed to have been authorized by all necessary corporate, partnership and/or other
action on the part of such Credit Party and such Responsible Officer shall be conclusively presumed
to have acted on behalf of such Credit Party.

     “Restricted Investment” means an Investment other than a Permitted Investment.

     “Restricted Payments” has the meaning assigned thereto in Section 10.5.

     “Restricted Subsidiary” means any Subsidiary of the Borrower that is not an
Unrestricted Subsidiary.

     “Revolving Credit Commitment” means (a) as to any Revolving Credit Lender, the
obligation of such Revolving Credit Lender to make Revolving Credit Loans to the account of

24

 

the Borrower hereunder in an aggregate principal amount at any time outstanding not to exceed
the amount set forth opposite such Revolving Credit Lender’s name on the Register, as such amount
may be reduced or modified at any time or from time to time pursuant to the terms hereof and (b) as
to all Revolving Credit Lenders, the aggregate commitment of all Revolving Credit Lenders to make
Revolving Credit Loans, as such amount may be reduced at any time or from time to time pursuant to
the terms hereof. The Revolving Credit Commitment of all Revolving Credit Lenders on the Closing
Date shall be Four Hundred Fifty Million Dollars ($450,000,000).

     “Revolving Credit Commitment Percentage” means, as to any Revolving Lender at any
time, the ratio of (a) the amount of the Revolving Credit Commitment of such Revolving Credit
Lender to (b) the Revolving Credit Commitments of all Revolving Credit Lenders.

     “Revolving Credit Facility” means the revolving credit facility established pursuant
to Article II.

     “Revolving Credit Lenders” means Lenders with a Revolving Credit Commitment.

     “Revolving Credit Loans” means any revolving loan made to the Borrower pursuant to
Section 2.1, and all such revolving loans collectively as the context requires.

     “Revolving Credit Maturity Date” means the earliest to occur of (a) December 21, 2012,
(b) the date of termination of the entire Revolving Credit Commitment by the Borrower pursuant to
Section 2.5(a)(i), or (c) the date of termination of the Revolving Credit Commitment by the
Administrative Agent on behalf of the Lenders pursuant to Section 11.2(a).

     “Revolving Credit Note” means a promissory note made by the Borrower in favor of a
Revolving Credit Lender evidencing the Revolving Credit Loans made by such Lender, substantially in
the form of Exhibit A-1, and any amendments, supplements and modifications thereto, any substitutes
therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part.

     “S&P” means Standard & Poor’s Ratings Group.

     “Sanctioned Entity” shall mean (i) an agency of the government of, (ii) an
organization directly or indirectly controlled by, or (iii) a person resident in a country that is
subject to a sanctions program identified on the list maintained by OFAC and available at
http://www.treas.gov/offices/enforcement/ofac/sanctions/index.html, or as otherwise
published from time to time as such program may be applicable to such agency, organization or
person.

     “Sanctioned Person” shall mean a person named on the list of Specially Designated
Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/
enforcement/ofac/sdniindex.html, or as otherwise published from time to time.

     “SEC” means the Securities and Exchange Commission.

     “Security Documents” means the collective reference to the Collateral Agreement and
each other agreement or writing pursuant to which any Credit Party purports to pledge or grant a

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security interest in any property or assets securing the Obligations or any such Person
purports to guaranty the payment and/or performance of the Obligations, in each case, as amended,
restated, supplemented or otherwise modified from time to time.

     “Senior Unsecured $150MM Notes” means the Indebtedness of the Borrower evidenced by
its 6.75% Senior Notes due 2014, in the original aggregate principal amount of $150,000,000, issued
pursuant to that certain Base Indenture dated as of January 23, 2006, among the Borrower, certain
of its Subsidiaries and U.S. Bank National Association, as trustee, as amended by First
Supplemental Indenture dated January 23, 2006, in each case, as amended, restated, supplemented or
otherwise modified from time to time as permitted by the terms and conditions of this Agreement.

     “Senior Unsecured $200MM Notes” means the Indebtedness of the Borrower evidenced by
its 7.50% Senior Notes due 2011, in the original aggregate principal amount of $200,000,000, issued
pursuant to that certain Indenture dated as of May 7, 2003 among the Borrower, certain of its
Subsidiaries and U.S. Bank National Association, as trustee, as amended by the Supplemental
Indenture dated May 7, 2003, the First Supplement dated August 8, 2003 and the Second Supplement
dated August 8, 2003, in each case, as amended, restated, supplemented or otherwise modified from
time to time as permitted by the terms and conditions of this Agreement.

     “Senior Unsecured $250MM Notes” means the Indebtedness of the Borrower evidenced by
its 7.50% Senior Notes due 2011, in the original aggregate principal amount of $250,000,000, issued
pursuant to that certain Indenture dated as of May 7, 2003 among the Borrower, certain of its
Subsidiaries and U.S. Bank National Association, as trustee, as amended by the Supplemental
Indenture dated May 7, 2003, in each case, as amended, restated, supplemented or otherwise modified
from time to time as permitted by the terms and conditions of this Agreement.

     “Senior Unsecured $375MM Notes” means the Indebtedness of the Borrower evidenced by
its 6.25% Senior Notes due 2013, in the original principal amount of $375,000,000, issued pursuant
to that certain Indenture dated as of March 23, 2005 among the Borrower, certain of its
Subsidiaries and U.S. Bank National Association, as trustee, as amended, restated, supplemented or
otherwise modified from time to time as permitted by the terms and conditions of this Agreement.

     “Senior Unsecured Notes” means the collective reference to the (i) Senior Unsecured
$200MM Notes, (ii) the Senior Unsecured $250MM Notes, (iii) the Senior Unsecured $375MM Notes, (iv)
the Senior Unsecured $150MM Notes and (v) and any other instruments and agreements entered into by
the Borrower or its Subsidiaries in connection therewith, in each case, as amended, restated,
supplemented or otherwise modified from time to time as permitted by the terms and conditions of
this Agreement.

     “Series A Preferred Stock” means the 8% Series A Cumulative Preferred Stock of the
Borrower described in the Borrower’s Amended and Restated Charter.

     “Series B Preferred Stock” means the Series B Cumulative Convertible Preferred Stock
of the Borrower described in the Borrower’s Amended and Restated Charter.

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     “Solvent” means, as to the Borrower and its Restricted Subsidiaries on a particular
date, that any such Person (a) has capital sufficient to carry on its business and transactions and
all business and transactions in which it is about to engage and is able to pay its debts as they
mature, (b) has assets having a value, both at fair valuation and at present fair saleable value,
greater than the amount required to pay its probable liabilities (including contingencies), and (c)
does not believe that it will incur debts or liabilities beyond its ability to pay such debts or
liabilities as they mature.

     “Stated Maturity” means, with respect to any installment of interest or principal on
any Indebtedness, the date on which such payment of interest or principal was scheduled to be paid
in the original documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.

     “Subordinated Indebtedness” means the collective reference to any Indebtedness of the
Borrower or any Restricted Subsidiary subordinated in right and time of payment to the Obligations
and containing such other terms and conditions, in each case as are satisfactory to the Required
Lenders.

     “Subsidiary” means as to any Person, any corporation, partnership, limited liability
company or other entity of which more than fifty percent (50%) of the outstanding Capital Stock
having ordinary voting power to elect a majority of the board of directors or other managers of
such corporation, partnership, limited liability company or other entity is at the time owned by,
or the management of which is otherwise controlled by, such Person (irrespective of whether, at the
time, Capital Stock of any other class or classes of such corporation, partnership, limited
liability company or other entity shall have or might have voting power by reason of the happening
of any contingency). Unless otherwise qualified references to “Subsidiary” or “Subsidiaries”
herein shall refer to those of the Borrower.

     “Subsidiary Guarantors” means each direct or indirect Domestic Subsidiary that is a
Restricted Subsidiary in existence on the Closing Date or that becomes a party to the Subsidiary
Guaranty Agreement pursuant to Section 8.11.

     “Subsidiary Guaranty Agreement” means the unconditional guaranty agreement of even
date herewith executed by the Subsidiary Guarantors in favor of the Administrative Agent for the
ratable benefit of itself and the Lenders, substantially in the form of Exhibit H, as amended,
restated, supplemented or otherwise modified from time to time.

     “Swingline Commitment” means the lesser of (a) Twenty Million Dollars ($20,000,000)
and (b) the Revolving Credit Commitment.

     “Swingline Facility” means the swingline facility established pursuant to Section
2.2.

     “Swingline Lender” means Bank of America in its capacity as swingline lender
hereunder.

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     “Swingline Loan” means any swingline loan made by the Swingline Lender to the Borrower
pursuant to Section 2.2, and all such swingline loans collectively as the context requires.

     “Swingline Note” means a promissory note made by the Borrower in favor of the
Swingline Lender evidencing the Swingline Loans made by the Swingline Lender, substantially in the
form of Exhibit A-2, and any amendments, supplements and modifications thereto, any substitutes
therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part.

     “Swingline Termination Date” means the first to occur of (a) the resignation of Bank
of America as Administrative Agent in accordance with Section 12.6 and (b) the Revolving
Credit Termination Date.

     “Synthetic Lease” means any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product where such transaction is
considered borrowed money indebtedness for tax purposes but is classified as an Operating Lease in
accordance with GAAP.

     “Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental Authority with respect
to this Agreement, any of the other Loan Documents or the transactions that are the subject
thereof, including any interest, additions to tax or penalties applicable thereto.

     “Termination Event” except for any such event or condition that could not reasonably
be expected to have a Material Adverse Effect: (a) a “Reportable Event” described in Section 4043
of ERISA for which the notice requirement has not been waived by the PBGC, or (b) the withdrawal of
the Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a
“substantial employer” as defined in Section 4001(a)(2) of ERISA, or (c) the termination of a
Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a
Pension Plan amendment as a termination, under Section 4041 of ERISA, if the plan assets are not
sufficient to pay all plan liabilities, or (d) the institution of proceedings to terminate, or the
appointment of a trustee with respect to, any Pension Plan by the PBGC, or (e) any other event or
condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan, or (f) the imposition of a Lien
pursuant to Section 412 of the Code or Section 302 of ERISA, or (g) the partial or complete
withdrawal of the Borrower of any ERISA Affiliate from a Multiemployer Plan if withdrawal liability
is asserted by such plan, or (h) any event or condition which results in the reorganization or
insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA, or (i) any event or
condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or
the institution by PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of
ERISA.

     “Termination Value” means, in respect of any one or more Hedging Agreements, after
taking into account the effect of any legally enforceable netting agreement relating to such
Hedging Agreements, (a) for any date on or after the date such Hedging Agreements have been closed
out and termination value(s) determined in accordance therewith, such termination

28

 

value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s)
determined as the mark-to-market value(s) for such Hedging Agreements, as determined based upon one
or more mid-market or other readily available quotations provided by any recognized dealer in such
Hedging Agreements (which may include a Lender or any Affiliate of a Lender).

     “UCC” means the Uniform Commercial Code as in effect in the State of New York, as
amended or modified from time to time.

     “United States” means the United States of America.

     “Unoccupied Prison Facility” means any Prison Facility owned by the Borrower or its
Restricted Subsidiaries that, for the twelve-month period ending on the date of measurement, has
had an average occupancy level of less than fifteen percent (15%).

     “Unrestricted Subsidiary” means any Subsidiary of the Borrower that is designated by
the board of directors of the Borrower as an Unrestricted Subsidiary pursuant to Section
8.12, but only to the extent that such Subsidiary:

     (a) has no Indebtedness that is recourse (directly or indirectly) to the Borrower or any of
its Restricted Subsidiaries;

     (b) is not party to any agreement, contract, arrangement or understanding with the Borrower or
any of its Restricted Subsidiaries unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Borrower or such Restricted Subsidiary than those that
might be obtained at the time from Persons who are not Affiliates of the Borrower;

     (c) is a Person with respect to which neither the Borrower nor any of its Restricted
Subsidiaries has any direct or indirect obligation (i) to subscribe for additional Capital Stock or
(ii) to maintain or preserve such Person’s financial condition or to cause such Person to achieve
any specified levels of operating results; and

     (d) has not guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Borrower or any of its Restricted Subsidiaries.

     “WCM” means Wachovia Capital Markets, LLC, and its successors.

     SECTION 1.2 Other Definitions and Provisions. With reference to this Agreement and
each other Loan Document, unless otherwise specified herein or in such other Loan Document: (a)
the definitions of terms herein shall apply equally to the singular and plural forms of the terms
defined, (b) whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms, (c) the words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”, (d) the word “will” shall be construed to
have the same meaning and effect as the word “shall”, (e) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications set forth herein),
(f) any reference herein to any Person shall be

29

 

construed to include such Person’s successors and assigns, (g) the words “herein”, “hereof”
and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (h) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement, (i) the words “asset” and “property” shall be construed
to have the same meaning and effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights, (j) the term “documents”
includes any and all instruments, documents, agreements, certificates, notices, reports, financial
statements and other writings, however evidenced, whether in physical or electronic form, (k) in
the computation of periods of time from a specified date to a later specified date, the word “from”
means “from and including” the words “to” and “until” each mean “to but excluding” and the word
“through” means “to and including”, and (l) Section headings herein and in the other Loan Documents
are included for convenience of reference only and shall not affect the interpretation of this
Agreement or any other Loan Document.

     SECTION 1.3 Accounting Terms. All accounting terms not specifically or completely
defined herein shall be construed in conformity with, and all financial data (including financial
ratios and other financial calculations) required to be submitted pursuant to this Agreement shall
be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time,
applied in a manner consistent with that used in preparing the audited financial statements
required by Section 7.1(b), except as otherwise specifically prescribed herein.

     SECTION 1.4 UCC Terms. Terms defined in the UCC in effect on the Closing Date and not
otherwise defined herein shall, unless the context otherwise indicates, have the meanings provided
by those definitions. Subject to the foregoing, the term “UCC” refers, as of any date of
determination, to the UCC then in effect.

     SECTION 1.5 Rounding. Any financial ratios required to be maintained by the Borrower
pursuant to this Agreement shall be calculated by dividing the appropriate component by the other
component, carrying the result to one place more than the number of places by which such ratio is
expressed herein and rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).

     SECTION 1.6 References to Agreement and Laws. Unless otherwise expressly provided
herein, (a) references to formation documents, governing documents, agreements (including the Loan
Documents) and other contractual instruments shall be deemed to include all subsequent amendments,
restatements, extensions, supplements and other modifications thereto, but only to the extent that
such amendments, restatements, extensions, supplements and other modifications are not prohibited
by any Loan Document; and (b) references to any Applicable Law shall include all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or interpreting such
Applicable Law.

     SECTION 1.7 Times of Day. Unless otherwise specified, all references herein to times
of day shall be references to Eastern time (daylight or standard, as applicable).

     SECTION 1.8 Letter of Credit Amounts. Unless otherwise specified, all references
herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum

30

 

face amount of such Letter of Credit after giving effect to all increases thereof contemplated
by such Letter of Credit or the Letter of Credit Application therefor, whether or not such maximum
face amount is in effect at such time.

     SECTION 1.9 Consolidation of Variable Interest Entities. All references herein to
Consolidated financial statements of the Borrower and its Subsidiaries or to the determination of
any amount for the Borrower and its Subsidiaries on a consolidated basis or any similar reference
shall, in each case, be deemed to include each variable interest entity that the Borrower is
required to consolidate pursuant to FASB Interpretation No. 46 — Consolidation of Variable
Interest Entities: an interpretation of ARB No. 51 (January 2003) as if such variable interest
entity were a Subsidiary as defined herein.

ARTICLE II

REVOLVING CREDIT FACILITY

     SECTION 2.1 Revolving Credit Loans. Subject to the terms and conditions of this
Agreement, and in reliance upon the representations and warranties set forth herein, each Revolving
Credit Lender severally agrees to make Revolving Credit Loans to the Borrower from time to time
from the Closing Date through, but not including, the Revolving Credit Maturity Date as requested
by the Borrower in accordance with the terms of Section 2.3; provided, that (a) the
aggregate principal amount of all outstanding Revolving Credit Loans (after giving effect to any
amount requested) shall not exceed the Revolving Credit Commitment less the sum of all
outstanding Swingline Loans and L/C Obligations and (b) the principal amount of outstanding
Revolving Credit Loans from any Revolving Credit Lender to the Borrower shall not at any time
exceed such Revolving Credit Lender’s Revolving Credit Commitment less such Revolving
Credit Lender’s Revolving Credit Commitment Percentage of outstanding L/C Obligations and
outstanding Swingline Loans. Each Revolving Credit Loan by a Revolving Credit Lender shall be in a
principal amount equal to such Revolving Credit Lender’s Revolving Credit Commitment Percentage of
the aggregate principal amount of Revolving Credit Loans requested on such occasion. Subject to
the terms and conditions hereof, the Borrower may borrow, repay and reborrow Revolving Credit Loans
hereunder until the Revolving Credit Maturity Date.

     SECTION 2.2 Swingline Loans.

     (a) Availability. Subject to the terms and conditions of this Agreement, the
Swingline Lender agrees to make Swingline Loans to the Borrower from time to time from the Closing
Date through, but not including, the Swingline Termination Date; provided, that the
aggregate principal amount of all outstanding Swingline Loans (after giving effect to any amount
requested), shall not exceed the lesser of (i) the Revolving Credit Commitment less the sum of all
outstanding Revolving Credit Loans and the L/C Obligations and (ii) the Swingline Commitment.

     (b) Refunding.

          (i) Swingline Loans shall be refunded by the Revolving Credit Lenders on demand by the
Swingline Lender. Such refundings shall be made by the Revolving Credit

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Lenders in accordance with their respective Revolving Credit Commitment Percentages and shall
thereafter be reflected as Revolving Credit Loans of the Revolving Credit Lenders on the books and
records of the Administrative Agent. Each Revolving Credit Lender shall fund its respective
Revolving Credit Commitment Percentage of Revolving Credit Loans as required to repay Swingline
Loans outstanding to the Swingline Lender upon demand by the Swingline Lender but in no event later
than 2:00 p.m. on the next succeeding Business Day after such demand is made. No Revolving Credit
Lender’s obligation to fund its respective Revolving Credit Commitment Percentage of a Swingline
Loan shall be affected by any other Revolving Credit Lender’s failure to fund its Revolving Credit
Commitment Percentage of a Swingline Loan, nor shall any Revolving Credit Lender’s Revolving Credit
Commitment Percentage be increased as a result of any such failure of any other Revolving Credit
Lender to fund its Revolving Credit Commitment Percentage of a Swingline Loan.

          (ii) The Borrower shall pay to the Swingline Lender on demand the amount of such Swingline
Loans to the extent amounts received from the Revolving Credit Lenders are not sufficient to repay
in full the outstanding Swingline Loans requested or required to be refunded. In addition, the
Borrower hereby authorizes the Administrative Agent to charge any account maintained by the
Borrower with the Swingline Lender (up to the amount available therein) in order to immediately pay
the Swingline Lender the amount of such Swingline Loans to the extent amounts received from the
Revolving Credit Lenders are not sufficient to repay in full the outstanding Swingline Loans
requested or required to be refunded. If any portion of any such amount paid to the Swingline
Lender shall be recovered by or on behalf of the Borrower from the Swingline Lender in bankruptcy
or otherwise, the loss of the amount so recovered shall be ratably shared among all the Revolving
Credit Lenders in accordance with their respective Revolving Credit Commitment Percentages (unless
the amounts so recovered by or on behalf of the Borrower pertain to a Swingline Loan extended after
the occurrence and during the continuance of an Event of Default of which the Administrative Agent
has received notice in the manner required pursuant to Section 12.3 and which Event of
Default has not been waived by the Required Lenders or the Lenders, as applicable).

          (iii) Each Revolving Credit Lender acknowledges and agrees that its obligation to refund
Swingline Loans in accordance with the terms of this Section is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including, without limitation,
non-satisfaction of the conditions set forth in Article V. Further, each Revolving Credit
Lender agrees and acknowledges that if prior to the refunding of any outstanding Swingline Loans
pursuant to this Section, one of the events described in Section 11.1(i) or (j)
shall have occurred, each Revolving Credit Lender will, on the date the applicable Revolving Credit
Loan would have been made, purchase an undivided participating interest in the Swingline Loan to be
refunded in an amount equal to its Revolving Credit Commitment Percentage of the aggregate amount
of such Swingline Loan. Each Revolving Credit Lender will immediately transfer to the Swingline
Lender, in immediately available funds, the amount of its participation and upon receipt thereof
the Swingline Lender will deliver to such Revolving Credit Lender a certificate evidencing such
participation dated the date of receipt of such funds and for such amount. Whenever, at any time
after the Swingline Lender has received from any Revolving Credit Lender such Revolving Credit
Lender’s participating interest in a Swingline Loan, the Swingline Lender receives any payment on
account thereof, the Swingline Lender will distribute to such Revolving Credit Lender its
participating interest in such amount

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(appropriately adjusted, in the case of interest payments, to reflect the period of time
during which such Revolving Credit Lender’s participating interest was outstanding and funded).

     SECTION 2.3 Procedure for Advances of Revolving Credit Loans and Swingline Loans.

     (a) Requests for Borrowing. The Borrower shall give the Administrative Agent
irrevocable prior written notice substantially in the form of Exhibit B (a “Notice of
Borrowing”) not later than 12:00 noon (i) on the same Business Day as each Base Rate Loan and
each Swingline Loan and (ii) at least three (3) Business Days before each LIBOR Rate Loan, of its
intention to borrow, specifying (A) the date of such borrowing, which shall be a Business Day, (B)
the amount of such borrowing, which shall be, (x) with respect to Base Rate Loans (other than
Swingline Loans) in an aggregate principal amount of $2,000,000 or a whole multiple of $1,000,000
in excess thereof, (y) with respect to LIBOR Rate Loans in an aggregate principal amount of
$3,000,000 or a whole multiple of $1,000,000 in excess thereof and (z) with respect to Swingline
Loans in whole multiples of $100,000, (C) whether such Loans are to be Revolving Credit Loans or
Swingline Loans, (D) in the case of Revolving Credit Loans whether the Loans are to be LIBOR Rate
Loans or Base Rate Loans, and (E) in the case of LIBOR Rate Loans, the duration of the Interest
Period applicable thereto. A Notice of Borrowing received after 12:00 noon shall be deemed
received on the next Business Day. The Administrative Agent shall promptly notify the Lenders of
each Notice of Borrowing.

     (b) Disbursement of Revolving Credit and Swingline Loans. Not later than 2:00 p.m. on
the proposed borrowing date, (i) each Lender will make available to the Administrative Agent, for
the account of the Borrower, at the office of the Administrative Agent, in funds immediately
available to the Administrative Agent, such Lender’s Revolving Credit Commitment Percentage of the
Revolving Credit Loans to be made on such borrowing date and (ii) the Swingline Lender will make
available to the Administrative Agent, for the account of the Borrower, at the office of the
Administrative Agent, in funds immediately available to the Administrative Agent, the Swingline
Loans to be made on such borrowing date. The Borrower hereby irrevocably authorizes the
Administrative Agent to disburse the proceeds of each borrowing requested pursuant to this Section
in immediately available funds by crediting or wiring such proceeds to the deposit account of the
Borrower identified in the most recent notice substantially in the form of Exhibit C (a “Notice
of Account Designation”) delivered by the Borrower to the Administrative Agent, or as may be
otherwise agreed upon by the Borrower and the Administrative Agent from time to time. Subject to
Section 4.7 hereof, the Administrative Agent shall not be obligated to disburse the portion
of the proceeds of any Revolving Credit Loan requested pursuant to this Section to the extent that
any Lender has not made available to the Administrative Agent its Revolving Credit Commitment
Percentage of such Loan. Revolving Credit Loans to be made for the purpose of refunding Swingline
Loans shall be made by the Revolving Credit Lenders as provided in Section 2.2(b).

     SECTION 2.4 Repayment and Prepayment of Revolving Credit and Swingline Loans.

     (a) Repayment on Termination Date. The Borrower hereby agrees to repay the
outstanding principal amount of (i) all Revolving Credit Loans in full on the Revolving Credit
Maturity Date, and (ii) all Swingline Loans in accordance with Section 2.2(b), together, in
each case, with all accrued but unpaid interest thereon.

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     (b) Mandatory Prepayments. If at any time the outstanding principal amount of all
Revolving Credit Loans plus the sum of all outstanding Swingline Loans and L/C Obligations exceeds
the Revolving Credit Commitment, the Borrower agrees to repay immediately upon notice from the
Administrative Agent, by payment to the Administrative Agent for the account of the Lenders,
Extensions of Credit in an amount equal to such excess with each such repayment applied
first to the principal amount of outstanding Swingline Loans, second to the
principal amount of outstanding Revolving Credit Loans and third, with respect to any
Letters of Credit then outstanding, a payment of cash collateral into a cash collateral account
opened by the Administrative Agent, for the benefit of the Lenders, in an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit (such cash collateral to be
applied in accordance with Section 11.4). The application of any prepayment of Revolving
Credit Loans pursuant to this Section 2.4(b) shall be made, first, to Base Rate Loans and,
second, to LIBOR Rate Loans.

     (c) Optional Prepayments. The Borrower may at any time and from time to time prepay
Revolving Credit Loans and Swingline Loans, in whole or in part, with irrevocable prior written
notice to the Administrative Agent substantially in the form of Exhibit D (a “Notice of
Prepayment”) given not later than 12:00 noon (i) on the same Business Day as each Base Rate
Loan and each Swingline Loan and (ii) at least three (3) Business Days before each LIBOR Rate Loan,
specifying the date and amount of prepayment and whether the prepayment is of LIBOR Rate Loans,
Base Rate Loans, Swingline Loans or a combination thereof, and, if of a combination thereof, the
amount allocable to each. Upon receipt of such notice, the Administrative Agent shall promptly
notify each Lender. If any such notice is given, the amount specified in such notice shall be due
and payable on the date set forth in such notice. Partial prepayments shall be in an aggregate
amount of $2,000,000 or a whole multiple of $1,000,000 in excess thereof with respect to Base Rate
Loans (other than Swingline Loans), $3,000,000 or a whole multiple of $1,000,000 in excess thereof
with respect to LIBOR Rate Loans and $100,000 or a whole multiple of $100,000 in excess thereof
with respect to Swingline Loans. A Notice of Prepayment received after 12:00 noon shall be deemed
received on the next Business Day. Each such repayment shall be accompanied by any amount required
to be paid pursuant to Section 4.9 hereof.

     (d) Limitation on Prepayment of LIBOR Rate Loans. The Borrower may not prepay any
LIBOR Rate Loan on any day other than on the last day of the Interest Period applicable thereto
unless such prepayment is accompanied by any amount required to be paid pursuant to Section
4.9 hereof.

     (e) Hedging Agreements. No repayment or prepayment pursuant to this Section shall
affect any of the Borrower’s obligations under any Hedging Agreement.

     SECTION 2.5 Permanent Reduction of the Revolving Credit Commitment.

     (a) Voluntary Reduction. The Borrower shall have the right at any time and from time
to time, upon at least five (5) Business Days’ prior written notice to the Administrative Agent, to
permanently reduce, without premium or penalty, (i) the entire Revolving Credit Commitment at any
time or (ii) portions of the Revolving Credit Commitment, from time to time, in an aggregate
principal amount not less than $5,000,000 or any whole multiple of

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$1,000,000 in excess thereof. Any reduction of the Revolving Credit Commitment shall be
applied to the Revolving Credit Commitment of each Revolving Credit Lender according to its
Revolving Credit Commitment Percentage. All commitment fees accrued until the effective date of
any termination of the Revolving Credit Commitment shall be paid on the effective date of such
termination.

     (b) Corresponding Payment. Each permanent reduction permitted or required pursuant to
this Section shall be accompanied by a payment of principal sufficient to reduce the aggregate
Revolving Credit Loans, Swingline Loans and L/C Obligations, as applicable, outstanding after such
reduction to the Revolving Credit Commitment as so reduced, and if the Revolving Credit Commitment
as so reduced is less than the aggregate amount of all outstanding Letters of Credit, the Borrower
shall be required to deposit cash collateral in a cash collateral account opened by the
Administrative Agent in an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Such cash collateral shall be applied in accordance with Section 11.4.
Any reduction of the Revolving Credit Commitment to zero shall be accompanied by payment of all
outstanding Revolving Credit Loans and Swingline Loans (and furnishing of cash collateral
satisfactory to the Administrative Agent for all L/C Obligations) and shall result in the
termination of the Revolving Credit Commitment and the Swingline Commitment and the Revolving
Credit Facility. Such cash collateral shall be applied in accordance with Section 11.4.
If the reduction of the Revolving Credit Commitment requires the repayment of any LIBOR Rate Loan,
such repayment shall be accompanied by any amount required to be paid pursuant to Section
4.9 hereof.

     SECTION 2.6 Termination of Revolving Credit Facility. The Revolving Credit Facility
shall terminate on the Revolving Credit Maturity Date.

     SECTION 2.7 Increase in Revolving Credit Facility.

     (a) As an alternative or in addition to Section 2.8 below, subject to the conditions
set forth below, at any time prior to the Revolving Credit Maturity Date, the Borrower shall have
the right to request, upon not less than thirty (30) days’ prior written notice (an
“Incremental Revolving Credit Commitment Notification”) to the Administrative Agent, an
increase in the Revolving Credit Commitment in an aggregate principal amount as may be specified by
the Borrower. Such Incremental Revolving Credit Commitment Notification shall specify the
applicable Incremental Revolving Credit Commitment Effective Date.

     (b) Increases in the Revolving Credit Commitment pursuant to this Section 2.7 shall be
obtained from existing Lenders or from other banks, financial institutions or investment funds that
qualify as Eligible Assignees (each such other bank, financial institution or investment fund, a
“New Revolving Lender” and, collectively with the existing Lenders providing a portion of
the proposed increase in the Revolving Credit Commitment pursuant to this Section 2.7, the
“Incremental Revolving Credit Lenders”); provided that no existing Lender shall
have any obligation to increase its Revolving Credit Commitment pursuant to this Section
2.7 and the failure by any existing Lender to respond to a request for such increase shall be
deemed to be a refusal of such request by such existing Lender.

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     (c) The following terms and conditions shall apply to each increase in the Revolving Credit
Commitment pursuant to this Section 2.7:

          (i) such increase in the Revolving Credit Commitment pursuant to this Section 2.7 (and
any Revolving Credit Loans made thereunder) shall constitute Obligations of the Borrower and shall
be secured and guaranteed with the other Extensions of Credit on a pari passu
basis;

          (ii) the Administrative Agent and the Lenders shall have received from the Borrower an
Officer’s Compliance Certificate, in form and substance reasonably satisfactory to the
Administrative Agent, demonstrating that, as of the applicable Incremental Revolving Credit
Commitment Effective Date and after giving effect thereto and any Extensions of Credit made or to
be made in connection therewith, the Borrower and its Restricted Subsidiaries are in pro
forma compliance with the financial covenants set forth in Article IX;

          (iii) no Default or Event of Default shall have occurred and be continuing as of the
applicable Incremental Revolving Credit Commitment Effective Date or after giving effect to such
increase in the Revolving Credit Commitment pursuant to this Section 2.7;

          (iv) the representations and warranties made by each Credit Party in this Agreement and the
other Loan Documents shall be true and correct on and as of the applicable Incremental Revolving
Credit Commitment Effective Date with the same effect as if made on and as of such date (other than
those representations and warranties that by their terms speak as of a particular date, which
representations and warranties shall be true and correct as of such particular date);

          (v) the Administrative Agent shall have received a resolution duly adopted by the board of
directors of each Credit Party authorizing such increase in the Revolving Credit Commitment
pursuant to this Section 2.7;

          (vi) in no event shall the aggregate amount of all increases in the Revolving Credit
Commitment pursuant to this Section 2.7 (including the requested increase) plus the
aggregate amount of all Incremental Term Loans made pursuant to Section 2.8, exceed
$300,000,000;

          (vii) the amount of such increase in the Revolving Credit Commitment pursuant to this
Section 2.7 shall not be less than a minimum principal amount of $15,000,000, or, if less,
the remaining amount permitted pursuant to clause (vii) above;

          (viii) the Borrower and each Incremental Revolving Credit Lender shall execute and deliver a
Lender Addition and Acknowledgement Agreement to the Administrative Agent for its acceptance and
recording in the Register, which shall be acknowledged by the Administrative Agent and each
Subsidiary Guarantor and shall be in form and substance reasonably satisfactory to the
Administrative Agent;

          (ix) the Administrative Agent shall have received any documents or information in connection
with such increase in the Revolving Credit Commitment pursuant to this Section 2.7 as it
may request in its reasonable discretion; and

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          (x) the outstanding Revolving Credit Loans and Revolving Credit Commitment Percentages of L/C
Obligations will be reallocated by the Administrative Agent on the applicable Incremental Revolving
Credit Commitment Effective Date among the Lenders in accordance with their revised Revolving
Credit Commitment Percentages (and the Lenders agree to make all payments and adjustments necessary
to effect such reallocation and the Borrower shall pay any and all costs required pursuant to
Section 4.9 in connection with such reallocation as if such reallocation were a repayment).

     (d) Notwithstanding the provisions of Section 13.2 to the contrary, the Administrative
Agent is hereby authorized to execute and deliver amendment documentation evidencing such
amendments (or any other amendments necessary to effectuate the proposed increase in the Revolving
Credit Commitment pursuant to this Section 2.7 on the terms set forth above) on behalf of
the Lenders; provided that such amendment shall not modify this Agreement or any other Loan
Document in any manner materially adverse to any Lender without the consent of such Lenders
adversely affected thereby in accordance with Section 13.2 hereof.

     (e) Upon the execution, delivery, acceptance and recording of the applicable Lender Addition
and Acknowledgment Agreement, from and after the applicable Incremental Revolving Credit Commitment
Effective Date, (i) each Incremental Revolving Credit Lender shall have a Revolving Credit
Commitment as set forth in the Register and all the rights and obligations of a Lender with a
Revolving Credit Commitment hereunder and (ii) all Revolving Credit Loans made on account of any
increase in the Revolving Credit Commitment pursuant to this Section 2.7 shall bear
interest at the rate applicable to the Revolving Credit Loans immediately prior to giving effect to
such increase in the Revolving Credit Commitment pursuant to this Section 2.7.

     (f) The Administrative Agent shall maintain a copy of each Lender Addition and Acknowledgment
Agreement delivered to it in accordance with Section 13.10(c).

     SECTION 2.8 Incremental Term Loans.

     (a) As an alternative or in addition to Section 2.7 above, subject to the conditions
set forth in paragraphs (a) through (f) hereof, at any time prior to the Revolving Credit Maturity
Date, the Borrower, shall have the right to request, upon not less than thirty (30) days’ prior
written notice (an “Incremental Term Loan Notification”) to the Administrative Agent,
Incremental Term Loans in an aggregate principal amount as may be specified by the Borrower. Such
Incremental Term Loan Notification shall specify the applicable Incremental Term Loan Effective
Date, and on such date, the Borrower shall deliver a Notice of Borrowing with respect to such
Incremental Term Loan. The Borrower shall not deliver more than two (2) Incremental Term Loan
Notifications during the term of this Agreement.

     (b) Each Incremental Term Loan shall be obtained from existing Lenders or from other banks,
financial institutions or investment funds that qualify as Eligible Assignees (each such other
bank, financial institution or investment fund, a “New Incremental Term Loan Lender” and,
collectively with the existing Lenders providing such Incremental Term Loan, the “Incremental
Term Loan Lenders”); provided that no existing Lender shall have any obligation to
provide any portion of such Incremental Term Loan and the failure by any existing Lender to

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respond to a request for an Incremental Term Loan shall be deemed to be a refusal of such
request by such existing Lender.

     (c) The following terms and conditions shall apply to each Incremental Term Loan:

          (i) such Incremental Term Loan shall constitute Obligations of the Borrower and shall be
secured and guaranteed with the other Extensions of Credit on a pari passu basis;

          (ii) the Administrative Agent and the Lenders shall have received from the Borrower an
Officer’s Compliance Certificate, in form and substance reasonably satisfactory to the
Administrative Agent, demonstrating that, as of the applicable Incremental Term Loan Effective Date
and after giving effect thereto and any Extensions of Credit made or to be made in connection
therewith, the Borrower and its Restricted Subsidiaries are in pro forma compliance
with the financial covenants set forth in Article IX;

          (iii) no Default or Event of Default shall have occurred and be continuing as of the
applicable Incremental Term Loan Effective Date or after giving effect to the making of any such
Incremental Term Loan;

          (iv) the representations and warranties made by each Credit Party in this Agreement and the
other Loan Documents shall be true and correct on and as of the applicable Incremental Term Loan
Effective Date with the same effect as if made on and as of such date (other than those
representations and warranties that by their terms speak as of a particular date, which
representations and warranties shall be true and correct as of such particular date);

          (v) the Administrative Agent shall have received a resolution duly adopted by the board of
directors of each Credit Party authorizing such Incremental Term Loan;

          (vi) each Incremental Term Loan will mature and amortize in a manner reasonably acceptable to
the Administrative Agent and the Incremental Term Loan Lenders making such Incremental Term Loan,
but will not in any event have a maturity date earlier than the Revolving Credit Maturity Date;

          (vii) in no event shall the aggregate principal amount of all Incremental Term Loans made
pursuant to this Section 2.8 (including the requested Incremental Term Loan) plus
the aggregate amount of all increases in the Revolving Credit Commitment pursuant to Section
2.7, exceed $300,000,000;

          (viii) the amount of such Incremental Term Loan obtained hereunder shall not be less than a
minimum principal amount of $15,000,000, or, if less, the remaining amount permitted pursuant to
clause (vi) above;

          (ix) the Borrower and each Incremental Term Loan Lender shall execute and deliver an
Incremental Term Loan Agreement to the Administrative Agent, for its acceptance and recording in
the Register, which shall be acknowledged by the Administrative Agent and each Subsidiary Guarantor
and shall be in form and substance reasonably satisfactory to the Administrative Agent; and

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          (x) the Administrative Agent shall have received any documents or information in connection
with such Incremental Term Loan as it may request in its reasonable discretion.

     (d) Notwithstanding the provisions of Section 13.2 to the contrary, the Administrative
Agent is hereby authorized to execute and deliver amendment documentation evidencing such
amendments (or any other amendments necessary to effectuate the Incremental Term Loan on the terms
set forth above) on behalf of the Lenders; provided that such amendment shall not modify
this Agreement or any other Loan Document in any manner materially adverse to any Lender without
the consent of such Lenders adversely affected thereby in accordance with Section 13.2
hereof.

     (e) Upon the execution, delivery, acceptance and recording of the applicable Incremental Term
Loan Agreement, from and after the applicable Incremental Term Loan Effective Date, each
Incremental Term Loan Lender shall have an Incremental Term Loan Commitment as set forth in the
Register and all the rights and obligations of a Lender with such an Incremental Term Loan
Commitment hereunder. The applicable Incremental Term Loan Lenders shall make the Incremental Term
Loan to the Borrower on the applicable Incremental Term Loan Effective Date in an amount equal to
the Incremental Term Loan Commitment of each Incremental Term Loan Lender with respect to such
Incremental Term Loan as agreed upon pursuant to subsection (b) above.

     (f) The Administrative Agent shall maintain a copy of each Incremental Term Loan Agreement
delivered to it in accordance with Section 13.10(c).

ARTICLE III

LETTER OF CREDIT FACILITY

     SECTION 3.1 L/C Commitment. Subject to the terms and conditions hereof, each Issuing
Lender, in reliance on the agreements of the other Lenders set forth in Section 3.4(a),
agrees to issue standby letters of credit (“Letters of Credit”) for the account of the
Borrower on any Business Day from the Closing Date through but not including the Revolving Credit
Maturity Date in such form as may be approved from time to time by the applicable Issuing Lender;
provided, that no Issuing Lender shall have any obligation to issue any Letter of Credit
if, after giving effect to such issuance, the Administrative Agent has determined that (a) the L/C
Obligations would exceed the L/C Commitment or (b) the aggregate principal amount of outstanding
Revolving Credit Loans, plus the aggregate principal amount of outstanding Swingline Loans,
plus the aggregate amount of L/C Obligations would exceed the Revolving Credit Commitment.
Each Letter of Credit shall (i) be denominated in Dollars in a minimum amount of $100,000 (other
than Existing Letters of Credit or as otherwise agreed to by the applicable Issuing Lender and the
Administrative Agent), (ii) be a standby letter of credit issued to support obligations of the
Borrower or any of its Restricted Subsidiaries, contingent or otherwise, incurred in the ordinary
course of business, (iii) expire on a date no more than twelve (12) months after the date of
issuance or last renewal of such Letter of Credit, which date shall be no later than the fifth
(5th) Business Day prior to the Revolving Credit Maturity Date and (iv) be subject to the ISP98, as
set forth in the Letter of Credit Application or as determined by the

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applicable Issuing Lender and, to the extent not inconsistent therewith, the laws of the State
of New York. Notwithstanding the foregoing, each Issuing Lender agrees to issue Letters of Credit
with an expiration date later than the fifth (5th) Business Day prior to the Revolving Credit
Maturity Date (but no later than one year from the date of issuance thereof) in reliance upon the
agreement by the Borrower to cash collateralize such Letters of Credit in an amount equal to 105%
of the aggregate amount available to be drawn under such Letters of Credit by the date that is
thirty (30) days prior to the Revolving Credit Maturity Date, and the Borrower agrees so to cash
collateralize such Letters of Credit by such date, it being understood that, except with respect to
drawings made under such Letters of Credit prior to the date of receipt of such cash collateral by
the applicable Issuing Lender, the Administrative Agent and the Lenders (other than the applicable
Issuing Lender) shall, after the date of receipt of such cash collateral by the applicable Issuing
Lender, be released from any and all obligations to purchase participations or make Revolving
Credit Loans in respect of such Letters of Credit. As of the Closing Date, each of the Existing
Letters of Credit shall constitute, for all purposes of this Agreement and the other Loan
Documents, a Letter of Credit issued and outstanding hereunder. No Issuing Lender shall at any
time be obligated to issue any Letter of Credit hereunder if such issuance would violate, or cause
such Issuing Lender or any L/C Participant to exceed any limits imposed by, any Applicable Law.
References herein to “issue” and derivations thereof with respect to Letters of Credit shall also
include extensions or modifications of any outstanding Letters of Credit, unless the context
otherwise requires.

     SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time
to time request that an Issuing Lender issue a Letter of Credit by delivering to such Issuing
Lender and the Administrative Agent a Letter of Credit Application therefor, completed to the
satisfaction of such Issuing Lender, and such other certificates, documents and other papers and
information as such Issuing Lender may request. Upon receipt of any Letter of Credit Application,
the applicable Issuing Lender shall process such Letter of Credit Application and the certificates,
documents and other papers and information delivered to it in connection therewith in accordance
with its customary procedures and shall, subject to Section 3.1 and Article V,
promptly issue the Letter of Credit requested thereby (but in no event shall such Issuing Lender be
required to issue any Letter of Credit earlier than three (3) Business Days after its receipt of
the Letter of Credit Application therefor and all such other certificates, documents and other
papers and information relating thereto) by issuing the original of such Letter of Credit to the
beneficiary thereof or as otherwise may be agreed by such Issuing Lender and the Borrower. The
applicable Issuing Lender shall promptly furnish to the Borrower and the Administrative Agent a
copy of such Letter of Credit. Upon receipt of such Letter of Credit, the Administrative Agent
shall promptly notify each Lender of the issuance and upon request by any Lender, furnish to such
Lender a copy of such Letter of Credit and the amount of such Lender’s participation therein,
provided that the Administrative Agent shall be obligated to deliver the foregoing with
respect to a Letter of Credit issued by an Additional Issuing Lenders only after receipt by the
Administrative Agent of all notices required to be delivered to the Administrative Agent with
respect thereto.

     SECTION 3.3 Commissions and Other Charges.

     (a) Letter of Credit Commissions. The Borrower shall pay to the Administrative Agent,
for the account of the applicable Issuing Lender and the L/C Participants, a letter of credit

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commission with respect to each Letter of Credit in an amount per annum equal to the face
amount of such Letter of Credit multiplied by the Applicable Margin with respect to
Revolving Credit Loans that are LIBOR Rate Loans (determined on a per annum basis). Such
commission shall be payable quarterly in arrears on the last Business Day of each calendar quarter,
on the Revolving Credit Maturity Date and thereafter on demand of the Administrative Agent. The
Administrative Agent shall, promptly following its receipt thereof, distribute to the applicable
Issuing Lender and the L/C Participants all commissions received pursuant to this Section in
accordance with their respective Revolving Credit Commitment Percentages.

     (b) Issuance Fee. In addition to the foregoing commission, for Letters of Credit
issued by Bank of America or Wachovia, the Borrower shall pay to the Administrative Agent, for the
account of the applicable Issuing Lender, an issuance fee with respect to each Letter of Credit in
an amount equal to the face amount of such Letter of Credit multiplied by one eighth of one percent
(0.125%) per annum. Such issuance fee shall be payable quarterly in arrears on the last Business
Day of each calendar quarter commencing with the first such date to occur after the issuance of
such Letter of Credit, on the Revolving Credit Maturity Date and thereafter on demand of the
Administrative Agent. For Letters of Credit issued by Additional Issuing Lenders, the Borrower
shall pay to the applicable Additional Issuing Lender such issuance fees as shall be agreed to by
the Borrower and such Additional Issuing Lender.

     (c) Other Costs. In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the applicable Issuing Lender for such normal and customary costs and
expenses as are incurred or charged by such Issuing Lender in issuing, effecting payment under,
amending or otherwise administering any Letter of Credit.

     SECTION 3.4 L/C Participations.

     (a) The applicable Issuing Lender irrevocably agrees to grant and hereby grants to each L/C
Participant, and, to induce the applicable Issuing Lender to issue Letters of Credit hereunder,
each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases
from such Issuing Lender, on the terms and conditions hereinafter stated, for such L/C
Participant’s own account and risk, an undivided interest equal to such L/C Participant’s Revolving
Credit Commitment Percentage in such Issuing Lender’s obligations and rights under and in respect
of each Letter of Credit issued hereunder and the amount of each draft paid by such Issuing Lender
thereunder. Each L/C Participant unconditionally and irrevocably agrees with the applicable
Issuing Lender that, if a draft is paid under any Letter of Credit for which such Issuing Lender is
not reimbursed in full by the Borrower through a Revolving Credit Loan or otherwise in accordance
with the terms of this Agreement, such L/C Participant shall pay to such Issuing Lender upon demand
at such Issuing Lender’s address for notices specified herein an amount equal to such L/C
Participant’s Revolving Credit Commitment Percentage of the amount of such draft, or any part
thereof, which is not so reimbursed.

     (b) Upon becoming aware of any amount required to be paid by any L/C Participant to the
applicable Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by such Issuing Lender under any Letter of Credit, such Issuing Lender shall
notify the Administrative Agent and each L/C Participant of the amount and due date of such
required payment and such L/C Participant shall pay to such Issuing Lender the

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amount specified on the applicable due date. If any such amount is paid to the applicable
Issuing Lender after the date such payment is due, such L/C Participant shall pay to such Issuing
Lender on demand, in addition to such amount, the product of (i) such amount, times (ii)
the daily average Federal Funds Rate as determined by the Administrative Agent during the period
from and including the date such payment is due to the date on which such payment is immediately
available to such Issuing Lender, times (iii) a fraction the numerator of which is the
number of days that elapse during such period and the denominator of which is 360. A certificate
of the applicable Issuing Lender with respect to any amounts owing under this Section shall be
presumed correct in the absence of manifest error. With respect to payment to the applicable
Issuing Lender of the unreimbursed amounts described in this Section, if the L/C Participants
receive notice that any such payment is due (A) prior to 2:00 p.m. on any Business Day, such
payment shall be due that Business Day, and (B) after 2:00 p.m. on any Business Day, such payment
shall be due on the following Business Day.

     (c) Whenever, at any time after the applicable Issuing Lender has made payment under any
Letter of Credit and has received from any L/C Participant its Revolving Credit Commitment
Percentage of such payment in accordance with this Section, such Issuing Lender receives any
payment related to such Letter of Credit (whether directly from the Borrower or otherwise), or any
payment of interest on account thereof, such Issuing Lender will distribute to such L/C Participant
its pro rata share thereof; provided, that in the event that any such
payment received by such Issuing Lender shall be required to be returned by such Issuing Lender,
such L/C Participant shall return to such Issuing Lender the portion thereof previously distributed
by the Issuing Lender to it.

     SECTION 3.5 Reimbursement Obligation of the Borrower. In the event of any drawing
under any Letter of Credit, the Borrower agrees to reimburse (either with the proceeds of a
Revolving Credit Loan as provided for in this Section or with funds from other sources), in same
day funds, the applicable Issuing Lender on each date on which such Issuing Lender notifies the
Borrower of the date and amount of a draft paid under any Letter of Credit for the amount of (a)
such draft so paid and (b) any amounts referred to in Section 3.3(c) incurred by such
Issuing Lender in connection with such payment. Unless the Borrower shall immediately notify the
Administrative Agent and the applicable Issuing Lender that the Borrower intends to reimburse such
Issuing Lender for such drawing from other sources or funds, the Borrower shall be deemed to have
timely given a Notice of Borrowing to the Administrative Agent requesting that the Revolving Credit
Lenders make a Revolving Credit Loan bearing interest at the Base Rate on such date in the amount
of (a) such draft so paid and (b) any amounts referred to in Section 3.3(c) incurred by
such Issuing Lender in connection with such payment, and the Revolving Credit Lenders shall make a
Revolving Credit Loan bearing interest at the Base Rate in such amount, the proceeds of which shall
be applied to reimburse such Issuing Lender for the amount of the related drawing and costs and
expenses. Each Revolving Credit Lender acknowledges and agrees that its obligation to fund a
Revolving Credit Loan in accordance with this Section to reimburse the applicable Issuing Lender
for any draft paid under a Letter of Credit is absolute and unconditional and shall not be affected
by any circumstance whatsoever, including, without limitation, non-satisfaction of the conditions
set forth in Section 2.3(a) or Article V. If the Borrower has elected to pay the
amount of such drawing with funds from other sources and shall fail to reimburse the applicable
Issuing Lender as provided above, the unreimbursed amount of such drawing shall bear interest at
the rate which would be payable on any outstanding Base Rate

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Loans which were then overdue from the date such amounts become payable (whether at stated
maturity, by acceleration or otherwise) until payment in full.

     SECTION 3.6 Obligations Absolute. The Borrower’s obligations under this Article
III (including, without limitation, any Reimbursement Obligation) shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off, counterclaim or
defense to payment which the Borrower may have or have had against the applicable Issuing Lender or
any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees that the
applicable Issuing Lender and the L/C Participants shall not be responsible for, and the Borrower’s
Reimbursement Obligation under Section 3.5 shall not be affected by, among other things,
the validity or genuineness of documents or of any endorsements thereon, even though such documents
shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the
Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such
Letter of Credit or any such transferee. The applicable Issuing Lender and the Administrative
Agent shall not be liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with any Letter of Credit,
except for errors or omissions caused by such Issuing Lender’s or Administrative Agent’s gross
negligence or willful misconduct, as determined by a court of competent jurisdiction by final
nonappealable judgment. The Borrower agrees that any action taken or omitted by the applicable
Issuing Lender or the Administrative Agent under or in connection with any Letter of Credit or the
related drafts or documents, if done in the absence of gross negligence or willful misconduct shall
be binding on the Borrower and shall not result in any liability of such Issuing Lender, the
Administrative Agent or any L/C Participant to the Borrower. The responsibility of the applicable
Issuing Lender and the Administrative Agent to the Borrower in connection with any draft presented
for payment under any Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the documents (including each
draft) delivered under such Letter of Credit in connection with such presentment are in conformity
with such Letter of Credit.

     SECTION 3.7 Effect of Letter of Credit Application. To the extent that any provision
of any Letter of Credit Application related to any Letter of Credit is inconsistent with the
provisions of this Article III, the provisions of this Article III shall apply.

     SECTION 3.8 Appointment and Duties of Additional Issuing Lenders. The Borrower may
appoint Additional Issuing Lenders by delivering written notice to the Administrative Agent at
least two (2) Business Days before the issuance of any Letters of Credit by such Additional Issuing
Lenders. Any Revolving Credit Lender designated as an Additional Issuing Lender shall remain as
such until the Borrower gives written notice to the Administrative Agent that such Revolving Credit
Lender is no longer an Additional Issuing Lender; provided that no L/C Obligations remain
outstanding with respect to such Additional Issuing Lender. Each Additional Issuing Lender shall
notify the Administrative Agent at least two (2) Business Days before (i) the issuance of any
Letter of Credit by such Additional Issuing Lender and (ii) any amendment or modification to any
Letter of Credit issued by such Additional Issuing Lender.

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ARTICLE IV

GENERAL LOAN PROVISIONS

     SECTION 4.1 Interest.

     (a) Interest Rate Options. Subject to the provisions of this Section, at the election
of the Borrower, (i) Revolving Credit Loans shall bear interest at (A) the Base Rate plus
the Applicable Margin or (B) the LIBOR Rate plus the Applicable Margin (provided
that the LIBOR Rate shall not be available until three (3) Business Days after the Closing Date)
and (ii) any Swingline Loan shall bear interest at the Base Rate plus the Applicable
Margin. The Borrower shall select the rate of interest and Interest Period, if any, applicable to
any Loan at the time a Notice of Borrowing is given or at the time a Notice of
Conversion/Continuation is given pursuant to Section 4.2. Any Loan or any portion thereof
as to which the Borrower has not duly specified an interest rate as provided herein shall be deemed
a Base Rate Loan.

     (b) Interest Periods. In connection with each LIBOR Rate Loan, the Borrower, by
giving notice at the times described in Section 2.3 or 4.2, as applicable, shall
elect an interest period (each, an “Interest Period”) to be applicable to such Loan, which
Interest Period shall be a period of one (1), two (2), three (3) or six (6) months;
provided that:

          (i) the Interest Period shall commence on the date of advance of or conversion to any LIBOR
Rate Loan and, in the case of immediately successive Interest Periods, each successive Interest
Period shall commence on the date on which the immediately preceding Interest Period expires;

          (ii) if any Interest Period would otherwise expire on a day that is not a Business Day, such
Interest Period shall expire on the next succeeding Business Day; provided, that if any
Interest Period with respect to a LIBOR Rate Loan would otherwise expire on a day that is not a
Business Day but is a day of the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the immediately preceding Business Day;

          (iii) any Interest Period with respect to a LIBOR Rate Loan that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last Business Day of the
relevant calendar month at the end of such Interest Period;

          (iv) no Interest Period shall extend beyond the Revolving Credit Maturity Date; and

          (v) there shall be no more than six (6) Interest Periods in effect at any time.

     (c) Default Rate. Subject to Section 11.3, (i) immediately upon the
occurrence and during the continuance of an Event of Default under Section 11.1(a), (b),
(j) or (k), or (ii) at the election of the Required Lenders, upon the occurrence and
during the continuance of any other Event of Default, (A) the Borrower shall no longer have the
option to request LIBOR Rate Loans, Swingline Loans or Letters of Credit, (B) all outstanding such
LIBOR Rate Loans shall bear interest at a rate per annum of two percent (2%) in excess of the rate
then applicable to

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LIBOR Rate Loans until the end of the applicable Interest Period and thereafter at a rate
equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans, and (C) all
outstanding Base Rate Loans and other Obligations arising hereunder or under any other Loan
Document shall bear interest at a rate per annum equal to two percent (2%) in excess of the rate
then applicable to Base Rate Loans or such other Obligations arising hereunder or under any other
Loan Document. Interest shall continue to accrue on the Obligations after the filing by or against
the Borrower of any petition seeking any relief in bankruptcy or under any act or law pertaining to
insolvency or debtor relief, whether state, federal or foreign. Such interest shall be payable on
demand of the Administrative Agent.

     (d) Interest Payment and Computation. Interest on each Base Rate Loan shall be due
and payable in arrears on the last Business Day of each calendar quarter commencing March 31, 2008;
and interest on each LIBOR Rate Loan shall be due and payable on the last day of each Interest
Period applicable thereto, and if such Interest Period extends over three (3) months, at the end of
each three (3) month interval during such Interest Period. Interest on LIBOR Rate Loans and all
fees payable hereunder shall be computed on the basis of a 360-day year and assessed for the actual
number of days elapsed and interest on Base Rate Loans shall be computed on the basis of a
365/366-day year and assessed for the actual number of days elapsed.

     (e) Maximum Rate. In no contingency or event whatsoever shall the aggregate of all
amounts deemed interest or loan charges under this Agreement charged or collected pursuant to the
terms of this Agreement exceed the amount collectible at the highest rate permissible under any
Applicable Law that a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders have charged or
received interest or loan charges hereunder in excess of the amount collectible at the highest
permissible rate, the rate in effect hereunder shall automatically be reduced to the maximum rate
permitted by Applicable Law and the Lenders shall at the Administrative Agent’s option (i) promptly
refund to the Borrower any interest or loan charges received by the Lenders in excess of the amount
collectible at the maximum lawful rate or (ii) apply such excess to the principal balance of the
Obligations on a pro rata basis. It is the intent hereof that the Borrower not pay
or contract to pay, and that neither the Administrative Agent nor any Lender receive or contract to
receive, directly or indirectly in any manner whatsoever, interest or loan charges in excess of
those that may be paid by the Borrower under Applicable Law.

     SECTION 4.2 Notice and Manner of Conversion or Continuation of Loans. Provided that
no Default or Event of Default has occurred and is then continuing, the Borrower shall have the
option to (a) convert at any time following the third Business Day after the Closing Date all or
any portion of any outstanding Base Rate Loans (other than Swingline Loans) in a principal amount
equal to $3,000,000 or any whole multiple of $1,000,000 in excess thereof into one or more LIBOR
Rate Loans and (b) upon the expiration of any Interest Period, (i) convert all or any part of its
outstanding LIBOR Rate Loans in a principal amount equal to $2,000,000 or a whole multiple of
$1,000,000 in excess thereof into Base Rate Loans (other than Swingline Loans) or (ii) continue
such LIBOR Rate Loans as LIBOR Rate Loans. Whenever the Borrower desires to convert or continue
Loans as provided above, the Borrower shall give the Administrative Agent irrevocable prior written
notice in the form attached as Exhibit E (a “Notice of Conversion/Continuation”) not later
than 2:00 p.m. three (3) Business Days before the day on which a proposed conversion or
continuation of such Loan is to be effective specifying (A) the

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Loans to be converted or continued, and, in the case of any LIBOR Rate Loan to be converted or
continued, the last day of the Interest Period therefor, (B) the effective date of such conversion
or continuation (which shall be a Business Day), (C) the principal amount of such Loans to be
converted or continued, and (D) the Interest Period to be applicable to such converted or continued
LIBOR Rate Loan. The Administrative Agent shall promptly notify the Lenders of such Notice of
Conversion/Continuation. In the event the Borrower shall fail to give any required notice as
described in this Section 4.2 or if such continuation or conversion is not permitted
pursuant to the terms of this Agreement, any LIBOR Rate Loans shall be automatically converted to
Base Rate Loans on the last day of the then expiring Interest Period.

     SECTION 4.3 Fees.

     (a) Commitment Fee. Commencing on the Closing Date, the Borrower shall pay to the
Administrative Agent, for the account of the Revolving Credit Lenders, a non-refundable commitment
fee at a rate per annum equal to the Applicable Margin on the average daily unused portion of the
Revolving Credit Commitment; provided, that the amount of outstanding Swingline Loans shall
not be considered usage of the Revolving Credit Commitment for the purpose of calculating such
commitment fee. The commitment fee shall be payable in arrears on the last Business Day of each
calendar quarter during the term of this Agreement commencing March 31, 2008 and ending on the
Revolving Credit Maturity Date. Such commitment fee shall be distributed by the Administrative
Agent to the Revolving Credit Lenders pro rata in accordance with the Lenders’
respective Revolving Credit Commitment Percentages.

     (b) Administrative Agent’s and Other Fees. The Borrower shall pay to the Arrangers
and the Administrative Agent for their own respective accounts fees in the amounts and at the times
specified in the applicable Fee Letter. Such fees shall be fully earned when paid and shall not be
refundable for any reason whatsoever.

     SECTION 4.4 Manner of Payment. Each payment by the Borrower on account of the
principal of or interest on the Loans or of any fee, commission or other amounts (including any
Reimbursement Obligation) payable to the Lenders under this Agreement shall be made not later than
1:00 p.m. on the date specified for payment under this Agreement to the Administrative Agent at the
Administrative Agent’s Office for the account of the Lenders (other than as set forth below)
pro rata in accordance with their respective Revolving Credit Commitment
Percentages (except as specified below), in Dollars, in immediately available funds, and shall be
made without any set-off, counterclaim or deduction whatsoever. Any payment received after such
time but before 2:00 p.m. on such day shall be deemed a payment on such date for the purposes of
Section 11.1, but for all other purposes shall be deemed to have been made on the next
succeeding Business Day. Any payment received after 2:00 p.m. shall be deemed to have been made on
the next succeeding Business Day for all purposes. Upon receipt by the Administrative Agent of
each such payment, the Administrative Agent shall distribute to each Lender at its address for
notices set forth herein its pro rata share of such payment in accordance with such Lender’s
Revolving Credit Commitment Percentage (except as specified below) and shall wire advice of the
amount of such credit to each Lender. Each payment to the Administrative Agent of any Issuing
Lender’s fees or L/C Participants’ commissions shall be made in like manner, but for the account of
the applicable Issuing Lender or the L/C Participants, as the case may be. Each payment to the
Administrative Agent of Administrative Agent’s fees or expenses shall be

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made for the account of the Administrative Agent and any amount payable to any Lender under
Sections 4.9, 4.10, 4.11 or 13.3 shall be paid to the
Administrative Agent for the account of the applicable Lender. Subject to Section
4.1(b)(ii) if any payment under this Agreement shall be specified to be made upon a day which
is not a Business Day, it shall be made on the next succeeding day which is a Business Day and such
extension of time shall in such case be included in computing any interest if payable along with
such payment.

     SECTION 4.5 Evidence of Indebtedness.

     (a) Extensions of Credit. The Extensions of Credit made by each Lender shall be
evidenced by one or more accounts or records maintained by such Lender and by the Administrative
Agent in the ordinary course of business. The accounts or records maintained by the Administrative
Agent and each Lender shall be presumed correct absent manifest error of the amount of the
Extensions of Credit made by the Lenders to the Borrower and the interest and payments thereon.
Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the
obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In
the event of any conflict between the accounts and records maintained by any Lender and the
accounts and records of the Administrative Agent in respect of such matters, the accounts and
records of the Administrative Agent shall control in the absence of manifest error. Upon the
request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver
to such Lender (through the Administrative Agent) a Revolving Credit Note and/or Swingline Note, as
applicable, which shall evidence such Lender’s Revolving Credit Loans and/or Swingline Loans, as
applicable, in addition to such accounts or records. Each Lender may attach schedules to its Notes
and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto.

     (b) Participations. In addition to the accounts and records referred to in subsection
(a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice
accounts or records evidencing the purchases and sales by such Lender of participations in Letters
of Credit and Swingline Loans. In the event of any conflict between the accounts and records
maintained by the Administrative Agent and the accounts and records of any Lender in respect of
such matters, the accounts and records of the Administrative Agent shall control in the absence of
manifest error.

     SECTION 4.6 Adjustments. If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its
Loans or other obligations hereunder resulting in such Lender’s receiving payment of a proportion
of the aggregate amount of its Loans and accrued interest thereon or other such obligations (other
than pursuant to Sections 4.9, 4.10, 4.11 or 13.3 hereof) greater
than its pro rata share thereof as provided herein, then the Lender receiving such
greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for
cash at face value) participations in the Loans and such other obligations of the other Lenders, or
make such other adjustments as shall be equitable, so that the benefit of all such payments shall
be shared by the Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans and other amounts owing them; provided that

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     (a) if any such participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest, and

     (b) the provisions of this paragraph shall not be construed to apply to (x) any payment made
by the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any
payment obtained by a Lender as consideration for the assignment of or sale of a participation in
any of its Loans or participations in Swingline Loans and Letters of Credit to any assignee or
participant, other than to the Borrower or any Restricted Subsidiary thereof (as to which the
provisions of this paragraph shall apply).

Each Credit Party consents to the foregoing and agrees, to the extent it may effectively do so
under Applicable Law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against each Credit Party rights of setoff and counterclaim with respect
to such participation as fully as if such Lender were a direct creditor of each Credit Party in the
amount of such participation.

     SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by
the Administrative Agent. The obligations of the Lenders under this Agreement to make the
Loans and issue or participate in Letters of Credit are several and are not joint or joint and
several. Unless the Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the Administrative Agent such
Lender’s ratable portion of the amount to be borrowed on such date (which notice shall not release
such Lender of its obligations hereunder), the Administrative Agent may assume that such Lender has
made such portion available to the Administrative Agent on the proposed borrowing date in
accordance with Section 2.3(b), and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount. If such amount is
made available to the Administrative Agent on a date after such borrowing date, such Lender shall
pay to the Administrative Agent on demand an amount, until paid, equal to the product of (a) the
amount not made available by such Lender in accordance with the terms hereof, times (b) the
daily average Federal Funds Rate during such period as determined by the Administrative Agent,
times (c) a fraction the numerator of which is the number of days that elapse from and
including such borrowing date to the date on which such amount not made available by such Lender in
accordance with the terms hereof shall have become immediately available to the Administrative
Agent and the denominator of which is 360. A certificate of the Administrative Agent with respect
to any amounts owing under this Section shall be presumed correct, absent manifest error. If such
Lender’s Revolving Credit Commitment Percentage of such borrowing is not made available to the
Administrative Agent by such Lender within three (3) Business Days after such borrowing date, the
Administrative Agent shall be entitled to recover such amount made available by the Administrative
Agent with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on
demand, from the Borrower. The failure of any Lender to make available its Revolving Credit
Commitment Percentage of any Loan requested by the Borrower shall not relieve it or any other
Lender of its obligation, if any, hereunder to make its Revolving Credit Commitment Percentage of
such Loan available on the borrowing date, but no Lender shall be responsible for the failure of
any other Lender to make its Revolving Credit Commitment Percentage of such Loan available on the
borrowing date.

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     SECTION 4.8 Changed Circumstances.

     (a) Circumstances Affecting LIBOR Rate Availability. If the Required Lenders
determine that for any reason in connection with any request for a LIBOR Rate Loan or a conversion
to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London
interbank eurodollar market for the applicable amount and Interest Period of such LIBOR Rate Loan,
(b) adequate and reasonable means do not exist for determining LIBOR for any requested Interest
Period with respect to a proposed LIBOR Rate Loan, or (c) because of changes in circumstances
affecting foreign exchange and interbank markets generally LIBOR for any requested Interest Period
with respect to a proposed LIBOR Rate Loan does not adequately and fairly reflect the cost to such
Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and
each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR Rate Loans shall
be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes
such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a
Borrowing of, conversion to or continuation of LIBOR Rate Loans or, failing that, will be deemed to
have converted such request into a request for a borrowing of Base Rate Loans hereunder in the
amount specified therein.

     (b) Laws Affecting LIBOR Rate Availability. If, after the date hereof, the
introduction of, or any change in, any Applicable Law or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any of the Lenders (or any of
their respective Lending Offices) with any request or directive (whether or not having the force of
law) of any such Governmental Authority, central bank or comparable agency, shall make it unlawful
or impossible for any of the Lenders (or any of their respective Lending Offices) to honor its
obligations hereunder to make or maintain any LIBOR Rate Loan, or to determine or charge interest
rates based upon the LIBOR Rate, or any Governmental Authority imposes material restrictions on the
authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London
interbank markets, such Lender shall promptly give notice thereof to the Administrative Agent and
the Administrative Agent shall promptly give notice to the Borrower and the other Lenders.
Thereafter, until the Administrative Agent notifies the Borrower that such circumstances no longer
exist, (i) the obligations of such Lender to make or continue LIBOR Rate Loans and the right of the
Borrower to convert any Loan or continue any Loan as a LIBOR Rate Loan shall be suspended and
thereafter the Borrower may select only Base Rate Loans hereunder, and (ii) the Borrower shall,
upon demand from such Lender (with a copy to the Administrative Agent), repay or, if applicable,
convert all LIBOR Rate Loans of such Lender to Base Rate Loans, either on the last day of the
Interest Period therefor, if such Lender may lawfully continue to maintain such LIBOR Rate Loans to
such day, or immediately, if such Lender may not lawfully continue to maintain such LIBOR Rate
Loans. Upon any such repayment or conversion, the Borrower shall also pay accrued interest on the
amount so prepaid or converted.

     SECTION 4.9 Indemnity. Upon demand of any Lender (with a copy to the Administrative
Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such
Lender harmless from any loss, cost or expense incurred by it as a result of:

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     (a) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate
Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary,
mandatory, automatic, by reason of acceleration, or otherwise);

     (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a
Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in
the amount notified by the Borrower; or

     (c) any assignment of a LIBOR Rate Loan on a day other than the last day of the Interest
Period therefor as a result of a request by the Borrower pursuant to Section 4.12(b);

including any loss or expense arising from the liquidation or reemployment of funds obtained by it
to maintain such Loan or from fees payable to terminate the deposits from which such funds were
obtained. The Borrower shall also pay any customary administrative fees charged by such Lender in
connection with the foregoing.

     For purposes of calculating amounts payable by the Borrower to the Lenders under this
Section 4.9, each Lender shall be deemed to have funded each LIBOR Rate Loan made by it at
LIBOR used in determining the LIBOR Rate for such Loan by a matching deposit or other borrowing in
the London interbank eurodollar market for a comparable amount and for a comparable period, whether
or not such LIBOR Rate Loan was in fact so funded.

     SECTION 4.10 Increased Costs.

     (a) Increased Costs Generally. If any Change in Law shall:

          (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance
charge or similar requirement against assets of, deposits with or for the account of, or advances,
loans or other credit extended or participated in by, any Lender (except any reserve requirement
reflected in the LIBOR Rate) or any Issuing Lender;

          (ii) subject any Lender or any Issuing Lender to any tax of any kind whatsoever with respect
to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any LIBOR Rate
Loan made by it, or change the basis of taxation of payments to such Lender or such Issuing Lender
in respect thereof (except for Indemnified Taxes covered by Section 4.11 and the imposition
of or any change in the rate of any Excluded Tax payable by such Lender or the Issuing Lender); or

          (iii) impose on any Lender or any Issuing Lender or the London interbank market any other
condition, cost or expense affecting this Agreement or LIBOR Rate Loans made by such Lender or any
Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making,
converting into or maintaining any LIBOR Rate Loan (or of maintaining its obligation to make any
such Loan), or to increase the cost to such Lender or such Issuing Lender of participating in,
issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or
to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such
Lender or such Issuing Lender hereunder (whether of principal, interest or any other amount)

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then, upon written request of such Lender or such Issuing Lender, the Borrower shall promptly pay
to any such Lender or such Issuing Lender, as the case may be, such additional amount or amounts as
will compensate such Lender or such Issuing Lender, as the case may be, for such additional costs
incurred or reduction suffered.

     (b) Capital Requirements. If any Lender or any Issuing Lender determines that any
Change in Law affecting such Lender or such Issuing Lender or any lending office of such Lender or
such Lender’s or such Issuing Lender’s holding company, if any, regarding capital requirements has
or would have the effect of reducing the rate of return on such Lender’s or such Issuing Lender’s
capital or on the capital of such Lender’s or such Issuing Lender’s holding company, if any, as a
consequence of this Agreement, the Revolving Credit Commitment of such Lender or the Loans made by,
or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by
such Issuing Lender, to a level below that which such Lender or such Issuing Lender or such
Lender’s or such Issuing Lender’s holding company could have achieved but for such Change in Law
(taking into consideration such Lender’s or such Issuing Lender’s policies and the policies of such
Lender’s or such Issuing Lender’s holding company with respect to capital adequacy), then from time
to time upon written request of such Lender or such Issuing Lender the Borrower shall promptly pay
to such Lender or such Issuing Lender, as the case may be, such additional amount or amounts as
will compensate such Lender or such Issuing Lender or such Lender’s or such Issuing Lender’s
holding company for any such reduction suffered.

     (c) Certificates for Reimbursement. A certificate of a Lender or any Issuing Lender
setting forth the amount or amounts necessary to compensate such Lender or such Issuing Lender or
its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section and
delivered to the Borrower shall be presumed correct absent manifest error. The Borrower shall pay
such Lender or such Issuing Lender, as the case may be, the amount shown as due on any such
certificate within ten (10) days after receipt thereof.

     (d) Delay in Requests. Failure or delay on the part of any Lender or any Issuing
Lender to demand compensation pursuant to this Section shall not constitute a waiver of such
Lender’s or such Issuing Lender’s right to demand such compensation; provided that the
Borrower shall not be required to compensate a Lender or an Issuing Lender pursuant to this Section
for any increased costs incurred or reductions suffered more than six (6) months prior to the date
that such Lender or such Issuing Lender, as the case may be, notifies the Borrower of the Change in
Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Lender’s
intention to claim compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the six-month period referred to above shall be
extended to include the period of retroactive effect thereof).

     SECTION 4.11 Taxes.

     (a) Payments Free of Taxes. Any and all payments by or on account of any obligation
of the Borrower hereunder or under any other Loan Document shall be made free and clear of and
without reduction or withholding for any Indemnified Taxes; provided that if the Borrower
shall be required by Applicable Law to deduct any Indemnified Taxes from such payments, then (i)
the sum payable shall be increased as necessary so that after making all

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required deductions (including deductions applicable to additional sums payable under this
Section) the Administrative Agent, Lender or Issuing Lender, as the case may be, receives an amount
equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the
relevant Governmental Authority in accordance with Applicable Law.

     (b) Payment of Other Taxes by the Borrower. Without limiting the provisions of
paragraph (a) above, the Borrower shall timely pay any Other Taxes (other than Excluded Taxes) to
the relevant Governmental Authority in accordance with Applicable Law.

     (c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative
Agent, each Lender and each Issuing Lender, within ten (10) days after demand therefor, for the
full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or
attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender
or such Issuing Lender, as the case may be, and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrower by a Lender or an Issuing Lender (with a
copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of
a Lender or an Issuing Lender, shall be presumed correct absent manifest error.

     (d) Evidence of Payments. As soon as is reasonably practicable after any payment of
Indemnified Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return (if any) reporting such payment or other
evidence of such payment reasonably satisfactory to the Administrative Agent.

     (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident
for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by Applicable Law or reasonably requested by
the Borrower or the Administrative Agent, such properly completed and executed documentation
prescribed by Applicable Law as will permit such payments to be made without withholding or at a
reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the
Administrative Agent, shall deliver such other documentation prescribed by Applicable Law or
reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to backup or other
withholding or information reporting requirements. Without limiting the generality of the
foregoing, in the event that the Borrower is a resident for tax purposes in the United States, any
Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies
as shall be requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the request of the
Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do
so), whichever of the following is applicable:

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          (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for
benefits of an income tax treaty to which the United States is a party,

          (ii) duly completed copies of Internal Revenue Service Form W-8ECI,

          (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio
interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender
is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent
shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a
“controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly
completed copies of Internal Revenue Service Form W-8BEN, or

          (iv) any other form prescribed by Applicable Law as a basis for claiming exemption from or a
reduction in United States Federal withholding tax duly completed together with such supplementary
documentation as may be prescribed by Applicable Law to permit the Borrower to determine the
withholding or deduction required to be made.

     (f) Treatment of Certain Refunds. If the Administrative Agent, a Lender or an Issuing
Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other
Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has
paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to
such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the
Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund),
net of all out-of-pocket expenses of the Administrative Agent, such Lender or such Issuing Lender,
as the case may be, and without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund); provided that the Borrower, upon the request of the
Administrative Agent, such Lender or such Issuing Lender, agrees to repay the amount paid over to
the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent, such Lender or such Issuing Lender in the event the
Administrative Agent, such Lender or such Issuing Lender is required to repay such refund to such
Governmental Authority. This paragraph shall not be construed to require the Administrative Agent,
any Lender or such Issuing Lender to make available its tax returns (or any other information
relating to its taxes which it deems confidential) to the Borrower or any other Person.

     (g) Survival. Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in this Section shall
survive the payment in full of the Obligations and the termination of the Revolving Credit
Commitment.

     SECTION 4.12 Mitigation Obligations; Replacement of Lenders.

     (a) Designation of a Different Lending Office. If any Lender requests compensation
under Section 4.10, or requires the Borrower to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section 4.11, then
such Lender shall use reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to another of its
offices,

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branches or affiliates, if, in the reasonable judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section 4.10 or
Section 4.11, as the case may be, in the future and (ii) would not subject such Lender to
any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

     (b) Replacement of Lenders. If any Lender requests compensation under Section
4.10, or if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 4.11, or if any
Lender defaults in its obligation to fund Loans hereunder or is a Restricted Lender (as defined
below), then the Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance
with and subject to the restrictions contained in, and consents required by, Section
13.10), all of its interests, rights and obligations under this Agreement and the related Loan
Documents to an assignee that shall assume such obligations (which assignee may be another Lender,
if a Lender accepts such assignment); provided that

          (i) the Borrower shall have paid to the Administrative Agent the assignment fee specified in
Section 13.10,

          (ii) such Lender shall have received payment of an amount equal to the outstanding principal
of its Loans and participations in Letters of Credit, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder and under the other Loan Documents (including any amounts
under Section 4.9) from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts),

          (iii) in the case of any such assignment resulting from a claim for compensation under
Section 4.10 or payments required to be made pursuant to Section 4.11, such
assignment will result in a reduction in such compensation or payments thereafter,

          (iv) in the case of any such assignment by a Restricted Lender, the assignee must have
approved in writing the substance of the amendment, waiver or consent which caused the assignor to
be a Restricted Lender; and

          (v) such assignment does not conflict with Applicable Law.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply. For the purposes of this Section 4.12, a
“Restricted Lender” means a Lender that fails to approve an amendment, waiver or consent
requested by the Credit Parties pursuant to Section 13.2 that has received the written
approval of not less than the Required Lenders but also requires the approval of such Lender.

     SECTION 4.13 Security. The Obligations of the Borrower shall be secured as provided
in the Security Documents.

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ARTICLE V

CONDITIONS OF CLOSING AND BORROWING

     SECTION 5.1 Conditions to Closing and Initial Extensions of Credit. The obligation
of the Lenders to close this Agreement and to make the initial Loans or issue or participate in the
initial Letter of Credit, if any, is subject to the satisfaction of each of the following
conditions:

     (a) Executed Loan Documents. This Agreement, a Revolving Credit Note in favor of each
Lender requesting a Revolving Credit Note, a Swingline Note in favor of the Swingline Lender (if
requested thereby), the Security Documents, the Subsidiary Guaranty Agreement, together with any
other applicable Loan Documents, shall have been duly authorized, executed and delivered to the
Administrative Agent by the parties thereto, shall be in full force and effect and no Default or
Event of Default shall exist hereunder or thereunder.

     (b) Closing Certificates; Etc. The Administrative Agent shall have received each of
the following in form and substance reasonably satisfactory to the Administrative Agent:

          (i) Officer’s Certificate of the Borrower. A certificate from a Responsible Officer
of the Borrower to the effect that all representations and warranties of the Borrower contained in
this Agreement and the other Loan Documents are true, correct and complete; that none of the Credit
Parties is in violation of any of the covenants contained in this Agreement and the other Loan
Documents; that, after giving effect to the transactions contemplated by this Agreement, no Default
or Event of Default has occurred and is continuing; and that each of the Credit Parties, as
applicable, has satisfied each of the conditions set forth in Section 5.1 and Section
5.2 that has not been waived.

          (ii) Certificate of Secretary of each Credit Party. A certificate of a Responsible
Officer of each Credit Party certifying as to the incumbency and genuineness of the signature of
each officer of such Credit Party executing Loan Documents to which it is a party and certifying
that attached thereto is a true, correct and complete copy of (A) the articles or certificate of
incorporation or formation of such Credit Party and all amendments thereto, certified as of a
recent date by the appropriate Governmental Authority in its jurisdiction of incorporation or
formation, (B) the bylaws or other governing document of such Credit Party as in effect on the
Closing Date, (C) resolutions duly adopted by the board of directors or other governing body of
such Credit Party authorizing the transactions contemplated hereunder and the execution, delivery
and performance of this Agreement and the other Loan Documents to which it is a party, and (D) each
certificate required to be delivered pursuant to Section 5.1(b)(iii).

          (iii) Certificates of Good Standing. Certificates as of a recent date of the good
standing of each Credit Party under the laws of its jurisdiction of organization and, to the extent
requested by the Administrative Agent, each other jurisdiction where such Credit Party is qualified
to do business and, to the extent available, a certificate of the relevant taxing authorities of
such jurisdictions certifying that such Credit Party has filed required tax returns and owes no
delinquent taxes.

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          (iv) Opinions of Counsel. Favorable opinions of counsel to the Credit Parties
addressed to the Administrative Agent and the Lenders with respect to the Credit Parties, the Loan
Documents and such other matters as the Lenders shall request.

          (v) Tax Forms. If applicable, copies of the United States Internal Revenue Service
forms required by Section 4.11(e).

     (c) Personal Property Collateral.

          (i) Filings and Recordings. The Administrative Agent shall have received all filings
and recordations that are necessary to perfect the security interests of the Administrative Agent,
on behalf of itself and the Lenders, in the Collateral shall have been received by the
Administrative Agent and the Administrative Agent shall have received evidence and evidence
reasonably satisfactory to the Administrative Agent that upon such filings and recordations such
security interests constitute valid and perfected first priority Liens thereon.

          (ii) Pledged Collateral. The Administrative Agent shall have received original stock
certificates or other certificates evidencing the Capital Stock pledged pursuant to the Security
Documents, together with an undated stock power for each such certificate duly executed in blank by
the registered owner thereof.

          (iii) Lien Search. The Administrative Agent shall have received the results of a Lien
search (including a search as to judgments, pending litigation and tax matters), in form and
substance reasonably satisfactory thereto, made against the Credit Parties under the Uniform
Commercial Code (or applicable judicial docket) as in effect in any state in which any of the
assets of such Credit Party are located, indicating among other things that its assets are free and
clear of any Lien except for Permitted Liens.

          (iv) Hazard and Liability Insurance. The Administrative Agent shall have received
certificates of property hazard, business interruption and liability insurance, evidence of payment
of all insurance premiums for the current policy year of each (naming the Administrative Agent as
additional insured on all certificates for liability insurance), and, if requested by the
Administrative Agent, copies (certified by a Responsible Officer) of insurance policies in the form
required under the Security Documents and otherwise in form and substance reasonably satisfactory
to the Administrative Agent.

     (d) Consents; Defaults.

          (i) Governmental and Third Party Approvals. The Credit Parties shall have received
all material governmental, shareholder and third party consents and approvals necessary (or any
other material consents as determined in the reasonable discretion of the Administrative Agent) in
connection with the transactions contemplated by this Agreement and the other Loan Documents and
the other transactions contemplated hereby and all applicable waiting periods shall have expired
without any action being taken by any Person that could reasonably be expected to restrain, prevent
or impose any material adverse conditions on any of the Credit Parties or such other transactions
or that could seek or threaten any of the foregoing, and no Applicable Law in the reasonable
judgment of the Administrative Agent could reasonably be expected to have such effect.

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          (ii) No Injunction, Etc. No action, proceeding, investigation, regulation or
legislation shall have been instituted or overtly threatened in writing before any Governmental
Authority to enjoin, restrain or prohibit, or to obtain substantial damages in respect of, or that
is related to or arises out of this Agreement or the other Loan Documents or the consummation of
the transactions contemplated hereby or thereby.

     (e) Financial Matters.

          (i) Financial Statements. The Administrative Agent shall have received (A) a
pro forma Consolidated balance sheet of the Borrower and its Subsidiaries as of the
last month as to which financial statements are available, reflecting the capital structure of the
Borrower and its Subsidiaries after giving effect to the transactions contemplated hereby, prepared
and certified by the chief financial officer of the Borrower and (B) such other financial
information as the Administrative Agent may reasonably require, each of which shall be reasonably
satisfactory in all respects to the Administrative Agent.

          (ii) Financial Projections. The Administrative Agent shall have received pro
forma Consolidated financial statements for the Borrower and its Restricted Subsidiaries,
and forecasts prepared by management of the Borrower, of balance sheets, income statements and cash
flow statements on an annual basis for each year during the term of the Credit Facility.

          (iii) Financial Condition Certificate. The Borrower shall have delivered to the
Administrative Agent a certificate, in form and substance satisfactory to the Administrative Agent,
and certified as accurate by a Responsible Officer, that (A) the Borrower and each of its
Restricted Subsidiaries are Solvent, (B) the Borrower’s payables are current and no material part
thereof is past due, (C) attached thereto are calculations evidencing compliance on a pro
forma basis with the covenants contained in Article IX hereof, and (D) the
financial projections previously delivered to the Administrative Agent represent the good faith
estimates (utilizing assumptions believed by management of the Borrower to be reasonable) of the
financial condition and operations of the Borrower and its Restricted Subsidiaries.

          (iv) Payment at Closing; Fee Letters. The Borrower shall have paid to the
Administrative Agent and the Lenders the fees set forth or referenced in Section 4.3 that
are then due and any other accrued and unpaid fees or commissions due hereunder (including, without
limitation, legal fees and expenses) and to any other Person such amount as may be due thereto in
connection with the transactions contemplated hereby, including all taxes, fees and other charges
in connection with the execution, delivery, recording, filing and registration of any of the Loan
Documents.

     (f) Existing Credit Facility. The Existing Credit Facility shall be repaid in full
and all credit facilities, security interests and other agreements relating thereto shall have been
terminated (or provision for the termination thereof shall have been made) in a manner satisfactory
to the Administrative Agent and the Lenders, and the Administrative Agent shall have received a
pay-off letter in form and substance satisfactory to it regarding such repayment, termination and
release.

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     (g) Miscellaneous.

          (i) Notice of Borrowing. As to the initial Extensions of Credit, the Administrative
Agent shall have received a Notice of Borrowing from the Borrower in accordance with Section
2.3(a), and a Notice of Account Designation specifying the account or accounts to which the
proceeds of any Loans made after the Closing Date are to be disbursed.

          (ii) Due Diligence. The Administrative Agent shall have completed, to its reasonable
satisfaction, all legal, tax, business and other due diligence with respect to the business,
assets, liabilities, operations and condition (financial or otherwise) of the Borrower and its
Subsidiaries in scope and determination reasonably satisfactory to the Administrative Agent in its
sole discretion.

          (iii) Other Documents. All opinions, certificates and other instruments and all
proceedings in connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Administrative Agent. The Administrative Agent shall
have received copies of all other documents, certificates and instruments reasonably requested
thereby with respect to the transactions contemplated by this Agreement.

     SECTION 5.2 Conditions to All Extensions of Credit. The obligations of the Lenders
to make any Extensions of Credit (including the initial Extension of Credit) and convert or
continue any Loan of any Issuing Lender to issue or extend any Letter of Credit are subject to the
satisfaction of the following conditions precedent on the relevant borrowing, continuation,
conversion, issuance or extension date:

     (a) Continuation of Representations and Warranties. The representations and
warranties of the Borrower and each other Credit Party contained in Article VI and each
other Loan Document that are subject to materiality or Material Adverse Effect qualifications shall
be true and correct in all respects and the representations and warranties of the Borrower and each
other Credit Party contained in Article VI and each other Loan Document that are not
subject to materiality or Material Adverse Effect qualifications shall be true and correct in all
material respects, in each case, both before and after giving effect to such proposed borrowing,
continuation, conversion, issuance or extension, except to the extent that such representations and
warranties specifically refer to an earlier date, in which case they shall be true and correct as
of such earlier date.

     (b) No Existing Default. No Default or Event of Default shall have occurred and be
continuing (i) on the borrowing, continuation or conversion date with respect to such Loan or after
giving effect to the Loans to be made, continued or converted on such date or (ii) on the issuance
or extension date with respect to such Letter of Credit or after giving effect to the issuance or
extension of such Letter of Credit on such date.

     (c) Notices. The Administrative Agent shall have received a Notice of Borrowing or
Notice of Conversion/Continuation, as applicable, from the Borrower in accordance with Section
2.3(a) and Section 4.2.

     (d) Additional Documents. The Administrative Agent shall have received each
additional document, instrument, legal opinion or other item reasonably requested by it.

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ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE BORROWER

     SECTION 6.1 Representations and Warranties. To induce the Administrative Agent and
Lenders to enter into this Agreement and to induce the Lenders to make Extensions of Credit, the
Borrower hereby represents and warrants to the Administrative Agent and Lenders both before and
after giving effect to the transactions contemplated hereunder that:

     (a) Organization; Power; Qualification. Each of the Borrower and its Restricted
Subsidiaries is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, has the power and authority to own its properties
and to carry on its business as now being and hereafter proposed to be conducted and is duly
qualified and authorized to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification and authorization except in
jurisdictions where the failure to be so qualified or in good standing could not reasonably be
expected to result in a Material Adverse Effect. The jurisdictions in which the Borrower and its
Restricted Subsidiaries are organized and qualified to do business as of the Closing Date are
described on Schedule 6.1(a).

     (b) Ownership. Each Subsidiary of the Borrower as of the Closing Date is listed on
Schedule 6.1(b). As of the Closing Date, the capitalization of the Subsidiaries of the
Borrower consists of the number of shares or other interests, authorized, issued and outstanding,
of such classes and series, with or without par value, described on Schedule 6.1(b). As of
the Closing Date, all outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable, with no personal liability attaching to the ownership thereof, and not
subject to any preemptive or similar rights, except as described in Schedule 6.1(b). The
shareholders, members or partners, as applicable, of each Subsidiary of the Borrower and the number
of shares owned by each as of the Closing Date are described on Schedule 6.1(b). As of the
Closing Date, there are no outstanding stock purchase warrants, subscriptions, options, securities,
instruments or other rights of any type or nature whatsoever that are convertible into,
exchangeable for or otherwise provide for or permit the issuance of Capital Stock of the
Subsidiaries of the Borrower, except as described on Schedule 6.1(b).

     (c) Authorization of Agreement, Loan Documents and Borrowing. Each of the Borrower
and its Restricted Subsidiaries has the right, power and authority and has taken all necessary
corporate and other action to authorize the execution, delivery and performance of this Agreement
and each of the other Loan Documents to which it is a party in accordance with their respective
terms. This Agreement and each of the other Loan Documents have been duly executed and delivered
by duly authorized officers or other representatives of the Borrower and each of its Restricted
Subsidiaries party thereto, and each such document constitutes the legal, valid and binding
obligation of the Borrower or the Restricted Subsidiary party thereto, enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar state or federal debtor relief laws from time to time in
effect which affect the enforcement of creditors’ rights and the availability of equitable
remedies.

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     (d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc. The
execution, delivery and performance by the Borrower and its Restricted Subsidiaries of the Loan
Documents to which each such Person is a party, in accordance with their respective terms, the
Extensions of Credit hereunder and the transactions contemplated hereby do not and will not, by the
passage of time, the giving of notice or otherwise, (i) require any Governmental Approval or
violate any Applicable Law relating to the Borrower or any of its Restricted Subsidiaries where the
failure to obtain such Governmental Approval or such violation of Applicable Law could reasonably
be expected to have a Material Adverse Effect, (ii) conflict with, result in a breach of or
constitute a default under the articles of incorporation, bylaws or other organizational documents
of the Borrower or any of its Restricted Subsidiaries, (iii) conflict with, result in a breach of
or constitute a default under any indenture, agreement or other instrument to which such Person is
a party or by which any of its properties may be bound or any Governmental Approval relating to
such Person that could reasonably be expected to have a Material Adverse Effect, (iv) result in or
require the creation or imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by such Person other than Liens arising under the Loan Documents and Permitted
Liens or (v) require any consent or authorization of, filing with, or other act in respect of, an
arbitrator or Governmental Authority and no consent of any other Person is required in connection
with the execution, delivery, performance, validity or enforceability of this Agreement other than
consents, authorizations, filings or other acts or consents that have been obtained or made or for
which the failure to obtain or make could not reasonably be expected to have a Material Adverse
Effect and other than consents or filings under the UCC.

     (e) Compliance with Law; Governmental Approvals. Each of the Borrower and its
Restricted Subsidiaries (i) has all Governmental Approvals required by any Applicable Law for it to
conduct its business, each of which is in full force and effect, is final and not subject to review
on appeal and is not the subject of any pending or, to its knowledge, threatened challenge by
direct or collateral proceeding, (ii) is in compliance with each Governmental Approval applicable
to it and in compliance with all other Applicable Laws relating to it or any of its respective
properties and (iii) has timely filed all reports, documents and other materials required to be
filed by it under all Applicable Laws with any Governmental Authority and has retained all records
and documents required to be retained by it under Applicable Law, except in each clause (i), (ii)
or (iii) above, where the failure to have, comply or file could not reasonably be expected to have
a Material Adverse Effect.

     (f) Tax Returns and Payments. Each of the Borrower and its Restricted Subsidiaries
has duly filed or caused to be filed all federal, state, local and other material tax returns
required by Applicable Law to be filed, and has paid, or made adequate provision for the payment
of, all federal, state, local and other material taxes, assessments and governmental charges or
levies upon it and its property, income, profits and assets that are due and payable. Such returns
accurately reflect in all material respects all material liabilities for taxes of the Borrower and
its Restricted Subsidiaries for the periods covered thereby. There is no ongoing audit or
examination or, to the knowledge of the Borrower, other investigation by any Governmental Authority
of the tax liability of the Borrower and its Restricted Subsidiaries. No Governmental Authority
has asserted any Lien or other claim against the Borrower or any Restricted Subsidiary with respect
to unpaid taxes that has not been discharged or resolved other than Permitted Liens. The charges,
accruals and reserves on the books of the Borrower and any of its Restricted

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Subsidiaries in
respect of federal, state, local and other taxes for all Fiscal Years and portions thereof since
the organization of the Borrower and any of its Restricted Subsidiaries are in the judgment of the
Borrower adequate, and the Borrower does not anticipate any additional taxes or assessments for any
of such years.

     (g) Intellectual Property Matters. Each of the Borrower and its Restricted
Subsidiaries owns or possesses rights to use all material franchises, licenses, copyrights,
copyright applications, patents, patent rights or licenses, patent applications, trademarks,
trademark rights, service mark, service mark rights, trade names, trade name rights, copyrights and
other rights with respect to the foregoing that are reasonably necessary to conduct its business.
No event has occurred that permits, or after notice or lapse of time or both would permit, the
revocation or termination of any such rights, and neither the Borrower nor any Restricted
Subsidiary thereof is liable to any Person for infringement under Applicable Law with respect to
any such rights as a result of its business operations except as could not reasonably be expected
to have a Material Adverse Effect.

     (h) Environmental Matters. Except to the extent that any of the following,
individually or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect:

          (i) To the knowledge of the Borrower, the properties owned, leased or operated by the Borrower
and its Subsidiaries now or in the past do not contain, and have not previously contained, any
Hazardous Materials in amounts or concentrations that (A) constitute or constituted a violation of
applicable Environmental Laws or (B) could reasonably be expected to give rise to liability under
applicable Environmental Laws;

          (ii) The Borrower, each of its Subsidiaries and such properties and all operations conducted
in connection therewith are in compliance, and have been in compliance, with all applicable
Environmental Laws, and to the knowledge of the Borrower there is no contamination at, under or
about such properties or such operations that could interfere with the continued operation of such
properties or impair the fair saleable value thereof;

          (iii) Neither the Borrower nor any Subsidiary thereof has received from any Governmental
Authority, any written notice of violation, alleged violation, non-compliance, liability or
potential liability regarding Hazardous Materials or compliance with Environmental Laws, nor does
the Borrower or any Subsidiary thereof have knowledge or reason to believe that any such notice
will be received or is being threatened;

          (iv) To the knowledge of the Borrower, Hazardous Materials have not been transported or
disposed of to or from the properties owned, leased or operated by the Borrower and its
Subsidiaries in violation of, or in a manner or to a location that could give rise to liability
under, Environmental Laws, nor have any Hazardous Materials been generated, treated, stored or
disposed of at, on or under any of such properties in violation of, or in a manner that could
reasonably be expected to give rise to liability under, any applicable Environmental Laws;

          (v) No judicial proceedings or governmental or administrative action is pending, or, to the
knowledge of the Borrower, overtly threatened in writing, under any

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Environmental Law to which the
Borrower or any Subsidiary thereof is or, to the Borrower’s knowledge will be, named as a
potentially responsible party with respect to such properties or operations conducted in connection
therewith, nor are there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Borrower, any Subsidiary or such properties or such
operations; and

          (vi) To the knowledge of the Borrower, there has been no release of Hazardous Materials at or
from properties owned, leased or operated by the Borrower or any Subsidiary, now or in the past, in
violation of or in amounts or in a manner that could give rise to liability under Environmental
Laws.

     (i) ERISA.

          (i) As of the Closing Date, neither the Borrower nor any ERISA Affiliate maintains or
contributes to, or has any obligation under, any Pension Plans or Multiemployer Plans other than
those identified on Schedule 6.1(i);

          (ii) The Borrower and each other Credit Party is in material compliance with all applicable
provisions of ERISA and the regulations and published interpretations thereunder, including the
prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code, with
respect to all Employee Benefit Plans except for any required amendments for which the remedial
amendment period as defined in Section 401(b) of the Code has not yet expired and except where a
failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each
Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified (or the Borrower is entitled to rely
on an opinion letter issued by the Internal Revenue Service to the sponsor of a prototype plan),
and each trust related to such plan has been determined to be exempt under Section 501(a) of the
Code except for such plans that have not yet received determination letters but for which the
remedial amendment period for submitting a determination letter (or an application for an opinion
letter) has not yet expired. No unsatisfied liability for any taxes or penalties has been incurred
by the Borrower or any other Credit Party with respect to any Employee Benefit Plan, or by any
other ERISA Affiliate with respect to any Pension Plan or Multiemployer Plan, except for a
liability that could not reasonably be expected to have a Material Adverse Effect;

          (iii) As of the Closing Date, no Pension Plan has been terminated, nor has any accumulated
funding deficiency (as defined in Section 412 of the Code) been incurred (without regard to any
waiver granted under Section 412 of the Code), nor has any funding waiver from the Internal Revenue
Service been received or requested with respect to any Pension Plan, nor has the Borrower or any
ERISA Affiliate failed to make any contributions or to pay any amounts due and owing as required by
Section 412 of the Code, Section 302 of ERISA or the terms of any Pension Plan prior to the due
dates of such contributions under Section 412 of the Code or Section 302 of ERISA, nor has there
been any event requiring any disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with
respect to any Pension Plan;

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          (iv) Except where the failure of any of the following representations to be correct in all
material respects could not reasonably be expected to have a Material Adverse Effect, neither the
Borrower nor any ERISA Affiliate has: (A) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums and there are no premium payments which are due and
unpaid, (B) failed to make a required contribution or payment to a Multiemployer Plan, or (C)
failed to make a required installment or other required payment under Section 412 of the Code;

          (v) No Termination Event has occurred or is reasonably expected to occur; and

          (vi) Except where the failure of any of the following representations to be correct in all
material respects could not reasonably be expected to have a Material Adverse Effect, no
proceeding, claim (other than a benefits claim in the ordinary course of business), lawsuit and/or
investigation is existing or, to the best knowledge of the Borrower after due inquiry, threatened
concerning or involving any (A) employee welfare benefit plan (as defined in Section 3(1) of ERISA)
currently maintained or contributed to by the Borrower or any other Credit Party, (B) Pension Plan
or (C) Multiemployer Plan.

     (j) Margin Stock. Neither the Borrower nor any Restricted Subsidiary is engaged
principally or as one of its activities in the business of extending credit for the purpose of
“purchasing” or “carrying” any “margin stock” (as each such term is defined or used in Regulation U
of the Board of Governors of the Federal Reserve System). No part of the proceeds of any of the
Loans or Letters of Credit will be used for purchasing or carrying margin stock in violation of, or
for any purpose that violates the provisions of, Regulation T, U or X of such Board of Governors.
Following the application of the proceeds of each borrowing hereunder or drawing under each Letter
of Credit, not more than 25% of the aggregate value of the assets (either of the Borrower only or
of the Borrower and its Subsidiaries on a consolidated basis) that are subject to the provisions of
Section 10.2 or Section 10.4, or that are subject to any restriction contained in
any agreement or instrument between the Borrower and any Lender or any Affiliate of any Lender
relating to Indebtedness and within the scope of Section 11.1(g), will be margin stock.

     (k) Government Regulation. Neither the Borrower nor any Restricted Subsidiary is an
“investment company” or a company “controlled” by an “investment company” (as each such term is
defined or used in the Investment Company Act of 1940, as amended) or any other Applicable Law that
limits its ability to incur or consummate the transactions contemplated hereby.

     (l) Material Indebtedness. Schedule 6.1(l) sets forth a complete and accurate
list of all Material Indebtedness of the Borrower and its Restricted Subsidiaries in effect as of
the Closing Date not listed on any other Schedule hereto; other than as set forth in Schedule
6.1(l), each indenture, contract or agreement executed in connection with such Material
Indebtedness is, and after giving effect to the consummation of the transactions contemplated by
the Loan Documents will be, in full force and effect in accordance with the terms thereof. To the
extent requested by the Administrative Agent, the Borrower and its Restricted Subsidiaries have
delivered or otherwise made available to the Administrative Agent a true and complete copy of

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each
indenture, contract or agreement executed in connection with the Material Indebtedness required to
be listed on Schedule 6.1(l) or any other Schedule hereto. Neither the Borrower nor any
Restricted Subsidiary (nor, to the knowledge of the Borrower, any other party thereto) is in breach
of or in default under any indenture, contract or agreement executed in connection with any
Material Indebtedness in any material respect.

     (m) Employee Relations. Each of the Borrower and its Restricted Subsidiaries has a
stable work force in place and is not, as of the Closing Date, party to any collective bargaining
agreement nor has any labor union been recognized as the representative of its employees except as
set forth on Schedule 6.1(m). The Borrower knows of no pending, threatened or contemplated
strikes, work stoppage or other collective labor disputes involving its employees or those of its
Restricted Subsidiaries that could reasonably be expected to have a Material Adverse Effect.

     (n) Burdensome Provisions. Neither the Borrower nor any Restricted Subsidiary thereof
is a party to any indenture, agreement, lease or other instrument, or subject to any corporate or
partnership restriction, Governmental Approval or Applicable Law that is so unusual or burdensome
as in the foreseeable future could be reasonably expected to have a Material Adverse Effect. The
Borrower and its Restricted Subsidiaries do not presently anticipate that future expenditures
needed to meet the provisions of any statutes, orders, rules or regulations of a Governmental
Authority will be so burdensome as to have a Material Adverse Effect. No Restricted Subsidiary is
a party to any agreement or instrument or otherwise subject to any restriction or encumbrance that
restricts or limits its ability to make dividend payments or other distributions in respect of its
Capital Stock to the Borrower or any Restricted Subsidiary or to transfer any of its assets or
properties to the Borrower or any Restricted Subsidiary in each case other than existing under or
by reason of the Loan Documents or Applicable Law.

     (o) Financial Statements. The Audited Financial Statements and the financial
statements delivered by the Borrower to the Administrative Agent pursuant to Sections
7.1(a), 7.1(b) and the last paragraph of Section 7.1 are complete and correct
and fairly present on a Consolidated basis the assets, liabilities and financial position of the
Borrower and its Subsidiaries as at such dates, and the results of the operations and changes of
financial position for the periods then ended (other than customary year-end adjustments for
unaudited financial statements). All such financial statements, including the related schedules
and notes thereto, have been prepared in accordance with GAAP. Such financial statements show all
material indebtedness and other material liabilities, direct or contingent, of the Borrower and its
Subsidiaries as of the date thereof, including material liabilities for taxes, material
commitments, and Indebtedness, in each case, to the extent required to be disclosed under GAAP.
All pro forma financial statements delivered by the Borrower to the Administrative
Agent were prepared in good faith on the basis of the assumptions stated therein, which assumptions
are believed to be reasonable in light of then existing conditions.

     (p) No Material Adverse Change. Since December 31, 2006, there has been no material
adverse change in the business, assets, material agreements, operations, liabilities (actual or
contingent) or condition (financial or otherwise) of the Borrower and its Subsidiaries and no event
has occurred or condition arisen that, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

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     (q) Solvency. As of the Closing Date and after giving effect to each Extension of
Credit made hereunder, the Borrower and each of its Restricted Subsidiaries will be Solvent.

     (r) Title to Properties. Each of the Borrower and its Restricted Subsidiaries has
such title to the real property owned or leased by it as is necessary or desirable to the conduct
of its business and valid and legal title to all of its personal property and assets, including,
but not limited to, those reflected on the balance sheets of the Borrower and its Restricted
Subsidiaries described in Section 6.1(o), except those which have been disposed of by the
Borrower or its Restricted Subsidiaries subsequent to such date which dispositions are expressly
permitted hereunder.

     (s) Insurance. The properties of the Borrower and its Restricted Subsidiaries are
insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in
such amounts, with such self-insurance and deductibles and covering such risks as are customarily
maintained by companies engaged in similar businesses and owning similar properties in locations
where the Borrower or the applicable Restricted Subsidiary operates.

     (t) Liens. None of the properties and assets of the Borrower or any Restricted
Subsidiary thereof is subject to any Lien, except Permitted Liens. Neither the Borrower nor any
Restricted Subsidiary thereof has signed any financing statement or any security agreement
authorizing any secured party thereunder to file any financing statement, except to perfect those
Permitted Liens.

     (u) Litigation. Except for matters existing on the Closing Date and set forth on
Schedule 6.1(u), there are no actions, suits or proceedings pending nor, to the knowledge
of the Borrower, threatened against or in any other way relating adversely to or affecting the
Borrower or any Restricted Subsidiary thereof or any of their respective properties in any court or
before any arbitrator of any kind or before or by any Governmental Authority that (i) either
individually or in the aggregate, has had, or could reasonably be expected to have, a Material
Adverse Effect, or (ii) materially adversely affects any transaction contemplated hereby.

     (v) Absence of Defaults. No event has occurred or is continuing that constitutes a
Default or an Event of Default, or that constitutes, or that with the passage of time or giving of
notice or both would constitute, a default or event of default by the Borrower or any Restricted
Subsidiary thereof under any Material Indebtedness or any material judgment, decree or order to
which the Borrower or its Restricted Subsidiaries is a party or by that the Borrower or its
Restricted Subsidiaries or any of their respective properties may be bound or which would require
the Borrower or its Restricted Subsidiaries to make any payment thereunder prior to the scheduled
maturity date therefor.

     (w) Senior Indebtedness Status. The Obligations of the Borrower and each of its
Restricted Subsidiaries under this Agreement and each of the other Loan Documents ranks and shall
continue to rank at least senior in priority of payment to all Subordinated Indebtedness.

     (x) OFAC. None of the Borrower, any Subsidiary of the Borrower or any Affiliate of
the Borrower or any Subsidiary Guarantor: (i) is a Sanctioned Person, (ii) has more than 10% of
its assets in Sanctioned Entities, or (iii) derives more than 10% of its operating income from

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investments in, or transactions with Sanctioned Persons or Sanctioned Entities. The proceeds of
any Loan will not be used and have not been used to fund any operations in, finance any investments
or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

     (y) Disclosure. No financial statement, material report, material certificate or
other material information furnished (whether in writing or orally), taken together as a whole, by
or on behalf of any of the Borrower or any of its Subsidiaries to the Administrative Agent or any
Lender in connection with the transactions contemplated hereby and the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other information so furnished)
contains any material misstatement of any material fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial information, pro
forma financial information, estimated financial information and other projected or estimated
information, the Borrower represents only that such information was prepared in good faith based
upon assumptions believed by the management of the Borrower to be reasonable at the time.

     SECTION 6.2 Survival of Representations and Warranties, Etc. All representations and
warranties set forth in this Article VI and all representations and warranties contained in
any certificate, or any of the Loan Documents (including, but not limited to, any such
representation or warranty made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All representations and warranties made
under this Agreement shall be made or deemed to be made at and as of the Closing Date (except those
that are expressly made as of a specific date), shall survive the Closing Date and shall not be
waived by the execution and delivery of this Agreement, any investigation made by or on behalf of
the Lenders or any borrowing hereunder.

ARTICLE VII

FINANCIAL INFORMATION AND NOTICES

     Until all the Obligations have been paid and satisfied in full and the Revolving Credit
Commitment has been terminated, unless consent has been obtained in the manner set forth in
Section 13.2, the Borrower will furnish or cause to be furnished to the Administrative
Agent at the Administrative Agent’s Office at the address set forth in Section 13.1 or such
other office as may be designated by the Administrative Agent from time to time:

     SECTION 7.1 Financial Statements and Projections.

     (a) Quarterly Financial Statements. As soon as practicable and in any event within
forty-five (45) days (or, if earlier, on the date of any required public filing thereof) after the
end of each fiscal quarter of each Fiscal Year (other than the last fiscal quarter of any such
Fiscal Year), an unaudited Consolidated balance sheet of the Borrower and its Subsidiaries as of
the close of such fiscal quarter and unaudited Consolidated statements of income or operations,
stockholders’ equity and cash flows and a report containing management’s discussion and analysis of
such financial statements for the fiscal quarter then ended and that portion of the

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Fiscal Year
then ended, including the notes thereto, all in reasonable detail setting forth in comparative form
the corresponding figures as of the end of and for the corresponding period in the preceding Fiscal
Year and prepared by the Borrower in accordance with GAAP and, if applicable, containing disclosure
of the effect on the financial position or results of operations of any change in the application
of accounting principles and practices during the period, and certified by the chief financial
officer of the Borrower to present fairly in all material respects the financial condition of the
Borrower and its Subsidiaries on a Consolidated basis as of their respective dates and the results
of operations of the Borrower and its Subsidiaries for the respective periods then ended, subject
to normal year end adjustments. Delivery by the Borrower to the Administrative Agent of the
Borrower’s quarterly report to the SEC on Form 10–Q with respect to any fiscal quarter, or the
availability of such report on EDGAR Online (to the extent such report complies with the
requirements of this clause (a)), within the period specified above shall be deemed to be
compliance by the Borrower with this Section 7.1(a).

     (b) Annual Financial Statements. As soon as practicable and in any event within
ninety (90) days (or, if earlier, on the date of any required public filing thereof) after the end
of each Fiscal Year, an audited Consolidated balance sheet of the Borrower and its Subsidiaries as
of the close of such Fiscal Year and audited Consolidated statements of income or operations,
stockholders’ equity and cash flows and a report containing management’s discussion and analysis of
such financial statements for the Fiscal Year then ended, including the notes thereto, all in
reasonable detail setting forth in comparative form the corresponding figures as of the end of and
for the preceding Fiscal Year and prepared in accordance with GAAP and, if applicable, containing
disclosure of the effect on the financial position or results of operations of any change in the
application of accounting principles and practices during the year. Such annual financial
statements shall be audited by an independent certified public accounting firm reasonably
acceptable to the Administrative Agent, and accompanied by a report thereon by such certified
public accountants that is not qualified with respect to scope limitations imposed by the Borrower
or any of its Subsidiaries or with respect to accounting principles followed by the Borrower or any
of its Subsidiaries not in accordance with GAAP. Delivery by the Borrower to the Administrative
Agent of the Borrower’s annual report to the SEC on Form 10-K with respect to any Fiscal Year, or
the availability of such report on EDGAR Online (to the extent such report complies with the
requirements of this clause (b)), within the period specified above shall be deemed to be
compliance by the Borrower with this Section 7.1(b).

     (c) Annual Business Plan and Financial Projections. As soon as practicable and in any
event within sixty (60) days after the end of each Fiscal Year, a business plan of the Borrower and
its Subsidiaries for the ensuing four (4) fiscal quarters, such plan to be prepared in accordance
with GAAP to the extent applicable and to include, on a quarterly basis, the following: a
quarterly operating and capital budget, a projected income statement, statement of cash flows and
balance sheet and a report containing management’s discussion and analysis of such projections,
accompanied by a certificate from a Responsible Officer of the Borrower to the effect that, to such
officer’s knowledge, such projections are good faith estimates (utilizing reasonable assumptions)
of the financial condition and operations of the Borrower and its Subsidiaries for such four (4)
quarter period.

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     If the Borrower has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the
quarterly financial information required by clause (a) above, the annual financial information
required by clause (b) above and the projected financial statements required by clause (c) above
shall include a reasonably detailed presentation satisfactory to the Administrative Agent, either
on the face of the financial statements or in the footnotes thereto, and in Management’s Discussion
and Analysis of Financial Condition and Results of Operations, of the financial condition and
results of operations of the Borrower and its Restricted Subsidiaries separate from the financial
condition and results of operations of its Unrestricted Subsidiaries.

     SECTION 7.2 Officer’s Compliance Certificate. At each time financial statements are
delivered pursuant to Sections 7.1(a) or (b) and at such other times as the
Administrative Agent shall reasonably request, an Officer’s Compliance Certificate.

     SECTION 7.3 Accountants’ Certificate. At each time financial statements are
delivered pursuant to Section 7.1(b), a certificate of the independent public accountants
certifying such financial statements that in connection with their audit, nothing came to their
attention that caused them to believe that the Borrower failed to comply with the terms, covenants,
provisions or conditions of Article IX insofar as they relate to financial and accounting
matters or, if such is not the case, specifying such non-compliance and its nature and period of
existence.

     SECTION 7.4 Other Reports. Such other information regarding the operations, business
affairs and financial condition of the Borrower or any of its Subsidiaries as the Administrative
Agent or any Lender may reasonably request.

     SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but in no event later
than fifteen (15) days after a Responsible Officer of the Borrower obtains knowledge thereof)
telephonic and written notice of:

     (a) the commencement of, or any material development in, all proceedings and investigations by
or before any Governmental Authority and all actions and proceedings in any court or before any
arbitrator against or involving the Borrower or any Restricted Subsidiary thereof or any of their
respective properties, assets or businesses that if adversely determined could reasonably be
expected to have a Material Adverse Effect;

     (b) any notice of any violation received by the Borrower or any Restricted Subsidiary thereof
from any Governmental Authority including, without limitation, any notice of violation of
Environmental Laws, that in any such case could reasonably be expected to have a Material Adverse
Effect;

     (c) any labor controversy that has resulted in, or threatens to result in, a strike or other
work action against the Borrower or any Restricted Subsidiary thereof that could reasonably be
expected to have a Material Adverse Effect;

     (d) any litigation or proceeding affecting the Borrower or any of its Restricted Subsidiaries
that could reasonably be expected to be determined adversely to the Borrower or its Restricted
Subsidiaries and in which the amount involved is $20,000,000 or more and not covered by insurance
or in which injunctive or similar relief is sought;

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     (e) (i) any Default or Event of Default or (ii) any event that constitutes or that with the
passage of time or giving of notice or both would constitute a default or event of default under
any Material Indebtedness;

     (f) (i) any unfavorable determination letter from the Internal Revenue Service regarding the
qualification of an Employee Benefit Plan under Section 401(a) of the Code (along with a copy
thereof), (ii) all notices received by the Borrower or any ERISA Affiliate of the PBGC’s intent to
terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan, (iii) all
notices received by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor
concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA and
(iv) the Borrower obtaining knowledge or reason to know that the Borrower or any ERISA Affiliate
has filed or intends to file a notice of intent to terminate any Pension Plan under a distress
termination within the meaning of Section 4041(c) of ERISA; and

     (g) the designation of any Subsidiary as a “restricted subsidiary” (or any similar
designation), or the joinder of any Subsidiary as a guarantor, under any Material Indebtedness or
any other Indebtedness permitted pursuant to Section 10.1(k).

     SECTION 7.6 Accuracy of Information. All written information, reports, statements
and other papers and data furnished by or on behalf of the Borrower to the Administrative Agent or
any Lender whether pursuant to this Article VII or any other provision of this Agreement,
or any of the Security Documents, shall, at the time the same is so furnished, comply with the
representations and warranties set forth in Section 6.1(y).

     SECTION 7.7 Posting of Borrower Materials. The Borrower hereby acknowledges that (a)
the Administrative Agent and/or the Arrangers will make available to the Lenders and the Issuing
Lenders materials and/or information provided by or on behalf of the Borrower hereunder
(collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or
another similar electronic system (the “Platform”) and (b) certain of the Lenders (each, a
“Public Lender”) may have personnel who do not wish to receive material non-public
information with respect to the Borrower or its Affiliates, or the respective securities of any of
the foregoing, and who may be engaged in investment and other market-related activities with
respect to such Persons’ securities. The Borrower hereby agrees that (w) all Borrower Materials
that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC”
which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page
thereof; (x) by marking Borrower Materials “PUBLIC”, the Borrower shall be deemed to have
authorized the Administrative Agent, the Arrangers, the L/C Issuers and the Lenders to treat such
Borrower Materials as not containing any material non-public information with respect to the
Borrower or its securities for purposes of United States Federal and state securities laws
(provided, however, that to the extent such Borrower Materials constitute
Information, they shall be treated as set forth in Section 13.11); (y) all Borrower
Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform
designated “Public Investor”; and (z) the Administrative Agent and the Arrangers shall be entitled
to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on
a portion of the Platform not designated “Public Investor”.

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ARTICLE VIII

AFFIRMATIVE COVENANTS

     Until all of the Obligations have been paid and satisfied in full and the Revolving Credit
Commitment has been terminated, and unless a waiver or consent has been obtained in the manner
provided for in Section 13.2, the Borrower will, and will cause each of its Restricted
Subsidiaries to:

     SECTION 8.1 Preservation of Corporate Existence and Related Matters.

     Except as permitted by Section 8.1(b) or Section 10.3:

     (a) Preserve and keep in full force and effect its corporate existence, and the corporate,
partnership or other existence of each of its Subsidiaries, in accordance with the respective
organizational documents of the Borrower or any such Subsidiary, and qualify and remain qualified
as a foreign organization and authorized to do business in each jurisdiction in which the failure
to so qualify could reasonably be expected to have a Material Adverse Effect.

     (b) Preserve and keep in full force and effect the rights (charter and statutory), licenses
and franchises of the Borrower and its Subsidiaries; provided, that the Borrower shall not
be required to preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Subsidiaries, if the board of directors of the Borrower shall
determine that the preservation thereof is no longer desirable in the conduct of the business of
the Borrower and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in
any material respect to the Lenders.

     SECTION 8.2 Maintenance of Property. Protect and preserve all material properties
necessary in and material to its business, including copyrights, patents, trade names, service
marks and trademarks; maintain in good working order and condition, ordinary wear and tear
excepted, all buildings, equipment and other tangible real and personal property; and from time to
time make or cause to be made all repairs, renewals and replacements thereof and additions to such
property necessary for the conduct of its business, so that the business carried on in connection
therewith may be conducted in a commercially reasonable manner.

     SECTION 8.3 Insurance. Maintain insurance with financially sound and reputable
insurance companies against such risks and in such amounts as are customarily maintained by similar
businesses and as may be required by Applicable Law and as are required by any Security Documents
(including, without limitation, hazard and business interruption insurance), and on the Closing
Date and from time to time thereafter deliver to the Administrative Agent upon its request
information in reasonable detail as to the insurance then in effect, stating the names of the
insurance companies, the amounts and rates of the insurance, the dates of the expiration thereof
and the properties and risks covered thereby.

     SECTION 8.4 Accounting Methods and Financial Records. Maintain a system of
accounting, and keep proper books, records and accounts (that shall be true and correct in all
material respects) as may be required or as may be necessary to permit the preparation of

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financial
statements in accordance with GAAP and in compliance with applicable regulations of any
Governmental Authority having jurisdiction over it or any of its properties.

     SECTION 8.5 Payment and Performance of Obligations. Pay and perform all Obligations
under this Agreement and the other Loan Documents, and pay or perform (a) all taxes, assessments
and other governmental charges that may be levied or assessed upon it or any of its property, and
(b) all other indebtedness, obligations and liabilities in accordance with customary trade
practices; provided, that the Borrower or such Restricted Subsidiary may contest any item
described in clauses (a) or (b) of this Section in good faith so long as adequate reserves are
maintained with respect thereto in accordance with GAAP.

     SECTION 8.6 Compliance With Laws and Approvals. Observe and remain in compliance
with all Applicable Laws and maintain in full force and effect all Governmental Approvals, in each
case applicable to the conduct of its business except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.

     SECTION 8.7 Environmental Laws. In addition to and without limiting the generality
of Section 8.6, and except to the extent that a failure to comply with any of the
following, individually or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect, (a) comply with, and use reasonable efforts to ensure such compliance by all of its
tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply with
and maintain, and use reasonable efforts to ensure that all tenants and subtenants, if any, obtain
and comply with and maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws, and (b) conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and other actions required under
Environmental Laws, and promptly comply with all lawful orders and directives of any Governmental
Authority regarding Environmental Laws. Except as otherwise noted, the Borrower will defend,
indemnify and hold harmless the Administrative Agent and the Lenders, and their respective parents,
Subsidiaries, Affiliates, employees, agents, officers and directors, from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind
or nature, known or unknown, contingent or otherwise, arising out of, or in any way relating to the
presence of Hazardous Materials in, on or under properties owned, leased or operated by the
Borrower and its Subsidiaries, or the Borrower’s or any of its Subsidiaries’ violation of,
noncompliance with or liability under any Environmental Laws applicable to the operations of the
Borrower or any such Subsidiary, or any orders, requirements or demands of Governmental Authorities
related thereto, including, without limitation, reasonable attorney’s and consultant’s fees,
investigation and laboratory fees, response costs, court costs and litigation expenses, except to
the extent that any of the foregoing directly result from the gross negligence or willful
misconduct of the party seeking indemnification therefor, as determined by a court of competent
jurisdiction by final nonappealable judgment.

     SECTION 8.8 Compliance with ERISA. In addition to and without limiting the
generality of Section 8.6, (a) except where the failure to so comply could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i)
comply with all material applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans, (ii) not take any action or
fail to take action the result of which could be a liability to the PBGC or to a Multiemployer
Plan, (iii) not

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participate in any prohibited transaction that could result in any civil penalty
under ERISA or tax under the Code and (iv) operate each Employee Benefit Plan in such a manner that
will not incur any tax liability under Section 4980B of the Code or any liability to any qualified
beneficiary as defined in Section 4980B of the Code and (b) furnish to the Administrative Agent
upon the Administrative Agent’s request such additional information about any Employee Benefit Plan
as may be reasonably requested by the Administrative Agent.

     SECTION 8.9 Compliance With Agreements. Comply in all material respects with each
material term, condition and provision of all material leases, agreements and other instruments
entered into in the conduct of its business including, without limitation, any indenture, contract
or agreement executed in connection with any Material Indebtedness; provided, that the
Borrower or any such Restricted Subsidiary may contest any such lease, agreement or other
instrument in good faith through applicable proceedings so long as adequate reserves are maintained
in accordance with GAAP. 

     SECTION 8.10 Visits and Inspections. Permit representatives of the Administrative
Agent or any Lender, from time to time upon prior reasonable notice and at such times during normal
business hours, at the Borrower’s expense, to visit and inspect its properties; inspect, audit and
make extracts from its books, records and files, including, but not limited to, management letters
prepared by independent accountants; and discuss with its principal officers, and its independent
accountants, its business, assets, liabilities, financial condition and results of operations.
Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent or
any Lender may do any of the foregoing at any time without advance notice.

     SECTION 8.11 Additional Subsidiaries.

     (a) Additional Domestic Subsidiaries. Notify the Administrative Agent of (i) the
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary in accordance with
Section 8.12 or (ii) the creation or acquisition of any Domestic Subsidiary that is a
Restricted Subsidiary and promptly thereafter (and in any event within thirty (30) days), cause
such Person to (i) become a Subsidiary Guarantor by delivering to the Administrative Agent a duly
executed supplement to the Subsidiary Guaranty Agreement or such other document as the
Administrative Agent shall deem appropriate for such purpose, (ii) pledge a security interest in
all applicable Collateral covered under the Security Documents owned by such Restricted Subsidiary
by delivering to the Administrative Agent a duly executed supplement to each Security Document or
such other document as the Administrative Agent reasonably shall deem appropriate for such purpose
and to comply with the terms of each Security Document, (iii) deliver to the Administrative Agent
such documents and certificates referred to in Section 5.1 as may be reasonably requested
by the Administrative Agent, (iv) deliver to the Administrative Agent such original Capital Stock
or other certificates and stock or other transfer powers evidencing the Capital Stock of such
Person, (v) deliver to the Administrative Agent such updated Schedules to the Loan Documents as may
be reasonably requested by the Administrative Agent with respect to such Person, and (vi) deliver
to the Administrative Agent such other documents as may be reasonably requested by the
Administrative Agent, all in form, content and scope reasonably satisfactory to the Administrative
Agent.

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     (b) Additional Foreign Subsidiaries. Notify the Administrative Agent at the time that
any Person becomes a first-tier Foreign Subsidiary that is a Restricted Subsidiary, and promptly
thereafter (and in any event within forty-five (45) days after notification), cause (i) the
Borrower or the applicable Restricted Subsidiary to deliver to the Administrative Agent Security
Documents pledging sixty-five percent (65%) (or such lesser percentage as may then be necessary to
avoid material adverse tax consequences) of the total outstanding Capital Stock of such new Foreign
Subsidiary and a consent thereto executed by such new Foreign Subsidiary (including, without
limitation, if applicable, original stock certificates (or the equivalent thereof pursuant to the
Applicable Laws and practices of any relevant foreign jurisdiction) evidencing the Capital Stock of
such new Foreign Subsidiary, together with an appropriate undated stock power for each certificate
duly executed in blank by the registered owner thereof), (ii) such Person to deliver to the
Administrative Agent such documents and certificates referred to in Section 5.1 as may be
reasonably requested by the Administrative Agent (specifically excluding, however, any joinders or
supplements to the Subsidiary Guaranty Agreement and the Security Documents), (iii) such Person to
deliver to the Administrative Agent such updated Schedules to the Loan Documents as may be
reasonably requested by the Administrative Agent with regard to such Person and (iv) such Person to
deliver to the Administrative Agent such other documents as may be reasonably requested by the
Administrative Agent, all in form, content and scope reasonably satisfactory to the Administrative
Agent.

     SECTION 8.12 Designation of Restricted and Unrestricted Subsidiaries.

     (a) Subject to the terms of this Section, the board of directors of the Borrower may designate
any Restricted Subsidiary as an Unrestricted Subsidiary (or designate any newly formed or acquired
Subsidiary as an Unrestricted Subsidiary to the extent such formation or acquisition is otherwise
permitted hereunder); provided that (i) such designation would not result in a Default or
Event of Default and (ii) any such individual Subsidiary is not a guarantor of, or a “restricted
subsidiary” (or equivalent term) under, any Material Indebtedness or any other Indebtedness
permitted pursuant to Section 10.1(k). If a Subsidiary is designated as an Unrestricted
Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Borrower
and its Restricted Subsidiaries in such Subsidiary shall be deemed to be Investments made as of the
time of the designation, subject to the limitations hereof on Restricted Payments. That
designation shall only be permitted if the Investment would be permitted at that time and if the
Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.

     (b) Any designation of a Subsidiary as an Unrestricted Subsidiary shall be evidenced to the
Administrative Agent by providing prompt written notice to the Administrative Agent together with a
certified copy of the resolution of the board of directors of the Borrower giving effect to such
designation and a certificate from a Responsible Officer of the Borrower certifying that such
designation complied with the conditions set forth in the definition of “Unrestricted Subsidiary”
and was permitted by this Section. If, at any time, any Unrestricted Subsidiary would fail to meet
the requirements as an Unrestricted Subsidiary, it shall thereafter cease to be deemed an
Unrestricted Subsidiary for purposes of this Agreement and the other Loan Documents and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Borrower as of such date and, if such Indebtedness is not permitted

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to be incurred as of such date under Section 10.1, the Borrower shall be in Default of
such covenant.

     (c) The board of directors of the Borrower may at any time redesignate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such redesignation shall be deemed
to be an incurrence of Indebtedness by a Restricted Subsidiary of the Borrower of any outstanding
Indebtedness of such Unrestricted Subsidiary and such redesignation shall only be permitted if (i)
such Indebtedness is permitted under Section 10.1, (ii) the Borrower has demonstrated to
the Administrative Agent compliance with Section 9.1, Section 9.2 and Section
9.3 calculated on a pro forma basis as if such redesignation had occurred at
the beginning of the most recent four-quarter period ended prior to the date of such redesignation
for which financial statements have to be delivered pursuant to Section 7.1, (iii) the
Borrower has complied with Section 8.11, and (iv) no Default or Event of Default would be
in existence following such redesignation.

     (d) Notwithstanding the foregoing, promptly after the date on which the Borrower or the
Administrative Agent determines that any individual Unrestricted Subsidiary fails to satisfy the
requirements specified in the definition of “Unrestricted Subsidiary”, then such Unrestricted
Subsidiary shall be redesignated as a Restricted Subsidiary and the Borrower agrees to deliver all
instruments, documents, certificates and opinions required pursuant to Section 8.11(a).

     SECTION 8.13 Use of Proceeds. The Borrower shall use the proceeds of the Extensions
of Credit (a) to refinance and/or replace existing Indebtedness of the Borrower under the Existing
Credit Facility, (b) for general corporate purposes of the Borrower and its Restricted
Subsidiaries, including, without limitation, working capital, capital expenditures in the ordinary
course of business and Permitted Acquisitions, and (c) to pay fees and expense related to this
Agreement.

     SECTION 8.14 Further Assurances. Make, execute and deliver all such additional and
further acts, things, deeds and instruments as the Administrative Agent or the Required Lenders
(through the Administrative Agent) may reasonably require to document and consummate the
transactions contemplated hereby and to vest completely in and insure the Administrative Agent and
the Lenders their respective rights under this Agreement, the Letters of Credit and the other Loan
Documents.

ARTICLE IX

FINANCIAL COVENANTS

     Until all of the Obligations have been paid and satisfied in full and the Revolving Credit
Commitment has been terminated, and unless a waiver or consent has been obtained in the manner set
forth in Section 13.2, the Borrower and its Restricted Subsidiaries on a Consolidated basis
will not:

     SECTION 9.1 Consolidated Total Leverage Ratio. As of any fiscal quarter end, permit
the Consolidated Total Leverage Ratio to be greater than 5.00 to 1.00.

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     SECTION 9.2 Consolidated Secured Leverage Ratio. As of any fiscal quarter end, permit
the Consolidated Secured Leverage Ratio to be greater than 2.50 to 1.00.

     SECTION 9.3 Interest Coverage Ratio. As of any fiscal quarter end, permit the ratio
of (a) Consolidated EBITDA for the period of four (4) consecutive fiscal quarters ending on such
date to (b) Consolidated Interest Expense for the period of four (4) consecutive fiscal quarters
ending on such date to be less than 2.25 to 1.00.

ARTICLE X

NEGATIVE COVENANTS

     Until all of the Obligations have been paid and satisfied in full and the Revolving Credit
Commitment has been terminated, and unless a waiver or consent has been obtained in the manner set
forth in Section 13.2, the Borrower will not and will not permit any of its Restricted
Subsidiaries to:

     SECTION 10.1 Limitations on Indebtedness. Create, incur, assume or suffer to exist
any Indebtedness except:

     (a) the Obligations (excluding Hedging Obligations permitted pursuant to Section
10.1(b));

     (b) Indebtedness incurred in connection with a Hedging Agreement with a counterparty and upon
terms and conditions (including interest rate) reasonably satisfactory to the Administrative Agent;
provided, that any counterparty that is a Lender shall be deemed satisfactory to the
Administrative Agent;

     (c) Indebtedness existing on the Closing Date and listed on Schedule 6.1(l), and the
renewal, refinancing, refunding, extension and replacement (but not the increase in the aggregate
principal amount) thereof;

     (d) Indebtedness of the Borrower and its Restricted Subsidiaries incurred in connection with
Capital Leases;

     (e) purchase money Indebtedness of the Borrower and its Restricted Subsidiaries;

     (f) Indebtedness of a Person existing at the time such Person became a Restricted Subsidiary
or assets were acquired from such Person, to the extent such Indebtedness was not incurred in
connection with or in contemplation of, such Person becoming a Restricted Subsidiary or the
acquisition of such assets, not to exceed in the aggregate at any time outstanding $100,000,000,
and any refinancings, refundings, renewals or extensions thereof; provided that, any (i) such
refinancings, refundings, renewals or extensions do not increase the principal amount thereof, (ii)
such refinancings, refundings, renewals or extensions are issued on terms and conditions reasonably
satisfactory to the Administrative Agent (including a maturity date at least six (6) months after
the Revolving Credit Maturity Date) and (iii) no Default or Event of Default exists and is
continuing at the time of consummation thereof (both before and giving effect thereto);

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     (g) Guaranty Obligations in favor of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders;

     (h) Guaranty Obligations with respect to Indebtedness permitted pursuant to this Section;

     (i) Indebtedness owed by any Credit Party to another Credit Party;

     (j) Indebtedness of the Borrower or any Restricted Subsidiary consisting of Qualified Trust
Indebtedness;

     (k) unsecured Indebtedness of the Borrower and its Restricted Subsidiaries pursuant to each of
the Senior Unsecured Notes, and, in each case, any refinancings, refundings, renewals, extensions
or exchanges thereof (“Refinancing Indebtedness”); provided that (i) such
Refinancing Indebtedness is an original aggregate principal amount not greater than the aggregate
principal amount of, and unpaid interest on, the Indebtedness being refinanced, refunded, renewed,
extended or exchanged plus the amount of any premiums required to be paid thereon and fees and
expense associated therewith, (ii) such Refinancing Indebtedness has a later or equal final
maturity and a larger or equal weighted average life than the Indebtedness being refinanced,
refunded, renewed, extended or exchanged, (iii) the covenants, events of default and any Guaranty
Obligations in respect thereof, taken as a whole, shall not be materially less favorable to the
Borrower and its Restricted Subsidiaries (as determined by the Administrative Agent in its
reasonable discretion) than those contained in the Indebtedness being refinanced, refunded,
renewed, extended or exchanged and (iv) at the time of, and after giving effect to, such
refinancing, refunding, renewal, extension or exchange, no Default or Event of Default shall have
occurred and be continuing;

     (l) additional unsecured Indebtedness of the Borrower or its Restricted Subsidiaries;
provided that (i) such Indebtedness matures at least six (6) months after the Revolving
Credit Maturity Date, (ii) after giving effect to the incurrence of any such Indebtedness on a
pro forma basis, as if such incurrence of Indebtedness had occurred on the first
day of the twelve month period ending on the last day of the Borrower’s then most recently
completed fiscal quarter, the Borrower and its Restricted Subsidiaries would have been in
compliance with all the financial covenants set forth in Article IX, and the Borrower shall
have delivered to the Administrative Agent a certificate of its chief financial officer to such
effect setting forth in reasonable detail the computations necessary to determine such compliance,
(iii) at the time of the incurrence of such Indebtedness and after giving effect thereto, no
Default or Event of Default shall exist or be continuing and (iv) the documentation governing such
Indebtedness contains customary market terms;

     (m) additional secured Indebtedness not otherwise permitted pursuant to this Section in an
aggregate amount outstanding not to exceed an amount equal to ten percent (10%) of Consolidated
Tangible Assets, determined, with respect to each incurrence of Indebtedness pursuant to this
Section 10.1(m), as of the most recently-ended fiscal quarter for which financial
statements have been furnished pursuant to clauses (a) and (b), respectively, of Section
7.1 (it being understood that this Section 10.1(m) is a limitation on such Indebtedness
on a prospective basis only and that no Default or Event of Default shall occur under this
Section 10.1(m)

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retroactively); provided that (i) not more than $150,000,000 of such secured
Indebtedness is recourse to any Credit Party, (ii) such Indebtedness matures at least six (6)
months after the Revolving Credit Maturity Date and (iii) at the time of the incurrence of such
Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or be
continuing;

     (n) Indebtedness incurred by the Borrower or any of its Restricted Subsidiaries, including
Indebtedness represented by letters of credit for the account of the Borrower or any Restricted
Subsidiary, in respect of workers’ compensation claims, self-insurance obligations, performance,
proposal, completion, surety and similar bonds and completion guarantees provided by the Borrower
or its Restricted Subsidiaries in the ordinary course of business; provided that the underlying
obligation to perform is that of the Borrower or one of its Restricted Subsidiaries and not that of
any other Person and, provided, further, that such underlying obligation is not in respect of
borrowed money;

     (o) Indebtedness of the Borrower consisting of customary indemnification, deferred purchase
price adjustments or similar obligations, in each case, incurred or assumed in connection with the
acquisition of any business or assets permitted to be acquired hereunder; and

     (p) Indebtedness of the Borrower or any Restricted Subsidiary arising from the honoring by a
bank or other financial institution of a check, draft or similar instrument (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course of business, provided
that such Indebtedness is extinguished within five (5) Business Days of incurrence.

     SECTION 10.2 Limitations on Liens. Create, incur, assume or suffer to exist, any Lien
on or with respect to any of its assets or properties (including, without limitation, shares of
Capital Stock), real or personal, whether now owned or hereafter acquired, except:

     (a) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly instituted and
diligently pursued; provided that any reserve or other appropriate provision as is required
in conformity with GAAP has been made therefor;

     (b) Liens or deposits to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of
business;

     (c) Liens consisting of judgments or judicial attachment liens (including prejudgment
attachment), provided that the enforcement of such Liens is effectively stayed, or payment of which
is covered in full (subject to customary deductible) by insurance, or that do not otherwise result
in an Event of Default;

     (d) the claims of materialmen, mechanics, carriers, warehousemen, processors or landlords for
labor, materials, supplies or rentals incurred in the ordinary course of business, (i) that are not
overdue for a period of more than thirty (30) days or (ii) that are being contested in good faith
and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP;

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     (e) Liens consisting of (i) deposits or pledges made in the ordinary course of business in
connection with, or to secure payment of, obligations under workers’ compensation, unemployment
insurance or similar legislation, (ii) good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Indebtedness) or leases to which the Borrower or any
Restricted Subsidiary is a party or (iii) deposits as security for contested taxes or import or
customs duties or for the payment of rent, incurred in the ordinary course of business;

     (f) Liens constituting encumbrances in the nature of zoning restrictions, easements and rights
or restrictions of record on the use of real property that in the aggregate are not substantial in
amount and that do not, in any case, materially detract from the value of such property or
materially impair the use thereof in the ordinary conduct of business;

     (g) Liens securing Hedging Obligations so long as the related Indebtedness was incurred in
compliance with Section 10.1(b);

     (h) leases and subleases of real property that do not materially interfere with the ordinary
conduct of the business of the Borrower or any of its Restricted Subsidiaries;

     (i) Liens of the Administrative Agent for the benefit of the Administrative Agent and the
Lenders under the Loan Documents;

     (j) Liens existing on any asset of any Person at the time such Person becomes a Restricted
Subsidiary or is merged or consolidated with or into a Restricted Subsidiary (i) that were not
created in contemplation of or in connection with such event, (ii) that do not extend to or cover
any other property or assets of Borrower or any Restricted Subsidiary and (iii) so long as any
Indebtedness related to any such Liens is permitted under Section 10.1(f); provided
that, to the extent any such Liens extend to or cover any assets of such Person included in the
Collateral, (A) the Borrower shall keep records for the accounts receivable of such Person separate
from those of the Borrower and its Restricted Subsidiaries and (B) such Person shall not be merged,
consolidated or liquidated with or into the Borrower or any Restricted Subsidiary unless such Liens
are released in connection therewith;

     (k) Liens arising solely by virtue of any statutory or common law provisions relating to
banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other
funds maintained with a credit or depository institution;

     (l) Liens in existence on the Closing Date and described on Schedule 10.2;

     (m) Liens securing Indebtedness permitted under Sections 10.1(d) and (e);
provided that (i) such Liens shall be created substantially simultaneously with the
acquisition or lease of the related asset, (ii) such Liens do not at any time encumber any assets
other than the assets financed by such Indebtedness, (iii) the amount of Indebtedness secured
thereby is not increased and (iv) the principal amount of Indebtedness secured by any such Lien
shall at no time exceed one hundred percent (100%) of the original purchase price or lease payment
amount of such assets at the time of acquisition;

     (n) Liens securing Indebtedness permitted under Section 10.1(m); provided that
(i) the total Asset Lien Value of assets of the Borrower and its Restricted Subsidiaries owned on
the

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Closing Date that are subject to such Liens shall not exceed (A) an amount equal to ten
percent (10%) of Consolidated Tangible Assets determined as of the end of the fiscal quarter ended
immediately prior to the Closing Date less (B) the aggregate amount of all Asset
Dispositions made pursuant to Section 10.4(k), and (ii) the total Asset Lien Value subject
to such Liens (including those permitted by clause (i) of this proviso) shall not exceed, in the
aggregate, an amount equal to ten percent (10%) of Consolidated Tangible Assets determined as of
the most recently-ended fiscal quarter for which financial statements have been furnished pursuant
to clauses (a) and (b), respectively, of Section 7.1; provided further that
compliance with this Section 10.2(n) shall be determined, in each case, as of the date a
Lien is incurred in reliance on this Section 10.2(n) (it being understood that this
Section 10.2(n) is a limitation on such Liens on a prospective basis only and that no
Default or Event of Default shall occur under this Section 10.2(n) retroactively);

     (o) Liens on the Capital Stock of Agecroft to secure the obligations of Agecroft;

     (p) Liens in favor of the Borrower or the Subsidiary Guarantors; and

     (q) Liens on the Capital Stock of Unrestricted Subsidiaries.

     SECTION 10.3 Limitations on Mergers and Liquidation. Merge, consolidate or enter into
any similar combination with any other Person or liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution) except:

     (a) any Person may be merged or consolidated with or into the Borrower; provided that
the Borrower shall be the continuing or surviving Person;

     (b) any Person other than the Borrower may be merged with or consolidated into any Restricted
Subsidiary; provided that such Restricted Subsidiary shall be the continuing or surviving
Person; 

     (c) any Subsidiary of the Borrower may be liquidated, wound-up and/or dissolved into the
Borrower or any Restricted Subsidiary to the extent that such liquidation, winding-up and/or
dissolution would not violate Section 8.1; and

     (d) any Subsidiary of the Borrower may merge into the Person such Subsidiary was formed to
acquire in connection with a Permitted Acquisition.

     SECTION 10.4 Limitations on Asset Dispositions. Make any Asset Disposition
(including, without limitation, the sale of any receivables and leasehold interests and any
sale-leaseback or similar transaction) except:

     (a) the sale or lease of equipment, inventory or other assets in the ordinary course of
business;

     (b) the sale of obsolete, worn-out or surplus assets no longer used or usable in the business
of the Borrower or any of its Restricted Subsidiaries;

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     (c) any Subsidiary of the Borrower may sell, lease, transfer or otherwise dispose of any or
all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other Subsidiary
of the Borrower; provided that if the transferor in such a transaction is a Restricted
Subsidiary, then the transferee must either be the Borrower or a Restricted Subsidiary;

     (d) the sale or other disposition of investments permitted pursuant to clause (b) of the
definition of Permitted Investments;

     (e) the sale or discount without recourse of accounts receivable arising in the ordinary
course of business in connection with the compromise or collection thereof;

     (f) the disposition of any Hedging Agreement;

     (g) the sale (i) for cash or Purchase Notes by the Borrower or any of its Restricted
Subsidiaries of Unoccupied Prison Facilities for a minimum price per bed of $25,000, (ii) for cash
of other Prison Facilities having a fair market value not to exceed $45,000,000 in the aggregate in
any Fiscal Year, and (iii) for cash of any Prison Facility to the United States Bureau of Prisons
or any other federal, state or local governmental agency in connection with a management contract
with such entity with respect to such Prison Facility, such Asset Disposition to be for fair market
value, as determined in good faith by the board of directors of the Borrower and certified in
writing by the board of directors to the Administrative Agent;

     (h) any sale or other disposition for cash of Purchase Notes for fair market value;

     (i) the sale and leaseback of Unoccupied Prison Facilities to Governmental Authorities in
connection with management contracts relating thereto; provided that the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair market value, as
determined in good faith by the Borrower, of such Unoccupied Prison Facility that is the subject of
that sale and leaseback transaction and such transaction is otherwise on terms and conditions
reasonably satisfactory to the Administrative Agent;

     (j) Asset Swaps; provided that (i) the Borrower would, at the time of such Asset Swap
and after giving pro forma effect thereto as if such Asset Swap had been made at
the beginning of the applicable four-fiscal quarter period, have been permitted to incur at least
$1.00 of additional Indebtedness without declining below a Consolidated Fixed Charge Coverage Ratio
of 2.0 to 1.0 for the Borrower’s most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such Asset Swap is to
made and (ii) the board of directors of the Borrower determines that the fair market value of the
assets received by the Borrower in the Asset Swap is not less than the fair market value of the
assets disposed of by the Borrower in such Asset Swap and such determination is evidenced by a
resolution of the board of directors of the Borrower set forth in an officer’s certificate
delivered to the Administrative Agent, in form and substance satisfactory to the Administrative
Agent;

     (k) Asset Dispositions of assets owned by the Borrower and its Restricted Subsidiaries on the
Closing Date, not otherwise permitted pursuant to this Section, in an aggregate amount not to
exceed (i) an amount equal to ten percent (10%) of Consolidated Tangible Assets determined as of
the end of the fiscal quarter ended immediately prior to the Closing Date less (ii) the aggregate
amounts of Liens incurred pursuant to Section 10.2(n) that

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are subject to clause (i) of the proviso of such Section (after giving effect to any Liens
that are released in connection with such Asset Dispositions); provided that compliance
with this Section 10.4(k) shall be determined, in each case, as of the date an Asset
Disposition is made in reliance on this Section 10.4(k) (it being understood that this
Section 10.4(k) is a limitation on such Asset Dispositions on a prospective basis only and
that no Default or Event of Default shall occur under this Section 10.4(k) retroactively);

     (l) the sale by CCA (U.K.) Ltd, a U.K. corporation, of its interest in Agecroft;

     (m) the sale or other disposition by the Borrower of its interest in the Agecroft Note;

     (n) sales or other dispositions permitted pursuant to Section 10.5;

     (o) Asset Dispositions not otherwise permitted pursuant to this Section in an aggregate amount
not to exceed $20,000,000 in any Fiscal Year; and

     (p) additional Asset Dispositions of assets acquired by the Borrower and its Restricted
Subsidiaries after the Closing Date and Designated Assets, subject to the terms and conditions set
forth below:

          (i) the Borrower (or the Restricted Subsidiary, as the case may be) receives consideration at
the time of the Asset Disposition at least equal to (A) the fair market value of the assets (other
than Designated Assets) sold or otherwise disposed of or (B) the Designated Asset Value of the
Designated Assets sold or otherwise disposed of;

          (ii) the fair market value or Designated Asset Value, as applicable, is determined by the
board of directors of the Borrower and evidenced by a resolution of such board of directors set
forth in an officer’s certificate delivered to the Administrative Agent, in form and substance
reasonably satisfactory to the Administrative Agent; and

          (iii) at least 75% of the consideration received in the Asset Disposition by the Borrower or
such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this clause
(iii) only, each of the following will be deemed to be cash:

     (A) any liabilities, as shown on the Borrower’s or such Restricted Subsidiary’s
most recent balance sheet, of the Borrower or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to this
Agreement) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Borrower or such Restricted
Subsidiary from further liability;

     (B) any securities, notes or other obligations received by the Borrower or any
such Restricted Subsidiary from such transferee that are converted within ninety
(90) days of the applicable Asset Disposition by the Borrower or such Restricted
Subsidiary into cash or Cash Equivalents, to the extent of the cash or Cash
Equivalents received in that conversion;

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     (C) 100% of the securities, notes or other obligations or Indebtedness actually
received by the Borrower as consideration for the sale or other disposition of a
Designated Asset pursuant to the terms of a Designated Asset Contract, but only to
the extent that such securities, notes or other obligations or Indebtedness were
explicitly required to be included, or permitted to be included solely at the option
of the purchaser, in such consideration pursuant to the terms of the applicable
Designated Asset Contract;

     (D) 100% of the Indebtedness actually received by the Borrower as consideration
for the sale or other disposition of an Unoccupied Prison Facility; and

     (E) any Designated Non-Cash Consideration received by the Borrower or any such
Restricted Subsidiary in the Asset Disposition;

provided, however, that within 360 days after the receipt of any Net Proceeds from
an Asset Disposition permitted pursuant to this Section 10.4(p), the Borrower may apply the
Net Proceeds from such Asset Disposition:

     (1) to acquire all or substantially all of the assets of, or a majority of the Capital
Stock of, another Permitted Business;

     (2) to make a capital expenditure (provided, that the completion of (i)
construction of new facilities, (ii) expansions to existing facilities, and (iii) repair or
reconstruction of damaged or destroyed facilities that commences within 360 days after the
receipt of any Net Proceeds from an Asset Disposition may extend for an additional 360 day
period if the Net Proceeds to be used for such construction, expansion or repair are
committed to and set aside specifically for such activity within 360 days of their receipt);
or

     (3) to acquire other long-term assets that are used or useful in a Permitted Business.

     Pending the final application of any Net Proceeds, the Borrower may use the Net Proceeds to
pay Loans or invest the Net Proceeds in any Permitted Investment. Any Net Proceeds from Asset
Dispositions that are not applied or invested as provided in the preceding proviso to this
Section 10.4(p) shall constitute “Excess Proceeds.” Within five (5) days of each
date on which the aggregate amount of Excess Proceeds exceeds $15,000,000, the Borrower shall apply
all the Excess Proceeds to prepay the Loans in the manner set forth in Section 2.4(b),
without a corresponding permanent reduction in the Revolving Credit Commitment. If any Excess
Proceeds remain after such prepayment of the Loans, the Borrower shall offer to purchase Senior
Unsecured Notes with such remaining Excess Proceeds pursuant to the terms and conditions of the
Senior Unsecured Notes. Upon application of the Excess Proceeds to prepay the Loans and prepay the
Senior Unsecured Notes, the amount of Excess Proceeds shall be reset at zero.

     SECTION 10.5 Restricted Payments. (a) Declare or pay any dividend or make any other
payment or distribution on account of the Borrower’s, or any Restricted Subsidiary’s,

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Capital Stock (including, without limitation, any payment in connection with any merger or
consolidation involving the Borrower or any Restricted Subsidiary) or to the direct or indirect
holders of the Borrower’s or any Restricted Subsidiary’s Capital Stock in their capacity as such
(other than dividends or distributions (i) payable in Capital Stock (other than Disqualified Stock)
of the Borrower or (ii) payable to the Borrower and/or a Restricted Subsidiary of the Borrower),
(b) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving the Borrower) any Capital Stock of the
Borrower, (c) make any payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Subordinated Indebtedness, except a payment of interest or
principal at the Stated Maturity thereof or a payment of principal or interest on Indebtedness owed
to the Borrower or any of its Restricted Subsidiaries, or (d) make any Restricted Investment (all
such payments and other actions set forth in these clauses (a) through (d) above being collectively
referred to as “Restricted Payments”);

     unless, at the time of and after giving effect to such Restricted Payment:

     (a) no Default or Event of Default has occurred and is continuing or would occur as a
consequence of such Restricted Payment;

     (b) the Borrower would, at the time of such Restricted Payment and after giving pro
forma effect thereto as if such Restricted Payment had been made at the beginning of the
applicable four-fiscal quarter period, have been permitted to incur at least $1.00 of additional
Indebtedness without declining below a Consolidated Fixed Charge Coverage Ratio of 2.0 to 1.0 for
the Borrower’s most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such Restricted Payment is to
made; and

     (c) such Restricted Payment, together with the aggregate amount of all other Restricted
Payments made by the Borrower and its Restricted Subsidiaries after May 3, 2002 (excluding
Restricted Payments permitted by clauses (b), (c), (d), (e), (g), (h) and (i) of the next
succeeding paragraph), is less than the sum, without duplication, of:

          (i) 50% of the Consolidated Net Income of the Borrower, for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing after May 3, 2002 to
the end of the Borrower’s most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus

          (ii) 100% of the aggregate net cash proceeds received by the Borrower (including the fair
market value of any Permitted Business or assets used or useful in a Permitted Business to the
extent acquired in consideration of Capital Stock of the Borrower (other than Disqualified Stock))
since May 3, 2002 as a contribution to its common equity capital or from the issue or sale of
Capital Stock of the Borrower (other than Disqualified Stock) or from the issue or sale of
convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of
the Borrower that have been converted into or exchanged for such Capital Stock (other than Capital
Stock (or Disqualified Stock or debt securities) sold to a Subsidiary of the Borrower),
plus

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          (iii) to the extent that any Restricted Investment (other than a Restricted Investment
permitted by clause (e) of the next succeeding paragraph) that was made after May 3, 2002 is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the
initial amount of such Restricted Investment, plus

          (iv) to the extent that any Unrestricted Subsidiary of the Borrower is redesignated as a
Restricted Subsidiary after May 3, 2002, the lesser of (i) the fair market value of the Borrower’s
Investment in such Subsidiary as of the date of such redesignation or (ii) such fair market value
as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary,
plus

          (v) $25,000,000.

     So long as no Default or Event of Default has occurred and is continuing or would be caused
thereby, the preceding provisions shall not prohibit:

     (a) the payment of any dividend within 60 days after the date of declaration of the dividend,
if at the date of declaration the dividend payment would have complied with the provisions of this
Agreement;

     (b) the redemption, repurchase, retirement, defeasance or other acquisition of any
subordinated Indebtedness of the Borrower or any Subsidiary Guarantor or of any Capital Stock of
the Borrower in exchange for, or out of the net cash proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Borrower) of, Capital Stock of the Borrower (other than
Disqualified Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c)(ii) of the preceding paragraph;

     (c) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness
of the Borrower or any Subsidiary Guarantor with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;

     (d) (i) loans or advances from any Restricted Subsidiary to the Borrower or any of its
Restricted Subsidiaries and (ii) the payment of any dividend or the making of any other
distribution by a Restricted Subsidiary of the Borrower (x) to the Borrower or any Restricted
Subsidiary or (y) to the holders of its Capital Stock on a pro rata basis;

     (e) (i) the purchase, redemption or other acquisition, cancellation or retirement for value of
Capital Stock, or options, warrants, equity appreciation rights or other rights to purchase or
acquire Capital Stock of the Borrower or any Restricted Subsidiary of the Borrower or any parent of
the Borrower held by any existing or former employees of the Borrower or any Subsidiary of the
Borrower or their assigns, estates or heirs, in each case in connection with the repurchase
provisions under employee stock option or stock purchase agreements or other agreements to
compensate management employees; provided that such redemptions or repurchases pursuant to
this clause will not exceed $2,500,000 in the aggregate during any calendar year and $10,000,000 in
the aggregate for all such redemptions and repurchases; provided further, that the
Borrower may carry-forward and make in a subsequent calendar year,

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in addition to the amounts permitted for such calendar year, the amount of such redemptions or
repurchases permitted to have been made but not made in any preceding calendar year;
provided further that such amount in any calendar year may be increased by an
amount not to exceed (x) the cash proceeds from the sale of Capital Stock of the Borrower to
existing or former employees of the Borrower or any Subsidiary of the Borrower after the Closing
Date (to the extent the cash proceeds from the sale of such Capital Stock have not otherwise been
applied to the payment of Restricted Payments by virtue of clause (c)(ii) of the preceding
paragraph) plus (y) the cash proceeds of key man life insurance policies received by the
Borrower and its Subsidiaries after the Closing Date less (z) the amount of any Restricted
Payments previously made pursuant to clause (x) and (y) of this clause (e)(i) and (ii) loans or
advances to employees or directors of the Borrower or any Subsidiary of the Borrower the proceeds
of which are used to purchase Capital Stock of the Borrower, in an aggregate amount not in excess
of $10,000,000 at any one time outstanding;

     (f) prior to the Closing Date, the declaration and payment by the Borrower of a dividend
consisting of Qualified Trust Preferred Stock with a fair market value that is not greater than is
necessary in order to preserve the Borrower’s eligibility to elect Real Estate Investment Trust
status with respect to its 1999 taxable year;

     (g) prior to the Closing Date, the repurchase, redemption or other acquisition or retirement
for value of up to $130,000,000 in liquidation preference of the Series B Preferred Stock if the
Borrower would, at the time of such Restricted Payment and after giving pro forma
effect thereto as if such Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness without
declining below a Consolidated Fixed Charge Coverage Ratio of 2.0 to 1.0 for the Borrower’s most
recently ended four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such Restricted Payment is to made;

     (h) repurchases of Capital Stock of the Borrower deemed to occur upon the exercise of stock
options if such Capital Stock represents a portion of the exercise price thereof;

     (i) prior to the Closing Date, the declaration and payment of dividends on the Borrower’s
Series A Preferred Stock and Series B Preferred Stock in accordance with terms of the Series A
Preferred Stock and Series B Preferred Stock as in effect on May 7, 2003;

     (j) prior to the Closing Date, the payment of the liquidation preference of and all accrued
and unpaid interest on 100% of issued and outstanding shares of the Series A Preferred Stock in
accordance with the terms of the Series A Preferred Stock as in effect on the Closing Date and the
notice of redemption to be given by the Borrower on May 7, 2003;

     (k) prior to the Closing Date, the redemption pursuant to their terms of all PMI Notes that
remain outstanding on the applicable redemption date after the Borrower sends notice of such
redemption to the holders of such notes, provided that (i) the Borrower converts all PMI
Notes pursuant to their terms upon the proper request of a holder of such notes and (ii) the fair
market value of the common stock received upon such conversion (measured as of the date the notice
of redemption is given) is not less than one and one half times the proceeds such holder would
receive pursuant to such redemption;

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     (l) prior to the Closing Date, the repurchase, redemption or other acquisition or retirement
for value of the shares of Series A Preferred Stock issued and outstanding on May 7, 2003 with the
net proceeds from the issuance by a Qualified Trust of Qualified Trust Preferred Stock; and

     (m) Restricted Payments not otherwise permitted in an amount not to exceed $40,000,000.

     The amount of all Restricted Payments (other than cash) shall be the fair market value on the
date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued
by the Borrower or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The
fair market value of any assets or securities that are required to be valued by this Section
10.5 shall be determined by the Borrower’s board of directors, whose resolution with respect
thereto shall be delivered to the Administrative Agent. The Borrower’s board of directors’
determination must be based upon an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if the fair market value exceeds $15,000,000. Except
with respect to any Restricted Payment permitted pursuant to clauses (a) — (m) of the immediately
preceding paragraph, not later than ten (10) days following the end of the fiscal quarter in which
such Restricted Payment was made, the Borrower shall deliver to the Administrative Agent an
officer’s certificate, in form reasonably satisfactory to the Administrative Agent, stating that
such Restricted Payment is permitted and setting forth the basis upon which the calculations
required by this Section 10.5 were calculated.

     SECTION 10.6 Limitations on Exchange and Issuance of Disqualified Stock. Issue, sell
or otherwise dispose of any class or series of Disqualified Stock.

     SECTION 10.7 Transactions with Affiliates. Directly or indirectly (a) make any loan
or advance to, or purchase or assume any note or other obligation to or from, any of its officers,
directors, shareholders or other Affiliates, or to or from any member of the immediate family of
any of its officers, directors, shareholders or other Affiliates, or subcontract any operations to
any of its Affiliates or (b) enter into, or be a party to, any other transaction not described in
clause (a) above with any of its Affiliates other than:

          (i) transactions permitted by Sections 10.1, 10.2, 10.3, 10.4,
10.5, and 10.6;

          (ii) transactions existing on the Closing Date and described on Schedule 10.7;

          (iii) normal compensation and reimbursement of reasonable expenses of officers and directors;
Subsidiaries;

          (iv) transactions between or among the Borrower and/or its Restricted Subsidiaries;

          (v) any issuance of securities, or other payments, awards or grants in cash, securities or
otherwise pursuant to, or the funding of employment arrangements, stock options and stock ownership
plans and other reasonable fees, compensation, benefits and indemnities paid or entered into by the
Borrower or any of its Restricted Subsidiaries in the ordinary course

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of business to or with officers, directors or employees of the Borrower and its Restricted
Subsidiaries; and

          (vi) other transactions (including, without limitation, employment agreements and indemnity
agreements) in the ordinary course of business on terms as favorable as would be obtained by it on
a comparable arms-length transaction with an independent, unrelated third party, as determined in
good faith by the board of directors of the Borrower.

     SECTION 10.8 Certain Accounting Changes; Organizational Documents. (a) Change its
Fiscal Year end, or make any change in its accounting treatment and reporting practices except as
required by GAAP or (b) except pursuant to a transaction permitted by Section 10.3, amend,
modify or change its articles of incorporation (or corporate charter or other similar
organizational documents) or bylaws (or other similar documents) in any manner adverse in any
respect to the rights or interests of the Lenders hereunder.

     SECTION 10.9 Amendments; Payments and Prepayments of Material Indebtedness.

     (a) Amend or modify (or permit the modification or amendment of) any of the terms or
provisions of any Material Indebtedness (including, without limitation, the Senior Unsecured Notes)
in any respect that would materially adversely affect the rights or interests of the Administrative
Agent and Lenders hereunder.

     (b) Make or offer to make any optional or voluntary payment, prepayment, repurchase or
redemption of, or otherwise voluntarily or optionally defease, any Material Indebtedness, or
segregate funds for any such payment, prepayment, repurchase, redemption or defeasance (including,
without limitation, (i) by way of depositing with any trustee with respect thereto money or
securities before due for the purpose of paying when due and (ii) at the maturity thereof), other
than the prepayment of Material Indebtedness permitted hereunder (including, without limitation, as
otherwise permitted pursuant to Section 10.5); provided, however, that (A)
the Borrower may make optional or voluntary payments on any Senior Unsecured Note so long as the
Borrower has demonstrated that the pro forma Consolidated Total Leverage Ratio is
less than 4.75 to 1.00 as of the date of any such payment and after giving effect thereto and (B)
the Borrower and its Restricted Subsidiaries may make optional or voluntary payments or prepayments
of any intercompany Indebtedness incurred pursuant to Section 10.1(i).

     SECTION 10.10 Restrictive Agreements.

     (a) Enter into any Indebtedness (other than the Senior Unsecured Notes) that contains any
negative pledge on assets or that restricts, limits or otherwise encumbers its ability to incur
Liens on or with respect to any of its assets or properties other than the assets or properties
securing such Indebtedness.

     (b) Enter into or permit to exist any agreement (other than the Senior Unsecured Notes) that
impairs or limits the ability of any Restricted Subsidiary of the Borrower to pay dividends to the
Borrower.

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     SECTION 10.11 Nature of Business. Engage in any business other than a Permitted
Business.

     SECTION 10.12 Impairment of Security Interests. Take or omit to take any action that
would have the result of materially impairing the security interests in favor of the Administrative
Agent with respect to the Collateral.

     SECTION 10.13 Use of Proceeds. Use the proceeds of the Extensions of Credit, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry
margin stock (within the meaning of Regulation T, U or X of the Board of Governors of the Federal
Reserve System) or to extend credit to others for the purpose of purchasing or carrying margin
stock or to refund indebtedness originally incurred for such purpose (except to the extent that
such purchase would not cause more than 25% of the aggregate value of the assets (either of the
Borrower only or of the Borrower and its Subsidiaries on a consolidated basis) that are subject to
the provisions of Section 10.2 or Section 10.4, or that are subject to any
restriction contained in any agreement or instrument between the Borrower and any Lender or any
Affiliate of any Lender relating to Indebtedness and within the scope of Section 11.1(g),
to consist of margin stock).

ARTICLE XI

DEFAULT AND REMEDIES

     SECTION 11.1 Events of Default. Each of the following shall constitute an Event of
Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment or order of any court or any order, rule
or regulation of any Governmental Authority or otherwise:

     (a) Default in Payment of Principal of Loans and Reimbursement Obligations. The
Borrower shall default in any payment of principal of any Loan or Reimbursement Obligation when and
as due (whether at maturity, by reason of acceleration or otherwise).

     (b) Other Payment Default. The Borrower shall default in the payment when and as due
(whether at maturity, by reason of acceleration or otherwise) of interest on any Loan or
Reimbursement Obligation or the payment of any other Obligation, and such default shall continue
for a period of three (3) Business Days.

     (c) Misrepresentation. Any representation, warranty, certification or statement of
fact made or deemed made by or on behalf of the Borrower or any other Credit Party herein, in any
other Loan Document or in any document delivered in connection herewith or therewith that is
subject to materiality or Material Adverse Effect qualifications shall be incorrect or misleading
in any respect when made or deemed made or any representation, warranty, certification or statement
of fact made or deemed made, by or on behalf of the Borrower or any other Credit Party herein, in
any other Loan Document or in any document delivered in connection herewith or therewith that is
not subject to materiality or Material Adverse Effect qualifications shall be incorrect or
misleading in any material respect when made or deemed made.

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     (d) Default in Performance of Certain Covenants. The Borrower or any other Credit
Party shall default in the performance or observance of any covenant or agreement contained in
Sections 7.1 or 7.2 or Articles IX or X.

     (e) Default in Performance of Other Covenants and Conditions. The Borrower or any
other Credit Party shall default in the performance or observance of any term, covenant, condition
or agreement contained in this Agreement (except as otherwise specifically provided in this
Section) or any other Loan Document and such default shall continue for a period of thirty (30)
days after written notice thereof has been given to the Borrower by the Administrative Agent.

     (f) Hedging Agreement. The Borrower or any other Credit Party shall default in the
performance or observance of any terms, covenant, condition or agreement (after giving effect to
any applicable grace or cure period) under any Hedging Agreement and such default causes the
termination of such Hedging Agreement and the Termination Value owed by such Credit Party as a
result thereof exceeds $20,000,000.

     (g) Material Indebtedness Cross-Default. The Borrower or any other Credit Party shall
(i) default in the payment of any Material Indebtedness (other than the Loans or any Reimbursement
Obligation) beyond the period of grace if any, provided in the instrument or agreement under which
such Material Indebtedness was created, or (ii) default in the observance or performance of any
other agreement or condition relating to any Material Indebtedness (other than the Loans or any
Reimbursement Obligation) or contained in any instrument or agreement evidencing, securing or
relating thereto or any other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders of such Material
Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, with the giving
of notice if required, any such Material Indebtedness to become due prior to its Stated Maturity
(any applicable grace period having expired).

     (h) Change in Control. Any Change in Control shall occur.

     (i) Voluntary Bankruptcy Proceeding. The Borrower or any Restricted Subsidiary
thereof shall (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter
in effect), (ii) file a petition seeking to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of
debts, (iii) consent to or fail to contest in a timely and appropriate manner any petition filed
against it in an involuntary case under such bankruptcy laws or other laws, (iv) apply for or
consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a
substantial part of its property, domestic or foreign, (v) admit in writing its inability to pay
its debts as they become due, (vi) make a general assignment for the benefit of creditors, or (vii)
take any corporate action for the purpose of authorizing any of the foregoing.

     (j) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be commenced
against the Borrower or any Restricted Subsidiary thereof in any court of competent jurisdiction
seeking (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any
other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization,

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winding up or composition or adjustment of debts, or (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like for the Borrower or any Restricted Subsidiary thereof
or for all or any substantial part of their respective assets, domestic or foreign, and such case
or proceeding shall continue without dismissal or stay for a period of sixty (60) consecutive days,
or an order granting the relief requested in such case or proceeding (including, but not limited
to, an order for relief under such federal bankruptcy laws) shall be entered.

     (k) Failure of Agreements. Any provision of this Agreement or any provision of any
other Loan Document shall for any reason cease to be valid and binding on the Borrower or any other
Credit Party party thereto or any such Person shall so state in writing, or any Loan Document shall
for any reason cease to create a valid and perfected first priority Lien on, or security interest
in, any of the Collateral purported to be covered thereby (subject to Permitted Liens), in each
case other than in accordance with the express terms hereof or thereof.

     (l) Termination Event. The occurrence of any of the following events: (i) the
Borrower or any ERISA Affiliate fails to make full payment when due of all amounts that, under the
provisions of any Pension Plan or Section 412 of the Code, the Borrower or any ERISA Affiliate is
required to pay as contributions thereto, (ii) an accumulated funding deficiency in excess of
$20,000,000 occurs or exists, whether or not waived, with respect to any Pension Plan, (iii) a
Termination Event or (iv) the Borrower or any ERISA Affiliate as employers under one or more
Multiemployer Plans makes a complete or partial withdrawal from any such Multiemployer Plan and the
plan sponsor of such Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding $20,000,000.

     (m) Judgment. A judgment or order for the payment of money that causes the aggregate
amount of all such judgments to exceed $20,000,000 in any Fiscal Year shall be entered against the
Borrower or any Credit Party by any court and such judgment or order shall continue without having
been discharged, vacated, stayed or bonded for a period of thirty (30) days after the entry
thereof.

     SECTION 11.2 Remedies. Upon the occurrence of an Event of Default, with the consent
of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders,
the Administrative Agent shall, by notice to the Borrower:

     (a) Acceleration; Termination of Facilities. Terminate the Revolving Credit
Commitment and declare the principal of and interest on the Loans and the Reimbursement Obligations
at the time outstanding, and all other amounts owed to the Lenders and to the Administrative Agent
under this Agreement or any of the other Loan Documents (including, without limitation, all L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have
presented or shall be entitled to present the documents required thereunder) and all other
Obligations (other than Hedging Obligations), to be forthwith due and payable, whereupon the same
shall immediately become due and payable without presentment, demand, protest or other notice of
any kind, all of which are expressly waived by each Credit Party, anything in this Agreement or the
other Loan Documents to the contrary notwithstanding, and terminate the Credit Facility and any
right of the Borrower to request borrowings or Letters of Credit thereunder; provided, that
upon the occurrence of an Event of Default specified in

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Section 11.1(i) or (j), the Credit Facility shall be automatically terminated
and all Obligations (other than Hedging Obligations) shall automatically become due and payable
without presentment, demand, protest or other notice of any kind, all of which are expressly waived
by each Credit Party, anything in this Agreement or in any other Loan Document to the contrary
notwithstanding;

     (b) Letters of Credit. With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph (a), require that the Borrower at such time deposit in a cash collateral
account opened by the Administrative Agent an amount equal to the aggregate then undrawn and
unexpired amount of such Letters of Credit; and

     (c) Rights of Collection. Exercise on behalf of the Lenders all of its other rights
and remedies under this Agreement, the other Loan Documents and Applicable Law, in order to satisfy
all of the Borrower’s Obligations.

     SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The enumeration of the
rights and remedies of the Administrative Agent and the Lenders set forth in this Agreement is not
intended to be exhaustive and the exercise by the Administrative Agent and the Lenders of any right
or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be
cumulative, and shall be in addition to any other right or remedy given hereunder or under the
other Loan Documents or that may now or hereafter exist at law or in equity or by suit or
otherwise. No delay or failure to take action on the part of the Administrative Agent or any
Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege or shall be construed to be
a waiver of any Event of Default. No course of dealing between the Borrower, the Administrative
Agent and the Lenders or their respective agents or employees shall be effective to change, modify
or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a
waiver of any Event of Default.

     SECTION 11.4 Crediting of Payments and Proceeds. In the event that the Borrower shall
fail to pay any of the Obligations when due and the Obligations have been accelerated pursuant to
Section 11.2, all payments received by the Lenders upon the Obligations and all net
proceeds from the enforcement of the Obligations shall be applied:

     First, to payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts, including attorney fees, payable to the Administrative Agent in its
capacity as such and the applicable Issuing Lender in its capacity as such (ratably among the
Administrative Agent and the Issuing Lender in proportion to the respective amounts described in
this clause First payable to them);

     Second, to payment of that portion of the Obligations constituting fees, indemnities
and other amounts (other than principal and interest) payable to the Lenders, including attorney
fees (ratably among the Lenders in proportion to the respective amounts described in this clause
Second payable to them);

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     Third, to payment of that portion of the Obligations constituting accrued and unpaid
interest on the Loans and Reimbursement Obligations and any Hedging Obligations (including any
termination payments and any accrued and unpaid interest thereon) (ratably among the Lenders in
proportion to the respective amounts described in this clause Third payable to them);

     Fourth, to payment of that portion of the Obligations constituting unpaid principal of
the Loans and Reimbursement Obligations (ratably among the Lenders in proportion to the respective
amounts described in this clause Fourth held by them);

     Fifth, to the Administrative Agent for the account of the applicable Issuing Lender,
to cash collateralize any L/C Obligations then outstanding; and

     Last, the balance, if any, after all of the Obligations have been indefeasibly paid in
full, to the Borrower or as otherwise required by Law.

     Amounts held to cash collateralize any L/C Obligations pursuant to clause Fifth above
and/or Section 11.2(b) shall be applied by the Administrative Agent to the payment of
drafts drawn under Letters of Credit with respect to which presentment for honor shall not have
occurred at the time of an acceleration pursuant to Section 11.2, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall
be applied to repay the other Obligations, if any, in the order set forth above.

     SECTION 11.5 Administrative Agent May File Proofs of Claim. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to any Credit Party, the Administrative Agent
(irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable
as herein expressed or by declaration or otherwise and irrespective of whether the Administrative
Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention
in such proceeding or otherwise:

     (a) to file and prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid
and to file such other documents as may be necessary or advisable in order to have the claims of
the Lenders and the Administrative Agent (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the Administrative Agent
under Sections 3.3, 4.3 and 13.3) allowed in such judicial proceeding; and

     (b) to collect and receive any monies or other property payable or deliverable on any such
claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make such payments to the
Administrative Agent and, in the event that the Administrative Agent shall consent to the making of
such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its
agents and counsel, and any other amounts due the Administrative Agent under Sections 4.3
and 13.3.

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     Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or
consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement,
adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the
Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

ARTICLE XII

THE ADMINISTRATIVE AGENT

     SECTION 12.1 Appointment and Authority. Each of the Lenders and each Issuing Lender
hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent
hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such
actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by
the terms hereof or thereof, together with such actions and powers as are reasonably incidental
thereto. The provisions of this Article are solely for the benefit of the Administrative Agent,
the Lenders and the Issuing Lenders, and neither the Borrower nor any Restricted Subsidiary thereof
shall have rights as a third party beneficiary of any of such provisions.

     SECTION 12.2 Rights as a Lender. The Person serving as the Administrative Agent
hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and
may exercise the same as though it were not the Administrative Agent and the term “Lender” or
“Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires,
include the Person serving as the Administrative Agent hereunder in its individual capacity. Such
Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or
in any other advisory capacity for and generally engage in any kind of business with the Borrower
or any Restricted Subsidiary or other Affiliate thereof as if such Person were not the
Administrative Agent hereunder and without any duty to account therefor to the Lenders.

     SECTION 12.3 Exculpatory Provisions. The Administrative Agent shall not have any
duties or obligations except those expressly set forth herein and in the other Loan Documents.
Without limiting the generality of the foregoing, the Administrative Agent:

     (a) shall not be subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing;

     (b) shall not have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan
Documents that the Administrative Agent is required to exercise as directed in writing by the
Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided
for herein or in the other Loan Documents), provided that the Administrative Agent shall
not be required to take any action that, in its opinion or the opinion of its counsel, may expose
the Administrative Agent to liability or that is contrary to any Loan Document or Applicable Law;
and

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     (c) shall not, except as expressly set forth herein and in the other Loan Documents, have any
duty to disclose, and shall not be liable for the failure to disclose, any information relating to
the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as
the Administrative Agent or any of its Affiliates in any capacity.

     The Administrative Agent shall not be liable for any action taken or not taken by it (i) with
the consent or at the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be
necessary, under the circumstances as provided in Section 13.2 and Section 11.2) or
(ii) in the absence of its own gross negligence or willful misconduct as determined by a court of
competent jurisdiction by final nonappealable judgment. The Administrative Agent shall be deemed
not to have knowledge of any Default unless and until notice describing such Default is given to
the Administrative Agent by the Borrower, a Lender or the Issuing Lenders.

     The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with this Agreement or
any other Loan Document, (ii) the contents of any certificate, report or other document delivered
hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance
of any of the covenants, agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this
Agreement, any other Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article V or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the Administrative Agent.

     SECTION 12.4 Reliance by the Administrative Agent. The Administrative Agent shall be
entitled to rely upon, and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing (including any electronic
message, Internet or intranet website posting or other distribution) believed by it to be genuine
and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative
Agent also may rely upon any statement made to it orally or by telephone and believed by it to have
been made by the proper Person, and shall not incur any liability for relying thereon. In
determining compliance with any condition hereunder to the making of a Loan, or the issuance of a
Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the
applicable Issuing Lender, the Administrative Agent may presume that such condition is satisfactory
to such Lender or such Issuing Lender unless the Administrative Agent shall have received notice to
the contrary from such Lender or such Issuing Lender prior to the making of such Loan or the
issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts selected by it, and
shall not be liable for any action taken or not taken by it in accordance with the advice of any
such counsel, accountants or experts.

     SECTION 12.5 Delegation of Duties. The Administrative Agent may perform any and all
of its duties and exercise its rights and powers hereunder or under any other Loan Document by or
through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent
and any such sub-agent may perform any and all of its duties and exercise its rights and powers by
or through their respective Related Parties. The exculpatory provisions

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of this Article shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective activities in
connection with the syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.

     SECTION 12.6 Resignation of Administrative Agent.

     (a) The Administrative Agent may at any time give notice of its resignation to the Lenders,
the Issuing Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required
Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which
shall be a bank with an office in the United States, or an Affiliate of any such bank with an
office in the United States. If no such successor shall have been so appointed by the Required
Lenders and shall have accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the
Lenders and the Issuing Lenders, appoint a successor Administrative Agent meeting the
qualifications set forth above provided that if the Administrative Agent shall notify the Borrower
and the Lenders that no qualifying Person has accepted such appointment, then such resignation
shall nonetheless become effective in accordance with such notice and (1) the retiring
Administrative Agent shall be discharged from its duties and obligations hereunder and under the
other Loan Documents (except that in the case of any collateral security held by the Administrative
Agent on behalf of the Lenders or the Issuing Lenders under any of the Loan Documents, the retiring
Administrative Agent shall continue to hold such collateral security until such time as a successor
Administrative Agent is appointed) and (2) all payments, communications and determinations provided
to be made by, to or through the Administrative Agent shall instead be made by or to each Lender
and each Issuing Lender directly, until such time as the Required Lenders appoint a successor
Administrative Agent as provided for above in this paragraph. Upon the acceptance of a successor’s
appointment as Administrative Agent hereunder, such successor shall succeed to and become vested
with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative
Agent, and the retiring Administrative Agent shall be discharged from all of its duties and
obligations hereunder or under the other Loan Documents (if not already discharged therefrom as
provided above in this paragraph). The fees payable by the Borrower to a successor Administrative
Agent shall be the same as those payable to its predecessor unless otherwise agreed between the
Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and
under the other Loan Documents, the provisions of this Article and Section 13.3 shall
continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be taken by any of them
while the retiring Administrative Agent was acting as Administrative Agent.

     (b) Any resignation by Bank of America as Administrative Agent pursuant to this Section shall
also constitute its resignation as an Issuing Lender and Swingline Lender. Upon the acceptance of
a successor’s appointment as Administrative Agent hereunder, (a) such successor shall succeed to
and become vested with all of the rights, powers, privileges and duties of as an Issuing Lender, if
applicable, and as Swingline Lender, (b) the retiring Issuing Lender and Swingline Lender shall be
discharged from all of their respective duties and obligations hereunder or under the other Loan
Documents, and (c) the successor Issuing Lender shall issue letters of credit in substitution for
the Letters of Credit, if any, outstanding at the time of such

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succession or make other arrangement satisfactory to Bank of America, as a retiring Issuing
Lender to effectively assume the obligations of the retiring Issuing Lender with respect to Letters
of Credit issued thereby.

     SECTION 12.7 Non-Reliance on Administrative Agent and Other Lenders. Each Lender and
each Issuing Lender acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender or any of their Related Parties and based on such
documents and information as it has deemed appropriate, made its own credit analysis and decision
to enter into this Agreement. Each Lender and each Issuing Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other Lender or any of
their Related Parties and based on such documents and information as it shall from time to time
deem appropriate, continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document or any related agreement or any document furnished
hereunder or thereunder.

     SECTION 12.8 No Other Duties, etc. Anything herein to the contrary notwithstanding,
none of the syndication agents, documentation agents, co-agents, book manager, lead manager,
arranger, lead arranger or co-arranger listed on the cover page or signature pages hereof shall
have any powers, duties or responsibilities under this Agreement or any of the other Loan
Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or an
Issuing Lender hereunder.

     SECTION 12.9 Collateral and Guaranty Matters. The Lenders irrevocably authorize the
Administrative Agent, at its option and in its discretion,

     (a) to release any Lien on any Collateral granted to or held by the Administrative Agent under
any Loan Document (i) upon repayment of the outstanding principal of and all accrued interest on
the Loans, payment of all outstanding fees and expenses hereunder, the termination of the Revolving
Credit Commitment and the expiration or termination of all Letters of Credit, (ii) that is sold or
to be sold as part of or in connection with any sale, disposition or other transaction permitted
hereunder or under any other Loan Document, or (iii) subject to Section 13.2, if approved,
authorized or ratified in writing by the Required Lenders;

     (b) to subordinate or release any Lien on any Collateral granted to or held by the
Administrative Agent under any Loan Document to the holder of any Permitted Lien (except Permitted
Liens permitted solely by Section 10.2(n)); and

     (c) to release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty
Agreement, the Collateral Agreement and any other Security Documents if such Person ceases to be a
Restricted Subsidiary as a result of a transaction permitted hereunder.

     Upon request by the Administrative Agent at any time, the Required Lenders will confirm in
writing the Administrative Agent’s authority to release or subordinate its interest in particular
types or items of property, or to release any Subsidiary Guarantor from its obligations under the
Subsidiary Guaranty Agreement pursuant to this Section.

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ARTICLE XIII

MISCELLANEOUS

     SECTION 13.1 Notices.

     (a) Method of Communication. Except as otherwise provided in this Agreement, all
notices and communications hereunder shall be in writing (for purposes hereof, the term “writing”
shall include information in electronic format such as electronic mail and internet web pages), or
by telephone subsequently confirmed in writing. Any notice shall be effective if delivered by hand
delivery or sent via electronic mail, posting on an internet web page, telecopy, recognized
overnight courier service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or sent by electronic
mail, posting on an internet web page or telecopy, (ii) on the next Business Day if sent by
recognized overnight courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to the Administrative Agent as
understood by the Administrative Agent will be deemed to be the controlling and proper notice in
the event of a discrepancy with or failure to receive a confirming written notice.

     (b) Addresses for Notices. Notices to any party shall be sent to it at the following
addresses, or any other address as to which all the other parties are notified in writing.

	 	 	 	 	 	 	 	 	 
	 

	 	If to the Borrower:
	 	 	 	Corrections Corporation of America

10 Burton Hills Boulevard, Suite 100

Nashville, Tennessee 37215

Attention: Chief Financial Officer

Telephone No.: (615) 263-3131

Telecopy No.: (615) 263-3010
	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	With copies to:
	 	 	 	Bass, Berry & Sims PLC

315 Deaderick Street, Suite 2700

Nashville, Tennessee 37238

Attention: James S. Tate, Jr.

Telephone No.: (615) 742-6200

Telecopy No.: (615) 742-6293	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	If to Bank of America as

Administrative Agent:
	 	 	 	Bank of America, N.A.

Mail Code: IL1-231-10-41

231 South LaSalle Street

Chicago, Illinois 60604

Attention: Agency Management

Telephone No.: (312) 828-3185

Telecopy No.: (877) 207-2382	 	 

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	 	With copies to:
	 	 	 	Bank of America, N.A.

Mail Code: MD9-978-04-01

1101 Wooton Parkway

Rockville, Maryland 20852

Attention: Barbara P. Levy

Telephone No.: (301) 517-3128

Telecopy No.: (804) 553-2394	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	If to any Lender:
	 	 	 	To the address set forth on the Register	 	 

     (c) Administrative Agent’s Office. The Administrative Agent hereby designates its
office located at the address set forth above, or any subsequent office that shall have been
specified for such purpose by written notice to the Borrower and Lenders, as the Administrative
Agent’s Office referred to herein, to which payments due are to be made and at which Loans will be
disbursed and Letters of Credit requested.

     SECTION 13.2 Amendments, Waivers and Consents. Except as set forth below or as
specifically provided in any Loan Document, any term, covenant, agreement or condition of this
Agreement or any of the other Loan Documents may be amended or waived by the Lenders, and any
consent given by the Lenders, if, but only if, such amendment, waiver or consent is in writing
signed by the Required Lenders (or by the Administrative Agent with the consent of the Required
Lenders) and delivered to the Administrative Agent and, in the case of an amendment, signed by the
Borrower; provided, that no amendment, waiver or consent shall:

     (a) waive any condition set forth in Section 5.1 without the written consent of each
Lender directly affected thereby;

     (b) extend or increase the Revolving Credit Commitment of any Lender (or reinstate any
Revolving Credit Commitment terminated pursuant to Section 11.2) or the amount of Loans of
any Lender without the written consent of such Lender;

     (c) postpone any date fixed by this Agreement or any other Loan Document for any payment of
principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under
any other Loan Document without the written consent of each Lender directly affected thereby;

     (d) reduce the principal of, or the rate of interest specified herein on, any Loan or
Reimbursement Obligation, or (subject to clause (iv) of the second proviso to this Section) any
fees or other amounts payable hereunder or under any other Loan Document without the written
consent of each Lender directly affected thereby; provided that only the consent of the
Required Lenders shall be necessary (i) to waive any obligation of the Borrower to pay interest at
the rate set forth in Section 4.1(c) during the continuance of an Event of Default, or (ii)
to amend any financial covenant hereunder (or any defined term used therein) even if the effect of
such amendment would be to reduce the rate of interest on any Loan or L/C Borrowing or to reduce
any fee payable hereunder;

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     (e) change Section 4.4 or Section 11.4 in a manner that would alter the
pro rata sharing of payments required thereby without the written consent of each
Lender directly affected thereby;

     (f) change any provision of this Section or the definition of “Required Lenders” or any other
provision hereof specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender directly affected thereby;

     (g) release all of the Subsidiary Guarantors or release Subsidiary Guarantors comprising
substantially all of the credit support for the Obligations, in either case, from the Subsidiary
Guaranty Agreement (other than as authorized in Section 12.9), without the written consent
of each Lender; or

     (h) release all or a material portion of the Collateral or release any Security Document
(other than as authorized in Section 12.9 or as otherwise specifically permitted or
contemplated in this Agreement or the applicable Security Document) without the written consent of
each Lender;

provided further, that (i) no amendment, waiver or consent shall, unless in writing
and signed by the applicable Issuing Lender in addition to the Lenders required above, affect the
rights or duties of such Issuing Lender under this Agreement or any Letter of Credit Application
relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent
shall, unless in writing and signed by the Swingline Lender in addition to the Lenders required
above, affect the rights or duties of the Swingline Lender as such under this Agreement; (iii) no
amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in
addition to the Lenders required above, affect the rights or duties of the Administrative Agent as
such under this Agreement or any other Loan Document; and (iv) the Fee Letters may be amended, or
rights or privileges thereunder waived, in a writing executed only by the parties thereto.
Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to
approve or disapprove any amendment, waiver or consent hereunder, except that the Revolving Credit
Commitment of such Lender may not be increased or extended without the consent of such Lender.

     In addition, notwithstanding anything to the contrary herein, each Lender hereby authorizes
the Administrative Agent on its behalf, and without its further consent, to enter into amendments
to this Agreement and the other Loan Documents as the Administrative Agent may reasonably deem
appropriate in order to effectuate any increase in the Revolving Credit Commitment pursuant to
Section 2.7 or any Incremental Term Loans pursuant to Section 2.8, including,
without limitation, amendments to permit such increases in the Revolving Credit Commitment and any
Incremental Term Loans to share ratably in the benefits of this Agreement and the other Loan
Documents and to include appropriately any Lenders under such increases in the Revolving Credit
Commitment and any Incremental Term Loans in any determination of Required Lenders;
provided that no such amendment shall adversely affect in any material respect the rights
of any Lender, in each case, without the written consent of such Lender.

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     SECTION 13.3 Expenses; Indemnity.

     (a) Costs and Expenses. The Borrower and any other Credit Party, jointly and
severally, shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent
and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the
Administrative Agent), in connection with the syndication of the credit facilities provided for
herein, the preparation, negotiation, execution, delivery and administration of this Agreement and
the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or
thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii)
all reasonable out-of-pocket expenses incurred by the Issuing Lenders in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment
thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, each Lender
and the Issuing Lenders in connection with the enforcement or preservation of any rights
(including, without limitation, all such out-of-pocket expenses incurred during any workout,
restructuring or related negotiations in respect of any Loans or Letters of Credit) (A) in
connection with this Agreement and the other Loan Documents, including its rights under this
Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including,
without limitation, the fees and disbursements of counsel to the Administrative Agent, each Lender
and the Issuing Lenders; provided that, so long as no Default or Event of Default exists,
such reimbursement for legal fees and disbursements shall be limited to the fees and disbursements
of one primary counsel designated by the Administrative Agent plus the fees and disbursements of
any local and specialist counsel engaged by the Administrative Agent.

     (b) Indemnification by the Borrower. The Borrower shall indemnify the Administrative
Agent (and any sub-agent thereof), each Lender and each Issuing Lender, and each Related Party of
any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and
hold each Indemnitee harmless from, any and all losses, claims (including, without limitation, any
Environmental Claims or civil penalties or fines assessed by OFAC), damages, liabilities and
related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee),
incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower
or any other Credit Party arising out of, in connection with, or as a result of (i) the execution
or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the performance by the parties hereto of their respective obligations hereunder
or thereunder or the consummation of the transactions contemplated hereby or thereby, or, in the
case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the
administration of this Agreement and the other Loan Documents (ii) any Loan or Letter of Credit or
the use or proposed use of the proceeds therefrom (including any refusal by the applicable Issuing
Lender to honor a demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii)
any actual or alleged presence or release of Hazardous Materials on or from any property owned or
operated by the Borrower or any of its Subsidiaries, or any Environmental Claim related in any way
to the Borrower or any of its Subsidiaries, (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory, whether brought by a third party or by the Borrower or any other Credit Party,
and regardless of whether any Indemnitee is a party thereto, or (v) any claim (including, without

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limitation, any Environmental Claims or civil penalties or fines assessed by OFAC),
investigation, litigation or other proceeding (whether or not the Administrative Agent or any
Lender is a party thereto) and the prosecution and defense thereof, arising out of or in any way
connected with the Loans, this Agreement, any other Loan Document or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or thereby, including
without limitation, reasonable attorneys and consultant’s fees, provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross negligence or willful misconduct
of such Indemnitee or (y) result from a claim brought by the Borrower or any other Credit Party
against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under
any other Loan Document, if the Borrower or such Credit Party has obtained a final and
nonappealable judgment in its favor on such claim as determined by a court of competent
jurisdiction.

     (c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to
indefeasibly pay any amount required under clause (a) or (b) of this Section to be paid by it to
the Administrative Agent (or any sub-agent thereof), the applicable Issuing Lender or any Related
Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or
any such sub-agent), the applicable Issuing Lender or such Related Party, as the case may be, such
Lender’s Applicable Margin (determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred
by or asserted against the Administrative Agent (or any such subagent) or the applicable Issuing
Lender in its capacity as such, or against any Related Party of any of the foregoing acting for the
Administrative Agent (or any such sub-agent) or applicable Issuing Lender in connection with such
capacity. The obligations of the Lenders under this clause (c) are subject to the provisions of
Section 4.7.

     (d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
Applicable Law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to
direct or actual damages) arising out of, in connection with, or as a result of, this Agreement,
any other Loan Document or any agreement or instrument contemplated hereby, the transactions
contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.
No Indemnitee referred to in clause (b) above shall be liable for any damages arising from the use
by unintended recipients of any information or other materials distributed by it through
telecommunications, electronic or other information transmission systems in connection with this
Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

     (e) Payments. All amounts due under this Section shall be payable promptly after
demand therefor.

     (f) Survival. The agreements in this Section shall survive the resignation of the
Administrative Agent, any Issuing Lender and the Swing Line Lender, the replacement of any

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Lender, the termination of the Revolving Credit Commitments and the repayment, satisfaction or
discharge of all the other Obligations.

     SECTION 13.4 Right of Set-off. If an Event of Default shall have occurred and be
continuing, each Lender, each Issuing Lender, the Swingline Lender and each of their respective
Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted
by Applicable Law, to set off and apply any and all deposits (general or special, time or demand,
provisional or final, in whatever currency) at any time held and other obligations (in whatever
currency) at any time owing by such Lender, such Issuing Lender, the Swingline Lender or any such
Affiliate to or for the credit or the account of the Borrower or any other Credit Party against any
and all of the obligations of the Borrower or such Credit Party now or hereafter existing under
this Agreement or any other Loan Document to such Lender, such Issuing Lender or the Swingline
Lender, irrespective of whether or not such Lender, such Issuing Lender or the Swingline Lender
shall have made any demand under this Agreement or any other Loan Document and although such
obligations of the Borrower or such Credit Party may be contingent or unmatured or are owed to a
branch or office of such Lender, such Issuing Lender or the Swingline Lender different from the
branch or office holding such deposit or obligated on such indebtedness. The rights of each
Lender, each Issuing Lender, the Swingline Lender and their respective Affiliates under this
Section are in addition to other rights and remedies (including other rights of setoff) that such
Lender, such Issuing Lender, the Swingline Lender or their respective Affiliates may have. Each
Lender, each Issuing Lender and the Swingline Lender agrees to notify the Borrower and the
Administrative Agent promptly after any such setoff and application; provided that the
failure to give such notice shall not affect the validity of such setoff and application.

     SECTION 13.5 Governing Law.

     (a) Governing Law. This Agreement and the other Loan Documents, unless expressly set
forth therein, shall be governed by, and construed in accordance with, the law of the State of New
York, without reference to the conflicts or choice of law principles thereof, other than such
principles that are stated in Section 5-1401 and 5-1402 of the General Obligations Law of the State
of New York.

     (b) Submission to Jurisdiction. The Borrower and each other Credit Party irrevocably
and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the
courts of the State of New York sitting in the Borough of Manhattan and of the United States
District Court of the Borough of Manhattan, and any appellate court from any thereof, in any action
or proceeding arising out of or relating to this Agreement or any other Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such action or proceeding may be heard and
determined in such New York State court or, to the fullest extent permitted by Applicable Law, in
such Federal court. Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document
shall affect any right that the Administrative Agent, any Lender or any Issuing Lender may
otherwise have to bring any action or proceeding relating to this Agreement or any

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other Loan Document against the Borrower or any other Credit Party or its properties in the
courts of any jurisdiction.

     (c) Waiver of Venue. The Borrower and each other Credit Party irrevocably and
unconditionally waives, to the fullest extent permitted by Applicable Law, any objection that it
may now or hereafter have to the laying of venue of any action or proceeding arising out of or
relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of
this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.

     (d) Service of Process. Each party hereto irrevocably consents to service of process
in the manner provided for notices in Section 13.1. Nothing in this Agreement will affect
the right of any party hereto to serve process in any other manner permitted by Applicable Law.

     SECTION 13.6 Waiver of Jury Trial.

     (a) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     SECTION 13.7 Reversal of Payments. To the extent the Borrower makes a payment or
payments to the Administrative Agent for the ratable benefit of the Lenders or the Administrative
Agent receives any payment or proceeds of the Collateral, which payments or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then, to the extent of such payment or proceeds repaid,
the Obligations or part thereof intended to be satisfied shall be revived and continued in full
force and effect as if such payment or proceeds had not been received by the Administrative Agent.

     SECTION 13.8 Injunctive Relief; Punitive Damages.

     (a) The Borrower recognizes that, in the event the Borrower fails to perform, observe or
discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove
to be inadequate relief to the Lenders. Therefore, the Borrower agrees that the Lenders, at the
Lenders’ option, shall be entitled to temporary and permanent injunctive relief in any such

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case without the necessity of proving actual damages, to the extent permitted by Applicable
Law and principles of equity.

     (b) To the extent permitted by Applicable Law, the Administrative Agent, the Lenders and the
Borrower (on behalf of itself and the Credit Parties) hereby agree that no such Person shall have a
remedy of punitive or exemplary damages against any other party to a Loan Document and each such
Person hereby waives any right or claim to punitive or exemplary damages that they may now have or
may arise in the future in connection with any Dispute, whether such Dispute is resolved through
arbitration or judicially.

     SECTION 13.9 Accounting Matters. If at any time any change in GAAP would affect the
computation of any financial ratio or requirement set forth in any Loan Document, and either the
Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the
Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original
intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders);
provided that, until so amended, (i) such ratio or requirement shall continue to be
computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide
to the Administrative Agent and the Lenders financial statements and other documents required under
this Agreement or as reasonably requested hereunder setting forth a reconciliation between
calculations of such ratio or requirement made before and after giving effect to such change in
GAAP.

     SECTION 13.10 Successors and Assigns; Participations.

     (a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that neither the Borrower nor any other Credit Party may assign or
otherwise transfer any of its rights or obligations hereunder without the prior written consent of
the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its
rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the
provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the
provisions of paragraph (d) of this Section or (iii) by way of pledge or assignment of a security
interest subject to the restrictions of paragraph (f) of this Section (and any other attempted
assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than the parties hereto,
their respective successors and assigns permitted hereby, Participants to the extent provided in
paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties
of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.

     (b) Assignments by Lenders. Any Lender may at any time assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this Agreement (including all or a
portion of its Revolving Credit Commitment and the Loans (including for purposes of this paragraph
(b), participations in L/C Obligations and in Swingline Loans) at the time owing to it);
provided that

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          (i) except in the case of an assignment of the entire remaining amount of the assigning
Lender’s Revolving Credit Commitment and the Loans at the time owing to it, the aggregate amount of
the Revolving Credit Commitment (which for this purpose includes Loans outstanding thereunder) or,
if the applicable Revolving Credit Commitment is not then in effect, the principal outstanding
balance of the Loans of the assigning Lender subject to each such assignment (determined as of the
date the Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the
Trade Date) shall not be less than $5,000,000, unless (A) such assignment is made to an existing
Lender, to an Affiliate thereof or to an Approved Fund with respect thereto, or (B) each of the
Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing,
the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed);
provided, however, that concurrent assignments to members of an Assignee Group and
concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an
Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for
purposes of determining whether such minimum amount has been met;

          (ii) each partial assignment shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the
Revolving Credit Commitment assigned;

          (iii) no consent shall be required for any assignment except to the extent required by
subsections (b)(i) and (b)(iv) of this Section and, in addition:

     (A) the consent of the Borrower (such consent not to be unreasonably withheld
or delayed) shall be required unless (1) an Event of Default has occurred and is
continuing at the time of such assignment or (2) such assignment is to a Lender, an
Affiliate of a Lender or an Approved Fund with respect to a Lender;

     (B) the consent of the Administrative Agent (such consent not to be
unreasonably withheld or delayed) shall be required unless such assignment is to a
Person that is a Lender, an Affiliate of a Lender or an Approved Fund with respect
to a Lender;

     (C) the consent of the Issuing Lenders (such consent not to be unreasonably
withheld or delayed) shall be required for any assignment that increases the
obligation of the assignee to participate in exposure under one or more Letters of
Credit (whether or not then outstanding);

     (D) the consent of the Swing Line Lender (such consent not to be unreasonably
withheld or delayed) shall be required for any assignment;

          (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an
Assignment and Assumption, together with a processing and recordation fee of $3,500 for each
assignment, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire;

105

 

          (v) no such assignment shall be made to the Borrower or any of the Borrower’s Affiliates or
Subsidiaries; and

          (vi) no such assignment shall be made to a natural person.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c)
of this Section, from and after the effective date specified in each Assignment and Assumption, the
Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest
assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations
under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be
entitled to the benefits of Sections 4.8, 4.9, 4.10, 4.11 and
13.3 with respect to facts and circumstances occurring prior to the effective date of such
assignment. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the
assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement
as a sale by such Lender of a participation in such rights and obligations in accordance with
paragraph (d) of this Section.

     (c) Register. The Administrative Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at one of its offices in Chicago, Illinois, a copy of each Assignment
and Assumption delivered to it and a register for the recordation of the names and addresses of the
Lenders, and the Revolving Credit Commitment of, and principal amounts of the Loans and L/C
Obligations owing to, each Lender pursuant to the terms hereof from time to time (the
“Register”). The entries in the Register shall be conclusive, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be available for inspection by the
Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

     (d) Participations. Any Lender may at any time, without the consent of, or notice to,
the Borrower or the Administrative Agent, sell participations to any Person (other than a natural
person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a
“Participant”) in all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Revolving Credit Commitment and/or the Loans
(including such Lender’s participations in L/C Obligations and/or Swingline Loans)owing to it);
provided that (i) such Lender’s rights and obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the
exercise of such rights and the performance of such obligations and (iii) the Borrower, the
Administrative Agent, the Lenders and the Issuing Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and obligations under this
Agreement.

     Any agreement or instrument pursuant to which a Lender sells such a participation shall
provide that such Lender shall retain the sole right to enforce this Agreement and to approve any

106

 

amendment, modification or waiver of any provision of this Agreement; provided that
such agreement or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver or modification described in
Section 13.2 that directly affects such Participant. Subject to paragraph (e) of this
Section, the Borrower agrees that each Participant shall be entitled to the benefits of
Sections 4.8, 4.9, 4.10 and 4.11 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To
the extent permitted by law, each Participant also shall be entitled to the benefits of Section
13.4 as though it were a Lender, provided such Participant agrees to be subject to Section
4.6 as though it were a Lender.

     (e) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Sections 4.10 and 4.11 than the applicable Lender
would have been entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the Borrower’s prior written
consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to
the benefits of Section 4.11 unless the Borrower is notified of the participation sold to
such Participant and such Participant agrees, for the benefit of the Borrower, to comply with
Section 4.11(e) as though it were a Lender.

     (f) Certain Pledges. Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement (including under its Notes, if any) to
secure obligations of such Lender, including without limitation any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall
release such Lender from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.

     (g) Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of which shall be of the
same legal effect, validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as provided for in any
applicable law, including the Federal Electronic Signatures in Global and National Commerce Act,
the New York State Electronic Signatures and Records Act, or any other similar state laws based on
the Uniform Electronic Transactions Act.

     (h) Resignation as Issuing Lender or Swingline Lender after Assignment.
Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns
all of its Revolving Credit Commitment and Revolving Credit Loans pursuant to subsection (b) above,
Bank of America may, (i) upon 30 days’ notice to the Borrower and the Lenders, resign as an Issuing
Lender and/or (ii) upon 30 days’ notice to the Borrower, resign as Swingline Lender. In the event
of any such resignation as an Issuing Lender or Swingline Lender, the Borrower shall be entitled to
appoint from among the Lenders a successor Issuing Lender or Swingline Lender hereunder;
provided, however, that no failure by the Borrower to appoint any such successor
shall affect the resignation of Bank of America as an Issuing Lender or Swingline Lender, as the
case may be. If Bank of America resigns as an Issuing Lender, it shall retain all the rights,
powers, privileges and duties of an Issuing Lender hereunder with respect to all Letters of Credit
outstanding as of the effective date of its resignation as an Issuing

107

 

Lender and all L/C Obligations with respect thereto (including the right to require the L/C
Participants to make payments and fund risk participations in any unreimbursed portions of any
payment made by the Issuing Lender pursuant to Section 3.4(b)). If Bank of America resigns
as Swingline Lender, it shall retain all the rights of the Swingline Lender provided for hereunder
with respect to Swingline Loans made by it and outstanding as of the effective date of such
resignation, including the right to require the Revolving Credit Lenders to make Revolving Credit
Loans or fund risk participations in outstanding Swingline Loans pursuant to Section
2.2(b). Upon the appointment of a successor Issuing Lender and/or Swingline Lender, (a) such
successor shall succeed to and become vested with all of the rights, powers, privileges and duties
of the retiring Issuing Lender or Swingline Lender, as the case may be, and (b) the successor
Issuing Lender shall issue letters of credit in substitution for the Letters of Credit, if any,
outstanding at the time of such successor or make other arrangements satisfactory to Bank of
America to effectively assume the obligations of Bank of America with respect to such Letters of
Credit.

     SECTION 13.11 Confidentiality. Each of the Administrative Agent, the Lenders and the
Issuing Lenders agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its Affiliates and to its Affiliates’ respective
partners, directors, officers, employees, agents, accountants, legal counsel, advisors and
representatives (it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by, or required to be disclosed to, any rating agency,
or regulatory or similar authority purporting to have jurisdiction over it (including any
self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the
extent required by Applicable Laws or regulations or by any subpoena or similar legal process, (d)
to any other party hereto, (e) in connection with the exercise of any remedies under this Agreement
or under any other Loan Document (or any Hedging Agreement with a Lender or the Administrative
Agent) or any action or proceeding relating to this Agreement or any other Loan Document (or any
Hedging Agreement with a Lender or the Administrative Agent) or the enforcement of rights hereunder
or thereunder, (f) subject to an agreement containing provisions substantially the same as those of
this Section, to (A) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or any Eligible Assignee
invited to be a Lender pursuant to Section 2.7 or 2.8, or (B) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction relating to the
Borrower and its obligations, (g) with the consent of the Borrower, to Gold Sheets and other
similar bank trade publications, such information to consist of deal terms and other information
customarily found in such publications, (h) to the extent such Information (A) becomes publicly
available other than as a result of a breach of this Section or (B) becomes available to the
Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower
or (i) to governmental regulatory authorities in connection with any regulatory examination of the
Administrative Agent, any Lender, any Issuing Lender or any of their respective Affiliates or in
accordance with any such Person’s regulatory compliance policy if such Person deems the same to be
necessary for the mitigation of claims by those authorities against such Person or any of its
Affiliates. For purposes of this Section, “Information” means all information received
from any Credit Party relating to any Credit Party or any of their respective businesses, other
than any such information that is available to the Administrative Agent, any Lender or any Issuing
Lender on a nonconfidential basis prior to disclosure by any

108

 

Credit Party; provided that, in the case of information received from a Credit Party
after the date hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

     Each of the Administrative Agent, the Lenders and the Issuing Lenders acknowledges that (a)
the Information may include material non-public information concerning the Borrower or a
Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of
material non-public information and (c) it will handle such material non-public information in
accordance with Applicable Law, including United States Federal and state securities laws.

     SECTION 13.12 Performance of Duties. Each of the Credit Party’s obligations under
this Agreement and each of the other Loan Documents shall be performed by such Credit Party at its
sole cost and expense.

     SECTION 13.13 All Powers Coupled with Interest. All powers of attorney and other
authorizations granted to the Lenders, the Administrative Agent and any Persons designated by the
Administrative Agent or any Lender pursuant to any provisions of this Agreement or any of the other
Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of
the Obligations remain unpaid or unsatisfied, any of the Revolving Credit Commitment remains in
effect or the Credit Facility has not been terminated.

     SECTION 13.14 Survival of Indemnities. Notwithstanding any termination of this
Agreement, the indemnities to which the Administrative Agent and the Lenders are entitled under the
provisions of this Article XIII and any other provision of this Agreement and the other
Loan Documents shall continue in full force and effect and shall protect the Administrative Agent
and the Lenders against events arising after such termination as well as before.

     SECTION 13.15 Titles and Captions. Titles and captions of Articles, Sections and
subsections in, and the table of contents of, this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.

     SECTION 13.16 Severability of Provisions. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without
invalidating the remainder of such provision or the remaining provisions hereof or thereof or
affecting the validity or enforceability of such provision in any other jurisdiction.

     SECTION 13.17 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and shall be binding upon all parties, their successors
and assigns, and all of which taken together shall constitute one and the same agreement.

     SECTION 13.18 Integration. This Agreement, together with the other Loan Documents,
comprises the complete and integrated agreement of the parties on the subject matter hereof and
thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event

109

 

of any conflict between the provisions of this Agreement and those of any other Loan Document,
the provisions of this Agreement shall control; provided that the inclusion of supplemental
rights or remedies in favor of the Administrative Agent or the Lenders in any other Loan Document
shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint
participation of the respective parties thereto and shall be construed neither against nor in favor
of any party, but rather in accordance with the fair meaning thereof.

     SECTION 13.19 Term of Agreement. This Agreement shall remain in effect from the
Closing Date through and including the date upon which all Obligations arising hereunder or under
any other Loan Document (except for contingent Obligations that expressly survive the termination
of this Agreement or any other Loan Document) shall have been indefeasibly and irrevocably paid and
satisfied in full and the Revolving Credit Commitment has been terminated. No termination of this
Agreement shall affect the rights and obligations of the parties hereto arising prior to such
termination or in respect of any provision of this Agreement which survives such termination.

     SECTION 13.20 Advice of Counsel, No Strict Construction. Each of the parties
represents to each other party hereto that it has discussed this Agreement with its counsel. The
parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

     SECTION 13.21 No Advisory or Fiduciary Responsibility. In connection with all aspects
of each transaction contemplated hereby (including in connection with any amendment, waiver or
other modification hereof or of any other Loan Document), the Borrower acknowledges and agrees, and
acknowledges its Affiliates’ understanding, that: (i) (A) the arranging and other services
regarding this Agreement provided by the Administrative Agent and the Arrangers, are arm’s-length
commercial transactions between the Borrower and its Affiliates, on the one hand, and the
Administrative Agent and the Arrangers, on the other hand, (B) the Borrower has consulted its own
legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) the
Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of
the transactions contemplated hereby and by the other Loan Documents; (ii) (A) the Administrative
Agent and each Arranger is and has been acting solely as a principal and, except as expressly
agreed in writing by the relevant parties, has not been, is not, and will not be acting as an
advisor, agent or fiduciary for the Borrower or any of its Affiliates or any other Person and (B)
neither the Administrative Agent nor any Arranger has any obligation to the Borrower or any of its
Affiliates with respect to the transactions contemplated hereby except those obligations expressly
set forth herein and in the other Loan Documents and (iii) the Administrative Agent and the
Arrangers and their respective Affiliates may be engaged in a board range of transactions that
involve interests that differ from those of the Borrower and its Affiliates, and neither the
Administrative Agent nor any Arranger has any obligation to disclose any of such interests to the
Borrower or its Affiliates. To the fullest extent permitted by law, the Borrower hereby waives and
releases any claims that it may have against the Administrative Agent and the Arrangers with
respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect
of any transaction contemplated hereby.

110

 

     SECTION 13.22 USA Patriot Act. The Administrative Agent and each Lender hereby
notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub.
L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify
and record information that identifies the Borrower and Subsidiary Guarantors, which information
includes the name and address of each Borrower and Subsidiary Guarantor and other information that
will allow such Lender to identify such Borrower or Subsidiary Guarantor in accordance with the
Act.

     SECTION 13.23 Inconsistencies with Other Documents; Independent Effect of Covenants.

     (a) In the event there is a conflict or inconsistency between this Agreement and any other
Loan Document, the terms of this Agreement shall control; provided that any provision of
the Security Documents that imposes additional burdens on the Borrower or its Restricted
Subsidiaries or further restricts the rights of the Borrower or its Restricted Subsidiaries or
gives the Administrative Agent or Lenders additional rights shall not be deemed to be in conflict
or inconsistent with this Agreement and shall be given full force and effect.

     (b) The Borrower expressly acknowledges and agrees that each covenant contained in
Articles VIII, IX, or X hereof shall be given independent effect.
Accordingly, the Borrower shall not engage in any transaction or other act otherwise permitted
under any covenant contained in Articles VIII, IX, or X if, before or after
giving effect to such transaction or act, the Borrower shall or would be in breach of any other
covenant contained in Articles VIII, IX, or X.

[Signature pages to follow]

111

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by
their duly authorized officers, all as of the day and year first written above.

	 	 	 	 	 	 	 
	 	 	CORRECTIONS CORPORATION OF

AMERICA, as Borrower
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	/s/ Todd J Mullenger
	 	 	 	 	 
	 

	 	 	 	Name:
	 	Todd J Mullenger
	 

	 	 	 	Title:
	 	Chief Financial Officer and
	 

	 	 	 	 	 	Executive Vice President

CREDIT AGREEMENT — CORRECTIONS CORPORATION OF AMERICA

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	AGENT:
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A., as Administrative
 Agent
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	/s/ Roberto O. Salazar
	 	 	 	 	 
	 

	 	 	 	Name:	 	Roberto O. Salazar 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	Assistant Vice President 
	 

	 	 	 	 	 	 

CREDIT AGREEMENT — CORRECTIONS CORPORATION OF AMERICA

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	LENDERS:
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A., as Swingline
 Lender, Issuing
Lender and Lender
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	/s/  Barbara P. Levy
	 	 	 	 	 
	 

	 	 	 	Name:
	 	Barbara P. Levy
	 

	 	 	 	Title:
	 	Senior Vice President

CREDIT AGREEMENT — CORRECTIONS CORPORATION OF AMERICA

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	WACHOVIA BANK, NATIONAL
 ASSOCIATION
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	/s/ Michael Johnson
	 	 	 	 	 
	 

	 	 	 	Name:	 	Michael Johnson 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	Vice President 
	 

	 	 	 	 	 	 

CREDIT AGREEMENT — CORRECTIONS CORPORATION OF AMERICA

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	/s/ Robert L. Mendoza
	 	 	 	 	 
	 

	 	 	 	Name:	 	Robert L. Mendoza 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	Vice President 
	 

	 	 	 	 	 	 

CREDIT AGREEMENT — CORRECTIONS CORPORATION OF AMERICA

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	CITIBANK, N.A.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	/s/ Scott A. Miller
	 	 	 	 	 
	 

	 	 	 	Name:	 	Scott A. Miller 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	Vice President 
	 

	 	 	 	 	 	 

CREDIT AGREEMENT — CORRECTIONS CORPORATION OF AMERICA

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	HSBC BANK USA,
NATIONAL ASSOCIATION
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	/s/ Adriana D. Collins
	 	 	 	 	 
	 

	 	 	 	Name:	 	Adriana D. Collins 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	First Vice President 
	 

	 	 	 	 	 	 

CREDIT AGREEMENT — CORRECTIONS CORPORATION OF AMERICA

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	SUNTRUST BANK
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	/s/ Kap Yarbrough
	 	 	 	 	 
	 

	 	 	 	Name:	 	Kap Yarbrough 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	Vice President 
	 

	 	 	 	 	 	 

CREDIT AGREEMENT — CORRECTIONS CORPORATION OF AMERICA

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	US BANK NATIONAL ASSOCIATION
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	/s/ Michael P. Dickman
	 	 	 	 	 
	 

	 	 	 	Name:	 	Michael P. Dickman 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	Vice President 
	 

	 	 	 	 	 	 

CREDIT AGREEMENT — CORRECTIONS CORPORATION OF AMERICA

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	LEHMAN BROTHERS
COMMERCIAL BANK
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	/s/ George Janes
	 	 	 	 	 
	 

	 	 	 	Name:	 	George Janes 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	Chief Credit Officer 
	 

	 	 	 	 	 	 

CREDIT AGREEMENT — CORRECTIONS CORPORATION OF AMERICA

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	BRANCH BANKING AND TRUST COMPANY
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	/s/ R. Andrew Beam
	 	 	 	 	 
	 

	 	 	 	Name:	 	R. Andrew Beam 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	Senior Vice President 
	 

	 	 	 	 	 	 

CREDIT AGREEMENT — CORRECTIONS CORPORATION OF AMERICA

Signature PageEX-10.27 Amendment Number 17 to Contract

 

Exhibit 10.27

ARIZONA
HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION

DIVISION OF BUSINESS AND FINANCE

CONTRACT AMENDMENT

Page 1 of 1

	 	 	 	 	 	 	 
	1. AMENDMENT NO.:
	 	2. CONTRACT NO.:
	 	3. EFFECTIVE DATE OF MODIFICATION:
	 	4. PROGRAM:
	17
	 	YH04-0001-03
	 	October 1, 2007
	 	DHCM-ACUTE

	5.	 	CONTRACTOR/PROVIDER NAME AND ADDRESS:

Health Choice Arizona

1600 West Broadway Rd., Suite 260

Tempe, AZ 85282-1136

	6.	 	PURPOSE: To amend Sections B Capitation Rules; Section D, Program Requirements and
Attachment F, Periodic Reporting Requirements.

	7.	 	The contract referenced above is amended as follows:

     A. SECTION B. CAPITATION RATES — See attached rate sheet

     B. SECTION D, PROGRAM REQUIREMENTS — See Contract Section D for specifics.

     C. ATTACHMENT F, PERIODIC REPORT REQUIREMENTS

	 	 	 
	Note: Please sign, date and return one original to:

	 	Philip M. Baldwin ACSW
Senior Procurement Specialist
AHCCCS Contracts & Purchasing
701 E. Jefferson, MD5700
Phoenix, Arizona 85034

	8.	 	EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT NOT
HERETOFORE CHANGED AND/OR AMENDED REMAIN UNCHANGED AND IN FULL EFFECT.
	 
	 	 	IN WITNESS WHEREOF THE PARTIES HERETO SIGN THEIR NAMES IN AGREEMENT.

	 	 	 	 	 
	9. NAME OF CONTRACTOR:

	 	10. ARIZONA HEALTH CARE COST
	 	 
	HEALTH CHOICE ARIZONA

	 	CONTAINMENT SYSTEM	 	 
	 
	 	 	 	 
	SIGNATURE OF AUTHORIZED INDIVIDUAL:

	 	SIGNATURE:	 	 
	 
	 	 	 	 
	/s/ Carolyn Rose

	 	/s/ Michael Veit	 	 
	 

	 	 	 	 
	TYPED NAME:

	 	TYPED NAME:	 	 
	CAROLYN ROSE

	 	MICHAEL VEIT	 	 
	TITLE:

	 	TITLE:	 	 
	CHIEF EXECUTIVE OFFICER

	 	CONTRACTS AND PURCHASING
ADMINISTRATOR	 	 
	DATE:

	 	DATE:	 	 
	9/5/2007

	 	August 29, 2007	 	 

 

 

Contract/RFP No. YH04-0001 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	SECTION A: CONTRACT AMENDMENT	 	 	1	 
	 
	 	 	 	 	 	 
	SECTION B: CAPITATION RATES	 	 	6	 
	 
	 	 	 	 	 	 
	SECTION C: DEFINITIONS	 	 	7	 
	 
	 	 	 	 	 	 
	SECTION D: PROGRAM REQUIREMENTS	 	 	15	 
	 
	 	 	 	 	 	 
	     1.

	 	TERM OF CONTRACT AND OPTION TO RENEW
	 	 	15	 
	     2.

	 	ELIGIBILITY CATEGORIES
	 	 	16	 
	     3.

	 	ENROLLMENT AND DISENROLLMENT
	 	 	17	 
	     4.

	 	ANNUAL ENROLLMENT CHOICE
	 	 	20	 
	     5.

	 	OPEN ENROLLMENT
	 	 	20	 
	     6.

	 	AUTO-ASSIGNMENT ALGORITHM
	 	 	20	 
	     7.

	 	AHCCCS MEMBER IDENTIFICATION CARDS
	 	 	20	 
	     8.

	 	MAINSTREAMING OF AHCCCS MEMBERS
	 	 	20	 
	     9.

	 	TRANSITION OF MEMBERS
	 	 	21	 
	     10.

	 	SCOPE OF SERVICES
	 	 	22	 
	     11.

	 	SPECIAL HEALTH CARE NEEDS
	 	 	30	 
	     12.

	 	BEHAVIORAL HEALTH SERVICES
	 	 	31	 
	     13.

	 	AHCCCS GUIDELINES, POLICIES AND MANUALS
	 	 	33	 
	     14.

	 	MEDICAID SCHOOL BASED CLAIMING PROGRAM (MSBC)
	 	 	33	 
	     15.

	 	PEDIATRIC IMMUNIZATIONS AND THE VACCINES FOR CHILDREN PROGRAM
	 	 	34	 
	     16.

	 	STAFF REQUIREMENTS AND SUPPORT SERVICES
	 	 	34	 
	     17.

	 	WRITTEN POLICIES, PROCEDURES AND JOB DESCRIPTIONS
	 	 	36	 
	     18.

	 	MEMBER INFORMATION
	 	 	36	 
	     19.

	 	SURVEYS
	 	 	37	 
	     20.

	 	CULTURAL COMPETENCY
	 	 	38	 
	     21.

	 	MEDICAL RECORDS
	 	 	38	 
	     22.

	 	ADVANCE DIRECTIVES
	 	 	39	 
	     23.

	 	QUALITY MANAGEMENT AND MEDICAL MANAGEMENT (QM/MM)
	 	 	39	 
	     24.

	 	PERFORMANCE STANDARDS
	 	 	41	 
	     25.

	 	GRIEVANCE SYSTEM
	 	 	45	 
	     26.

	 	QUARTERLY GRIEVANCE SYSTEM REPORTS
	 	 	46	 
	     27.

	 	NETWORK DEVELOPMENT
	 	 	46	 
	     28.

	 	PROVIDER AFFILIATION TRANSMISSION
	 	 	48	 
	     29.

	 	NETWORK MANAGEMENT
	 	 	48	 
	     30.

	 	PRIMARY CARE PROVIDER STANDARDS
	 	 	49	 
	     31.

	 	MATERNITY CARE PROVIDER STANDARDS
	 	 	51	 
	     32.

	 	REFERRAL MANAGEMENT PROCEDURES AND STANDARDS
	 	 	51	 
	     33.

	 	APPOINTMENT STANDARDS
	 	 	52	 
	     34.

	 	FEDERALLY QUALIFIED HEALTH CENTERS (FQHC) AND RURAL HEALTH
CLINICS (RHC)
	 	 	53	 
	     35.

	 	PROVIDER MANUAL
	 	 	53	 
	     36.

	 	PROVIDER REGISTRATION
	 	 	54	 
	     37.

	 	SUBCONTRACTS
	 	 	54	 
	     38.

	 	CLAIMS PAYMENT/HEALTH INFORMATION SYSTEM
	 	 	57	 
	     39.

	 	SPECIALTY CONTRACTS
	 	 	59	 
	     40.

	 	HOSPITAL SUBCONTRACTING AND REIMBURSEMENT
	 	 	59	 
	     41.

	 	NURSING FACILITY REIMBURSEMENT
	 	 	60	 
	     42.

	 	PHYSICIAN INCENTIVES/PAY FOR PERFORMANCE
	 	 	60	 
	     43.

	 	MANAGEMENT SERVICES AGREEMENT AND COST ALLOCATION PLAN
	 	 	61	 

CYE ‘08 Acute Care Renewal

Final

August 27, 2007

-2-

 

Contract/RFP No. YH04-0001 

	 	 	 	 	 	 	 
	     44.

	 	RESERVED
	 	 	61	 
	     45.

	 	MINIMUM CAPITALIZATION REQUIREMENTS
	 	 	61	 
	     46.

	 	PERFORMANCE BOND OR BOND SUBSTITUTE
	 	 	62	 
	     47.

	 	AMOUNT OF PERFORMANCE BOND
	 	 	63	 
	     48.

	 	ACCUMULATED FUND DEFICIT
	 	 	63	 
	     49.

	 	ADVANCES, DISTRIBUTIONS, LOANS AND INVESTMENTS
	 	 	63	 
	     50.

	 	FINANCIAL VIABILITY STANDARDS / PERFORMANCE GUIDELINES
	 	 	63	 
	     51.

	 	SEPARATE INCORPORATION
	 	 	65	 
	     52.

	 	MERGER, REORGANIZATION AND CHANGE OF OWNERSHIP
	 	 	65	 
	     53.

	 	COMPENSATION
	 	 	65	 
	     54.

	 	PAYMENTS TO CONTRACTORS
	 	 	67	 
	     55.

	 	CAPITATION ADJUSTMENTS
	 	 	67	 
	     56.

	 	INCENTIVES
	 	 	68	 
	     57.

	 	REINSURANCE
	 	 	68	 
	     58.

	 	COORDINATION OF BENEFITS /THIRD PARTY LIABILITY
	 	 	72	 
	     59.

	 	COPAYMENTS
	 	 	74	 
	     60.

	 	MEDICARE SERVICES AND COST SHARING
	 	 	75	 
	     61.

	 	MARKETING
	 	 	75	 
	     62.

	 	CORPORATE COMPLIANCE
	 	 	75	 
	     63.

	 	RECORDS RETENTION
	 	 	77	 
	     64.

	 	DATA EXCHANGE REQUIREMENTS
	 	 	77	 
	     65.

	 	ENCOUNTER DATA REPORTING
	 	 	78	 
	     66.

	 	ENROLLMENT AND CAPITATION TRANSACTION UPDATES
	 	 	79	 
	     67.

	 	PERIODIC REPORT REQUIREMENTS
	 	 	79	 
	     68.

	 	REQUESTS FOR INFORMATION
	 	 	80	 
	     69.

	 	DISSEMINATION OF INFORMATION
	 	 	80	 
	     70.

	 	OPERATIONAL AND FINANCIAL READINESS REVIEWS
	 	 	80	 
	     71.

	 	OPERATIONAL AND FINANCIAL REVIEWS
	 	 	80	 
	     72.

	 	SANCTIONS
	 	 	81	 
	     73.

	 	BUSINESS CONTINUITY AND RECOVERY PLAN
	 	 	82	 
	     74.

	 	TECHNOLOGICAL ADVANCEMENT
	 	 	82	 
	     75.

	 	PENDING LEGISLATIVE / OTHER ISSUES
	 	 	84	 
	     76.

	 	BALANCED BUDGET ACT OF 1997 (BBA)
	 	 	84	 
	     77.

	 	RESERVED
	 	 	84	 
	     78.

	 	MEDICARE MODERNIZATION ACT (MMA)
	 	 	84	 
	      
	 	 	 	 	 	 
	SECTION E: CONTRACT CLAUSES	 	 	85	 
	     1)

	 	APPLICABLE LAW
	 	 	85	 
	     2)

	 	AUTHORITY
	 	 	85	 
	     3)

	 	ORDER OF PRECEDENCE
	 	 	85	 
	     4)

	 	CONTRACT INTERPRETATION AND AMENDMENT
	 	 	85	 
	     5)

	 	SEVERABILITY
	 	 	85	 
	     6)

	 	RELATIONSHIP OF PARTIES
	 	 	85	 
	     7)

	 	ASSIGNMENT AND DELEGATION
	 	 	85	 
	     8)

	 	INDEMNIFICATION
	 	 	85	 
	     9)

	 	INDEMNIFICATION — PATENT AND COPYRIGHT
	 	 	86	 
	     10)

	 	COMPLIANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS
	 	 	86	 
	     11)

	 	ADVERTISING AND PROMOTION OF CONTRACT
	 	 	86	 
	     12)

	 	PROPERTY OF THE STATE
	 	 	86	 
	     13)

	 	THIRD PARTY ANTITRUST VIOLATIONS
	 	 	86	 
	     14)

	 	RIGHT TO ASSURANCE
	 	 	86	 
	     15)

	 	TERMINATION FOR CONFLICT OF INTEREST
	 	 	87	 
	     16)

	 	GRATUITIES
	 	 	87	 
	     17)

	 	SUSPENSION OR DEBARMENT
	 	 	87	 
	     18)

	 	TERMINATION FOR CONVENIENCE
	 	 	87	 

CYE ‘08 Acute Care Renewal

Final

August 27, 2007

-3-

 

Contract/RFP No. YH04-0001 

	 	 	 	 	 	 	 
	     19)

	 	TEMPORARY MANAGEMENT/OPERATION OF A CONTRACTOR AND TERMINATION
	 	 	87	 
	     20)

	 	TERMINATION-AVAILABILITY OF FUNDS
	 	 	88	 
	     21)

	 	RIGHT OF OFFSET
	 	 	88	 
	     22)

	 	NON-EXCLUSIVE REMEDIES
	 	 	88	 
	     23)

	 	NON-DISCRIMINATION
	 	 	89	 
	     24)

	 	EFFECTIVE DATE
	 	 	89	 
	     25)

	 	INSURANCE
	 	 	89	 
	     26)

	 	DISPUTES
	 	 	89	 
	     27)

	 	RIGHT TO INSPECT PLANT OR PLACE OF BUSINESS
	 	 	90	 
	     28)

	 	INCORPORATION BY REFERENCE
	 	 	90	 
	     29)

	 	COVENANT AGAINST CONTINGENT FEES
	 	 	90	 
	     30)

	 	CHANGES
	 	 	90	 
	     31)

	 	TYPE OF CONTRACT
	 	 	90	 
	     32)

	 	AMERICANS WITH DISABILITIES ACT
	 	 	90	 
	     33)

	 	WARRANTY OF SERVICES
	 	 	90	 
	     34)

	 	NO GUARANTEED QUANTITIES
	 	 	90	 
	     35)

	 	CONFLICT OF INTEREST
	 	 	90	 
	     36)

	 	DISCLOSURE OF CONFIDENTIAL INFORMATION
	 	 	91	 
	     37)

	 	COOPERATION WITH OTHER CONTRACTORS
	 	 	91	 
	     38)

	 	ASSIGNMENT OF CONTRACT AND BANKRUPTCY
	 	 	91	 
	     39)

	 	OWNERSHIP OF INFORMATION AND DATA
	 	 	91	 
	     40)

	 	AHCCCSA RIGHT TO OPERATE CONTRACTOR
	 	 	91	 
	     41)

	 	AUDITS AND INSPECTIONS
	 	 	92	 
	     42)

	 	LOBBYING
	 	 	92	 
	     43)

	 	CHOICE OF FORUM
	 	 	92	 
	     44)

	 	DATA CERTIFICATION
	 	 	92	 
	     45)

	 	OFF SHORE PERFORMANCE OF WORK PROHIBITED
	 	 	92	 
	     46)

	 	FEDERAL IMMIGRATION AND NATIONALITY ACT
	 	 	93	 
	     47)

	 	IRS W-9 FORM
	 	 	93	 
	     48)

	 	CONTINUATION OF PERFORMANCE THROUGH TERMINATION
	 	 	93	 
	      
	 	 	 	 	 	 
	SECTION F: INDEX — PROGRAM REQUIREMENTS AND CONTRACT CLAUSES	 	 	94	 
	      
	 	 	 	 	 	 
	ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS	 	 	97	 
	     1.

	 	ASSIGNMENT AND DELEGATION OF RIGHTS AND RESPONSIBILITIES
	 	 	97	 
	     2.

	 	AWARDS OF OTHER SUBCONTRACTS
	 	 	97	 
	     3.

	 	CERTIFICATION OF COMPLIANCE — ANTI-KICKBACK AND LABORATORY TESTING
	 	 	97	 
	     4.

	 	CERTIFICATION OF TRUTHFULNESS OF REPRESENTATION
	 	 	97	 
	     5.

	 	CLINICAL LABORATORY IMPROVEMENT AMENDMENTS OF 1988
	 	 	98	 
	     6.

	 	COMPLIANCE WITH AHCCCSA RULES RELATING TO AUDIT AND INSPECTION
	 	 	98	 
	     7.

	 	COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS
	 	 	98	 
	     8.

	 	CONFIDENTIALITY REQUIREMENT
	 	 	98	 
	     9.

	 	CONFLICT IN INTERPRETATION OF PROVISIONS
	 	 	98	 
	     10.

	 	CONTRACT CLAIMS AND DISPUTES
	 	 	98	 
	     11.

	 	ENCOUNTER DATA REQUIREMENT
	 	 	98	 
	     12.

	 	EVALUATION OF QUALITY, APPROPRIATENESS, OR TIMELINESS OF SERVICES
	 	 	98	 
	     13.

	 	FRAUD AND ABUSE
	 	 	99	 
	     14.

	 	GENERAL INDEMNIFICATION
	 	 	99	 
	     15.

	 	INSURANCE
	 	 	99	 
	     16.

	 	LIMITATIONS ON BILLING AND COLLECTION PRACTICES
	 	 	99	 
	     17.

	 	MAINTENANCE OF REQUIREMENTS TO DO BUSINESS AND PROVIDE SERVICES
	 	 	99	 
	     18.

	 	NON-DISCRIMINATION REQUIREMENTS
	 	 	99	 
	     19.

	 	PRIOR AUTHORIZATION AND UTILIZATION MANAGEMENT
	 	 	100	 
	     20.

	 	RECORDS RETENTION
	 	 	100	 
	     21.

	 	SEVERABILITY
	 	 	100	 

CYE ‘08 Acute Care Renewal

Final

August 27, 2007

-4-

 

Contract/RFP No. YH04-0001 

	 	 	 	 	 	 	 
	     22.

	 	SUBJECTION OF SUBCONTRACT
	 	 	100	 
	     23.

	 	TERMINATION OF SUBCONTRACT
	 	 	100	 
	     24.

	 	VOIDABILITY OF SUBCONTRACT
	 	 	101	 
	     25.

	 	WARRANTY OF SERVICES
	 	 	101	 
	     26.

	 	OFF-SHORE PERFORMANCE OF WORK PROHIBITED
	 	 	101	 
	     27.

	 	FEDERAL IMMIGRATION AND NATIONALITY ACT
	 	 	101	 
	 
	 	 	 	 	 	 
	ATTACHMENT B: MINIMUM NETWORK STANDARDS (BY GEOGRAPHIC SERVICE AREA)	 	 	102	 
	 
	 	 	 	 	 	 
	ATTACHMENT F: PERIODIC REPORT REQUIREMENTS	 	 	106	 
	 
	 	 	 	 	 	 
	ATTACHMENT G: AUTO-ASSIGNMENT ALGORITHM	 	 	110	 
	 
	 	 	 	 	 	 
	ATTACHMENT H(1): ENROLLEE GRIEVANCE SYSTEM STANDARDS AND POLICY	 	 	113	 
	 
	 	 	 	 	 	 
	ATTACHMENT H(2) PROVIDER CLAIM DISPUTE STANDARDS AND POLICY	 	 	118	 
	 
	 	 	 	 	 	 
	ATTACHMENT I: ENCOUNTER SUBMISSION REQUIREMENTS	 	 	120	 
	 
	 	 	 	 	 	 
	ATTACHMENT L: COST SHARING COPAYMENTS	 	 	123	 

CYE ‘08 Acute Care Renewal

Final

August 27, 2007

-5-

 

			
	 	 	 
	CAPITATION RATES
	 	Contract/RFP No. YH04-0001
	 

SECTION B: CAPITATION RATES

The Contractor shall provide services as described in this contract. In consideration for these
services, the Contractor will be paid the attached Contractor specific rates per member per month
for the term October 1, 2007 through September 30, 2008.

See attached.

CYE ‘08 Acute Care Renewal

Final

August 27, 2007

-6-

 

			
	 	 	 
	DEFINITIONS
	 	Contract/RFP No. YH04-0001
	 

SECTION C: DEFINITIONS

	 	 	 
	638 TRIBAL FACILITY

	 	A facility that is operated by an Indian tribe and that is
authorized to provide services pursuant to Public Law 93-638, as
amended.
	 
	 	 
	1931

	 	Eligible individuals and families under the 1931 provision of
the Social Security Act, with household income levels at or
below 100% of the FPL.
	 
	 	 
	ACOM

	 	AHCCCS Contractor Operations Manual, available on the AHCCCS
Website at www.azahcccs.gov.
	 
	 	 
	ADHS

	 	Arizona Department of Health Services, the state agency mandated
to serve the public health needs of all Arizona citizens.
	 
	 	 
	ADHS BEHAVIORAL HEALTH
RECIPIENT

	 	A Title XIX or Title XXI acute care member who is eligible for,
and is receiving, behavioral health services through ADHS and
its subcontractors.
	 
	 	 
	ADJUDICATED CLAIMS

	 	Claims which have been received and processed by the Contractor
which resulted in a payment or denial of payment
	 
	 	 
	AGENT

	 	Any person who has been delegated the authority to obligate or
act on behalf of another person or entity.
	 
	 	 
	AHCCCS

	 	Arizona Health Care Cost Containment System, which is composed
of the Administration, Contractors, and other arrangements
through which health care services are provided to an eligible
person, as defined by A.R.S. § 36-2902, et seq.
	 
	 	 
	AHCCCS BENEFITS

	 	See “COVERED SERVICES”.
	 
	 	 
	AHCCCS MEMBER

	 	See “MEMBER”.
	 
	 	 
	AHCCCSA

	 	Arizona Health Care Cost Containment System Administration.
	 
	 	 
	ALTCS

	 	The Arizona Long Term Care System, a program under AHCCCSA that
delivers long term, acute, behavioral health and case management
services to members, as authorized by A.R.S. § 36-2932.
	 
	 	 
	AMBULATORY CARE

	 	Preventive, diagnostic and treatment services provided on an
outpatient basis by physicians, nurse practitioners, physician
assistants and other health care providers.
	 
	 	 
	AMPM

	 	AHCCCS Medical Policy Manual.
	 
	 	 
	ANNUAL ENROLLMENT CHOICE
(AEC)

	 	The opportunity, given each member annually, to change to
another Contractor in their GSA.
	 
	 	 
	APPEAL RESOLUTION

	 	The written determination by the Contractor concerning an appeal.
	 
	 	 
	ARIZONA ADMINISTRATIVE
CODE (A.A.C.)

	 	State regulations established pursuant to relevant statutes. For
purposes of this solicitation, the relevant sections of the AAC
are referred to throughout this document as “AHCCCS Rules”.
	 
	 	 
	A.R.S.

	 	Arizona Revised Statutes.
	 
	 	 
	BBA

	 	The Balanced Budget Act of 1997.

CYE ‘08 Acute Care Renewal

Final

August 27, 2007

-7-

 

			
	 	 	 
	DEFINITIONS
	 	Contract/RFP No. YH04-0001
	 

	 	 	 
	BCCTP

	 	Breast and Cervical Cancer Treatment
Program, a Title XIX eligibility
expansion program for women who are
not otherwise Title XIX eligible and
are diagnosed as needing treatment
for breast and/or cervical cancer or
lesions.
	 
	 	 
	BIDDER’S LIBRARY

	 	A repository of manuals, statutes,
rules and other reference material
located on the AHCCCS website at
www.azahcccs.gov.
	 
	 	 
	BOARD CERTIFIED

	 	An individual who has successfully
completed all prerequisites of the
respective specialty board and
successfully passed the required
examination for certification.
	 
	 	 
	CAPITATION

	 	Payment to Contractor by AHCCCSA of a
fixed monthly payment per person in
advance for which the Contractor
provides a full range of covered
services as authorized under A.R.S. §
36-2904 and § 36-2907.
	 
	 	 
	CATEGORICALLY LINKED TITLE XIX
MEMBER

	 	Member eligible for Medicaid under
Title XIX of the Social Security Act
including those eligible under 1931
provisions of the Social Security
Act, Sixth Omnibus Budget
Reconciliation Act (SOBRA),
Supplemental Security Income (SSI),
SSI-related groups. To be
categorically linked, the member must
be aged 65 or over, blind, disabled,
a child under age 19, a parent of a
dependent child, or pregnant.
	 
	 	 
	CLAIM DISPUTE

	 	A dispute, filed by a provider or
Contractor, whichever is applicable,
involving a payment of a claim,
denial of a claim, imposition of a
sanction or reinsurance.
	 
	 	 
	CLEAN CLAIM

	 	A claim that may be processed without
obtaining additional information from
the provider of service or from a
third party; but does not include
claims under investigation for fraud
or abuse or claims under review for
medical necessity.
	 
	 	 
	CMS

	 	Centers for Medicare and Medicaid
Services, an organization within the
U.S. Department of Health and Human
Services, which administers the
Medicare and Medicaid programs and
the State Children’s Health Insurance
Program.
	 
	 	 
	COMPETITIVE BID PROCESS

	 	A state procurement system used to
select Contractors to provide covered
services on a geographic basis.
	 
	 	 
	CONTINUING OFFEROR (INCUMBENT)

	 	An AHCCCS Contractor during CYE 03
that submits a proposal pursuant to
this solicitation.
	 
	 	 
	CONTRACT SERVICES

	 	See “COVERED SERVICES”.
	 
	 	 
	CONTRACT YEAR (CY)

	 	Corresponds to Federal fiscal year
(Oct. 1 through Sept. 30). For
example, Contract Year 04 is 10/01/03
— 9/30/04.
	 
	 	 
	CONTRACTOR

	 	An organization or entity agreeing
through a direct contracting
relationship with AHCCCSA to provide
the goods and services specified by
this contract in conformance with the
stated contract requirements, AHCCCS
statute and rules and Federal law and
regulations.
	 
	 	 
	CONVICTED

	 	A judgment of conviction has been
entered by a Federal, State or local
court, regardless of whether an
appeal from that judgment is pending.
	 
	 	 
	COPAYMENT

	 	A monetary amount specified by the
Director that the member pays
directly to a Contractor or provider
at the time covered services are
rendered, as defined in
R9-22-107.

CYE ‘08 Acute Care Renewal

Final

August 27, 2007

-8-

 

			
	 	 	 
	DEFINITIONS
	 	Contract/RFP No. YH04-0001
	 

	 	 	 
	COVERED SERVICES

	 	Health care services to be delivered by a Contractor which are designated in
Section D of this contract, AHCCCS Rules R9-22, Article 2 and R9-31, Article
2 and the AMPM. [42 CFR. 438.210(a)(4)]
	 
	 	 
	CRS

	 	The Children’s Rehabilitative Services administered by ADHS, as defined in
R9-22-114.
	 
	 	 
	CRS ELIGIBLE

	 	An individual who has completed the CRS application process, as delineated in
the CRS Policy and Procedure Manual, and has met all applicable criteria to
be eligible to receive CRS related services.
	 
	 	 
	CRS RECIPIENT

	 	A CRS recipient is a CRS eligible individual who has completed the initial
medical visit at an approved CRS Clinic, which allows the individual lo
participate in the CRS program.
	 
	 	 
	CY

	 	See “CONTRACT YEAR”.
	 
	 	 
	CYE

	 	Contract Year Ending; same as “CONTRACT YEAR”.
	 
	 	 
	DAYS

	 	Calendar days unless otherwise specified as defined in the text, as defined in
R9-22-101.
	 
	 	 
	DELEGATED AGREEMENT

	 	An agreement with a qualified organization or person to perform one or more
functions required to be provided by the Contractor pursuant to this
contract.
	 
	 	 
	DIRECTOR

	 	The Director of AHCCCSA.
	 
	 	 
	DISCLOSING ENTITY

	 	An AHCCCS provider or a fiscal agent.
	 
	 	 
	DISENROLLMENT

	 	The discontinuance of a member’s ability to receive covered services through
a Contractor.
	 
	 	 
	DME

	 	Durable Medical Equipment, which is an item, or appliance that can withstand
repeated use, is designated to serve a medical purpose, and is not generally
useful to a person in the absence of a medical condition, illness or injury
as defined in
R9-22-102.
	 
	 	 
	DUAL ELIGIBLE

	 	A member who is eligible for both Medicare and Medical.
	 
	 	 
	ELIGIBILITY
DETERMINATION

	 	A process of determining, through a written application and required
documentation, whether an applicant meets the qualifications for Title XIX or
Title XXI.
	 
	 	 
	EMERGENCY MEDICAL
CONDITION

	 	A medical condition manifesting itself by acute symptoms of sufficient
severity (including severe pain) such that a prudent layperson, who possesses
an average knowledge of health and medicine, could reasonably expect the
absence of immediate medical attention to result in: a) placing the patient’s
health (or, with respect to a pregnant woman, the health of the woman or her
unborn child) in serious jeopardy; b) serious impairment to bodily functions;
or c) serious dysfunction of any bodily organ or part. [42 CFR 438.114(a)]
	 
	 	 
	EMERGENCY MEDICAL
SERVICE

	 	Covered inpatient and outpatient services provided after the sudden onset of
an emergency medical condition as defined above. These services must be
furnished by a qualified provider, and must be necessary to evaluate or
stabilize the emergency medical condition. [42 CFR 438.114(a)]
	 
	 	 
	ENCOUNTER

	 	A record of a health care related service rendered by a provider or providers
registered with AHCCCSA to a member who is enrolled with a Contractor on the
date of service.

CYE ‘08 Acute Care Renewal

Final

August 27, 2007

-9-

 

			
	 	 	 
	DEFINITIONS
	 	Contract/RFP No. YH04-0001
	 

	 	 	 
	 
	 	 
	ENROLLEE

	 	A Medicaid recipient who is currently enrolled with a contractor. [42 CFR
438.10(a)]
	 
	 	 
	ENROLLMENT

	 	The process by which an eligible person becomes a member of a contractor’s
plan.
	 
	 	 
	EPSDT

	 	Early and Periodic Screening, Diagnosis and Treatment; services for
persons under 21 years of age as described in AHCCCS rules R9-22, Article
2.
	 
	 	 
	FAMILY PLANNING
SERVICES
EXTENSION
PROGRAM

	 	A program that provides only family planning services for a maximum of 24
months to SOBRA women whose pregnancy has ended and who are not otherwise
eligible for full Title XIX services.
	 
	 	 
	FEDERALLY
QUALIFIED HEALTH
CENTER (FQHC)

	 	An entity which meets the requirements and receives a grant and funding
pursuant to Section 330 of the Public Health Service Act. An FQHC includes
an outpatient health program or facility operated by a tribe or tribal
organization under the Indian Self-Determination Act (PL 93-638) or an
urban Indian organization receiving funds under Title V of the Indian
Health Care Improvement Act.
	 
	 	 
	FEE-FOR-SERVICE
(FFS)

	 	A method of payment to registered providers on an amount per service basis.
	 
	 	 
	FES

	 	Federal Emergency Services program covered under R9-22-217, to treat an
emergency medical condition for a member who is determined eligible under
A.R.S. § 36-2903.03 (D).
	 
	 	 
	FFP

	 	Federal financial participation (FFP) refers to the contribution that the
Federal government makes to the Title XIX and Title XXI program portions
of AHCCCS as defined in 42 CFR 400.203.
	 
	 	 
	FISCAL YEAR (FY)

	 	The budget year — Federal Fiscal Year: October 1 through September 30;
State fiscal year July 1 through June 30.
	 
	 	 
	FREEDOM TO WORK

(TICKET TO WORK)

	 	A Federal program that expands Title XIX eligibility to individuals, 16
through 64 years old, who are disabled and whose earned income, after
allowable deductions, is at or below 250% of the Federal Poverty Level.
	 
	 	 
	GEOGRAPHIC
SERVICE AREA
(GSA)

	 	A specific county or defined grouping of counties designated by AHCCCSA
within which a Contractor provides, directly or through subcontract,
covered health care to members enrolled with that Contractor.
	 
	 	 
	GRIEVANCE
SYSTEM

	 	A system that includes a process for enrollee grievances, enrollee
appeals, provider claim disputes, and access to the state fair hearing
system.
	 
	 	 
	HEALTHCARE GROUP
OF ARIZONA (HCG)

	 	A prepaid medical coverage plan marketed to small, uninsured businesses
and political subdivisions within the state.
	 
	 	 
	HEALTH PLAN

	 	See “CONTRACTOR”.
	 
	 	 
	HIFA

	 	The CMS Health Insurance Flexibility and Accountability Demonstration
Initiative, which targets State Children’s Health insurance Program (Title
XXI) funding for populations with incomes below 200 percent of the Federal
Poverty Level, seeking to maximize private health insurance coverage
options.
	 
	 	 
	HIFA PARENTS

	 	Parents of Medicaid (SOBRA) and KidsCare eligible children who are
eligible for AHCCCS benefits under the HIFA Waiver. All eligible parents
must pay an enrollment fee and a monthly premium based on household
income.

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	DEFINITIONS
	 	Contract/RFP No. YH04-0001
	 

	 	 	 
	LBNR

	 	Incurred But Not Reported liability
for services rendered for which
claims have not been received.
	 
	 	 
	IHS

	 	Indian Health Service authorized as
a Federal agency pursuant to 25
U.S.C. 1661.
	 
	 	 
	KIDSCARE

	 	Individuals under the age of 19,
eligible under the SCHIP program, in
households with income at or below
200% FPL. All members, except Native
American members, are required to
pay a premium amount based on the
number of children in the family and
the gross family income. Also
referred to as Title XXI.
	 
	 	 
	LIEN

	 	A legal claim, filed with the County
Recorder’s office in which a member
resides and in the county an injury
was sustained, for the purpose of
ensuring that AHCCCS receives
reimbursement for medical services
paid. The lien is attached to any
settlement the member may receive as
a result of an injury.
	 
	 	 
	MANAGED CARE

	 	Systems that integrate the financing
and delivery of health care services
to covered individuals by means of
arrangements with selected providers
to furnish comprehensive services to
members; establish explicit criteria
for the selection of health care
providers; have financial incentives
for members to use providers and
procedures associated with the plan;
and have formal programs for
quality, utilization management and
the coordination of care.
	 
	 	 
	MANAGEMENT SERVICES AGREEMENT

	 	An agreement with an entity in which
the owner of the Contractor
delegates some or all of the
comprehensive management and
administrative services necessary
for the operation of the Contractor.
	 
	 	 
	MANAGEMENT SERVICES SUBCONTRACTOR

	 	An entity to which the Contractor
delegates the comprehensive
management and administrative
services necessary for the operation
of the Contractor
	 
	 	 
	MANAGING EMPLOYEE

	 	A general manager, business manager,
administrator, director, or other
individual who exercises operational
or managerial control over, or who
directly or indirectly conducts the
day-to-day operation of an
institution, organization or agency.
	 
	 	 
	MATERIAL OMISSION

	 	Facts, data or other information
excluded from a report, contract,
etc., the absence of which could
lead to erroneous conclusions
following reasonable review of such
report, contract, etc.
	 
	 	 
	MAJOR UPGRADE

	 	Any upgrade or changes that may
result in a disruption to the
following: Loading of contracts,
providers, members, issuing prior
authorizations or the adjudication
of claims.
	 
	 	 
	MEDICAID

	 	A Federal/State program authorized
by Title XIX of the Social Security
Act, as amended.
	 
	 	 
	MEDICAL EXPENSE DEDUCTION (MED)

	 	Title XIX Waiver member whose family
income is more than 100% of the
Federal Poverty Level and has family
medical expenses that reduce income
to or below 40% of the Federal
Poverty Level. MED’s may have a
categorical link to a Title XIX
category; however, their income
exceeds the limits of the Title XIX
category.
	 
	 	 
	MEDICAL MANAGEMENT

	 	An integrated process or system that
is designed to assure appropriate
utilization of health care
resources, in the amount and
duration necessary to achieve
desired health outcomes, across the
continuum of care (from prevention
to end of life care).
	 
	 	 
	MEDICARE

	 	A Federal program authorized by
Title XVIII of the Social Security
Act, as amended.

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	DEFINITIONS
	 	Contract/RFP No. YH04-0001
	 

	 	 	 
	MEDICARE
MANAGED CARE
PLAN

	 	A managed cars entity that has a Medicare contract with
CMS to provide services to Medicare beneficiaries,
including Medicare Advantage Prescription Drug Plan
(MAPDP), MAPDP Special Needs Plan, or Medicare
Prescription Drug Plan
	 
	 	 
	MEDICARE PART D
EXCLUDED DRUGS

	 	Medicare Part D is the Prescription Drug Coverage
option available to Medicare beneficiaries, including
those also eligible for Medicaid, Medications that are
available under this benefit will not be covered by
AHCCCS post January 1, 2006. There are certain drugs
that are excluded from coverage by Medicare, and will
continue to be covered by AHCCCS. Those medications are
barbiturates, benzodiazepines, and over the counter
medication as defined in the AMPM. Prescription
medications that are covered under Medicare, but are
not on a Part D Health Plan’s formulary are not
considered excluded drugs, and will not be covered by
AHCCCS.
	 
	 	 
	MEMBER

	 	An eligible person who is enrolled in the system, as
defined in A.R.S. § 36-2901, A.R.S. § 36-2981 and
A.R.S. § 36-2981.01.
	 
	 	 
	NEW OFFEROR

	 	An organization or entity that submits a proposal in
response to this solicitation and which has not been an
AHCCCS Contractor during CYE 03.
	 
	 	 
	NON-CONTRACTING
PROVIDER

	 	A person who provides services as prescribed in A.R.S.
§ 36-2939 and who does not have a subcontract with an
AHCCCS Contractor.
	 
	 	 
	OFFEROR

	 	An organization or other entity that submits a proposal
to the Administration in response to this RFP, as
defined in R9-22-106.
	 
	 	 
	PERFORMANCE
STANDARDS

	 	A set of standardized indicators designed to assist
AHCCCSA in evaluating, comparing and improving the
performance of its Contractors. Specific descriptions
of health services measurement goals are found in
Section D, Paragraph 24, Performance Standards.
	 
	 	 
	PMMIS

	 	AHCCCSA’s Prepaid Medical Management Information System.
	 
	 	 
	POST
STABILIZATION
SERVICES

	 	Medically necessary services, related to an emergency
medical condition, provided after the member’s
condition is sufficiently stabilized in order to
maintain, improve or resolve the member’s condition so
that the member could alternatively be safely
discharged or transferred to another location. [42 CFR
438-114(a)]
	 
	 	 
	POTENTIAL
ENROLLEE

	 	A Medicaid eligible recipient who is not yet enrolled
with a contractor. [42 CFR 438.10(a)]
	 
	 	 
	PRIMARY CARE
PROVIDER (PCP)

	 	An individual who meets the requirements of A.R.S. §
36-2901, and who is responsible for the management of a
member’s health care. A PCP may be a physician defined
as a person licensed as an allopathic or osteopathic
physician according to A.R.S. Title 32, Chapter 13 or
Chapter 17 or a practitioner defined as a physician
assistant licensed under A.R.S. Title 32, Chapter 25,
or a certified nurse practitioner licensed under A.R.S.
Title 32, Chapter 15.
	 
	 	 
	PRIOR PERIOD

	 	The period of time, prior to the member’s enrollment,
during which a member is eligible for covered services.
The time frame is from the effective date of
eligibility to the day a member is enrolled with a
Contractor.
	 
	 	 
	PROVIDER

	 	Any person or entity who contracts with AHCCCSA or a
Contractor for the provision of covered services to
members according to the provisions A.R.S. § 36-2901 or
any subcontractor of a provider delivering services
pursuant to A.R.S. § 36-2901.

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	DEFINITIONS
	 	Contract/RFP No. YH04-0001
	 

	 	 	 
	QUALIFIED
MEDICARE
BENEFICIARY
(QMB)

	 	A person, eligible under A.R.S. § 36-2971(6), who is entitled to
Medicare Part A insurance and meets certain income and residency
requirements of the Qualified Medicare Beneficiary program. A
QMB, who is also eligible for Medicaid, is commonly referred to
as a QMB dual eligible.
	 
	 	 
	RATE CODE

	 	Eligibility classification for capitation payment purposes.
	 
	 	 
	REGIONAL
BEHAVIORAL
HEALTH AUTHORITY
(RBHA)

	 	An organization under contract with ADHS, who administers
covered behavioral health services in a geographically specific
area of the state. Tribal governments, through an agreement with
ADHS, may operate a tribal regional behavioral health authority
(TRBHA) for the provision of behavioral health services to
Native American members living on-reservation.
	 
	 	 
	REINSURANCE

	 	A risk-sharing program provided by AHCCCSA to Contractors for
the reimbursement of certain contract service costs incurred for
a member beyond a certain monetary threshold.
	 
	 	 
	RELATED PARTY

	 	A party that has, or may have, the ability to control or
significantly influence a Contractor, or a party that is, or may
be, controlled or significantly influenced by a Contractor.
“Related parties” include, but are not limited to, agents,
managing employees, persons with an ownership or controlling
interest in the disclosing entity, and their immediate families,
subcontractors, wholly-owned subsidiaries or suppliers, parent
companies, sister companies, holding companies, and other
entities controlled or managed by any such entities or persons.
	 
	 	 
	RISK GROUP

	 	Grouping of rate codes that are paid at the same capitation rate.
	 
	 	 
	RFP

	 	Request For Proposal is a document prepared by AHCCCSA, which
describes the services required and instructs prospective
offerors about how to prepare a response (proposal), as defined
in R9-22-106.
	 
	 	 
	SCHIP

	 	State Children’s Health Insurance Program under Title XXI of the
Social Security Act. The Arizona version of SCHIP is referred to
as “Kidscare”. See Kidscare.
	 
	 	 
	SCOPE OF SERVICES

	 	See “COVERED SERVICES”.
	 
	 	 
	SERVICE LEVEL
AGREEMENT

	 	An agreement with a a corporate owner, or any of its Divisions
or Subsidiaries, that requires specific levels of service for
administrative functions or services for the Contractor
specifically related to fulfilling the Contractor’s obligations
to AHCCCSA under the terms of this contract, as defined in
R9-22-101.
	 
	 	 
	SOBRA

	 	Section 9401 of the Sixth Omnibus Budget and Reconciliation Act,
1986, amended by the Medicare Catastrophic Coverage Act of 1988,
U.S.C. 1396a(a)(10)(A)(ii)(IX), November 5, 1990.
	 
	 	 
	SPECIAL HEALTH
CARE NEEDS

	 	Members with special health care needs are those members who
have serious and chronic physical, developmental or behavioral
conditions, and who also require medically necessary health and
related services of a type or amount beyond that required by
members generally.
	 
	 	 
	STATE

	 	The State of Arizona.
	 
	 	 
	STATE PLAN

	 	The written agreements between the State and CMS which describe
how the AHCCCS program meets CMS requirements for participation
in the Medicaid program and the State Children’s Health
Insurance Program.

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	DEFINITIONS
	 	Contract/RFP No. YH04-0001
	 

	 	 	 
	SUBCONTRACT

	 	An agreement entered into by the Contractor with a provider of health care
services, who agrees to furnish covered services to members or with any
other organization or person who agrees to perform any administrative
function or service for the Contractor specifically related to fulfilling
the Contractor’s obligations to AHCCCSA under the terms of this contract,
as defined in R9-22-101.
	 
	 	 
	SUBCONTRACTOR

	 	(1) A provider of health care who agrees to furnish covered services to
members.
	 
	 	 
	 

	 	(2) A person, agency or organization with which the Contractor has
contracted or delegated some of its management/administrative functions or
responsibilities
	 
	 	 
	 

	 	(3) A person, agency or organization with which a fiscal agent has entered
into a contract, agreement, purchase order or lease (or leases of real
property) to obtain space, supplies, equipment or services provided under
the AHCCCS agreement.
	 
	 	 
	SUPPLEMENTAL
SECURITY INCOME
(SSI)

	 	Federal cash assistance program under Title XVI of the Social Security Act.
	 
	 	 
	TEMPORARY
ASSISTANCE TO
NEEDY FAMILIES
(TANF)

	 	A Federal cash assistance program under Title IV of the Social Security
Act established by the Personal Responsibility and Work Opportunity Act of
1996. It replaced Aid To Families With Dependent Children (AFDC).
	 
	 	 
	THIRD PARTY

	 	An individual, entity or program that is or may be liable to pay all or
part of the medical cost of injury, disease or disability of an AHCCCS
applicant or member, as defined in R9-22-1001.
	 
	 	 
	THIRD PARTY
LIABILITY

	 	The resources available from a person or entity that is, or may be, by
agreement, circumstance or otherwise, liable to pay all or part of the
medical expenses incurred by an AHCCCS applicant or member, as defined in
R9-22-1001.
	 
	 	 
	TITLE XIX MEMBER

	 	Member eligible for Federally funded Medicaid programs under Title XIX of
the Social Security Act including those eligible under 1931 provisions of
the Social Security Act, Sixth Omnibus Budget Reconciliation Act (SOBRA),
Supplemental Security Income (SSI), SSI-related groups, Title XIX Waiver
groups, Medicare Cost Sharing groups, Breast and Cervical Cancer Treatment
program and Freedom to Work.
	 
	 	 
	TITLE XIX WAIVER
MEMBER

	 	All MED (Medical Expense Deduction) members, and adults or childless
couples at or below 100% of the Federal Poverty Level who are not
categorically linked to another Title XIX program. This would also include
Title XIX linked individuals whose income exceeds the limits of the
categorical program.
	 
	 	 
	TITLE XXI MEMBER

	 	Member eligible for acute care services under Title XXI of the Social
Security Act, referred to in Federal legislation as the “State Children’s
Health Insurance Program” (SCHIP and HIFA). The Arizona version of SCHIP
is referred to as “KidsCare.”
	 
	 	 
	WWHP

	 	Well Woman Health check Program, administered by the Arizona Department of
Health Services and funded by the Centers for Disease Control and
Prevention. (See AMPM Chapter 400)
	 
	 	 
	YEAR

	 	See “Contract Year”.

[END OF DEFINITIONS]

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	PROGRAM REQUIREMENTS
	 	Contract/RFP No. YH04-0001
	 

SECTION D: PROGRAM REQUIREMENTS

          1. TERM OF CONTRACT AND OPTION TO RENEW

The initial term of this contract shall be 10/1/03 through 9/30/06, with two one-year options to
renew. All contract renewals shall be through contract amendment. AHCCCSA shall issue amendments
prior to the end date of the contract when there is an adjustment to capitation rates and/or
changes to the scope of service contained herein. Changes to scope of service include but are not
limited to changes in the enrolled population, changes in covered services, changes in GSA’s

If the Contractor has been awarded a contract in more than one GSA, each such contract will be
considered separately renewable. AHCCCSA may renew the Contractor’s contract in one GSA, but not in
another. In addition, if the Contractor has had significant problems of non-compliance in one GSA,
it may result in the capping of the Contractor’s enrollment in all GSAs. Further, AHCCCSA may
require the Contractor to renew all currently awarded GSA’s, or may terminate the contract if the
Contractor does not agree to renew all currently awarded GSA’s.

When AHCCCSA issues an amendment to the contract, the provisions of such renewal will be deemed to
have been accepted 60 days after the date of mailing by AHCCCSA, even if the amendment has not been
signed by the Contractor, unless within that time the Contractor notifies AHCCCSA in writing that
it refuses to sign the renewal amendment. If the Contractor provides such notification, AHCCCSA
will initiate contract termination proceedings.

Contractor’s Notice of Intent Not To Renew: If the Contractor chooses not to renew this contract,
the Contractor may be liable for certain costs associated with the transition of its members to a
different Contractor. If the Contractor provides AHCCCSA written notice of its intent not to renew
this contract at least 180 days before its expiration, this liability for transition costs may be
waived by AHCCCSA.

Contract Termination: In the event the contract, or any portion thereof, is terminated for any
reason, or expires, the Contractor shall assist AHCCCSA in the transition of its members to other
contractors, and shall abide by standards and protocols set forth in Paragraph 9, Transition of
Members. In addition, AHCCCSA reserves the right to extend the term of the contract on a
month-to-month basis to assist in any transition of members. The Contractor shall make provision
for continuing all management and administrative services until the transition of all members is
completed and all other requirements of this contract are satisfied. The Contractor shall be
responsible for providing all reports set forth in this contract and necessary for the transition
process and shall be responsible for the following:

	a.	 	Notification of subcontractors and members.
	 
	b.	 	Payment of all outstanding obligations for medical care rendered to members.
	 
	c.	 	Until AHCCCSA is satisfied that the Contractor has paid all such obligations, the Contractor
shall provide the following reports to AHCCCSA:

	 	(1)	 	A monthly claims aging report by provider/creditor including IBNR
amounts;
	 
	 	(2)	 	A monthly summary of cash disbursements;
	 
	 	(3)	 	Copies of all bank statements received by the Contractor.

	d.	 	Such reports shall be due on the fifth day of each succeeding month for the prior month.
	 
	e.	 	In the event of termination or suspension of the contract by AHCCCSA, such termination or
suspension shall not affect the obligation of the Contractor to indemnify AHCCCSA for any
claim by any third party against the State or AHCCCSA arising from the Contractor’s
performance of this contract and for which the Contractor would otherwise be liable under this
contract.
	 
	f.	 	Any dispute by the Contractor, with respect to termination or suspension of this contract by
AHCCCSA, shall be exclusively governed by the provisions of Section E, Paragraph 26, Disputes.

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	PROGRAM REQUIREMENTS
	 	Contract/RFP No. YH04-0001
	 

	g.	 	Any funds, advanced to the Contractor for coverage of members for periods after the date of
termination, shall be returned to AHCCCSA within 30 days of termination of the contract.

          2. ELIGIBILITY CATEGORIES

AHCCCS is Arizona’s Title XIX Medicaid program operating under an 1115 Waiver and Title XXI program
operating under Title XXI State Plan authority. Arizona has the authority to require mandatory
enrollment in managed care. All members eligible for AHCCCS benefits, with few exceptions, are
enrolled with acute care contractors and paid for on a capitated basis. AHCCCSA pays for health
care expenses on a fee for service (FFS) basis for Title XIX and Title XXI eligible members who
receive services through the Indian Health Service; for Title XIX eligible members who are entitled
to emergency services under the Federal Emergency Services (FES) program; for Medicare cost sharing
beneficiaries under QMB programs.

The following describes the eligibility groups enrolled in the managed care program and covered
under this contract [42 CFR 434.6(a)(2)].

Title XIX

1931 (Also referred to as TANF): Eligible individuals and families under the 1931 provision of
the Social Security Act, with household income levels at or below 100% of the FPL.

SSI and SSI Related Groups: Eligible individuals receiving Supplemental Security Income (SSI)
or who are aged, blind or disabled with household income levels at or below 100% of the FPL.

Freedom to Work (Ticket to Work): Eligible individuals under the Title XIX expansion program
that extends eligibility to individuals, 16 through 64 years old who meet SSI disability
criteria, whose earned income, after allowable deduction, is at or below 250% of the FPL and
who are not eligible for any other Medicaid program. These members must pay a premium to
AHCCCSA ranging from $10 to $35, depending on income.

SOBRA: Under the Sixth Omnibus Budget and Reconciliation Act of 1986, eligible pregnant women,
with household income levels at or below 150% of the FPL, and children in families with
household incomes ranging from below 100% to 140% of the FPL, depending on the age of the
child.

SOBRA Family Planning: Family planning extension program that covers the costs for family
planning services only, for a maximum of 24 months following the loss of SOBRA eligibility.

Breast and Cervical Cancer Treatment Program (BCCTP): Eligible individuals under the Title XIX
expansion program for women with income up to 250% of the FPL, who are diagnosed with and need
treatment for breast and/or cervical cancer or cervical lesions and are not eligible for other
Title XIX programs providing full Title XIX services. Eligible members cannot have other
creditable health insurance coverage, including Medicare.

Title XIX Waiver Croup

Non-MED: Eligible individuals and couples whose income is at or below 100% of the FPL, and who
are not categorically linked to another Title XIX program.

MED: Eligible individuals and families whose income is above 100% of the FPL with medical
expenses that reduce income to or below 40% of the FPL.

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	PROGRAM REQUIREMENTS
	 	Contract/RFP No. YH04-0001
	 

Title XXI

KidsCare: individuals under the age of 19, whose income does not exceed 200% FPL. All members,
except Native American members, are required to pay a premium amount to AHCCCSA based on the
number of children in the family and the gross family income.

HIFA Parents: Non-Title XIX-eligible parents of KidsCare children or parents of Title XIX
SOBRA eligible children who are eligible under the HIFA demonstration initiative waiver. HIFA
parents are required to pay a one-time enrollment fee and a monthly premium to AHCCCSA ranging
from $15 to $25 per parent (except Native American members), based on household income. Due to
funding considerations, this program has an enrollment cap.

Social Security Disability Insurance Temporary Medical Coverage (SSDI-TMC)

Laws 2006, Chapter 373 established a Temporary Medical Coverage Program. SSDI-TMC provides health
care coverage to persons who:

1. Are citizens and residents who have been enrolled in AHCCCS at any time within the last 24
months

2. And became ineligible for AHCCCS coverage due to federal disability insurance benefit
payments making them over income for Medicaid,

3. And they are not yet eligible for Medicare.

In order to participate in SSDI-TMC, eligible persons must pay a premium. Participants become
ineligible for SSDI-TMC once they become eligible for Medicare. SSDI-TMC is funded entirely by the
State. Contractors will be capitated for these members under unique rate codes and AHCCCS may
provide a reconciliation to limit the profit or loss of this population. If a reconciliation is to
be implemented, an SSDI-TMC reconciliation policy will be developed which will discuss the details
of the reconciliation calculations and timelines. SSDI-TMC members will not be eligible for prior
period coverage, any supplemental payments or reinsurance. Members will be entitled to all AHCCCS
Acute Care benefits.

          3. ENROLLMENT AND DISENROLLMENT

AHCCCSA has the exclusive authority to enroll and disenroll members. The Contractor shall not
disenroll any member for any reason unless directed to do so by AHCCCSA. The Contractor may request
AHCCCSA to change the member’s enrollment in accordance with the ACOM Enrollment Choice and Change
of Contractor Policy. The Contractor may not request disenrollment because of an adverse change in
the member’s health status, or because of the member’s utilization of medical services, diminished
mental capacity, or uncooperative or disruptive behavior resulting from his or her special needs.
An AHCCCS member may request disenrollment from the Contractor for cause at any time. Refer those
requests due to situations defined in Section A (1) of the ACOM Change of Plan Policy to AHCCCSA to
the AHCCCS Verification Unit via mail or at (602) 417-4000 or (800) 962-6690. For medical
continuity requests, the Contractor shall follow the procedures outlined in the ACOM Change of Plan
Policy, before notifying the AHCCCSA. AHCCCSA will disenroll the member when the member becomes
ineligible for the AHCCCS program, moves out of the Contractor’s service areas, changes contractors
during the member’s open enrollment/annual enrollment choice period, tile Contractor does not,
because of moral or religious objections, cover the service the member seeks or when approved for a
Contractor change through the ACOM Change of Plan Policy. [42 CFR 438.56] Eligibility for the
various AHCCCS coverage groups is determined by one of the following agencies:

	 	 	 
	Social Security Administration (SSA)

	 	SSA determines eligibility for the
Supplemental Security Income (SSI)
cash program. SSI cash recipients
are automatically eligible for
AHCCCS coverage.
	 
	 	 
	Department of Economic Security (DES)

	 	DES determines eligibility for the families with children under

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	PROGRAM REQUIREMENTS
	 	Contract/RFP No. YH04-0001
	 

	 	 	 
	 

	 	section 1931 of the Social Security Act, pregnant women and
children under SOBRA, the Adoption Subsidy Program, Title IV- E
foster care children, Young Adult Transitional Insurance Program,
the Federal Emergency Services program (FES), HIFA parents of
SOBRA eligible children, the Title XIX Waiver Members.
	 
	 	 
	AHCCCSA

	 	AHCCCSA determines eligibility for the SSI/Medical Assistance Only
groups, including the FES program for this population (aged,
disabled, blind), the Arizona Long-Term Care System (ALTCS), the
Qualified Medicare Beneficiary program and other Medicare cost
sharing programs, BCCTP, the Freedom to Work program, the Title
XXI KidsCare program, and HIFA parents of KidsCare children.

AHCCCS acute care members are enrolled with Contractors in accordance with the rules set forth in
R9-22, Article 17, R9-31-306, 307, 309 and 1719.

Health Plan Choice

All AHCCCS members eligible for services covered under this contract have a choice of available
contractor. Information about these contractors will be given to each applicant during the
application process for AHCCCS benefits. If there is only one contractor available for the
applicant’s Geographic Service Area, no choice is offered as long as the contractor offers the
member a choice of PCPs. Members, who do not choose prior to AHCCCSA being notified of their
eligibility, are automatically assigned to a contractor based on family continuity or the
auto-assignment algorithm. Once assigned, AHCCCS sends a choice notice to the member and gives them
16 days to choose a different contractor from the auto-assigned contractor. See Section D,
Paragraph 6, Auto-Assignment Algorithm, for further explanation.

The Contractor will share with AHCCCSA the cost of providing information about the acute care
contractors to potential members and to those eligible for annual enrollment choice.

Exceptions to the above enrollment policies for Title XIX members include previously enrolled
members who have been disenrolled for less than 90 days. These members will be automatically
enrolled with the same Contractor, if still available. Members who have less thin 30 days of
continued eligibility will not be enrolled with a Contractor, but will be placed on Fee for
Service. FES members are not enrolled with a contractor. Women, who become eligible for the Family
Planning Services Extension Program, will remain assigned to their current contractor. Some
specialty groups will also be FFS, such as persons approved only for the inpatient hospital stay.
These are inmates who are temporarily residing in a hospital.

The effective date of enrollment for a new Title XIX member with the Contractor is the day AHCCCSA
takes the enrollment action, generally the day prior to the date the Contractor receives
notification from AHCCCSA via the daily roster. However, the Contractor is responsible for payment
of medically necessary covered services retroactive to the member’s beginning date of eligibility.

SSDI-Temporary Medical Coverage and KidsCare members must select a contractor prior to being
determined eligible and therefore, will not be auto-assigned. If the HIFA parent does not choose,
they will be enrolled with their child’s contractor following the enrollment rules set forth in
R9-31-1719. When a member is transferred from Title XIX to Title XXI and has not made a contractor
choice for Title XXI, the member will remain with their current contractor and a choice notice will
be sent to the member. The member may then change plans no later than 16 days from the date the
choice notice is sent.

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	PROGRAM REQUIREMENTS
	 	Contract/RFP No. YH04-0001
	 

The effective date of enrollment for a Title XXI member, including HIFA parents, and SSDI-Temporary
Medical Coverage members, will be the first day of the month following notification to the
contractor, wife few exceptions.

Prior Period Coverage: AHCCCS provides prior period coverage for the period of time, prior to the
Title XIX member’s enrollment, during which a member is eligible for covered services. The time
frame is from the effective date of eligibility to the day a member is enrolled with the
Contractor. The Contractor receives notification from the Administration of the member’s
enrollment. The Contractor is responsible for payment of all claims for medically necessary covered
services, including behavioral health services, provided to members during prior period coverage.
This may include services provided prior to the contract year (See Section D, Paragraph 53,
Compensation, for a description of the Contractor’s reimbursement from AHCCCSA for this eligibility
time period.)

Newborns: Newborns, born to AHCCCS eligible mothers enrolled at the time of the child’s birth, will
be enrolled with the mother’s contractor, when newborn notification is received by AHCCCSA. The
Contractor is responsible for notifying AHCCCSA of a child’s birth to an enrolled member.
Capitation for the newborn will begin on the date notification is received by AHCCCSA (except for
cases of births during prior period coverage). The effective date of AHCCCS eligibility will be the
newborn’s date of birth, and the Contractor is responsible for all covered services to the newborn
whether or not AHCCCSA has received notification of the child’s birth. AHCCCSA is currently
available to receive notification 24 hours a day, 7 days a week via phone or the AHCCCS website.
Eligible mothers of newborns are sent a letter advising them of their right to choose a different
contractor for their child; the date of the change will be the date of processing the request from
the mother. If the mother does not request a change, the child will remain with the mother’s
contractor.

Newborns of FES mothers are auto-assigned to a contractor and mothers of these newborns are sent a
letter advising them of their right to choose a different contractor for their child. In the event
the FES mother chooses a different contractor, AHCCCS will recoup all capitation paid to the
originally assigned contractor and the baby will be enrolled retroactive to the date of birth in
the second contractor. The second contractor will receive prior period capitation from the date of
birth to the day before assignment and prospective capitation from the date of assignment forward.
The second contractor will be responsible for all covered services to the newborn from date of
birth.

Enrollment Guarantees: Upon initial capitated enrollment as a Title XIX-eligible member, the member
is guaranteed a minimum of five full months of continuous enrollment. Upon initial capitated
enrollment as a Title XXI-eligible member, the member is guaranteed a minimum of 12 full months of
continuous enrollment. Enrollment guarantees do not apply to HIFA parents end SSDI-Temporary
Medical Coverage members. The enrollment guarantee is a one-time benefit. If a member changes from
one contractor to another within the enrollment guarantee period, the remainder of the guarantee
period applies to the new contractor. The enrollment guarantee may not be granted or may be
terminated if the member is incarcerated or, if a minor child is adopted. AHCCCS Rule R9-22,
Article 17 and R9-31, Article 3 describes other reasons for which the enrollment guarantee may not
apply.

Native Americans: Native Americans, on or off-reservation, may choose to receive services from
Indian Health Service (IHS), a PL 93-638 tribal facility or any available contractor. If a choice
is not made within the specified time limit, Native American Title XIX members living
on-reservation will be assigned to AHCCCS FFS. Native American Title XIX members living
off-reservation will be assigned to an available contractor using AHCCCS’Family Continuity Policy
and auto-assignment algorithm. Native American Title XXI members must make a choice prior to being
determined eligible. Title XXI HIFA parent members’ enrollment will follow the Title XIX enrollment
rules. Native Americans may change from AHCCCS FFS to a contractor or from a contractor to AHCCCS
FFS at any time.

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Member Rights: Members may submit plan change requests to the Contractor or the AHCCCS
Administration. A denial of any plan change request must include a description of the member’s
right to appeal the denial.

          4. ANNUAL ENROLLMENT CHOICE

AHCCCSA conducts an Annual Enrollment Choice (AEC) for members on their annual anniversary date.
[42 CFR 438.56(c)(2)(ii)] AHCCCSA may hold an open enrollment as deemed necessary. During AEC,
members may change contractors subject to the availability of other contractors within their
Geographic Service Area. Members are mailed a printed enrollment form and other information
required by the Balanced Budget Act of 1997 (BBA) 60 days prior to their AEC date and may choose a
new contractor by contacting AHCCCSA to complete the enrollment process. If the member does not
participate in the AEC, no change of contractor will be made (except for approved changes under the
ACOM Change of Plan Policy) during the new anniversary year. This holds true if a contractor’s
contract is renewed and the member continues to live in a contractor’s service area. The Contractor
shall comply with the ACOM Member Transition for Annual Enrollment Choice, Open Enrollment and
Other Plan Changes Policy and the AMPM.

          5. OPEN ENROLLMENT

In the event that AHCCCSA does not award a CYE ‘04 contract to an incumbent contractor, AHCCCSA
will hold an open enrollment for those members enrolled with the exiting contractor. If those
members do not elect to choose a contractor, they will be auto assigned. In addition to open
enrollment, AHCCCSA will make changes to both annual enrollment choice materials and new enrollee
materials prior to October 1, 2003 to reflect the change in available contractors. The auto
assignment algorithm will be adjusted to exclude auto assignment of new enrollees to exiting
contractors(s). The exact dates for the open enrollment and other changes described above have not
yet been determined, but will be communicated when they are finalized.

          6. AUTO-ASSIGNMENT ALGORITHM

Once auto-assigned, AHCCCS sends a choice notice to the member and gives them 16 days to choose a
different contractor from the auto-assigned contractor. Members who do not exercise their right to
choose and do not have family continuity, are assigned to a contractor through an auto-assignment
algorithm. The algorithm is a mathematical formula used to distribute members to the various
contractors in a manner that is predictable and consistent with AHCCCSA goals. The algorithm favors
those contractors with lower capitation rates in the latest contract award and higher rates in
selected Performance Measures. For further details on the AHCCCS Auto-Assignment Algorithm, refer
to Attachment G. AHCCCSA may change the algorithm at any time during the term of the contract in
response to contractor-specific issues (e.g. imposition of an enrollment cap). Capitation rates may
be adjusted to reflect changes to a contractor’s risk due to changes in the algorithm.

          7. AHCCCS MEMBER IDENTIFICATION CARDS

Contractors are responsible for paying the costs of producing AHCCCS member identification cards.
The Contractor will receive an invoice the month following the issue date of the identification
card.

          8. MAINSTREAMING OF AHCCCS MEMBERS

To ensure mainstreaming of AHCCCS members, the Contractor shall take affirmative action so that
members are provided covered services without regard to payer source, race, color, creed, gender,
religion, age, national origin (to include those with limited English proficiency), ancestry,
marital status, sexual preference, genetic

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information, or physical or mental handicap, except where medically indicated. Contractors must
take into account a member’s literacy and culture, when addressing members and their concerns, and
most take reasonable steps to encourage subcontractors to do the same. The Contractor must make
interpreters, including assistance for the visual or hearing impaired, available free of charge for
all members to ensure appropriate delivery of covered services. The Contractor must provide members
with information instructing them about how to access these services.

Examples of prohibited practices include, but are not limited to, the following, in accordance with
Title VI of the US Civil Rights Act of 1964, 42 USC, Section 2001, Executive Order 13166, and rules
and regulation promulgated according to, or as otherwise provided by law:

	a.	 	Denying or not providing a member any covered service or access to an available facility.
	 
	b.	 	Providing to a member any covered service which is different, or is provided in a different
manner or at a different time from that provided to other members, other public or private
patients or the public at large, except where medically necessary.
	 
	c.	 	Subjecting a member to segregation or separate treatment in any manner related to the receipt
of any covered service; restricting a member in any way in his or her enjoyment of any
advantage or privilege enjoyed by others receiving any covered service.
	 
	d.	 	The assignment of times or places for the provision of services on the basis of the race,
color, creed, religion, age, sex, national origin, ancestry, marital status, sexual
preference, income status, AHCCCS membership, or physical or mental handicap of the
participants to be served.

If the Contractor knowingly executes a subcontract with a provider with the intent of allowing or
permitting the subcontractor to implement barriers to care (i.e. the terms of the subcontract act
to discourage the full utilization of services by some members), the Contractor will be in default
of its contract.

If the Contractor identifies a problem involving discrimination by one of its providers, it shall
promptly intervene and implement a corrective action plan. Failure to take prompt corrective
measures may place the Contractor in default of its contract.

          9. TRANSITION OF MEMBERS

The Contractor shall comply with the AMPM, and the ACOM Member Transition for Annual Enrollment
Choice, Open Enrollment and Other Plan Changes Policy standards for member transitions between
contractors or GSAs, participation in or discharge from CRS or CMDP, to or from an ALTCS Contractor
and upon termination or expiration of a contract. The Contractor shall develop and implement
policies and procedures, which comply with these policies to address transition of:

	a.	 	Members with significant medical conditions such as a high-risk pregnancy or pregnancy within
the last 30 days, the need for organ or tissue transplantation, chronic illness resulting in
hospitalization or nursing facility placement, etc.;
	 
	b.	 	Members who are receiving ongoing services such as dialysis, home health, chemotherapy and/or
radiation therapy or who are hospitalized at the time of transition;
	 
	c.	 	Members who have received prior authorization for services such as scheduled surgeries,
out-of-area specialty services, nursing home admission;
	 
	d.	 	Prescriptions, DME and medically necessary transportation ordered for the transitioning
member by the relinquishing contractor; and
	 
	e.	 	Medical records of the transitioning member (the cost, if any, of reproducing and forwarding
medical records shall be the responsibility of the relinquishing AHCCCS contractor).
	 
	f.	 	Any members transitioning to CMDP.

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When relinquishing members, the Contractor is responsible for timely notification to the receiving
contractor regarding pertinent information related to any special needs of transitioning members.
The Contractor, when receiving a transitioning member with special needs, is responsible for
coordinating care with the relinquishing contractor in order that services not be interrupted, and
for providing the new member with contractor and service information, emergency numbers and
instructions about how to obtain services.

          10. SCOPE OF SERVICES

The Contractor shall provide covered services So AHCCCS members in accordance with all applicable
Federal, State and local laws, rules, regulations and policies, including services listed in this
document, listed by reference in attachments, and AHCCCS policies referenced in this document. The
services are described in detail in AHCCCS Rules R9-22, Article 2 and the AHCCCS Medical Policy
Manual (AMPM), all of which are incorporated herein by reference, except for provisions specific to
the Fee-for-Service program, and may be found in the Bidder’s Library. [42 CFR 438.210(a)(l)] The
covered services must be medically necessary and are briefly described below. [42 CFR
438.210(a)(4)] Except for annual well woman exams, behavioral health and children’s dental
services, covered services must be provided by, or coordinated with, a primary care provider. The
Contractor shall coordinate the services it provides to a member with services the member receives
from other entities, including behavioral health services the member receives through an ADHS/RBHA
provider. The Contractor shall ensure that, in the process of coordinating care, each member’s
privacy is protected in accordance with the privacy requirements in 45 CFR Parts 160 and 164
Subparts A and E, to the extent that they are applicable. [42 CFR 438.208(b)(4) and 438.224]
Services must be rendered by providers that are appropriately licensed or certified, operating
within their scope of practice, and registered as an AHCCCS provider. The Contractor shall provide
the same standard of care for all members regardless of the member’s eligibility category. The
Contractor shall ensure that the services are sufficient in amount, duration, or scope to
reasonably be expected to achieve the purpose for which the services are furnished. The Contractor
shall not arbitrarily deny or reduce the amount, duration, or scope of a required service solely
because of diagnosis, type of illness, or condition of the member. The Contractor may place
appropriate limits on a service on the basis of criteria such as medical necessity; or for
utilization control, provided the services furnished can reasonably be expected to achieve their
purpose. [42 CFR 438.210(a)(3)]

Authorization of Services: For the processing of requests for initial and continuing authorizations
of services, the Contractor shall have in place, and follow, written policies and procedures. The
Contractor shall have mechanisms in place to ensure consistent application of review criteria for
authorization decisions. Any decision to deny a service authorization request or to authorize a
service in an amount, duration, or scope that is less than requested, shall be made by a health
care professional who has appropriate clinical expertise in treating the member’s condition or
disease. [42 CFR 438.210(b)]

Notice of Action: The Contractor shall notify the requesting provider, and give the member written
notice of any decision by the Contractor to deny, reduce, suspend or terminate a service
authorization request, or to authorize a service in an amount, duration, or scope that is less than
requested. The notice shall meet the requirements of 42 CFR 438.404, except for the requirement
that the notice to the provider be in writing. [42 CFR 438.210(c)]

The Contractor shall ensure that its providers are not restricted or inhibited in any way from
communicating freely with members regarding the members’ health care, medical needs and treatment
options, even if needed services are not covered by the Contractor.

Ambulatory Surgery and Anesthesiology: The Contractor shall provide surgical services for either
emergency or scheduled surgeries when provided in an ambulatory or outpatient setting such as a
freestanding surgical center or a hospital based outpatient surgical setting.

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Anti-hemophilic Agents and Related Services: The Contractor shall provide services for the
treatment of hemophilia and Von Willebrands disease (See Paragraph 57, REINSURANCE,
Catastrophic Reinsurance). AHCCCSA holds a single-source specialty contract for
anti-hemophilic agents and related services for hemophilia. Non-hemophilia related services are not
covered under this contract. Non-hemophilia-related care is defined as any care that is provided
not related to the hemophilia services.

AHCCCSA’s participating Contractors may access anti-hemophilic agents and related pharmaceutical
services for hemophilia or Von Willebrands under the terms and conditions of this contract for
members enrolled in their plans. In that instance, the Contractor is the authorizing payor. As
such, the Contractor will provide prior authorization, care coordination, and reimbursement for all
components covered under the contract for their members. Contractors utilizing the contract will
comply with the terms and conditions of the contract. Contractors may use the AHCCCSA contract or
contract with a provider of their choice.

Andiology: The Contractor shall provide audiology services to members under the age of 21 including
the identification and evaluation of hearing loss and rehabilitation of the hearing loss through
medical or surgical means (i.e. hearing aids). Only the identification and evaluation of hearing
loss are covered for members 21 years of age and older unless the hearing loss is due to an
accident or injury-related emergent condition.

Behavioral Health: The Contractor shall provide behavioral health services as described in Section
D, Paragraph 12, Behavioral Health Services.

Children’s Rehabilitative Services (CRS): The program for children with CRS-covered conditions is
administered by the Arizona Department of Health Services (ADHS) for children who meet CRS
eligibility criteria. The Contractor shall refer children to the CRS program who are potentially
eligible for services related to CRS covered conditions, as specified in R9-22, Article 2 and
A.R.S. Title 36, Chapter 2, Article 3. The Contractor is responsible for care of members until
Children’s Rehabilitative Services Administration (CRSA) determines those members eligible. In
addition, the Contractor is responsible for covered services for CRS eligible members unless and
until the Contractor has received written confirmation from CRSA that CRSA will provide the
requested service. The Contractor shall require the member’s Primary Care Provider (PCP) to
coordinate the member’s care with the CRS Program. For more detailed information regarding
eligibility criteria, referral practices, and contractor-CRS coordination issues, refer to the CRS
Policy and Procedures Manual and the ACOM, including Section 409 “Notices of Action.”

The Contractor shall respond to requests for services potentially covered by CRSA in accordance
with Section 409 “Notices of Action” of the ACOM. The Contractor is responsible to address prior
authorization requests if CRSA fails to comply with the timeframes specified in Section 409. The
Contractor remains ultimately responsible for the provision of all covered services to its members,
including emergency services not related to a CRS condition, emergency services related to a CRS
condition rendered outside the CRS network, and AHCCCS covered services denied by CRSA for the
reason that it is not a service related to a CRS condition.

Referral to CRSA does not relieve the Contractor of the responsibility for timely providing
medically necessary AHCCCS services not covered by CRSA. In the event that CRSA denies a medically
necessary AHCCCS service for the reason that it is not related to a CRS condition, the Contractor
must promptly respond to the service authorization request and authorize the provision of medically
necessary services. CRSA cannot contest the Contractor prior authorization determination if CRSA
fails to timely respond to a service authorization request. Contractors, through their Medical
Directors, may request review from CRS Regional Medical Director when it denies a service for the
reason that it is not covered by the CRS Program. The Contractor may also request a hearing with
the Administration if it is dissatisfied with the CRSA determination. If the AHCCCS Hearing
Decision determines that the service should have been provided by CRSA, CRSA shall be financially
responsible for the costs incurred by the Contractor in providing the service.

A member with private insurance is not required to utilize CRSA. This includes members with
Medicare whether they are enrolled in Medicare FFS or a Medicare Managed Care Plan. If the member
uses the private

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insurance network or Medicare for a CRS covered condition, the Contractor is responsible for all
applicable deductibles and copayments. If the member is on Medicare, the AHCCCS Policy 201-
Medicare Cost Sharing for Members in Traditional Fee for Service Medicare and Policy 202 — Medicare
Cost Sharing for Members in Medicare Managed Care Plans shall apply. When the private insurance or
Medicare is exhausted, or certain annual or lifetime limits are reached with respect to CRS covered
conditions, the Contractor shall refer the member to CRSA for determination for CRS services. If
the member with private insurance or Medicare chooses to enroll wish CRS, CRS becomes the secondary
payer responsible for all applicable deductibles and copayments. The Contractor is not responsible
to provide services in instances when the CRS eligible member, who has no primary insurance or
Medicare, refuses to receive CRS covered services through the CRS Program. If the Contractor
becomes aware that a member with a CRS covered condition refuses to participate in the CRS
application process or refuses to receive services through the CRS Program, the member may be
billed by the provider in accordance with AHCCCS regulations regarding billing for unauthorized
services.

Chiropractic Services: The Contractor shall provide chiropractic services to members under age 21
when prescribed by the member’s PCP and approved by the Contractor in order to ameliorate the
member’s medical condition. Medicare approved chiropractic services shall also be covered, subject
to limitations specified in CFR 410.22, for Qualified Medicare Beneficiaries if prescribed by the
member’s PCP and approved by the Contractor.

Dental: The Contractor shall provide all members under the age of 21 with all medically necessary
dental services including emergency dental services, dental screening and preventive services in
accordance with the AHCCCS periodicity schedule, as well as therapeutic dental services, dentures,
and pre-transplantation dental services. The Contractor shall monitor compliance with the EPSDT
periodicity schedule for dental screening services. The Contractor is required to meet specific
utilization rates for members as described in Section D, Paragraph 24, Performance Standards. The
Contractor shall ensure that members are notified when denial screenings are due if the member has
not been scheduled for a visit. If a dental screening is not received by the member, a second
notice must be sent. Members under the age of 21 may request dental services without referral and
may choose a dental provider from the Contractor’s provider network. For members who are 21 years
of age and older, the Contractor shall provide emergency dental care, medically necessary dentures
and dental services for transplantation services as specified in the AMPM.

Dialysis: The Contractor shall provide medically necessary dialysis, supplies, diagnostic testing
and medication for all members when provided by Medicare-certified hospitals or Medicare-certified
end stage renal disease (ESRD) providers. Services may be provided on an outpatient basis, or on an
inpatient basis if the hospital admission is not solely to provide chronic dialysis services.

Early and Periodic Screening, Diagnosis and Treatment (EPSDT): The Contractor shall provide
comprehensive health care services through primary prevention, early intervention, diagnosis and
medically necessary treatment to correct or ameliorate defects and physical or mental illness
discovered by the screenings for members under age 21. The Contractor shall ensure that these
members receive required health screenings, including those for developmental/behavioral health, in
compliance with the AHCCCS periodicity schedule. The Contractor shall submit all EPSDT reports to
the AHCCCS Division of Health Care Management, as required by the AMPM. The Contractor is required
to meet specific participation/utilization rates for members as described in Section D, Paragraph
24, Performance Standards.

The Contractor shall ensure the initiation and coordination of a referral to the ADHS/RBHA system
for members in need of behavior health services. The Contractor shall follow up with the RBHA to
monitor whether members have received these health services.

Emergency Services: The Contractor shall have and/or provide the following as a minimum:

	 	a.	 	Emergency services facilities adequately staffed by qualified medical professionals
to provide pre-hospital, emergency care on a 24-hour-a-day, 7-day-a-week basis, for the sudden onset of
a medically

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	 	 	 	emergent condition. Emergency medical services are covered without prior authorization.
The Contractor is encouraged to contract with emergency service facilities for the
provision of emergency services. The Contractor is also encouraged to contract with or
employ the services of non-emergency facilities (e.g. urgent care centers) to address
member non-emergency care issues occurring after regular office hours or on weekends.
The Contractor shall be responsible for educating members and providers regarding
appropriate utilization of emergency room services including behavioral health
emergencies. The Contractor shall monitor emergency service utilization (by both
provider and member) and shall have guidelines for implementing corrective action for
inappropriate utilization;
	 
	 	b.	 	All medical services necessary to rule out an emergency condition;
	 
	 	c.	 	Emergency transportation; and
	 
	 	d.	 	Member access by telephone to a physician, registered nurse, physician assistant or
nurse practitioner for advice in emergent or urgent situations, 24 hours per day, 7 days
per week.

Per the Balanced Budget Act of 1997, CFR 438.114, the following conditions apply with respect to
coverage and payment of emergency services:

The Contractor must cover and pay for emergency services regardless of whether the provider that
furnishes the service has a contract with the Contractor.

The Contractor may not deny payment for treatment obtained under either of the following
circumstances:

	 	1.	 	A member had an emergency medical condition, including cases in which the absence
of medical attention would not have resulted in the outcomes identified in the definition
of emergency medical condition CFR 438.114.
	 
	 	2.	 	A representative of the Contractor (an employee or subcontracting provider)
instructs the member to seek emergency medical services.

Additionally, the Contractor may not:

	 	1.	 	Limit what constitutes an emergency medical condition as defined in CFR 438.114, on
the basis of lists of diagnoses or symptoms.
	 
	 	2.	 	Refuse to cover emergency services based on the failure of the emergency room
provider, hospital, or fiscal agent to notify the Contractor of the member’s screening
and treatment within 10 calendar days of presentation for emergency services. Claims
submission by the hospital within 10 calendar days of presentation for the emergency
services constitutes notice to the Contractor. This notification stipulation is only
related to the provision of emergency services.
	 
	 	3.	 	Require notification of Emergency Department treat and release visits as a
condition of payment unless the plan has prior approval of the AHCCCS Administration.

A member who has an emergency medical condition may not be held liable for payment of subsequent
screening and treatment needed to diagnose the specific condition or stabilize the patient.

The attending emergency physician, or the provider actually treating the member, is responsible for
determining when the member is sufficiently stabilized for transfer or discharge, and such
determination is binding on the Contractor responsible for coverage and payment. The Contractor
shall comply with BBA guidelines regarding the coordination of post-stabilization care.

For additional information and requirements regarding emergency services, refer to AHCCCS Rules
R9-22-201 et seq..

Eye Examinations/Optometry: The Contractor shall provide all medically necessary emergency eye
care, vision examinations, prescriptive lenses, and treatments for conditions of the eye for all
members under the age of 21. For members who are 21 years of age and older, the Contractor shall
provide emergency care for eye

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conditions which meet the definition of an emergency medical condition. Also covered for this
population is cataract removal, and medically necessary vision examinations and prescriptive
lenses, if required, following cataract removal and other eye conditions as specified in the AMPM.

Family Planning: The Contractor shall provide family planning services in accordance with the AMPM,
for all members who choose to delay or prevent pregnancy. These include medical, surgical,
pharmacological and laboratory services, as well as contraceptive devices. Information and
counseling, which allow members to make informed decisions regarding family planning methods, shall
also be included. If the Contractor does not provide family planning services, it must contract for
these services through another health care delivery system, which allows members freedom of choice
in selecting a provider.

The Contractor shall provide services to members enrolled in the Family Planning Services Extension
Program, a program that provides family planning services only, for a maximum of 24 months, to
women whose SOBRA eligibility has terminated. The Contractor is also responsible for notifying
AHCCCSA when a SOBRA woman is sterilized to prevent inappropriate enrollment in the SOBRA Family
Planning Services Extension Program. Notification should be made at the time the newborn is
reported or after the sterilization procedure is completed.

Health Risk Assessment and Screening: The Contractor shall provide these services for
non-hospitalized members, 21 years of age and older. These services include, but are not limited
to, screening for hypertension, elevated cholesterol, colon cancer, sexually transmitted diseases,
tuberculosis and HIV/AIDS; nutritional assessment in cases when the member has a chronic
debilitating disease affected by nutritional needs; mammograms and prostate screenings; physical
examinations and diagnostic work-ups; and immunizations. Required assessment and screening services
for members under age 21 are included in the AHCCCS EPSDT periodicity schedule.

Home and Community Based Services (HCBS): Assisted living facility, alternative residential
setting, or home and community based services (HCBS) as defined in R9-22, Article 2 and R9-28,
Article 2 that meet the provider standards described in R9-28, Article 5, and subject to the
limitations set forth in the AMPM. This service is covered in lieu of a nursing facility.

Home Health: This service shall be provided under the direction of a physician to prevent
hospitalization or institutionalization and may include nursing, therapies, supplies and home
health aide services. It shall be provided on a part-time or intermittent basis.

Hospice: These services are covered for members who are certified by a physician as being
terminally ill and having six months or less to live. See the AMPM for details on covered hospice
services.

Hospital: Inpatient services include semi-private accommodations for routine care, intensive and
coronary care, surgical care, obstetrics and newborn nurseries, and behavioral health
emergency/crisis services. If the member’s medical condition requires isolation, private inpatient
accommodations are covered. Nursing services, dietary services and ancillary services such as
laboratory, radiology, Pharmaceuticals, medical supplies, blood and blood derivatives, etc. are
also covered. Outpatient hospital services include any of the above, which may be appropriately
provided on an outpatient or ambulatory basis (i.e. laboratory, radiology, therapies, ambulatory
surgery, etc.). Observation services may be provided on an outpatient basis, if determined
reasonable and necessary, when deciding whether the member should be admitted for inpatient care.
Observation services include the use of a bed and periodic monitoring by hospital nursing staff
and/or other staff to evaluate, stabilize or treat medical conditions of a significant degree of
instability and/or disability.

Immunizations: Tire Contractor shall provide immunizations for adults (21 years of age and older)
to include diphtheria-tetanus, influenza, pneumococcus, rubella, measles and hepatitis-B, or others
as medically indicated. For all members under the age of 21, immunization requirements include
diphtheria, tetanus,

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pertussis vaccine (DPT), inactivated polio vaccine (IPV), measles, mumps, rubella (MMR) vaccine, H.
influenza, type B (HIB) vaccine, hepatitis B (Hep B) vaccine, varicella zoster virus (VZV) vaccine
and pneumococcal conjugate vaccine (PCV). The Contractor is required to meet specific immunization
rates for members under the age of 21, which are described in Paragraph 24, Performance Standards.
(Please refer to the AMPM for current immunization requirements.)

Indian Health Service (IHS): AHCCCSA will reimburse claims on a FFS basis for acute care services
that are medically necessary, eligible for 100% Federal reimbursement, and are provided to Title
XIX members enrolled with the Contractor, in an IHS or a 638 tribal facility. The Contractor is
responsible for reimbursement to IHS or tribal facilities for emergency services provided to Title
XXI Native American members enrolled with the Contractor. The Contractor may choose to subcontract
with an IHS or 638 tribal facility as part of their provider network for the delivery of covered
services, however, the Contractor will be liable for the cost of the care in the event they choose
to do so.

Laboratory: Laboratory services for diagnostic, screening and monitoring purposes are covered when
provided by a CLIA (Clinical Laboratory Improvement Act) approved free standing, hospital, clinic,
physician office or other health care facility laboratory.

Upon written request, the Contractor may obtain laboratory test data on members from a freestanding
laboratory or hospital- based laboratory subject to the requirements specified in A.R.S, §
36-2903(R) and (S). The data shall be used exclusively for quality improvement activities and
health care outcome studies required and/or approved by the Administration.

Maternity: The Contractor shall provide pre-conception counseling, pregnancy identification,
prenatal care, treatment of pregnancy related conditions, labor and delivery services, and
postpartum care for members. Services may be provided by physicians, physician assistants, nurse
practitioners, or certified nurse midwives. Members may select or be assigned to a PCP specializing
in obstetrics. All members, anticipated to have a low-risk delivery, may elect to receive labor and
delivery services in their home, if this setting is included in the allowable settings of the
Contractor and the Contractor has providers in its network that offer home labor and delivery
services. All members, anticipated to have a low-risk prenatal course and delivery, may elect to
receive prenatal care, labor and delivery and postpartum care provided by licensed midwives, if
these providers are in the Contractor’s network. All licensed midwife labor and delivery services
must be provided in the member’s home, as licensed midwives do not have admitting privileges in
hospitals or AHCCCS registered freestanding birthing centers. Members receiving maternity services
from a licensed midwife must also be assigned to a PCP for other health care and medical services.
The Contractor shall allow women and their newborns to receive up to 48 hours of inpatient hospital
care after a routine vaginal delivery and up to 36 hours of inpatient care after a cesarean
delivery. The attending health care provider, in consultation with the mother, may discharge the
mother or newborn prior to the 48-hour minimum length of stay. A normal newborn may be granted an
extended stay in the hospital of birth when the mother’s continued stay in the hospital is beyond
the 48 or 96 hour stay.

The Contractor shall inform all assigned AHCCCS pregnant women of voluntary prenatal HIV testing
and the availability of medical counseling if the test is positive. The Contractor shall provide
information in the member handbook and annually in the member newsletter, which encourages pregnant
women to be tested and provides instructions about where testing is available. Semi-annually, the
Contractor shall report to AHCCCS the number of pregnant women who have been identified as HIV/AIDS
positive. This report is due no later than 30 days after the end of the second and fourth quarters
of the contract year.

Medical Foods: Medical foods are covered within limitations defined in the AMPM for members
diagnosed with a metabolic condition included under the ADHS Newborn Screening Program and
specified in the AMPM. The medical foods, including metabolic formula and modified low protein
foods, must be prescribed or ordered under the supervision of a physician.

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Medical Supplies, Durable Medical Equipment (DME), Orthotic and Prosthetic Devices: These services
are covered when prescribed by the member’s PCP, attending physician, practitioner, or by a
dentist. Medical equipment may be rented or purchased only if other sources, which provide the
items at no cost, are not available. The total cost of the rental must not exceed the purchase
price of the item. Reasonable repairs or adjustments of purchased equipment are covered to make the
equipment serviceable and/or when the repair cost is less than renting or purchasing another unit.

Nursing Facility: The Contractor shall provide services in nursing facilities, including religious
non-medical health care institutions, for members who require short-term convalescent care not to
exceed 90 days per contract year. In lieu of a nursing facility, the member may be placed in an
assisted living facility, an alternative residential setting, or receive home and community based
services (HCBS) as defined in R9-22, Article 2 and R9-28, Article 2 that meet the provider
standards described in R9-28, Article 5, and subject to the limitations set forth in the AMPM.

Nursing facility services must be provided in a dually-certified Medicare/Medicaid nursing
facility, which includes in the per-diem rate: nursing services; basic patient care equipment and
sickroom supplies; dietary services; administrative physician visits; non-customized DME; necessary
maintenance and rehabilitation therapies; over-the-counter medications; social, recreational and
spiritual activities; and administrative, operational medical direction services. See Paragraph 41,
Nursing Facility Reimbursement, for further details.

The Contractor shall notify the Assistant Director of the Division of Member Services, in writing,
when a member has been residing in a nursing facility for 75 days. This will allow AHCCCSA time to
follow-up on the status of the ALTCS application and to prepare for potential fee-for-service
coverage, if the stay goes beyond the 90-day maximum.

Nutrition: Nutritional assessments may be conducted as a part of the EPSDT screenings for members
under age 21, and to assist members 21 years of age and older whose health status may improve with
nutritional intervention. Assessment of nutritional status on a periodic basis may be provided as
determined necessary, and as a part of the health risk assessment and screening services provided
by the member’s FCP. AHCCCS covers nutritional therapy on an enteral, parenteral or oral basis,
when determined medically necessary to provide either complete daily dietary requirements or to
supplement a member’s daily nutritional and caloric intake and when AHCCCS criteria specified in
the AMPM are met

Physician: The Contractor shall provide physician services to include medical assessment,
treatments and surgical services provided by licensed allopathic or osteopathic physicians.

Podiatry: The Contractor shall provide podiatry services to include bunionectomies, casting for the
purpose of constructing or accommodating orthotics, medically necessary orthopedic shoes that are
an integral part of a brace, and medically necessary routine foot care for patients with a severe
systemic disease which prohibits care by a nonprofessional person.

Post-stabilization Care Services Coverage and Payment: Pursuant to 42 CFR 438.114, 422.113(c) and
422.133, the following conditions apply with respect to coverage and payment of emergency and of
post-stabilization care services, except where otherwise noted in the contract:

The Contractor must cover and pay for post-stabilization care services without authorization,
regardless of whether the provider that furnishes the service has a contract with the Contractor,
for the following situations:

	 	1.	 	Post-stabilization care services that were pre-approved by the Contractor; or,
	 
	 	2.	 	Post-stabilization care services were not pre-approved by the Contractor because
the Contractor did not respond to the treating provider’s
request for pre-approval within
one hour after being requested to approve such care or could not be contacted for
pre-approval.

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	 	3.	 	The Contractor representative and the treating physician cannot reach agreement
concerning the member’s care and a contractor physician is not available for
consultation. In this situation, the Contractor must give the treating physician the
opportunity to consult wish a contractor physician and the treating physician may
continue with care of the patient until a contractor physician is reached or one of the
criteria in CFR 422.113(c)(3) is met.

Pursuant
to CFR 422.113(c)(3), the Contractor’s financial responsibility for post-stabilization care
services that have not been pre-approved ends when:

	 	1.	 	A contractor physician with privileges at the treating hospital assumes
responsibility for the member’s care;
	 
	 	2.	 	A contractor physician assumes responsibility for she member’s care through
transfer;
	 
	 	3.	 	A contractor representative and the treating physician reach an agreement
concerning the member’s care; or
	 
	 	4.	 	The member is discharged.

Pregnancy Terminations: AHCCCS covers pregnancy termination if the pregnant member suffers from a
physical disorder, physical injury, or physical illness, including a life endangering physical
condition caused by, or arising from, the pregnancy itself, that would, as certified by a
physician, place the member in danger of death unless the pregnancy is terminated; the pregnancy is
a result of rape or incest.

The attending physician must acknowledge that a pregnancy termination has been determined medically
necessary by submitting the Certificate of Necessity for Pregnancy Termination. This certificate
must be submitted to the appropriate assigned Contractor Medical Director. The Certificate must
certify that, in the physician’s professional judgment, one or more of the previously mentioned
criteria have been met.

Prescription Drugs: Medications ordered by a PCP, attending physician, dentist or other authorized
prescriber and dispensed under the direction of a licensed pharmacist are covered subject to
limitations related to prescription supply amounts, contractor formularies and prior authorization
requirements. Contractors may include over-the-counter medications in their formulary, as defined
in the AMPM. An appropriate over-the-counter medication may be prescribed, when it is determined to
be a lower-cost alternative to prescription drugs.

Primary Care Provider (PCP): PCP services are covered when provided by a physician, physician
assistant or nurse practitioner selected by, or assigned to, the member. The PCP provides primary
health care and serves as a coordinator in referring the member for specialty medical services. [42
CFR 438.208(b)] The PCP is responsible for maintaining the member’s primary medical record, which
contains documentation of all health risk assessments and health care services of which they are
aware whether or not they were provided by the PCP.

Radiology and Medical Imaging: These services are covered when ordered by the member’s PCP,
attending physician or dentist and are provided for diagnosis, prevention, treatment or assessment
of a medical condition. Services are generally provided in hospitals, clinics, physician offices
and other health care facilities.

Rehabilitation Therapy: The Contractor shall provide occupational, physical and speech therapies.
Therapies must be prescribed by the member’s PCP or attending physician for an acute condition and
the member must have the potential for improvement due to the rehabilitation. Physical therapy for
all members, and occupational and speech therapies for members under the age of 21, are covered in
both inpatient and outpatient settings. For those members who are 21 and over, occupational and
speech therapies are covered in inpatient settings only.

Respiratory Therapy: This therapy is covered in inpatient and outpatient settings when prescribed
by the member’s PCP or attending physician, and is necessary to restore, maintain or improve
respiratory functioning.

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Transplantation of Organs and Tissue, and Related Immunosuppressant Drugs: These services are
covered within limitations defined in the AMPM for members diagnosed with specified medical
conditions. Services include pre-transplant inpatient or outpatient evaluation; donor search;
organ/tissue harvesting or procurement; preparation and transplantation services; and convalescent
care. In addition, if a member receives, or has received, a transplant covered by a source other
than AHCCCS, medically necessary non-experimental services are provided, within limitations, alter
the discharge from the acute care hospitalization for the transplantation. AHCCCS has contracted
with transplantation providers for the Contractor’s use or the Contractor may select its own
transplantation provider.

Transportation: These services include emergency and non-emergency medically necessary
transportation. Emergency transportation, including transportation initiated by an emergency
response system such as 911, may be provided by ground, air or water ambulance to manage an AHCCCS
member’s emergency medical condition at an emergency scene and transport the member to the nearest
appropriate medical facility. Non-emergency transportation shall be provided for members who are
unable to provide their own transportation for medically necessary services.

Triage/Screening and Evaluation: These are covered services when provided by acute care hospitals,
IHS facilities and urgent care centers to determine whether or not an emergency exists, assess the
severity of the member’s medical condition and determine what services are necessary to alleviate
or stabilize the emergent condition. Triage/screening services must be reasonable, cost effective
and meet the criteria for severity of illness and intensity of service.

          11. SPECIAL HEALTH CARE NEEDS

The Contractor shall have in place a mechanism to identify and stratify all members with special
health care needs [42 CFR 438.240(b)(4)]. The Contractor shall implement mechanisms to assess each
member identified as having special health care needs, in order to identify any ongoing special
conditions of the member which require a course of treatment or regular care monitoring. The
assessment mechanisms shall use appropriate health care professionals [42 CFR 438.208(c)(2)]. The
Contractor shall share with other entities providing services to that member the results of its
identification and assessment of that member’s needs so that those activities need not be
duplicated [42 CFR 438.208(b)(3)].

For members with special health care needs determined to need a specialized course of treatment or
regular care monitoring, the Contractor must have procedures in place to allow members to directly
access a specialist (for example through a standing referral or an approved number of visits) as
appropriate for the member’s condition and identified needs.
[42 CFR 438.208(c)(4)]

The Contractor shall have a methodology to identify providers willing to provide medical home
services and make reasonable efforts to offer access to these providers.

The American Academy of Pediatrics (AAP) describes care from a medical home as:

	 	•	 	Accessible
	 
	 	•	 	Continuous
	 
	 	•	 	Coordinated
	 
	 	•	 	Family-centered
	 
	 	•	 	Comprehensive
	 
	 	•	 	Compassionate
	 
	 	•	 	Culturally effective

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          12. BEHAVIORAL HEALTH SERVICES

AHCCCS members, except for SOBRA Family Planning members, are eligible for comprehensive behavioral
health services. For SOBRA Family Planning members, there is no behavioral health coverage. With
the exception of the Contractor’s providers’ medical management of certain behavioral health
conditions as described under “medication Management Services” below, the behavioral health benefit
for these members is provided through the ADHS — Regional Behavioral Health Authority (RBHA)
system. The Contractor shall be responsible for member education regarding these benefits;
provision of limited emergency inpatient services; and screening and referral to the RBHA system of
members identified as requiring behavioral health services.

Member Education: The Contractor shall be responsible for educating members in the member handbook
and other printed documents about covered behavioral health services and where and how to access
services. Covered services include:

	a.	 	Behavior Management (behavioral health personal care, family support/home care training,
self-help/peer support)
	 
	b.	 	Behavioral Health Case Management Services (limited)
	 
	c.	 	Behavioral Health Nursing Services
	 
	d.	 	Emergency Behavioral Health Care
	 
	e.	 	Emergency and Non-Emergency Transportation
	 
	f.	 	Evaluation and Assessment
	 
	g.	 	Individual, Group and Family Therapy and Counseling
	 
	h.	 	Inpatient Hospital Services (the Contractor may provide services in alternative inpatient
settings that are licensed by ADHS/DLS/OBHL, in lieu of services in an inpatient hospital.
These alternative settings must be lower cost than traditional inpatient settings. The cost of
the alternative settings will be considered in capitation rate development.)
	 
	i.	 	Non-Hospital Inpatient Psychiatric Facilities Services (Level I residential treatment centers
and sub-acute facilities)
	 
	j.	 	Institutions for Mental Diseases (with limitations and in accordance with 1115 Waiver Phase
Down for services to AHCCCS enrollees ages 21 through 64). Allowable expenditures that will be
recognized under the 1115 Waiver for enrollees ages 21 through 64 years of age residing in
IMDs for the first 30 days of an inpatient episode, subject to an aggregate annual limit of 60
days will be phased down in accordance with the following:

	 	 	 	 	 
	Period	 	Allowable Portion of Expenditures
	October 1, 2006 — September 30, 2007

	 	 	100	%
	October 1, 2007 — September 30, 2008

	 	 	50	%
	October 1, 2008 — September 30, 2009

	 	 	0	%

	k.	 	Laboratory and Radiology Services for Psychotropic Medication Regulation and Diagnosis
	 
	l.	 	Opioid Agonist Treatment
	 
	m.	 	Partial Care (Supervised day program, therapeutic day program and medical day program)
	 
	n.	 	Psychosocial Rehabilitation (living skills training; health promotion; supportive employment
services)
	 
	o.	 	 Psychotropic Medication
	 
	p.	 	Psychotropic Medication Adjustment and Monitoring
	 
	q.	 	Respite Care (with limitations)
	 
	r.	 	Rural Substance Abuse Transitional Agency Services
	 
	s.	 	Screening
	 
	t.	 	Behavioral Health Therapeutic Home Care Services

Referrals: As specified in Section D, Paragraph 10, Scope of Services, EPSDT, the Contractor must
provide developmental/behavioral health screenings for members up to 21 years of age in compliance
with the AHCCCS periodicity schedule. The Contractor shall ensure the initiation and coordination
of behavioral health referrals of these members to the RBHA when determined necessary through the
screening process.

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The Contractor is responsible for RBHA referral and follow-up collaboration, as necessary, for
other members identified as needing behavioral health evaluation and treatment. Members may also
access the RBHA system for evaluation by self-referral or be referred by schools, State agencies or
other service providers. The Contractor is responsible for providing transportation to a member’s
first RBHA evaluation appointment if a member is unable to provide his/her own transportation.

Emergency Services: Contactors are responsible for providing up to 72 hours inpatient emergency
behavioral health services to members with psychiatric or substance abuse diagnoses who are not
behavioral health recipients in accordance with AHCCCS Rule R9-22-210.01. For additional
information regarding behavioral health services refer to Title 9 Chapter 22 Articles 2 and 12. It
is expected that Contractors initiate a referral to the RBHA for evaluation and behavioral health
recipient eligibility as soon as possible after admission.

When members present in an emergency room setting, the Contractor is responsible for all emergency
medical services including triage, physician assessment and diagnostic tests. For members who are
not ADHS behavioral health recipients, the Contractor is responsible to provide medically necessary
psychiatric consultations or psychological consultations in emergency room settings to help
stabilize the member or determine the need for inpatient behavioral health services. ADHS is
responsible for medically necessary psychiatric consultations provided to ADHS behavioral health
recipients in emergency room settings.

Coordination of Care: The Contractor is responsible for ensuring that a medical record is
established by the PCP when behavioral health information is received from the RBHA or provider
about an assigned member even if the PCP has not yet seen the assigned member. In lieu of actually
establishing a medical record, such information may be kept in an appropriately labeled File but
must be associated with the member’s medical record as soon as one is established. The Contractor
shall require the PCP to respond to RBHA/provider information requests pertaining to ADHS
behavioral health recipient members within 10 business days of receiving the request. The response
should include all pertinent information, including, but not limited to, current diagnoses,
medications, laboratory results, last PCP visit, and recent hospitalizations. The Contractor shall
require the PCP to document or initial signifying review of member behavioral health information
received from a RBHA behavioral health provider who is also treating the member. All affected
subcontracts shall include this provision by July 1, 2005. For prior period coverage, the
Contractor is responsible for payment of all claims for medically necessary covered behavioral
health services to members who are not ADHS behavioral health recipients.

Medication Management Services: The Contractor shall allow PCPs to provide medication management
services (prescriptions, medication monitoring visits, laboratory and other diagnostic tests
necessary for diagnosis and treatment of behavioral disorders) to members with diagnoses of
depression, anxiety and attention deficit hyperactivity disorder. The Contractor shall make
available, on the Contractor’s formulary, medications for the treatment of these disorders.

The Contractor shall ensure that training and education are available to PCPs regarding behavioral
health referral and consultation procedures. The Contractor shall establish policies and procedures
for referral and consultation and shall describe them in its provider manual. Policies for referral
must include, at a minimum, criteria, processes, responsible parties and minimum requirements no
less stringent than those specified in this contract for the forwarding of member medical
information.

Transfer of Care: When a PCP has initiated medication management services for a member to treat a
behavioral health disorder, and it is subsequently determined by the PCP or contractor that the
member should be transferred to a RBHA prescriber for evaluation and/or continued medication
management services, the Contractor will require and ensure that the PCP or contractor coordinates
the transfer of care. All affected subcontracts shall include this provision by July 1, 2005. The
Contractor shall establish policies and procedures for the transition of members who arc referred
to the RBHA for ongoing treatment. The contractor shall ensure that PCPs maintain continuity of
care for these members. The policies and procedures must address, at a minimum, the following:

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	 	1.	 	Guidelines for when a transition of the member to the RBHA for ongoing treatment is
indicated.
	 
	 	2.	 	Protocols for notifying the RBHA of the member’s transfer, including reason for
transfer, diagnostic information, and medication history.
	 
	 	3.	 	Protocols and guidelines for the transfer of medical records, including but not
limited to which parts of the medical record are to be copied, timeline for making the
medical record available to the RBHA, observance of confidentiality of the member’s
medical record, and protocols for responding to RBHA requests for additional medical
record information.
	 
	 	4.	 	Protocols for transition of prescription services, including but not limited to
notification to the RBHA of the member’s current medications and timeframes for
dispensing and refilling medications during the transition period. This coordination must
ensure at a minimum, that the member does not run out of prescribed medications prior to
the first appointment with a RBHA prescriber and that all relevant member pertinent
medical information as outlined above and, including the reason for transfer is forwarded
to the receiving RBHA prescriber prior to the member’s first scheduled appointment with
the RBHA prescriber.
	 
	 	5.	 	Contractor activities to monitor to ensure that members are appropriately
transitioned to the RBHA for care.

The Contractor shall ensure that its quality management program incorporates monitoring of the
PCP’s management of behavioral health disorders and referral to, coordination of care with and
transfer of care to RBHA providers as required under this contract.

          13. AHCCCS GUIDELINES, POLICIES and MANUALS

All AHCCCS guidelines, policies and manuals are hereby incorporated by reference into this
contract. All guidelines, policies and manuals are available on the AHCCCS Home Page on the
Internet at www.azahcccs.gov or upon request. The Contractor is responsible for complying
with the requirements set forth within. In addition, linkages to AHCCCS rules (Arizona
Administrative Code), Statutes and other resources are also available to all interested parties
through the AHCCCS Home Page. Upon adoption by AHCCCS, updates will be made available to the
Contractors. Once notification to the Contractors has taken place, the Contractor shall be
responsible for implementing and maintaining current copies of updates.

          14. MEDICAID SCHOOL BASED CLAIMING PROGRAM (MSBC)

Pursuant to an Intergovernmental Agreement with the Department of Education, and a contract with a
Third Party Administrator, AHCCCSA reimburses participating school districts for specifically
identified Medicaid services when provided to Medicaid eligible children who are included under the
Individuals with Disabilities Education Act (IDEA). The Medicaid services mast be identified in the
member’s Individual Education Plan (IEP) as medically necessary for the child to obtain a public
school education.

MSBC services are provided in a school setting or other approved setting specifically to allow
children to receive a public school education. They do not replace medically necessary services
provided outside the school setting or other MSBC approved alternative setting. Currently, services
include audiology, therapies (OT, PT and speech/language); behavioral health evaluation and
counseling; nursing and attendant care; and specialized transportation. The Contractor’s
evaluations and determinations, about whether services are medically necessary, should be made
independent of the fact that the child is receiving MSBC services.

Contractors and their providers must coordinate with schools and school districts that provide MSBC
services to the Contractor’s enrolled members. Services should not be duplicative. Contractor case
managers, working with special needs children, should coordinate with school or school district
case managers/special education teachers, working with these members. Transfer of member medical
information and progress toward

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treatment goals between the Contractor and the member’s school or school district is required and
should be used to enhance the services provided to members.

          15. PEDIATRIC IMMUNIZATIONS AND THE VACCINES FOR CHILDREN PROGRAM

Through the Vaccines for Children Program, the Federal and State governments purchase, and make
available to providers free of charge, vaccines for AHCCCS children under age 19. The Contractor
shall not utilize AHCCCS funding to purchase vaccines for members under the age of 19. If vaccines
are not available through the VFC Program, the Contractor shall contact the AHCCCSA Division of
Health Care Management, Clinical Quality Management Unit. Any provider, licensed by the State to
administer immunizations, may register with ADHS as a “VFC provider” and receive free vaccines. The
Contractor shall not reimburse providers for the administration of the vaccines in excess of the
maximum allowable as set by CMS. The Contractor shall comply with all VFC requirements and monitor
its providers to ensure that, a physician if acting as primary care physician (PCP) to AHCCCS
members under the age of 19, is registered with ADHS/VFC.

Arizona State law requires the reporting of all immunizations given to children under the age of
19. Immunizations must be reported at least monthly to the ADHS. Reported immunizations are held in
a central database known as ASIIS (Arizona State Immunization Information System), which can be
accessed by providers to obtain complete, accurate immunization records. Software is available from
ADHS to assist providers in meeting this reporting requirement. Contractors must educate their
provider network about these reporting requirements and the use of this resource and monitor to
ensure compliance.

          16. STAFF REQUIREMENTS AND SUPPORT SERVICES

The Contractor shall have in place the organization, management and administrative systems capable
of fulfilling all contract requirements. For the purposes of this contract, the Contractor shall
not employ or contract with any individual that has been debarred, suspended or otherwise lawfully
prohibited from participating in any public procurement activity or from participating in
non-procurement activities under regulations issued under Executive Order No. 12549 or under
guidelines implementing Executive Order 12549. [42 CFR 438.610(a) and (b)]. The Contractor is
responsible for maintaining a significant local (within the State of Arizona) presence. This
presence would include staff as described in a., b., d., c., d., e., f., g., i., k., n., o., p. and
q. below. The Contractor must obtain approval from AHCCCS prior to moving functions outside the
State of Arizona. Such a request for approval must include a description of the processes in place
that assure rapid responsiveness to effect changes for contract compliance.

The Contractor shall be responsible for any additional costs associated with on-site audits or
other oversight activities which result from required system located outside of the State of
Arizona.

At a minimum, the following staff is required:

	a.	 	A full-time Administrator/CEO/COO or designee must be available during working hours to
fulfill the responsibilities of the position and to oversee the entire operation of the
contractor. The Administrator shall devote sufficient time to the Contractor’s operations to
ensure adherence to program requirements and timely responses to AHCCCS Administration.
	 
	b.	 	A Medical Director who shall be an Arizona-licensed physician. The Medical Director shall be
actively involved in all-major clinical programs and QM/UM components of the Contractor. The
Medical Director shall devote sufficient time to the Contractor to ensure timely medical
decisions, including after-hours consultation as needed.
	 
	c.	 	A Chief Financial Officer/CFO who is available at all times to fulfill the responsibilities
of the position and to oversee the budget and accounting systems implemented by the
Contractor.

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	d.	 	A Quality Management/ Coordinator who is an Arizona-licensed registered nurse, physician or
physician’s assistant.
	 
	e.	 	A Utilization Management/Medical Management Coordinator who is an Arizona licensed registered
nurse, physician or physician’s assistant.
	 
	f.	 	A Maternal Health/EPSDT (child health) Coordinator who shall be an Arizona licensed nurse,
physician or physician’s assistant; or have a Master’s degree in health services, public
health or health care administration or other related field.
	 
	g.	 	A Behavioral Health Coordinator who shall be a behavioral health professional as described in
Health Services Rule R9-20. The Behavioral Health Coordinator shall devote sufficient time to
ensure that the Contractor’s behavioral health referral and coordination activities are
implemented per AHCCCSA requirements.
	 
	h.	 	Prior Authorization staff to authorize health care 24 hours per day, 7 days per week. This
staff shall include an Arizona-licensed nurse, physician or physician’s assistant. The staff
will work under the direction of an Arizona-licensed registered nurse, physician, or
physician’s assistant.
	 
	i.	 	Concurrent Review staff to conduct inpatient concurrent review. This staff shall consist of
an Arizona-licensed nurse, physician, physician’s assistant. The staff will work under the
direction of an Arizona-licensed registered nurse, physician or physician’s assistant.
	 
	j.	 	Member Services Manager and staff to coordinate communications with members and act as member
advocates. There shall be sufficient Member Service staff to enable members to receive prompt
resolution to their inquiries/problems, and to meet the Contractor’s standards for resolution,
telephone abandonment rates and telephone hold times.
	 
	k.	 	Provider Services Manager and staff to coordinate communications between the Contractor and
its subcontractors. There shall be sufficient Provider Services staff to enable providers to
receive prompt resolution to their problems or inquiries and appropriate education about
participation in the AHCCCS program.
	 
	l.	 	A Claims Administrator and Claims Processors to ensure the timely and accurate processing of
original claims, resubmissions and overall adjudication of claims.
	 
	m.	 	Encounter Processors to ensure the timely and accurate processing and submission to AHCCCSA
of encounter data and reports.
	 
	n.	 	A Grievance Manager who will manage and adjudicate member and provider disputes arising under
the Grievance System including member grievances, appeals, and requests for hearing and
provider claim disputes.
	 
	o.	 	 A Compliance Officer who will implement and oversee the Contractor’s compliance program. The
compliance officer shall be an on-site management official, available to all employees, with
designated and recognized authority to access records and make independent referrals to the
AHCCCSA, Office of Program Integrity. See Paragraph 62, Corporate Compliance, for more
information.
	 
	p.	 	Contractor Staff sufficient to implement and oversee compliance with both the Contractor’s
Cultural Competency Plan and the ACOM Cultural Competency Policy, and to oversee compliance
with all AHCCCS requirements pertaining to limited English proficiency (LEP).
	 
	q.	 	Clerical and Support staff to ensure appropriate functioning of the Contractor’s operation.
	 
	r.	 	Business Continuity Planning Coordinator as noted in the ACOM Business Continuity and
Recovery Plan Policy
	 
	s.	 	A Pharmacy Coordinator/Director who is an Arizona licensed pharmacist or physician who
oversees and administers the prescription drug and pharmacy benefits. The Pharmacy
Coordinator/Director may be an employee or contractor of the Plan.
	 
	t.	 	Dental Director/Coordinator that is responsible for coordinating dental activities of the
health plan and providing required communication between the plan and AHCCCS. The Dental
Director/Coordinator may be an employee or contractor of the plan and must be licensed in
Arizona if they are required to review or deny dental services.

The Contractor shall inform AHCCCS, Division of Health Care Management, in writing within seven
days, when an employee leaves one of the key positions listed below. The name of the interim
contact person should

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be included with the notification. The name and resume of the permanent employee should be
submitted as soon as the new hire has taken place.

	 	 	 
	Administrator

	 	Member Services Manager
	Medical Director

	 	Provider Services Manager
	Chief Financial Officer

	 	Claims Administrator
	Maternal Health/ EPSDT Coordinator

	 	Quality Management/Utilization Management
	Grievance Manager

	 	Coordinator
	Compliance Officer

	 	Behavioral Health Coordinator

The Contractor shall ensure that all staff have appropriate training, education, experience and
orientation to fulfill the requirements of the position.

          17. WRITTEN POLICIES, PROCEDURES AND JOB DESCRIPTIONS

The Contractor shall develop and maintain written policies, procedures and job descriptions for
each functional area of its plan, consistent in format and style. The Contractor shall maintain
written guidelines for developing, reviewing and approving all policies, procedures and job
descriptions. All policies and procedures shall be reviewed at least annually to ensure that the
Contractor’s written policies reflect current practices. Reviewed policies shall be dated and
signed by the Contractor’s appropriate manager, coordinator, director or administrator. Minutes
reflecting the review and approval of the policies by an appropriate committee are also acceptable
documentation. All medical and quality management policies must be approved and signed by the
Contractor’s Medical Director. Job descriptions shall be reviewed at least annually to ensure that
current duties performed by the employee reflect written requirements.

          18. MEMBER INFORMATION

The Contractor shall be accessible by phone for general member information during normal business
hours. All enrolled members will have access to a toll free phone number. All informational
materials, prepared by the Contractor, shall be approved by AHCCCSA prior to distribution to
members. The reading level and name of the evaluation methodology used should be included.

All materials shall be translated when the Contractor is aware that a language is spoken by 3,000
or 10%, whichever is less, of the Contractor’s members, who also have limited English proficiency
(LEP).

All vital materials shall be translated when the Contractor is aware that a language is spoken by
1,000 or 5%, whichever is less, of the Contractor’s members, who also have LEP. Vital materials
must include, at a minimum, Notices of Action, vital information from the member handbooks and
consent forms.

All written notices informing members of their right to interpretation and translation services in
a language shall be translated when the Contractor is aware that 1,000 or 5% (whichever is less) of
the Contractor’s members speak that language and have LEP. [42 CFR 438.10(c)(3)]

Oral interpretation services must be available and free of charge to all members regardless of the
prevalence of the language. The Contractor must notify all members of their right to access oral
interpretation services and how to access them. Refer to the ACOM Member Information Policy. [42
CFR 438.10(c)(4) and (5)]

The Contractor shall make every effort to ensure that all information prepared for distribution to
members is written using an easily understood language and format and as further described in the
AHCCCS Member Information Policy. Regardless of the format chosen by the Contractor, the member
information must be printed in a type, style and size, which can easily be read by members with
varying degrees of visual impairment. The

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Contractor
must notify its members that alternative formats are available and how to access them.
[42 CFR 438.10(d)]

When there are program changes, notification shall be provided to the affected members at least 30
days before implementation.

The Contractor shall produce and provide the following printed information to each member or family
within 10 days of receipt of notification of the enrollment date [42 CFR 438.10(f)(3)]:

	I.	 	A member handbook which, at a minimum, shall include the items listed in the ACOM Member
Information Policy.
	 
	 	 	The Contractor shall review and update the Member Handbook at least once a year. The handbook
must be submitted to AHCCCS, Division of Health Care Management for approval by August 15th of
each contract year, or within four weeks of receiving the annual renewal amendment, whichever
is later.
	 
	II.	 	A description of the Contractor’s provider network, which at a minimum, includes those items
listed in the ACOM Member Information Policy.

The Contractor must give written notice about termination of a contracted provider, within 15 days
after receipt or issuance of the termination notice, to each member who received their primary care
from, or is seen on a regular basis by, the terminated provider. Affected members must be informed
of any other changes in the network 30 days prior to the implementation date of the change. [42 CFR
438.10(f)(4) and (5)] The Contractor shall have information available for potential enrollees as
described in the ACOM Member Information Policy.

The Contractor must develop and distribute, at a minimum, quarterly newsletters during the contract
year. The following types of information are to be contained in the newsletter:

	 	•	 	Educational information on chronic illnesses and ways to self-manage care
	 
	 	•	 	Reminders of flu shots and other prevention measures at appropriate times
	 
	 	•	 	Medicare Part D issues
	 
	 	•	 	Cultural Competency
	 
	 	•	 	Contractor specific issues

The Contractor will, on an annual basis, inform all members of their right to request the following
information [42 CFR 438.10(f)(6) and 42 CFR 438.100(a)(1) and (2)]:

	a.	 	An updated member handbook at no cost to the member
	 
	b.	 	The network description as described in the ACOM Member Information Policy

This information may be sent in a separate written communication or included with other written
information such as in a member newsletter.

          19. SURVEYS

The Contractor may be required to perform its own annual general or focused member survey. All such
contractor surveys, along with a timeline for the project, shall be approved in advance by AHCCCS
DHCM. The results and the analysis of the results shall be submitted to the Health Plan Operations
Unit within 45 days of the completion of the project. AHCCCSA may require inclusion of certain
questions.

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AHCCCSA may periodically conduct surveys of a representative sample of the Contractor’s membership
and providers. AHCCCSA will consider suggestions from the Contractor for questions to be included
in each survey. The results of these surveys, conducted by AHCCCSA, will become public information
and available to all interested parties upon request. The draft reports from the surveys will be
shared with the Contractor prior to finalization. The Contractor will be responsible for the cost
of these surveys based on its share of AHCCCS enrollment.

          20. CULTURAL COMPETENCY

The Contractor shall have a Cultural Competency Plan that meets the requirements of the ACOM
Cultural Competency Policy. An annual assessment of the effectiveness of the plan, along wish any
modifications to the plan, must be submitted to the Division of Health Care Management, no later
than 45 days after the start of each contract year. This plan should address all services and
settings. [42 CFR 438.206(c)(2)]

          21. MEDICAL RECORDS

The member’s medical record is the property of the provider who generates the record. Each member
is entitled to one copy of his or her medical record free of charge. The Contractor shall have
written policies and procedures to maintain the confidentiality of all medical records.

The Contractor is responsible for ensuring that a medical record is established when information is
received about a member. If the PCP has not yet seen the member, such information may be kept
temporarily in an appropriately labeled file, in lieu of establishing a medical record, but must be
associated with the member’s medical record as soon as one is established.

The Contractor shall have written policies and procedures for the maintenance of medical records so
that those records are documented accurately and in a timely manner, are readily accessible, and
permit prompt and systematic retrieval of information.

The Contractor shall have written standards for documentation on the medical record for legibility,
accuracy and plan of care, which comply with the AMPM.

The Contractor shall have written plans for providing training and evaluating providers’ compliance
with the Contractor’s medical records standards. Medical records shall be maintained in a detailed
and comprehensive manner, which conforms to good professional medical practice, permits effective
professional medical review and medical audit processes, and which facilitates an adequate system
for follow-up treatment. Medical records must be legible, signed and dated.

When a member changes PCPs, his or her medical records or copies of medical records must be
forwarded to the new PCP within 10 business days from receipt of the request for transfer of the
medical records.

AHCCCSA is not required to obtain written approval from a member, before requesting the member’s
medical record from the PCP or any other agency. The Contractor may obtain a copy of a member’s
medical records without written approval of the member, if the reason for such request is directly
related to the administration of the AHCCCS program. AHCCCSA shall be afforded access to all
members’ medical records whether electronic or paper within 20 business days of receipt of request.

Information related to fraud and abuse may be released so long as protected HIV-related information
is not disclosed (A.R.S. §36-664(I)).

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          22. ADVANCE DIRECTIVES

In accordance with 42 CFR 422.128, the Contractor shall maintain policies and procedures addressing
advanced directives for adult members that specify:

	a.	 	Each contract or agreement with a hospital, nursing facility, home health agency, hospice or
organization responsible for providing personal care, must comply with Federal and State law
regarding advance directives for adult members [42 CFR 438.6(i)(l)]. Requirements include:

	 	(1)	 	Maintaining written policies that address the rights of adult members to make
decisions about medical care, including the right to accept or refuse medical care, and
the right to execute an advance directive. If the agency/organization has a conscientious
objection to carrying out an advance directive, it must be explained in policies. (A
health care provider is not prohibited from making such objection when made pursuant to
A.R.S. § 36-3205.C.1.)
	 
	 	(2)	 	Provide written information to adult members regarding each individual’s rights
under State law to make decisions regarding medical care, and the health care provider’s
written policies concerning advance directives (including any conscientious objections).
[42 CFR 438.6(i)(3)]
	 
	 	(3)	 	Documenting in the member’s medical record whether or not the adult member has been
provided the information and whether an advance directive has been executed,
	 
	 	(4)	 	Not discriminating against a member because of his or her decision to execute or
not execute an advance directive, and not making it a condition far the provision of
care.
	 
	 	(5)	 	Providing education to staff on issues concerning advance directives including
notification of direct care providers of services, such as home health care and personal
care, of any advanced directives executed by members to whom they are assigned to provide
services.

	b.	 	Contractors shall require subcontracted PCPs, which have agreements with the entities
described in paragraph a. above, to comply with the requirements of subparagraphs a. (2)
through (5) above. Contractors shall also encourage health care providers specified in
subparagraphs a. to provide a copy of the member’s executed advanced directive, or
documentation of refusal, to the member’s PCP for inclusion in the member’s medical record.
	 
	c.	 	The Contractor shall provide written information to adult members that describe the
following:

	 	(1)	 	A member’s rights under State law, including a description of the applicable State
law
	 
	 	(2)	 	The organization’s policies respecting the implementation of those rights,
including a statement of any limitation regarding the implementation of advance
directives as a matter of conscience.
	 
	 	(3)	 	The member’s right to file complaints directly with AHCCCSA.
	 
	 	(4)	 	Changes to State law as soon as possible, but no later than 90 days after the
effective date of the change. [(42 CFR 438.6(i)(4)]

          23. QUALITY MANAGEMENT AND MEDICAL MANAGEMENT (QM/MM)

Quality Management (QM): The Contractor shall provide quality medical care to members,
regardless of payer source or eligibility category. The Contractor shall use and disclose medical
records and any other health and enrollment information that identifies a particular member in
accordance with Federal and State privacy requirements. The Contractor shall execute processes to
assess, plan, implement and evaluate quality management and performance improvement activities, as
specified in the AMPM, that include at least the following [42 CFR 438.240(a)(l) and (e)(2)]:

	1.	 	Conducting Performance Improvement Projects (PIPs);
	 
	2.	 	QM monitoring and evaluation activities;

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	3.	 	Investigation, analysis, tracking and trending of quality of care issues, abuse and/or
complaints that includes:

	 	a.	 	Acknowledgement letter to the originator of the concern
	 
	 	b.	 	Documentation of all steps utilized during the investigation and resolution process
	 
	 	c.	 	Follow-up with the member to assist in ensuring immediate health care needs are met
	 
	 	d.	 	Closure/resolution letter that provides sufficient detail to ensure that the member
has an understanding of the resolution of their issue, any responsibilities they have in
ensuring all covered, medically necessary care needs are met, and a contact
name/telephone number to call for assistance or to express any unresolved concerns
	 
	 	e.	 	Documentation of implemented corrective action plan(s) or action(s) taken to
resolve the concern

	4.	 	AHCCCS mandated performance measures; and
	 
	5.	 	Credentialing, recredentialing and provisional credentialing processes for provider and
organizations [42 CFR 438.206(b)(6)].

AHCCCS has established a uniform credentialing, recredentialing and provisional credentialing
policy. The Contractor shall demonstrate that its providers are credentialed [42 CFR 438.214] and:

	 	a.	 	Shall follow a documented process for credentialing and recredentialing of
providers who have signed contracts or participation agreements with the Contractor;
	 
	 	b.	 	Shall not discriminate against particular providers that serve high-risk
populations or specialize in conditions that require costly treatment; and
	 
	 	c.	 	Shall not employ or contract with providers excluded from participation in Federal
health care programs.

The Contractor shall submit, within timelines specified in Attachment F, a written QM plan, QM
evaluation of the previous year’s QM program, and Quarterly Quality Management Report that
addresses its strategies for performance improvement and conducting the quality management
activities described in this section. The Contractor shall conduct performance improvement projects
as required in the AMPM.

The Contractor may combine its quality management plan with the plan that addresses utilization
management as described below.

Medical Management (MM): The Contractor shall execute processes to assess, plan, implement
and evaluate medical management activities, as specified in the AMPM, that include at least the
following:

	1.	 	Pharmacy Management; including the evaluation, reporting, analysis and interventions based on
the data and reported through the MM Committee
	 
	2.	 	Prior authorization and Referral Management;
	 
	 	 	For the processing of requests for initial and continuing authorizations of services the
Contractor shall:

	 	a)	 	Have in effect mechanisms to ensure consistent
application of review criteria for authorization decisions; and
	 
	 	b)	 	Consult with the requesting provider when appropriate [42 CFR
438.210(b)(2)]
	 
	 	c)	 	Monitor and ensure that all enrollees with special health
care needs have direct access to care

	3.	 	Development and/or Adoption of Practice Guidelines [42 CFR 438.236(b)], that

	 	a)	 	Are based on valid and reliable clinical evidence or a
consensus of health care professionals in the particular field;
	 
	 	b)	 	Consider the needs of the Contractor’s members;
	 
	 	c)	 	Are adopted in consultation with contracting health care
professionals;
	 
	 	d)	 	Are reviewed and updated periodically as appropriate;
	 
	 	e)	 	Are disseminated by Contractors to all affected providers
and, upon request, to enrollees and potential enrollees [42 CFR 438.236(c)];
and
	 
	 	f)	 	Provide a basis for consistent decisions for utilization
management, member education, coverage of services, and other areas to which
the guidelines apply [42 CFR 438,236(d)]

	4.	 	Concurrent review;

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	 	a)	 	Consistent application of review criteria; Provide a basis for consistent
decisions for utilization management, coverage of services, and other areas
to which the guidelines apply;
	 
	 	b)	 	Discharge planning

	5.	 	Continuity and coordination of care;
	 
	6.	 	Monitoring and evaluation of over and/or under utilization of services [42 CFR
438-240(b)(3)];
	 
	7.	 	Evaluation of new medical technologies, and new uses of existing technologies; 8. Disease
Management or Chronic Care Program that reports results and provides for analysis of the
program through the MM Committee; and
	 
	8.	 	Quarterly Utilization Management Report (details in the AMPM)

The Contractor shall have a process to report MM data and management activities through a MM
Committee, The Contractor’s MM committee will analyze the data, make recommendations for action,
monitor the effectiveness of actions and report these findings to the committee. The Contractor
shall have in effect mechanisms to assess the quality and appropriateness of care furnished to
members with special health care needs. [42 CFR 438.240(b)(4)]

The Contractor will assess, monitor and report quarterly through the MM Committee medical decisions
to assure compliance with timeliness, language and Notice of Action intent, and that the decisions
comply with all Contractor coverage criteria.

The Contractor shall maintain a written MM plan that addresses its plan for monitoring MM
activities described in this section. The plan must be submitted for review by AHCCCS Division of
Health Care Management within timelines specified in Attachment F.

          24. PERFORMANCE STANDARDS

Administrative Measures:

The maximum allowable speed of answer (SOA) is 45 seconds. The SOA is defined as the on line wait
time in seconds that the member/provider waits from the moment the call is connected in the
Contractor’s phone switch until the call is picked up by a contractor representative or Interactive
Voice Recognition System (IVR). If the Contractor has IVR capabilities, callers must be given the
choice of completing their call by IVR or by contractor representative.

The Contractor shall meet the following standards for its member services and centralized provider
telephone line statistics. All calls to the line shall be included in the measure.

	 	a.	 	The Monthly Average Abandonment Rate shall be 5% or less;
	 
	 	b.	 	First Contact Call Resolution shall be 70% or better, and
	 
	 	c.	 	The Monthly Average Service Level shall be 75% or better.

The Monthly Average Abandonment Rate (AR) is:

Number of calls abandoned in a 24-hour period

Total number of calls received in a 24-hour period

The ARs are then summed and divided by the number of days in the reporting period.

First Contact Call Resolution Rate (FCCR.) is:

Number of calls received in 24-hour period for which no follow up communication or internal
phone transfer is needed, divided by Total number of calls received in 24-hour period

The daily FCCRs am then Slimmed and divided by the number of days in the reporting period.

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The Monthly Average Service Level (MASL) is:

Calls answered within 45 seconds for the month reported

Total of month’s answered calls + month’s abandoned calls + (if available) month’s calls
receiving a busy signal

Note: Do not use average daily service levels divided by the days in the reporting period.

On a monthly basis the measures are to be reported for both the Member Services and Provider
telephone lines. For each of the Administrative Measures a. through c., the Contractor shall also
report the number of days in the reporting period that the standard was not met. The Contractor
shall include in the report the instances of down time for the centralized telephone lines, the
dates of occurrence and the length of time they were out of service. The reports should be sent to
the Contractor’s assigned Operations and Compliance Officer in the Health Plan Operations Unit of
the Division of Health Care Management. The deadline for submission of the reports is the 15th day
of the month following the reporting period (or the first business day following the 15th). Back up
documentation for the report, to the level of measured segments in the 24-hour period, shall be
retained for a rolling 12-month period. AHCCCSA will review the performance measure calculation
procedures and source data for this report.

Performance Measures:

All Performance Measures described below apply to all member populations [42 CFR 438.240(a)(2),
(b)(2) and (c)].

Contractors must meet AHCCCS stated Minimum Performance Standards. However, it is equally important
that Contractors continually improve their performance measure outcomes from year to year.
Contractors shall strive to meet the ultimate standard, or benchmark, established by AHCCCS.

AHCCCS has established three levels of performance:

Minimum Performance Standard — A Minimum Performance Standard is the minimal expected level
of performance by the Contractor. If a Contractor does not achieve this standard, or any
measure rate declines to a level below the AHCCCS Minimum Performance Standard, the Contractor
will be required to submit a corrective action plan and may be subject to sanctions.

Goal — A Goal is a reachable standard for a given performance measure for the Contract Year.
If the Contractor has already met or exceeded the AHCCCS Minimum Performance Standard for any
measure, the Contractor must strive to meet the established Goal for the measure(s).

Benchmark — A Benchmark is the ultimate standard to be achieved. Contractors that have
already achieved or exceeded the Goal for any performance measure must strive to meet the
Benchmark for the measure(s). Contractors that have achieved the Benchmark are expected to
maintain this level of performance for future years.

A Contractor must show demonstrable and sustained improvement toward meeting AHCCCS Performance
Standards. In addition to corrective action plans, AHCCCS may impose sanctions on Contractors that
do not meet the Minimum Performance Standard and do not show statistically significant improvement
in a measure rate and/or require those Contractors to demonstrate that they are allocating
increased administrative resources to improving rates for a particular measure or service area.
AHCCCS also may require a corrective action plan of any Contractor that shows a statistically
significant decrease in its rate, even if it meets or exceeds the Minimum Performance Standard.

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The corrective action plan must be received by AHCCCS within 30 days of receipt of notification
from AHCCCS. This plan must be approved by AHCCCS prior to implementation. AHCCCS may conduct one
or more follow-up on-site reviews to verify compliance with a corrective action plan.

Performance Measures: The Contractor shall comply with AHCCCS quality management requirements to
improve performance for all AHCCCS established performance measures. Complete descriptions of these
measures can be found in the most recently published results and analysis of acute-core performance
measures, or upon request from AHCCCSA. The measures for postpartum visits and low birth weight
deliveries have been eliminated as contractual performance standards. The Contractor shall continue
to monitor rates for postpartum visits and low birth weight deliveries and implement interventions
as necessary to improve or sustain these rates. These activities will be monitored by AHCCCSA
during the Operational and Financial Review.

CMS has been working in partnership with states in developing core performance measures for
Medicaid and SCHIP programs. The current AHCCCS established performance measures may be subject to
change when these core measures are finalized and implemented.

In addition, AHCCCS has established standards for the following measures:

EPSDT Participation: The Contractor shall take affirmative steps to increase member participation
in the EPSDT program. The participation rate is the number of children younger than 21 years
receiving at least one medical screen during the contract year, compared to the number of children
expected to receive at least one medical screen. The number of children expected to receive at
least one medical screen is based on the AHCCCS EPSDT periodicity schedule and the average period
of eligibility.

The following table identifies the Minimum Performance Standards, Goals and Benchmarks for each
measure:

Acute-care Contractor Performance Standards

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	CYE 07 Minimum	 	 	 	 	 	 
	 	 	Performance	 	 	 	 	 	Benchmark (Healthy
	Performance Measure	 	Standard	 	CYE 07 Goal	 	People Goals)
	Immunization of Two-year-olds
	 	 	 	 	 	 	 	 	 	 	 	 
	4:3:1:3:3:1 Series
	 	 	74	%	 	 	80	%	 	 	80	%
	DTaP — 4 doses
	 	 	85	%	 	 	90	%	 	 	90	%
	Polio — 3 doses
	 	 	90	%	 	 	90	%	 	 	90	%
	MMR — 1 dose
	 	 	90	%	 	 	90	%	 	 	90	%
	Hib — 3 doses
	 	 	86	%	 	 	90	%	 	 	90	%
	HBV — 3 doses
	 	 	90	%	 	 	90	%	 	 	90	%
	Varicella — 1 dose
	 	 	86	%	 	 	90	%	 	 	90	%
	Adolescent Immunizations (1)
	 	 	60	%	 	 	63	%	 	 	90	%
	Children’s Dental Visits 2 to 21
	 	 	51	%	 	 	57	%	 	 	57	%
	Well-child Visits 15 Months (2)
	 	 	70	%	 	 	72	%	 	 	90	%
	Well-child Visits 3 — 6 Years
	 	 	56	%	 	 	58	%	 	 	80	%
	Adolescent Well-care Visits
	 	 	37	%	 	 	38	%	 	 	50	%
	EPSDT Participation
	 	 	68	%	 	 	69	%	 	 	80	%
	Children’s Access to PCPs12-24
Months
	 	 	85	%	 	 	86	%	 	 	97	%
	Children’s Access to PCPs25
months-6 Years
	 	 	78	%	 	 	80	%	 	 	97	%

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	 	 	CYE 07 Minimum	 	 	 	 	 	 
	 	 	Performance	 	 	 	 	 	Benchmark (Healthy
	Performance Measure	 	Standard	 	CYE 07 Goal	 	People Goals)
	Children’s Access to PCPs7-11 Years
	 	 	77	%	 	 	79	%	 	 	97	%
	Children’s Access to PCPs12-19 Years
	 	 	79	%	 	 	81	%	 	 	97	%
	Cervical Cancer Screening
	 	 	57	%	 	 	60	%	 	 	90	%
	Breast Cancer Screening
	 	 	50	%	 	 	52	%	 	 	70	%
	Adult Preventive/Ambulatory Care 20-44 Years
	 	 	78	%	 	 	80	%	 	 	96	%
	Adult Preventive/Ambulatory Care 45-64 Years
	 	 	83	%	 	 	84	%	 	 	96	%
	Timeliness of Prenatal Care
	 	 	70	%	 	 	72	%	 	 	90	%
	Chlamydia Screening(3)
	 	 	43	%	 	 	45	%	 	 	62	%

 

			
	(1)	 	This measure cannot be reliably generated through administrative data, and current AHCCCS
data is not yet available. MPS and Goal are based on NCQA Medicaid average
	 
	(2)	 	CYE 2007 Minimum Performance Standard and Goal for Well-child Visits in the First 15 Months of
Life is unchanged from the CYE 2006 contract because validated data for this measure was not
available in time to be incorporated into the contract renewal.
	 
	(3)	 	Baseline rate generated from AHCCCS Decision Support System (ADDS) MeasureBase and used to
establish MPS and Goal; Benchmark based on HP 2010 objective 25-16b.

Quality Improvement:

Contractors shall implement an ongoing quality assessment and performance improvement programs for
the services it furnishes to members. [42 CFR 438.240(a)(1)] Basic elements of the Contractor
quality assessment and performance improvement programs, at a minimum, shall comply with the
following requirements:

A. Quality Assessment Program:

The Contractor shall have an ongoing quality assessment program for the services it furnishes to
members that includes the following:

	1.	 	The program shall be designed to achieve, through ongoing measurements and intervention,
significant improvement, sustained over time, in clinical care and non-clinical care areas
that are expected to have a favorable effect on health outcomes and member satisfaction.
	 
	2.	 	The Contractor must [42 CFR 438.240(b)(2) and (c)]:

	 	a.	 	Measure and report to the State its performance, using standard
measures required by the State, or as required by CMS,
	 
	 	b.	 	Submit to the State, data specified by the State, that enables the
State to measure the Contractor’s performance; or
	 
	 	c.	 	Perform a combination of the activities.

	3.	 	The Contractor must have in effect mechanisms to detect both under utilization and over
utilization of services.
	 
	4.	 	The Contractor must have in effect mechanisms to assess the quality and appropriateness of
care furnished to members with special health care needs.
	 
	5.	 	The Contractor must have in place a process for internal monitoring of Performance Measure
rates, using standard methodology established or adopted by AHCCCS, for each required
Performance Measure. The Contractor’s Quality Assessment/Performance Improvement Program will
report its performance on an ongoing basis to its administration. It also will report this
Performance Measure data to AHCCCSA in conjunction with its Quarterly EPSDT Progress Report,
according to a format developed by AHCCCS.

	B.	 	Performance Improvement Program:

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The Contractor shall have an ongoing program of performance improvement projects that focus on
clinical and non-clinical areas, and that involve the following [42 CFR 438.240(b)(l) and (d)(l)]:

	 	1.	 	Measurement of performance using objective quality indicators.
	 
	 	2.	 	Implementation of system interventions to achieve improvement in
quality
	 
	 	3.	 	Evaluation of the effectiveness of the interventions.
	 
	 	4.	 	Planning and initiation of activities for increasing or sustaining
improvement.

The Contractor shall report the status and results of each project to the AHCCCSA as requested.
Each performance improvement project must be completed in a reasonable time period so as to
generally allow information on the success of performance improvement projects in the aggregate to
produce new information on quality of care every year. [42 CFR 438.240(d)(2)]

C. Data Collection Procedures:

When requested, the Contractor must submit data for standardized Performance Measures and/or
Performance Improvement Projects as required by AHCCCS within specified timelines and according to
AHCCCS procedures for collecting and reporting the data. Contractor is responsible for collecting
valid and reliable data, using qualified staff and personnel to collect the data. Data collected
for Performance Measures and/or Performance Improvement Projects must be returned by the Contractor
in the format and according to instructions from AHCCCS, by the due date specified. Any extension
for additional time to collect and report data must be made in writing in advance of the initial
due date. Failure to follow the data collection and reporting instructions that accompany the data
request may result in sanctions imposed on the Contractor.

The Contractor shall participate in immunization audits, at intervals specified by AHCCCSA, based
on random sampling to verify the immunization status of members at 24 months of age. If records are
missing for more than 5 percent of the Contractor’s final sample, the Contractor is subject to
sanctions by AHCCCSA. An External Quality Review Organization (EQRO) may conduct a study to
validate the Contractor’s reported rates.

          25. GRIEVANCE SYSTEM

The Contractor shall have in place a written grievance system process for subcontractors, enrollees
and non-contracted providers, which defines their rights regarding disputed matters with the
Contractor. The Contractor’s grievance system for enrollees includes a grievance process (the
procedures for addressing enrollee grievances), an appeals process and access to the state’s fair
hearing process. The Contractor shall provide the appropriate personnel to establish, implement and
maintain the necessary functions related to the grievance systems process. Refer to Attachments
H(l) and H(2) for Enrollee Grievance System and Provider Grievance System Standards and Policy,
respectively.

The Contractor may delegate the grievance system process to subcontractors, however, the Contractor
must ensure that standards which are delegated comply with applicable Federal and State laws,
regulations and policies, including, but not limited to 42 CFR Part 438 Subpart F. The Contractor
shall remain responsible for compliance with all requirements. The Contractor shall also ensure
that it timely provides written information to both enrollees and providers, which clearly explains
the grievance system requirements. This information must include a description of: the right to a
state fair hearing, the method for obtaining a state fair hearing, the rules that govern
representation at the hearing, the right to file grievances, appeals and claim disputes, the
requirements and timeframes for filing grievances, appeals and claim disputes, the availability of
assistance in the filing process, the toll-free numbers that the enrollee can use to file a
grievance or appeal by phone, that benefits will continue when requested by the enrollee in an
appeal or state fair hearing request concerning certain actions which are timely filed, that the
enrollee may be required to pay the cost of services furnished during the appeal/hearing process if
the final decision is adverse to the enrollee, and that a provider may file an

			
	 
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appeal on behalf of an enrollee with the enrollee’s written consent. Information to enrollees must
meet cultural competency and limited English proficiency requirements as specified in Section D,
Paragraph 18, Member Information, and Paragraph 20, Cultural Competency.

The Contractor shall be responsible to provide the necessary professional, paraprofessional and
clerical services for the representation of the Contractor in all issues relating to the grievance
system and any other matters arising under this contract which rise to the level of administrative
hearing or a judicial proceeding. Unless there is an agreement with the State in advance, the
Contractor shall be responsible for all attorney fees and costs awarded to the claimant in a
judicial proceeding.

          26. GRIEVANCE SYSTEM REPORTS

The Contractor will provide reports on the Grievance System as required in the Grievance System
Reporting Guide.

          27. NETWORK DEVELOPMENT

The Contractor shall develop and maintain a provider network that is designed to support a medical
home for members and sufficient to provide all covered services to AHCCCS members [42 CFR
438.206(b)(l)]. It shall ensure covered services are provided promptly and are reasonably
accessible in terms of location and hours of operation. [42 CFR 438.206(c)(l)(i) and (ii)] There
shall be sufficient personnel for the provision of covered services, including emergency medical
care on a 24-hour-a-day, 7-days-a-week basis [42 CFR 438.206(c)(l)(iii). The proposed network shall
be sufficient to provide covered services within designated time and distance limits. For Maricopa
and Pima Counties only, this includes a network such that 95% of its members residing within the
boundary area of metropolitan Phoenix and Tucson do not have to travel more than 5 miles to see a
PCP, dentist or pharmacy. PCPs and specialists who provide inpatient services to the Contractor’s
members shall have admitting and treatment privileges in a minimum of one general acute care
hospital within the Contractor’s service area. Hospitalists may satisfy this requirement.
Contractors in Maricopa and/or Pima counties must have at least one hospital contract in each of
the service districts specified in Attachment B.

Contractors must provide a comprehensive provider network that ensures its membership has access at
least equal to, or better than, community norms. Services shall be as accessible to AHCCCS members
in terms of timeliness, amount, duration and scope as those services are to non-AHCCCS persons
within the same service area [42 CFR 438.210(a)(2)]. The Contractor is expected to consider the
full spectrum of care when developing its network. The Contractor must also consider communities
whose residents typically receive care in neighboring states. If the Contractor is unable to
provide those services locally, it must so demonstrate to AHCCCSA and shall provide reasonable
alternatives for members to access care. These alternatives must be approved by AHCCCSA. If the
Contractor’s network is unable to provide medically necessary services required under contract, the
Contractor must adequately and timely cover these services through an out of network provider until
a network provider is contracted. The Contractor and out of network provider must coordinate with
respect to authorization and payment issues in these circumstances. [42 CFR 438.206(b)(4) and (5)]

The Contractor is also encouraged to develop non-financial incentive programs to increase
participation in its provider network.

AHCCCS is committed to workforce development and support of the medical residency and dental
student training programs in the state of Arizona. Working proactively with these programs is
beneficial to protect their viability, and also provides an excellent opportunity for the
Contractors to educate future providers on the principles of managed care. In addition, AHCCCS
believes that these programs can influence the provider capacity issues in Arizona. In the future,
AHCCCS would like to provide incentives to those programs that are working to retain physicians in
Arizona after completion of the program,

AHCCCS encourages plans to work with the many residency programs currently operating in the state
and to investigate opportunities for resident participation in contractor medical management and
committee activities.

			
	 
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If any Contractor or Contractors enter into the Graduate Medical Education Memorandum of
Understanding with a residency program and assign members to it, AHCCCSA may increase the
auto-assignment algorithm to favor those Contractors.

The Contractor shall not discriminate with respect to participation in the AHCCCS program,
reimbursement or indemnification against any provider based solely on the provider’s type of
licensure or certification [42 CFR 438.12(a)(l)]. In addition, the Contractor must not discriminate
against particular providers that service high-risk populations or specialize in conditions that
require costly treatment [42 CFR 438.214(c)]. This provision, however, does not prohibit the
Contractor from limiting provider participation to the extent necessary to meet the needs of the
Contractor’s members. This provision also does not interfere with measures established by the
Contractor to control costs consistent with its responsibilities under this contract [42 CFR
438.12(b)(l)]. If a Contractor declines to include individual or groups of providers in its
network, it must give the affected providers written notice of the reason for its decision [42 CFR
438.12(a)(l)]. The Contractor may not include providers excluded from participation in Federal
health care programs, under either section 1128 or section 1128A of the Social Security Act [42 CFR
438.214(d)].

See Attachment B, Minimum Network Requirements, for details on network requirements by Geographic
Service Area.

Provider Network Development and Management Plan: The Contractor shall develop and maintain a
provider network development and management plan, which ensures that the provision of covered
services will occur as stated above. [42 CFR 438.207(b)] This plan shall be updated annually and
submitted to AHCCCSA, Division of Health Care Management, 45 days from the start of each contract
year. The plan shall identify the methodology used by the Contractor to determine a geographically
appropriate distribution of medical disciplines for primary care, obstetrical care and individual
medical specialties for its membership. The plan shall also contain a description of the
Contractor’s criteria used to determine the numbers and kinds of PCP providers and of specialists,
and whether hospital privileges are considered when making this determination. A similar
description should be included for the dental and pharmacy networks and for the adequacy of
non-emergency transportation services. The plan shall identify the current status of the
Contractor’s network, and project future needs based upon, at a minimum, membership growth; the
number and types (in terms of training, experience and specialization) of providers that exist in
the Contractor’s service area, as well as the number of physicians who have privileges with and
practice in hospitals; the expected utilization of service, given the characteristics of its
population and its health care needs; the numbers of providers not accepting new Medicaid patients;
and access of its membership to specialty services as compared to the general population of the
community. [42 CFR 438.206(b)(l)] The plan, at a minimum, shall also include the following:

	 	a.	 	Current network gaps and the methodology used to identify them;
	 
	 	b.	 	Immediate short-term interventions when a gap occurs, including expedited or
temporary credentialing;
	 
	 	c.	 	Interventions to fill network gaps and barriers to those interventions;
	 
	 	d.	 	Outcome measures/evaluation of interventions;
	 
	 	e.	 	Ongoing activities for network development;
	 
	 	f.	 	Coordination between internal departments;
	 
	 	g.	 	Coordination with outside organizations;
	 
	 	h.	 	A description of network design by GSA for the general population, including
details regarding special populations including, but not limited to, the developmentally
delayed (Arizona Early Intervention Program (AzEIP), the homeless and those in border
communities.
	 
	 	 	 	The description should cover:

	 	i.	 	how members access the system
	 
	 	ii.	 	relationships between various levels of the system
	 
	 	iii.	 	the plan for incorporating the medical home for members and
the progress in its implementation

			
	 
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	 	i.	 	A description of the adequacy of the geographic access to tertiary hospital services
for the Contractor’s membership.
	 
	 	j.	 	The assistance provided to PCPs when they refer members to specialists. The methods
used to communicate the availability of this assistance to the providers.
	 
	 	k.	 	The methodology (ies) the Contractor uses to collect and analyze provider feedback
about the network designs and implementation. When specific provider issues are
identified, the protocols for handling them.
	 
	 	l.	 	Listing of non-Medicare Certified Home Health Agencies the Contractor is using. The
listing is to be provided on the form distributed by AHCCCS and attached to the Plan.
(AMPM Policy 1240)

The plan must include answers to the following questions:

	 	a.	 	How does the Contractor assess the medical and social needs of new members to
determine how the contractor may assist the member in navigating the network more
efficiently?
	 
	 	b.	 	What assistance is provided to members with a high severity of illness or higher
utilization to better navigate the provider network?
	 
	 	c.	 	Does the Contractor utilize any of the following strategies to reduce unnecessary
emergency department utilization by the membership? If so, how are members educated about
these options?

	 	i.	 	Physician coverage/call availability after-hours and on weekends
	 
	 	ii.	 	Same-day PCP appointments
	 
	 	iii.	 	Nurse call-in centers/information lines
	 
	 	iv.	 	Urgent Care facilities

	 	d.	 	Are members with special health care needs assigned to specialists for their
primary care needs?
	 
	 	e.	 	What are the most significant barriers to efficient network deployment within the
Contractor’s service area? How can AHCCCS best support the Contractor’s efforts to
improve its network and the quality of care delivered to its membership?

          28. PROVIDER AFFILIATION TRANSMISSION

The Contractor shall submit information, quarterly regarding its provider network. This information
shall be submitted in the format described in the Provider Affiliation Transmission User Manual on
October 15, January 15, April 15, and July 15 of each contract year. The manual may be found in the
Bidder’s Library. If the provider affiliation transmission is not timely, accurate and complete,
the Contractor may be required to submit a corrective action plan and may be subject to sanction.

          29. NETWORK MANAGEMENT

The Contractor shall have policies and procedures in place that pertain to all service
specifications described in the AMPM. In addition, the Contractor shall have policies on how the
Contractor will [42 CFR 438.214(a)]:

	a.	 	Communicate with the network regarding contractual and/or program changes and requirements;
	 
	b.	 	Monitor network compliance with policies and rules of AHCCCSA and the Contractor, including
compliance with all policies and procedures related to the grievance process and ensuring the
member’s care is not compromised during the grievance process;
	 
	c.	 	Evaluate the quality of services delivered by the network;
	 
	d.	 	Provide or arrange for medically necessary covered services should the network become
temporarily insufficient within the contracted service area;
	 
	e.	 	Monitor the adequacy, accessibility and availability of its provider network to meet the
needs of its members, including the provision of care to members with limited proficiency in
English;
	 
	f.	 	Process expedited and temporary credentials;
	 
	g.	 	Recruit, select, credential, re-credential and contract with providers in a manner that
incorporate quality management, utilization, office audits and provider profiling; and

			
	 
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	h.	 	Provide training for its providers and maintain records of such training.

Contractor policies shall be subject to approval by AHCCCSA, Division of Health Care Management,
and shall be monitored through operational audits. A material change in Contractor policy or
process requires 30 days advance notice to affected providers and members. A material change is
defined as any change in overall business practice that could have an impact on 5% or more of the
members, providers, or AHCCCS program, or may significantly impact the delivery of services
provided by an AHCCCS Contractor. Contractors are required to submit the member notices to AHCCCS
for approval 30 days prior to the notice being sent. Upon receipt of the member notice for review,
AHCCCSA may comment on the material change or may intervene if the policy/process change will have
an adverse affect to the overall system.

Provider notices do not require prior approval, however, the Contractor must notify AHCCCSA of the
material policy change 15 days prior to the provider notice being sent out. During the 15 day time
period, AHCCCS shall have the right to comment or may intervene if the change to policy/process
will lead to an adverse affect to the overall system. This provision is not intended to include
contract negotiations between Contractors and providers.

Contractors may be required to conduct meetings with providers to address issues (or to provider
general information, technical assistance, etc.) related to federal and state requirements, changes
in policy, reimbursement matters, prior authorization and other matters as identified or requested
by the Administration.

Contractors shall give hospitals and provider groups 90 days notice prior to a contract termination
without cause. Contracts between the Contractor and single practitioners are exempt from this
requirement.

All material changes in the Contractor’s provider network must be approved in advance by AHCCCSA,
Division of Health Care Management [42 CFR 438.207(c)]. A material change is defined as one which
affects, or can reasonably be foreseen to affect, the Contractor’s ability to meet the performance
and network standards as described in this contract AHCCCSA will assess proposed changes in the
Contractor’s provider network for potential impact on members’ health care and provide a written
response to the Contractor. For emergency situations, AHCCCSA will expedite the approval process.

The Contractor shall notify AHCCCSA, Division of Health Care Management, within one business day of
any unexpected changes that would impair its provider network. This notification shall include (1)
information about how the change will affect the delivery of covered services, and (2) the
Contractor’s plans for maintaining the quality of member care, if the provider network change is
likely to affect the delivery of covered services.

Homeless
Clinics:

Contractors in Maricopa and Pima County must contract with homeless clinics at the AHCCCS
Fee-for-Service rate for Primary Care services on or before April 1, 2006. Contracts must stipulate
that:

	 	1.	 	Only those members that request a homeless clinic as a PCP may be assigned to them;
and
	 
	 	2.	 	Members assigned to a homeless clinic may be referred out-of-network for needed
specialty services

The Contractor must make resources available to assist homeless clinics with administrative issues
such as obtaining Prior Authorization, and resolving claims issues.

AHCCCSA will convene meetings, as necessary, with the Contractors and the homeless clinics to
resolve administrative issues and perceived barriers to the homeless members receiving care.
Representatives from the Contractor must attend these meetings.

          30. PRIMARY CARE PROVIDER STANDARDS

 
			
	 
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The Contractor shall include in its provider network a sufficient number of PCPs to meet the
requirements of this contract. Health care providers designated by the Contractor as PCPs shall be
licensed in Arizona as allopathic or osteopathic physicians who generally specialize in family
practice, internal medicine, obstetrics, gynecology, or pediatrics; certified nurse practitioners
or certified nurse midwives; or physician’s assistants. [42 CFR 438.206(b)(2)]

The Contractor shall assess the PCP’s ability to meet AHCCCS appointment availability and other
standards when determining the appropriate number of its members to be assigned to a PCP. The
Contractor should also consider the PCP’s total panel size (i.e. AHCCCS and non-AHCCCS patients)
when making this determination. AHCCCS members shall not comprise the majority of a PCP’s panel of
patients. AHCCCSA shall inform the Contractor when a PCP has a panel of more than 1,800 AHCCCS
members (assigned by a single Contractor or multiple Contractors), to assist in the assessment of
the size of their panel. This information will be provided on a quarterly basis. The Contractor
will adjust the size of a PCP’s panel, as needed, for the PCP to meet AHCCCS appointment and
clinical performance standards.

The Contractor shall have a system in place to monitor and ensure that each member is assigned to
an individual PCP and that the Contractor’s data regarding PCP assignments is current. The
Contractor is encouraged to assign members with complex medical conditions, who are age 12 and
younger, to board certified pediatricians. PCP’s, with assigned members diagnosed with AIDS or as
HIV positive, shall meet criteria and standards set forth in the AMPM.

To the extent required by this contract, the Contractor shall offer members freedom of choice
within its network in selecting a PCP [42 CFR 438.6(m) and 438.52(d)]. The Contractor may restrict
this choice when a member has shown an inability to form a relationship with a PCP, as evidenced by
frequent changes, or when there is a medically necessary reason. When a new member has been
assigned to the Contractor, the Contractor shall inform the member in writing of his enrollment and
of his PCP assignment within 10 days of the Contractor’s receipt of notification of assignment by
AHCCCSA. The Contractor shall include with the enrollment notification a list of all the
Contractor’s available PCPs, the process for changing the PCP assignment, should the member desire
to do so, as well as the information required in the ACOM Member Information Policy. The Contractor
shall confirm any PCP change in writing to the member. Members may make both their initial PCP
selection and any subsequent PCP changes either verbally or in writing.

At a minimum, the Contractor shall hold the PCP responsible for the following activities [42 CFR
438.208(b)(l)]:

	a.	 	Supervision, coordination and provision of care to each assigned member;
	 
	b.	 	Initiation of referrals for medically necessary specialty care;
	 
	c.	 	Maintaining continuity of care for each assigned member; and
	 
	d.	 	Maintaining the member’s medical record, including documentation of all services provided to
the member by the PCP, as well as any specialty or referral services. Services potentially
requiring medical follow up are the only dental services whose documentation must be included
in the medical record.

The Contractor shall establish and implement policies and procedures to monitor PCP activities and
to ensure that PCPs are adequately notified of, and receive documentation regarding, specialty and
referral services provided to assigned members by specialty physicians, and other health care
professionals. Contractor policies and procedures shall be subject to approval by AHCCCSA, Division
of Health Care Management, and shall be monitored through operational audits.

Contractors will work with AHCCCSA to develop a methodology to reimburse clinics for the homeless
and school based clinics. AHCCCSA and Contractors will identify coordination of care processes and
reimbursement mechanisms. The Contractor will be responsible for payment of these services directly
to the clinics.

			
	 
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          31. MATERNITY CARE PROVIDER STANDARDS

The Contractor shall ensure that a maternity care provider is designated for each pregnant member
for the duration of her pregnancy and postpartum care and that maternity services are provided in
accordance with the AMPM. The Contractor may include in its provider network the following
maternity care providers:

	a.	 	Arizona licensed allopathic and/or osteopathic physicians who are general practitioners or
specialize in family practice or obstetrics
	 
	b.	 	Physician Assistants
	 
	c.	 	Nurse Practitioners
	 
	d.	 	Certified Nurse Midwives

Pregnant members may choose, or be assigned, a PCP who provides obstetrical care. Such assignment
shall be consistent with the freedom of choice requirements for selecting health care professionals
while ensuring that the continuity of care is not compromised. Members who choose to receive
maternity services from a licensed midwife shall also be assigned to a PCP for medical care, as
primary care is not within the scope of practice for licensed midwives.

All physicians and certified nurse midwives who perform deliveries shall have OB hospital
privileges or a documented hospital coverage agreement for those practitioners performing
deliveries in alternate settings. Licensed midwives perform deliveries only in the member’s home.
Labor and delivery services may also be provided in the member’s home by physicians, certified
nurse practitioners and certified nurse midwives who include such services within their practice.

          32. REFERRAL MANAGEMENT PROCEDURES AND STANDARDS

The Contractor shall have adequate written procedures regarding referrals to specialists, to
include, at a minimum, the following:

	a.	 	Use of referral forms clearly identifying the Contractor
	 
	b.	 	A system for resolving disputes regarding the referrals
	 
	c.	 	PCP referral shall be required for specialty physician services, except that women shall have
direct access to in-network GYN providers, including physicians, physician assistants and
nurse practitioners within the scope of their practice, without a referral for preventive and
routine services [42 CFR 438.206(b)(2)]. In addition, for members with special health care
needs determined to need a specialized course of treatment or regular care monitoring, the
Contractor must have a mechanism in place to allow such members to directly access a
specialist (for example through a standing referral or an approved number of visits) as
appropriate for the member’s condition and identified needs. Any waiver of this requirement by
the Contractor must be approved in advance by AHCCCSA.
	 
	d.	 	Specialty physicians shall not begin a course of treatment for a medical condition other than
that for which the member was referred, unless approved by the member’s PCP.
	 
	e.	 	A process in place that ensures the member’s PCP receives all specialist and consulting
reports and a process to ensure PCP follow-up of all referrals including EPSDT referrals for
behavioral health services
	 
	f.	 	A referral plan for any member who is about to lose eligibility and who requests information
on low-cost or no-cost health care services
	 
	g.	 	Referral to Medicare Managed Care Plan including payment of copayments
	 
	h.	 	Allow for a second opinion from a qualified health care professional within the network, or
if one is not available in network, arrange for the member to obtain one outside the network,
at no cost to the member [42 CFR 438.206(b)(3)].

The Contractor shall comply with all applicable physician referral requirements and conditions
defined in Sections 1903(s) and 1877 of the Social Security Act. Upon finalization of the
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shall comply with all applicable physician referral requirements and conditions defined in 42 CFR
Part 411, Part 424, Part 435 and Part 455. Sections 1903(s) and 1877 of the Act prohibits
physicians from making referrals for designated health services to health care entities with which
the physician or a member of the physician’s family has a financial relationship. Designated health
services include:

	 	a.	 	Clinical laboratory services
	 
	 	b.	 	Physical therapy services
	 
	 	c.	 	Occupational therapy services
	 
	 	d.	 	Radiology services
	 
	 	e.	 	Radiation therapy services and supplies
	 
	 	f.	 	Durable medical equipment and supplies
	 
	 	g.	 	Parenteral and enteral nutrients, equipment and supplies
	 
	 	h.	 	Prosthetics, orthotics and prosthetic devices and supplies
	 
	 	i.	 	Home health services
	 
	 	j.	 	Outpatient prescription drugs
	 
	 	k.	 	Inpatient and outpatient hospital services

          33. APPOINTMENT STANDARDS

For purposes of this section, “urgent” is defined as an acute, but not necessarily life-threatening
disorder, which, if not attended to, could endanger the patient’s health. The Contractor shall have
procedures in place that ensure the following standards are met:

	a.	 	Emergency PCP appointments — same day of request
	 
	b.	 	Urgent care PCP appointments — within 2 days of request
	 
	c.	 	Routine care PCP appointments — within 21 days of request

For specialty referrals, the Contractor shall be able to provide:

	a.	 	Emergency appointments — within 24 hours of referral
	 
	b.	 	Urgent care appointments — within 3 days of referral
	 
	c.	 	Routine care appointments — within 45 days of referral

For dental appointments, the Contractor shall be able to provide:

	a.	 	Emergency appointments — within 24 hours of request
	 
	b.	 	Urgent care appointments — within 3 days of request
	 
	c.	 	Routine care appointments — within 45 days of request

For maternity care, the Contractor shall be able to provide initial prenatal care appointments for
enrolled pregnant members as follows:

	a.	 	First trimester — within 14 days of request
	 
	b.	 	Second trimester — within 7 days of request
	 
	c.	 	Third trimester — within 3 days of request
	 
	d.	 	High risk pregnancies — within 3 days of identification of high risk by the Contractor or
maternity care provider, or immediately if an emergency exists

If a member needs non-emergent medically necessary transportation, the Contractor shall require its
transportation provider to schedule the transportation so that the member arrives on time for the
appointment, but no sooner than one hour before the appointment; does not have to wait more than
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the call to be picked up; nor have to wait for more than one hour after conclusion of the
appointment for transportation home.

The Contractor shall actively monitor the adequacy of its appointment processes and reduce the
unnecessary use of alternative methods such as emergency room visits [42 CFR 438.206(c)(l)(i)]. The
Contractor shall actively monitor and ensure that a member’s waiting time for a scheduled
appointment at the PCP’s or specialist’s office is no more than 45 minutes, except when the
provider is unavailable due to an emergency.

The Contractor shall have written policies and procedures about educating its provider network
regarding appointment time requirements. The Contractor must assign a specific staff member or unit
within its organization to monitor compliance with appointment standards. The Contractor must
develop a corrective action plan when appointment standards are not met; if appropriate, the
corrective action plan should be developed in conjunction with the provider [42 CFR
438.206(c)(l)(iv), (v) and (vi)]. Appointment standards shall be included in the Provider Manual.
The Contractor is encouraged to include the standards in the provider subcontract.

          34. FEDERALLY QUALIFIED HEALTH CENTERS (FQHC) AND RURAL HEALTH CLINICS (RHC)

The Contractor is encouraged to use FQHCs/RHCs in Arizona to provide covered services and must
comply with the Federal mandates. AHCCCS expects the contractors to negotiate rates of payment with
FQHCs/RHCs for non-pharmacy services that are comparable to the rates paid to providers that
provide similar services.

Contractors are required to submit member information for Title XIX members for each FQHC/RHC on a
quarterly basis to the AHCCCSA Division of Health Care Management. AHCCCSA will perform periodic
audits of the member information submitted. Contractors should refer of the AHCCCS Division of
Health Care Management’s policy on FQHC/RHC reimbursement for further guidance. The FQHCs/RHCs
registered with AHCCCS are listed on the AHCCCS website (www.azahcccs.gov).

          35. PROVIDER MANUAL

The Contractor shall develop, distribute and maintain a provider manual. The Contractor shall
ensure that each contracted provider is made aware of a website provider manual or, if requested,
issued a hard copy of the provider manual and is encouraged to distribute a provider manual to any
individual or group that submits claim and encounter data. The Contractor remains liable for
ensuring that all providers, whether contracted or not, meet the applicable AHCCCS requirements
such as covered services, billing, etc. At a minimum, the Contractor’s provider manual must contain
information on the following:

	a.	 	Introduction to the Contractor which explains the Contractor’s organization and
administrative structure
	 
	b.	 	Provider responsibility and the Contractor’s expectation of the provider
	 
	c.	 	Overview of the Contractor’s Provider Service department and function
	 
	d.	 	Listing and description of covered and non-covered services, requirements and limitations
including behavioral health services
	 
	e.	 	Emergency room utilization (appropriate and non-appropriate use of the emergency room)
	 
	f.	 	EPSDT Services — screenings include a comprehensive history, developmental/behavioral health
screening, comprehensive unclothed physical examination, appropriate vision testing, hearing
testing, laboratory tests, dental screenings and immunizations. EPSDT providers must document
immunizations into ASIIS and enroll every year in the Vaccine for Children program.
	 
	g.	 	Dental services
	 
	h.	 	Maternity/Family Planning services
	 
	i.	 	The Contractor’s policy regarding PCP assignments

			
	 
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	j.	 	Referrals to specialists and other providers, including access to behavioral health
services provided by the ADHS/RBHA system
	 
	k.	 	Grievance system process and procedures for providers and enrollees
	 
	1.	 	Billing and encounter submission information
	 
	m.	 	Information about policies and procedures relevant to the providers including, but not
limited to, utilization management and claims submission
	 
	n.	 	Reimbursement, including reimbursement for dual eligibles (i.e. Medicare and Medicaid) or
members with other insurance
	 
	o.	 	Cost sharing responsibility
	 
	p.	 	Explanation of remittance advice
	 
	q.	 	Prior authorization and notification requirements
	 
	r.	 	Claims medical, review
	 
	s.	 	Concurrent review
	 
	t.	 	Fraud and Abuse
	 
	u.	 	Formulary information, including updates when changes occur, must be provided in advance to
providers, including pharmacies. The Contractor is not required to send a hard copy, unless
requested, of the formulary each time it is updated. A memo may be used to notify providers of
updates and changes, and refer providers to view the updated formulary on the Contractor’s
website,
	 
	v.	 	AHCCCS appointment standards
	 
	w.	 	Americans with Disabilities Act (ADA) requirements and Title VI, as applicable
	 
	x.	 	Eligibility verification
	 
	y.	 	Cultural competency information, including notification about Title VI of the Civil Rights
Act of 1964. Providers should also be informed of how to access interpretation services to
assist members who speak a language other the English or who use sign language,
	 
	z.	 	Peer review and appeal process.
	 
	aa.	 	Medication management services as described in Section D, Paragraph 12.
	 
	bb.	 	Information about a member’s right to be treated with dignity and respect as specified in 42 CFR 438.100.
	 
	cc.	 	Notification that the contractor has no policies which prevent the provider from advocating on behalf of the member.
	 
	dd.	 	Information on how to access or obtain Practice Guidelines and coverage criteria for authorization decisions.

          36. PROVIDER REGISTRATION

The Contractor shall ensure that all of its subcontractors register with AHCCCSA as an approved
service provider. A Provider Participation Agreement must be signed by each provider who is not
already an AHCCCS registered provider. The original shall be forwarded to AHCCCSA. This provider
registration process must be completed in order for the Contractor to report services a
subcontractor renders to enrolled members and for the Contractor to be paid reinsurance. The
National Provider Identifier (NPI) will be required on all claim submissions and subsequent
encounters (from providers who are eligible for a NPI) effective for dates of service on or after
May 23,2007. Contractors shall work with providers to obtain their NPI.

          37. SUBCONTRACTS

The Contractor shall be legally responsible for contract performance whether or not subcontracts
are used [42 CFR 438.230(a) and 434.6(c)]. No subcontract shall operate to terminate the legal
responsibility of the Contractor to assure that all activities carried out by the subcontractor
conform to the provisions of this contract. Subject to such conditions, any function required to be
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be subcontracted to a qualified person or organization. All such subcontracts must be in writing
[42 CFR 438.6(L)]. See the ACOM Contractor Claims Processing by Health Plan Subcontracted Providers
Policy.

All subcontracts entered into by the Contractor are subject to prior review and written approval by
AHCCCS, Division of Health Care Management, and shall incorporate by reference the terms and
conditions of this contract The following types of subcontracts shall be submitted to AHCCCS,
Division of Health Care Management for prior approval at least 30 days prior to the beginning date
of the subcontract:

	a.	 	Delegated agreements that delegate:

	 	1)	 	Any function related to the management of the contract with
AHCCCS. Examples include quality management, medical management (e.g., prior
authorization, concurrent review, medical claims review)
	 
	 	2)	 	Claims processing, including pharmacy claims.
	 
	 	3)	 	Credentialing including those for only primary source
verification

	b.	 	All Management Service Agreements
	 
	c.	 	All Service Level Agreements with any Division or Subsidiary of a corporate parent owner

The Contractor shall maintain a fully executed original of all subcontracts, which shall be
accessible to AHCCCSA within two business days of request by AHCCCSA. All requested subcontracts
must have full disclosure of all terms and conditions and must fully disclose all financial or
other requested information. Information may be designated as confidential but may not be withheld
from AHCCCS as proprietary. Information designated as confidential may not be disclosed by AHCCCS
without the prior written consent of the Contractor except as required by law. All subcontracts
shall comply with the applicable provisions of Federal and State laws, regulations and policies.

Before entering into a subcontract which delegates Contractor duties or responsibilities to a
subcontractor, the Contractor must evaluate the prospective subcontractor’s ability to perform the
activities to be delegated. If the Contractor delegates duties or responsibilities such as
utilization management or claims processing to a subcontractor, then the Contractor shall establish
a written agreement that specifies the activities and reporting responsibilities delegated to the
subcontractor. The written agreement shall also provide for revoking delegation or imposing other
sanctions if the subcontractor’s performance is inadequate. In order to determine adequate
performance, the Contractor shall monitor the subcontractor’s performance on an ongoing basis and
subject it to formal review according to a periodic schedule. The schedule for review shall be
submitted to AHCCCSA, Division of Health Care Management for prior approval. As a result of the
performance review, any deficiencies must be communicated to the subcontractor in order to
establish a corrective action plan. The results of the performance review and the correction plan
shall be communicated to AHCCCS upon completion. [42 CFR 438.230(b)]

The Contractor must submit annually (within 90 days from the start of the contract year) a
statement whether any Contractor duties or responsibilities have been established under a., b.,
and/or c. of the second paragraph above. If duties or responsibilities have been delegated to a
subcontractor, the Contractor must submit annually (within 90 days from the start of the contract
year) a report listing the following:

	 	•	 	Subcontractor’s name
	 
	 	•	 	Delegated duties and responsibilities
	 
	 	•	 	Most recent review date of the duties, responsibilities and financial position
of the subcontractor
	 
	 	•	 	Next scheduled review date
	 
	 	•	 	Identified areas of deficiency
	 
	 	•	 	Contractor’s corrective action plan

			
	 
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The Contractor shall promptly inform AHCCCS, Division of Health Care Management, in writing if a
subcontractor is in significant non-compliance that would affect their abilities to perform the
duties and responsibilities of the subcontract.

The Contractor shall not include covenant-not-to-compete requirements in its provider agreements.
Specifically, the Contractor shall not contract with a provider and require that the provider not
provide services for any other AHCCCS Contractor. In addition, except for cost sharing
requirements, the Contractor shall not enter into subcontracts that contain compensation terms that
discourage providers from serving any specific eligibility category.

The Contractor must enter into a written agreement with any provider (including out-of-state
providers) the Contractor reasonably anticipates will be providing services at the request of the
Contractor more than 25 times during the contract year [42 CFR 438.206(b)(l)]. Exceptions to this
requirement include the following:

	a.	 	If a provider who provides services more than 25 times during the contract year refuses to
enter into a written agreement with the Contractor, the Contractor shall submit documentation
of such refusal to AHCCCS, Division of Health Care Management within seven days of its final
attempt to gain such agreement.
	 
	b.	 	If a provider performs emergency services such as an emergency room physician or an ambulance
company, a written agreement is not required.
	 
	c.	 	Individual providers as detailed in the AMPM,
	 
	d.	 	Hospitals, as discussed in Section D, Paragraph 40, Hospital Subcontracting and
Reimbursement.
	 
	e.	 	If a provider primarily performs services in an inpatient setting.
	 
	f.	 	If upon the Medical Director’s review, it is determined that the Contractor or members would
not benefit by adding the provider to the contracted network.

Any other exceptions to this requirement must be approved by AHCCCS, Division of Health Care
Management. If AHCCCS does not respond within 30 days, the requested exception is deemed approved.
The Contractor may request an expedited review and approval.

All subcontracts must contain verbatim all the provisions of Attachment A, Minimum Subcontract
Provisions. In addition, each provider subcontract must contain the following [42 CFR
438.206(b)(l)]:

	a.	 	Full disclosure of the method and amount of compensation or other consideration to be
received by the subcontractor.
	 
	b.	 	Identification of the name and address of the subcontractor.
	 
	c.	 	Identification of the population, to include patient capacity, to be covered by the
subcontractor.
	 
	d.	 	The amount, duration and scope of medical services to be provided, and for which compensation
will be paid.
	 
	e.	 	The term of the subcontract including beginning and ending dates, methods of extension,
termination and renegotiation.
	 
	f.	 	The specific duties of the subcontractor relating to coordination of benefits and
determination of third-party liability.
	 
	g.	 	A provision that the subcontractor agrees to identify Medicare and other third-party
liability coverage and to seek such Medicare or third party liability payment before
submitting claims to the Contractor.
	 
	h.	 	A description of the subcontractor’s patient, medical, dental and cost record keeping system.
	 
	i.	 	Specification that the subcontractor shall cooperate with quality management/quality
improvement programs, and comply with the utilization management and review procedures
specified in 42 CFR Part 456, as specified in the AMPM.
	 
	j.	 	A provision stating that a merger, reorganization or change in ownership of a subcontractor
that is related to or affiliated with the Contractor shall require a contract amendment and
prior approval of AHCCCSA.
	 
	k.	 	Procedures for enrollment or re-enrollment of the covered population (may also refer to the
Provider Manual).

			
	 
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	l.	 	A provision that the subcontractor shall be fully responsible for all tax obligations,
Worker’s Compensation Insurance, and all other applicable insurance coverage obligations which
arise under this subcontract, for itself and its employees, and that AHCCCSA shall have no
responsibility or liability for any such taxes or insurance coverage.
	 
	m.	 	A provision that the subcontractor must obtain any necessary authorization from the
Contractor or AHCCCSA for services provided to eligible and/or enrolled members.
	 
	n.	 	A provision that the subcontractor must comply with encounter reporting and claims submission
requirements as described in the subcontract.
	 
	o.	 	Provision(s) that allow the Contractor to suspend, deny, refuse to renew or terminate any
subcontractor in accordance with the terms of this contract and applicable law and regulation.
	 
	p.	 	A provision that the subcontractor may provide the member with factual information, but is
prohibited from recommending or steering a member in the member’s selection of a Contractor.
	 
	q.	 	A provision that compensation to individuals or entities that conduct utilization management
and concurrent review activities is not structured so as to provide incentives for the
individual or entity to deny, limit or discontinue medically necessary services to any
enrollee (42 CFR 438.210(e)).

          38. CLAIMS PAYMENT/HEALTH INFORMATION SYSTEM

The Contractor shall develop and maintain a health information system, that collects, analyzes,
integrates, and reports data. The system shall provide information on areas including, but not
limited to, service utilization, claim disputes and appeals. [42 CFR 438.242(a)]

The Contractor will ensure that changing or making major upgrades to the information systems
affecting claims processing, or any other major business component, will be accompanied by a plan
which includes a timeline, milestones, and adequate testing before implementation. At least six
months before the anticipated implementation date, the contractor shall provide the system change
plan to AHCCCSA for review and comment.

The Contractor shall develop and maintain a claims payment system capable of processing, cost
avoiding and paying claims in accordance with A.R.S. §§ 36-2903 and 2904 and AHCCCS Rules R9-28
Article 7. This system must produce a remittance advice related to the Contractor’s payments to
providers and must contain, at a minimum:

	 	•	 	an adequate description of all denials and adjustments,
	 
	 	•	 	the reasons for such denials and adjustments,
	 
	 	•	 	the amount billed,
	 
	 	•	 	the amount paid,
	 
	 	•	 	application of COB and
	 
	 	•	 	provider rights for claim disputes.

The related remittance advice must be sent with the payment, unless the payment is made by
electronic funds transfer (EFT). The remittance advice sent related to an EFT must be mailed, or
sent to the provider, no later than the date of the EFT.

The Contractor’s claims payment system, as well as its prior authorization and concurrent review
process, must minimize the likelihood of having to recoup already-paid claims. Any individual
recoupment in excess of 550,000 per provider within a contract year must be approved in advance by
AHCCCSA, Division of Health Care Management, Acute Care Operations Unit. If AHCCCS does not respond
within 30 days the recoupment request is deemed approved. AHCCCS must be notified of any cumulative
recoupment greater than $50,000 per provider Tax Identification Number per contract year. A
Contractor shall not recoup monies from a provider later than 12 months after the date of original
payment on a clean claim, without prior approval from AHCCCSA, unless the recoupment is a result of
fraud, reinsurance audit findings, data validation or audits conducted by the AHCCCSA Office of
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The Contractor is required to reimburse providers for previously recouped monies if the provider
was subsequently denied payment by the primary insurer based on timely filing limits or lack of
prior authorization and the member failed to disclose additional insurance coverage other than
AHCCCS.

Contractors must void encounters for claims that are recouped in full. For recoupments that result
in a reduced claim value, replacement encounters must be submitted. AHCCCS will validate the
submission of applicable voids and replacement encounters upon completion of any approved
recoupment that meets the qualifications of this section. All revised encounters must reach
adjudicated status within 120 days of the approval of the recoupment. The Contractor should refer
to the Acute Contractor Operations Manual for further guidance.

Unless a subcontract specifies otherwise, Contractors with 50,000 or more members shall ensure that
95% of all clean claims are adjudicated within 30 days of receipt of the clean claim and 99% are
adjudicated within 60 days of receipt of the clean claim. Unless a subcontract specifies otherwise,
Contractors with fewer than 50,000 members shall ensure that 90% of all clean claims are
adjudicated within 30 days of receipt of the clean claim and 99% are adjudicated within 60 days of
receipt of the clean claim. Additionally, unless a shorter time period is specified in contract,
the Contractor, shall not pay a claim initially submitted more than 6 months after date of service
or pay a clean claim submitted more than 12 months after date of
service. Claim payment
requirements pertain to both contracted and non-contracted providers. The receipt date of the claim
is the date stamp on the claim or the date electronically received. The receipt date is the day the
claim is received at the Contractor’s specified claim mailing address. The paid date of the claim
is the date on the check or other form of payment [42 CFR 447.45(d)] Claims submission deadlines
shall be calculated from the date of service or the effective date of eligibility posting,
whichever is later. Remittance advices accompanying the Contractor’s payments to providers must
contain, at a minimum, adequate descriptions of all denials and adjustments, the reasons for such
denials and adjustments, the amount billed, the amount paid, and provider rights for claim dispute.

Effective for all non-hospital clean claims, in the absence of a contract specifying other late
payment terms, Contractors are required to pay interest on late payments. Late claims payments are
those that are paid after 45 days of receipt of the clean claim (as defined in this contract). In
grievance situations, interest shall be paid back to the date interest would have started to accrue
beyond the applicable 45 day requirement. Interest shall be at the rate of ten per cent per annum,
unless a different rate is stated in a written contract. In the absence of interest payment terms
in a subcontract, interest shall accrue starting on the first day after a clean claim is contracted
to be paid. For hospital clean claims, a slow payment penalty shall be paid in accordance with
A.R.S. 2903.01. When interest is paid, the Contractor must report the interest as directed in the
Encounter Manual.

Contractors are required to accept HIPAA compliant electronic claims transactions from any provider
interested and capable of electronic submission; and must be able to make claims payments via
electronic funds transfer. In addition, Contractors shall implement and meet the following
milestone in order to make claims processing and payment more efficient and timely:

	 	•	 	Receive and pay 50% of all claims (based on volume of actual claims excluding
claims processed by Pharmacy Benefit Managers (PBMs)) electronically by July 1, 2006

In accordance with the Deficit Reduction Act of 2005, Section 6085, Contractor is required to
reimburse non-contracted emergency services providers at no more than the AHCCCS Fee-For-Service
rate. This applies to in state as well as out of state providers.

In accordance with Arizona Revised Statute 36-2903 and 36-2904, in the absence of a written
negotiated rate, Contractor is required to reimburse non-contracted non-emergent in state providers
at the AHCCCS fee schedule, or pursuant to 36-2905.01, at ninety-five percent of the AHCCCS
Fee-For-Service rates for urban hospital days. All payments are subject to other limitations that
apply, such as provider registration, prior authorization, medical necessity, and covered service.

 
			
	 
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The Contractor shall submit a monthly Claims Dashboard as specified in the AHCCCS Claims Reporting
Guide. Beginning October 1, 2006, the Contractor shall submit: 1) Claims Dashboard reporting claims
received on a UB92 or 83712) Claims Dashboard reporting claims received on a CMS1500, dental claim
form, 837P or 837D 3) Claims Dashboard combining all claims. The Monthly report must be received by
the AHCCCSA, Division of Healthcare Management, no later than 15 days from the end of each month.

          39. SPECIALTY CONTRACTS

AHCCCSA may at any time negotiate or contract on behalf of the Contractor and AHCCCSA for
specialized hospital and medical services. AHCCCSA will consider existing Contractor resources in
the development and execution of specialty contracts. AHCCCSA may require the Contractor to modify
its delivery network to accommodate the provisions of specialty contracts. Specialty contracts
shall take precedence over, and supersede, existing and future subcontracts for services that are
subject to specialty contracts. AHCCCSA may consider waiving this requirement in particular
situations if such action is determined to be in the best interest of the State; however, in no
case shall reimbursement exceed that payable under the relevant AHCCCSA specialty contract.

During the term of specialty contracts, AHCCCSA may act as an intermediary between the Contractor
and specialty contractors to enhance the cost effectiveness of service delivery. Adjudication of
claims related to such payments provided under specialty contracts shall remain the responsibility
of the Contractor. AHCCCSA may provide technical assistance prior to the implementation of any
specialty contracts.

Currently, AHCCCSA only has specialty contracts for transplant services and anti-hemophilic agents
and related pharmaceutical services. AHCCCSA shall provide at least 60 days advance written notice
to the Contractor prior to file implementation of any specialty contract.

          40. HOSPITAL SUBCONTRACTING AND REIMBURSEMENT

Marikopa
and Pima counties only: Effective October 1, 2003, legislation authorizes the Inpatient
Hospital Reimbursement Program (Program). The Program is defined in the Arizona Revised Statutes
(A.R.S.) 36-2905.01, and requires hospital subcontracts to be negotiated between contractors and
hospitals in Maricopa and Pima counties to establish reimbursement levels, terms and conditions.
Subcontracts shall be negotiated by the Contractor and hospitals to cover operational concerns,
such as timeliness of claims submission and payment, payment of discounts or penalties and legal
resolution which may, as an option, include establishing arbitration procedures. These negotiated
subcontracts shall remain under close scrutiny by AHCCCSA to ensure availability of quality
services within specific service districts, equity of related party interests and reasonableness of
rates. The general provisions of this program encompass acute care hospital services and outpatient
hospital services that result in an admission. The Contractor, upon request, shall make available
to AHCCCSA, all hospital subcontracts and amendments. For non-emergency patient-days, the
Contractor shall ensure that at least 65% of its members use contracted hospitals. AHCCCSA reserves
the right to subsequently adjust the 65% standard. Further, if in AHCCCSA’s judgment the number of
emergency days at a particular non-contracted hospital becomes significant, AHCCCSA may require a
subcontract at that hospital. In accordance with R9-22-718, unless otherwise negotiated by both
parties, the reimbursement for inpatient services provided at a non-contracted hospital shall be
based on the rates as defined in A.R.S. § 36-2903.01, multiplied by 95%.

All
counties EXCEPT Maricopa and Pima: The Contractor shall reimburse hospitals for member care in
accordance with AHCCCS Rule R9-22-705. The Contractor is encouraged to obtain subcontracts with
hospitals in all GSA’s and must submit copies of these subcontracts, including amendments, to
AHCCCSA, Division of Health Care Management.

 
			
	 
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Out-of-State Hospitals: The Contractor shall reimburse out-of-state hospitals in accordance with
AHCCCS Rule R9-22-705. Contractors serving border communities (excluding Mexico) are strongly
encouraged to establish contractual agreements with those out-of-state hospitals that are
identified by GSA in Attachment B.

Outpatient hospital services: With passage of SB 1410 (Laws of 2004, Chapter 279), effective for
dates of service on and after July 1, 2005, in absence of a contract, the default payment rate for
outpatient hospital services billed on a UB-92 will be based on the AHCCCS outpatient hospital fee
schedule, rather than a hospital-specific cost-to-charge ratio (pursuant to ARS 36-2904).

Hospital Recoupments: The Contractor may conduct prepayment and post-payment medical reviews of all
hospital claims including outlier claims. Erroneously paid claims are subject to recoupment. If the
Contractor fails to identify lack of medical necessity through concurrent review and/or prepayment
medical review, lack of medical necessity identified during post-payment medical review shall not
constitute a basis for recoupment by the Contractor. This prohibition does not apply to recoupments
that are a result of an AHCCCS reinsurance audit. See also Section D, Paragraph 38, Claims Payment
System. For a more complete description of the guidelines for hospital reimbursement, please
consult the Bidder’s Library for applicable statutes and rules.

          41. NURSING FACILITY REIMBURSEMENT

The Contractor shall not deny nursing facility services if the nursing facility is unable to obtain
prior authorization in situations where acute care eligibility and ALTCS eligibility overlap and
the member is enrolled with an AHCCCS acute care contractor. In such situations, the Contractor
shall impose reasonable authorization requirements. The Contractor’s payment responsibility,
described above, applies only in situations where the nursing facility has not been notified in
advance of the member’s enrollment with an AHCCCS acute care contractor. When ALTCS eligibility
overlaps AHCCCS acute care enrollment, the acute care enrollment takes precedence. Although the
member could be ALTCS eligible for this time period, there is no ALTCS enrollment that occurs on
the same days as AHCCCS acute enrollment.

The Contractor shall provide medically necessary nursing facility services for any member who has a
pending ALTCS application, who is currently residing in a nursing facility and is eligible for
services provided under this contract. If the member becomes ALTCS eligible and is enrolled with an
ALTCS Contractor before the end of the maximum 90 days per contract year of nursing facility
coverage, the Contractor is only responsible for nursing facility coverage during the time the
member is enrolled with the Contractor. Nursing facility services, covered by a third party insurer
(including Medicare) while the member is enrolled with the Contractor, shall be applied to the 90
day per contract year limitation.

The Contractor shall notify the Assistant Director of the Division of Member Services in writing,
when a member has been residing in a nursing facility for 75 days. This will allow AHCCCSA time to
follow-up on the status of the ALTCS application process and to prepare for potential
fee-for-service coverage if the stay goes beyond the 90-day per contract year maximum.

          42. PHYSICIAN INCENTIVES/PAY FOR PERFORMANCE

Physician Incentives

Reporting of Physician Incentive Plans has been suspended by CMS until further notice. No reporting
is required until suspension is lifted.

The Contractor must comply with all applicable physician incentive requirements and conditions
defined in 42 CFR 417.479. These regulations prohibit physician incentive plans that directly or
indirectly make payments to a doctor or a group as an inducement to limit or refuse medically
necessary services to a member. The

			
	 
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Contractor is required to disclose all physician incentive agreements to AHCCCSA and to AHCCCS
members who request them.

The Contractor shall not enter into contractual arrangements that place providers at significant
financial risk as defined in CFR 417.479 unless specifically approved in advance by the AHCCCSA
Division of Health Care Management. In order to obtain approval, the following must be submitted to
the AHCCCSA Division of Health Care Management 45 days prior to the implementation of the contract
[42 CFR 438.6(g)]:

	1.	 	A complete copy of the contract
	 
	2.	 	A plan for the member satisfaction survey
	 
	3.	 	Details of the stop-loss protection provided
	 
	4.	 	A summary of the compensation arrangement that meets the substantial financial risk
definition.

The Contractor shall disclose to AHCCCSA the information on physician incentive plans listed in 42
CFR 417.479(h)(l) through 417.479(1) upon contract renewal, prior to initiation of a new contract,
or upon request from AHCCCSA or CMS. Please refer to the Physician Incentive Plan Disclosure by
Contractors Policy in the Bidder’s Library for details on providing required disclosures.

The Contractor shall also provide for compliance with physician incentive plan requirements as set
forth in 42 CFR 422.208, 422.210 and 438.6(h). These regulations apply to contract arrangements
with subcontracted entities that provide utilization management services.

Pay for Performance Any pay for performance that meets the requirements of 42 CFR 417.479
must be approved by AHCCCS Division of Health Care Management prior to implementation.

          43. MANAGEMENT SERVICES AGREEMENT AND COST ALLOCATION PLAN

If a Contractor has subcontracted for management services, the management service agreement and the
corporate cost allocation plan must be approved in advance by AHCCCSA, Division of Health Care
Management. The cost allocation plan must be submitted with the proposed management fee agreement.
AHCCCSA reserves the right to perform a thorough review of actual management fees charged and/or
corporate allocations made. If the fees or allocations actually paid out are determined to be
unjustified or excessive, amounts may be subject to repayment to the Contractor. In addition,
sanctions may be imposed.

          44. RESERVED

          45. MINIMUM CAPITALIZATION REQUIREMENTS

In order
to be considered for a contract award, the Offeror must meet a minimum capitalization
requirement for each GSA bid. The capitalization requirement for both new and continuing offerors
must be met within 30 days after contract award. [42 CFR 438.116]

Minimum capitalization requirements by GSA are as follows:

	 	 	 	 	 	 	 	 	 
	 	 	Capitalization	 	 
	 	 	Requirement—	 	Capitalization Requirement—
	Geographic Service Area (GSA)	 	New Contractors	 	Existing Contractors
	Mohave/Coconino/Apache/Navajo
	 	$	4,400,000	 	 	$	3,000,000	 
	La Paz/Yuma
	 	$	3,000,000	 	 	$	2,000,000	 
	Maricopa
	 	$	5,000,000	 	 	$	4,000,000	 
	Pima/Santa Cruz
	 	$	4,500,000	 	 	$	3,000,000	 

			
	 
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	PROGRAM REQUIREMENTS
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	 	 	Capitalization	 	 
	 	 	Requirement-	 	Capitalization Requirement-
	Geographic Service Area (GSA)	 	New Contractors	 	Existing Contractors
	Cochise/Graham/ Greenlee
	 	$	2,150,000	 	 	$	2,000,000	 
	Pinal/Gila
	 	$	2,400,000	 	 	$	2,000,000	 
	Yavapai*
	 	$	1,600,000	 	 	$	1,600,000	 

 

			
	*	 	Yavapai’s minimum capitalization requirement for both new and existing offerors is limited to $150
times the estimated number of members.

New Offerors: To be considered for a contract award in a given GSA or group of GSA’s, a new offeror
must meet the minimum capitalization requirements listed above. The capitalization requirement is
subject to a $10,000,000 ceiling regardless of the number of GSA’s awarded. This requirement is in
addition to the Performance Bond requirements defined in Paragraphs 46 and 47 below and must be met
with cash with no encumbrances, such as a loan subject to repayment. The capitalization requirement
may be applied toward meeting the equity per member requirement (see Section D, Paragraph 50,
Financial Viability Standards/Performance Guidelines) and is intended for use in operations of the
Contractor,

Continuing Offerors: Continuing offerors that are bidding a county or GSA in which they currently
have a contract must meet the equity per member standard (see Section D, Paragraph 50, Financial
Viability Standards/Performance Guidelines) for their current membership. Continuing offerors that
do not meet the equity standard must fund, through capital contribution, the necessary amount to
meet the minimum capitalization requirement. Continuing offerors that are bidding a new GSA must
provide the additional capitalization for the new GSA they are bidding. The amount of the required
capitalization for continuing offers may differ from that for new offerors due to size of the
existing offerors current enrollment. (See the table of requirements by GSA above).

Continuing offerors will not be required to provide additional capitalization if they currently
meet the equity per member standard with their existing membership and their excess equity is
sufficient to cover the proposed additional members, or they have at
least $10,000,000 in equity.

          46. PERFORMANCE BOND OR BOND SUBSTITUTE

The Contractor shall be required to provide a performance bond of standard commercial scope issued
by a surety company doing business in this State, an irrevocable letter of credit, or a cash
deposit (“Performance Bond”) to AHCCCSA for as long as the Contractor has AHCCCS-related
liabilities of $50,000 or more outstanding, or 15 months following the effective date of this
contract, whichever is later, to guarantee: (1) payment of the Contractor’s obligations to
providers, non-contracting providers, and non-providers; and (2) performance by the Contractor of
its obligations under this contract [42 CFR 438.116(a)(l) and (b)(1)]. The Performance Bond shall
be in a form acceptable to AHCCCSA as described in the ACOM Performance Bond Policy available in
the Bidder’s Library,

In the event of a default by the Contractor, AHCCCSA shall, in addition to any other remedies if
may have under this contract, obtain payment under the Performance Bond or substitute security for
the purposes of the following:

	a.	 	Paying any damages sustained by providers, non-contracting providers and non-providers by
reason of a breach of the Contractor’s obligations under this contract,
	 
	b.	 	Reimbursing AHCCCSA for any payments made by AHCCCSA on behalf of the Contractor, and
	 
	c.	 	Reimbursing AHCCCSA for any extraordinary administrative expenses incurred by reason of a
breach of the Contractor’s obligations under this contract, including, but not limited to,
expenses incurred after termination of this contract for reasons other than the convenience of
the State by AHCCCSA.

In the event AHCCCSA agrees to accept substitute security in lieu of the Performance Bond,
irrevocable letter of credit or cash deposit, the Contractor agrees to execute any and all
documents and perform any and all acts necessary to secure and enforce AHCCCSA’s security interest
in such substitute security including, but not

			
	 
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	PROGRAM REQUIREMENTS
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limited to, security agreements and necessary UCC filings pursuant to the Arizona Uniform
Commercial Code. In the event such substitute security is agreed to and accepted by AHCCCSA, the
Contractor acknowledges that it has granted AHCCCSA a security interest in such substitute security
to secure performance of its obligations under this contract. The Contractor is solely responsible
for establishing the credit-worthiness of all forms of substitute security. AHCCCSA may, after
written notice to the Contractor, withdraw its permission for substitute security, in which case
the Contractor shall provide AHCCCSA with a form of security described above. The Contractor may
not change the amount, duration or scope of the performance bond without prior written approval
from AHCCCSA, Division of Health Care Management.

The Contractor must request an annual acceptance from AHCCCSA when a substitute security in lieu of
the performance bond, irrevocable letter of credit or cash deposit is established.

The Contractor shall not leverage the bond for another loan or create other creditors using the
bond as security.

          47. AMOUNT OF PERFORMANCE BOND

The initial amount of the Performance Bond shall be equal to 80% of the total capitation payment
expected to be paid to the Contractor in the first month of the contract year, or as determined by
AHCCCSA. The total capitation amount shall include delivery and hospital supplemental payments.
This requirement must be satisfied by the Contractor no later than 30 days after notification by
AHCCCSA of the amount required. Thereafter, AHCCCSA shall evaluate the enrollment statistics of the
Contractor on a monthly basis to determine if the Performance Bond must be increased. The
Contractor shall have 30 days following notification by AHCCCSA to increase the amount of the
Performance Bond. The Performance Bond amount that must be maintained after the contract term shall
be sufficient to cover all outstanding liabilities and will be determined by AHCCCSA. The
Contractor may not change the amount of the performance bond without prior written approval from
AHCCCS, Division of Health Care Management. Refer to the ACOM Performance Bond and Equity Per
Member Policy for more details.

          48. ACCUMULATED FUND DEFICIT

The Contractor and its owners shall fund any accumulated fund deficit through capital contributions
in a form acceptable to AHCCCSA within 30 days after receipt by AHCCCSA of the final audited
financial statements, or as otherwise requested by AHCCCSA. AHCCCSA may, at its option, impose
enrollment caps in any or all GSA’s as a result of an accumulated deficit, even if unaudited.

          49. ADVANCES, DISTRIBUTIONS, LOANS AND INVESTMENTS

The Contractor shall not, without the prior approval of AHCCCSA, make any advances, distributions,
loans or loan guarantees to related parties or affiliates including another fund or line of
business within its organization. The Contractor shall not, without prior notification to AHCCCSA,
make advances to its subcontractors in excess of $50,000. All requests for prior approval and
notifications are to be submitted to the AHCCCSA Division of Health Care Management.

          50. FINANCIAL VIABILITY STANDARDS / PERFORMANCE GUIDELINES

AHCCCSA has established financial viability standards/performance guidelines. On a quarterly basis,
AHCCCSA will review the following ratios with the purpose of monitoring the financial health of the
Contractor. The two financial viability standards, the Current Ratio and Equity per Member, are the
standards that best represent the financial solvency of the Contractor. Therefore, the Contractor
must comply with these two financial viability standards.

			
	 
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	PROGRAM REQUIREMENTS
	 	Contract/RFP No. YH04-0001
	 

AHCCCSA will also monitor the Medical Expense Ratio, the Administrative Cost Percentage, and the
RBUC’s Days Outstanding. These guidelines are analyzed as part of AHCCCSA’s due diligence in
financial statement monitoring. Sanctions will not automatically be imposed if the Contractor does
not meet these performance guidelines. AHCCCSA takes into account Contractors’ unique programs for
managing care and improving the heath status of members when analyzing medical expense and
administrative ratio results. However, if a critical combination of the Financial Viability
Standards and Performance Guidelines are not met, or if a Contractor’s experience differs
significantly from other Contractors’, additional monitoring, such as monthly reporting, may be
required.

FINANCIAL VIABILITY STANDARDS

	 	 	 
	Current Ratio

	 	Current assets divided by current liabilities. “Current
assets” includes any long-term investments that can be
converted to cash within 24 hours without significant
penalty (i.e., greater than 20%). A request to include
long-term investments that can be converted to cash
within 24 hours in the current ratio calculation must be
sent to AHCCCS, DHCM, within 30 days of the contract
start date and within 30 days of contract renewal).
	 
	 	 
	 

	 	Standard: At least 1.00
	 
	 	 
	 

	 	If current assets include a receivable from a parent
company, the parent company must have liquid assets that
support the amount of the intercompany loan.
	 
	 	 
	Equity per Member

	 	Unrestricted equity, less on-balance sheet performance
bond, divided by the number of non-SOBRA Family Planning
Extension Services members enrolled at the end of the
period.
	 
	 	 
	 

	 	Standard: At least$150 for Contractors with enrollment
< 100,000
$100 for Contractors with enrollment of
100,000+

	 
	 	 
	 

	 	For purposes of this measurement, the equity will be
measured according to the “Performance Bond and Equity
per Member Requirements” policy effective October 1,
2007.
	 
	 	 
	 

	 	(Failure to meet this standard may result in an
enrollment cap being imposed in any or all contracted
GSAs.)

			
	 
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	PROGRAM REQUIREMENTS
	 	Contract/RFP No. YH04-0001
	 

	 	 	 
	PERFORMANCE GUIDELINES
	 	 
	 
	 	 
	Medical Expense Ratio

	 	Total medical expenses divided by the sum
of total capitation + Delivery Supplement +
Hospital Supplemental Payment +TPL+
Reinsurance + HIV/AIDS Supplement less
premium tax
	 
	 	 
	 

	 	Standard: At least 84%
	 
	 	 
	Administrative Cost Percentage

	 	Total administrative expenses divided by
the sum of total capitation + Delivery
Supplement + Hospital Supplemental Payment
+ TPL + Reinsurance + HIV/AIDS Supplement
less premium tax
	 
	 	 
	 

	 	Standard: No more than 10%
	 
	 	 
	Received But Unpaid Claims

(Days Outstanding)

	 	Received but unpaid claims divided by the
average daily medical expenses for the
period, net of sub-capitation expense.
Standard: No more than 30 days

          51. SEPARATE INCORPORATION

Within 60 days of contract award, a non-governmental contractor shall have established a separate
corporation for the purposes of this contract, whose sole activity is the performance of contract
function with AHCCCS.

          52. MERGER, REORGANIZATION AND CHANGE OF OWNERSHIP

A proposed merger, reorganization or change in ownership of the Contractor shall require prior
approval of AHCCCSA and a subsequent contract amendment. The Contractor must submit a detailed
merger, reorganization and/or transition plan to AHCCCSA, Division of Health Care Management, for
review. The purpose of the plan review is to ensure uninterrupted services to members, evaluate the
new entity’s ability to support the provider network, ensure that services to members are not
diminished and that major components of the organization and AHCCCS programs are not adversely
affected by such merger, reorganization or change in ownership.

          53. COMPENSATION

The method of compensation under this contract will be Prior Period Coverage (PPC) capitation,
prospective capitation, delivery supplement, hospitalized supplement for Medical Expense Deduction
(MED) members, HIV-AIDS supplement, reinsurance and third party liability, as described and defined
within this contract and appropriate laws, regulations or policies.

Actuaries establish the capitation rates using practices established by the Actuarial Standards
Board. AHCCCS provides the following data to its actuaries to establish rates for the purposes of
rebasing the capitation rates.

	 	a.	 	Utilization and unit cost data derived from reported encounters
	 
	 	b.	 	Both Audited and unaudited financial statements reported by Contractors
	 
	 	c.	 	Local market basket inflation trends
	 
	 	d.	 	AHCCCS fee for service schedule pricing adjustments
	 
	 	e.	 	Programmatic or Medicaid covered service changes that affect reimbursement
	 
	 	f.	 	Additional administrative requirements for Contractors
	 
	 	g.	 	Other changes to medical practices that affect reimbursement

			
	 
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	PROGRAM REQUIREMENTS
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AHCCCS adjusts its rates to best match payment to risk. This further ensures the actuarial basis
for the capitation rates. The following risk factors will be included:

	 	a.	 	Reinsurance (as described in Paragraph 57)
	 
	 	b.	 	HIV/AIDS supplemental payment
	 
	 	c.	 	Age/Gender for the 1931 (b), SOBRA, KidsCare and BCCTP eligibility groups
	 
	 	d.	 	Medicare enrollment for SSI members
	 
	 	e.	 	Delivery supplemental payment
	 
	 	f.	 	Hospitalized supplemental payments for MED members
	 
	 	g.	 	Geographic Service Area adjustments
	 
	 	h.	 	Risk sharing for Title XIX Waiver Group reimbursement (if applicable)
	 
	 	i.	 	Risk sharing for PPC reimbursement
	 
	 	j.	 	Member choice statistic for Title XIX Waiver Group
	 
	 	k.	 	Member share of cost amounts

The above information is reviewed by AHCCCS’ actuaries in renewal years to determine if adjustments
are necessary to maintain actuarially sound rates. A Contractor may cover services for members that
are not covered under the State Plan; however those services are not included in the data provided
to actuaries for setting capitation rates [42 CFR 438.6(e)]. In addition to the above data used to
review the appropriateness of capitation rates, during renewal years, AHCCCS may look at other
factors that potentially impact appropriate reimbursement including the medical cost experience of
members who exercise their right to choose a contractor upon initial enrollment versus those who
are auto assigned to a contractor.

Prospective Capitation: The Contractor will be paid capitation for all prospective member months,
including partial member months. This capitation includes the cost of providing medically necessary
covered services to members during the prospective period coverage.

Prior Period Coverage (PPC) Capitation: Except for SOBRA Family Planning, SSDI-TMC, KidsCare and
HIFA Parents, the Contractor will be paid capitation for all PPC member months, including partial
member months. This capitation includes the cost of providing medically necessary covered services,
including behavioral health services, to members during prior period coverage. The PPC capitation
rates will be set by AHCCCSA and will be paid to the Contractor along with the prospective
capitation described below. Contractors will not receive PPC capitation for newborns of members who
were enrolled at the time of delivery.

Reconciliation of PPC Costs to Reimbursement: AHCCCSA will reconcile the Contractor’s PPC medical
cost expenses to PPC capitation paid to the Contractor during the year. This reconciliation will
limit the Contractor’s profits and losses to 2%. Any losses in excess of 2% will be reimbursed to
the Contractor, and likewise, profits in excess of 2% will be recouped. Encounter data will be used
to determine medical expenses. Refer to the ACOM PPC Reconciliation Policy for further details.

Risk Sharing for Title XIX Waiver Members: Effective October 1, 2006, AHCCCSA will no longer
reconcile the prospective Title XIX Waiver Member population (TWG). The PPC TWG population will be
reconciled with the PPC reconciliation referred to above. Capitation rates will be adjusted where
necessary.

Delivery Supplement: When the Contractor has an enrolled woman who delivers during a prospective
enrollment period, the Contractor will be entitled to a supplemental payment. Supplemental payments
will not apply to women who deliver in a prior period coverage time period. AHCCCSA reserves the
right at any time during the term of this contract to adjust the amount of this payment for women
who deliver at home. The delivery supplemental payment is not made if the hospitalized supplemental
payment has already been paid.

Hospitalized Supplemental Payment: If an MED member is an inpatient on the date of application for
AHCCCS eligibility, and the date of application falls within the member’s eligibility period, the
Contractor is entitled to a supplemental payment to help defray costs related to the inpatient
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	PROGRAM REQUIREMENTS
	 	Contract/RFP No. YH04-0001
	 

that is paid when the member is enrolled with the Contractor and is subject to review during the
term of the contract. If the member has Medicare Part A or other third party insurance coverage,
they will not be eligible for the supplemental payment.

HIV-AIDS Supplement: On a quarterly basis, the Contractor shall submit to AHCCCSA, Division of
Health Care Management, an unduplicated monthly count of members, by rate code, who are using
approved HIV/AIDS drugs along with the supporting pharmacy log. The report shall be submitted,
along with the quarterly financial reporting package, within 60 days after the end of each quarter.
AHCCCSA reserves the right to recoup any amounts paid for ineligible members as well as an
associated penalty for incorrect encounter reporting. The approved HIV/AIDS drug list is located on
the AHCCCS website at www.azahcccs.gov.

Refer to the ACOM Contractor HIV/AIDS Supplemental Payments Policy for further details and
requirements.

          54. PAYMENTS TO CONTRACTORS

Subject to the availability of funds, AHCCCSA shall make payments to the Contractor in accordance
with the terms of this contract provided that the Contractor’s performance is in compliance with
the terms and conditions of this contract. Payment must comply with requirements of A.R.S. Title
36. AHCCCSA reserves the option to make payments to the Contractor by wire or National Automated
Clearing House Association (NACHA) transfer and will provide the Contractor at least 30 days notice
prior to the effective date of any such change.

Where payments are made by electronic funds transfer, AHCCCSA shall not be liable for any error or
delay in transfer or indirect or consequential damages arising from the use of the electronic funds
transfer process. Any charges or expenses imposed by the bank for transfers or related actions
shall be borne by the Contractor. Except for adjustments made to correct errors in payment, and as
otherwise specified in this section, any savings remaining to the Contractor as a result of
favorable claims experience and efficiencies in service delivery at the end of the contract term
may be kept by the Contractor.

All funds received by the Contractor pursuant to this contract shall be separately accounted for in
accordance with generally accepted accounting principles.

Except for funds received from the collection of permitted copayments and third-party liabilities,
the only source of payment to the Contractor for the services provided hereunder is the Arizona
Health Care Cost Containment System Fund. An error discovered by the State, with or without an
audit, in the amount of fees paid to the Contractor will be subject to adjustment or repayment by
AHCCCSA making a corresponding decrease in a current Contractor’s payment or by making an
additional payment to the Contractor. When a contractor identifies an overpayment, AHCCCSA must be
notified and reimbursed within 30 days of identification.

No payment due the Contractor by AHCCCSA may be assigned or pledged by the Contractor. This section
shall not prohibit AHCCCSA at its sole option from making payment to a fiscal agent hired by
Contractor.

          55. CAPITATION ADJUSTMENTS

Except for changes made specifically in accordance with this contract, the rates set forth in
Section B shall not be subject to re-negotiation or modification during the contract period.
AHCCCSA may, at its option, review the effect of a program change and determine if a capitation
adjustment is needed. In these instances the adjustment will be prospective with assumptions
discussed with the Contractor prior to modifying capitation rates. The Contractor may request a
review of a program change if it believes the program change was not equitable; AHCCCSA will not
unreasonably withhold such a review.

 
			
	 
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	PROGRAM REQUIREMENTS
	 	Contract/RFP No. YH04-0001
	 

If the Contractor is in any manner in default in the performance of any obligation under this
contract, AHCCCSA may, at its option and in addition to other available remedies, adjust the amount
of payment until there is satisfactory resolution of the default. The Contractor shall reimburse
AHCCCSA and/or AHCCCSA may deduct from future monthly capitation for any portion of a month during
which the Contractor was not at risk due to, for example:

	a.	 	death of a member
	 
	b.	 	inmate of a public institution (not eligible for AHCCCS benefits from the date of
incarceration)
	 
	c.	 	duplicate capitation to the same Contractor
	 
	d.	 	adjustment based on change in member’s contract type
	 
	e.	 	voluntary withdrawal

If a member is in county detention and it is determined by AHCCCS that the member does meet the
inmate of a public institution definition, then the disenrollment is effective no earlier than the
date following the date of notification to AHCCCS of the member’s inmate status. Upon becoming
aware that a member may be an inmate of a public institution, the Contractor must contact AHCCCS
for an eligibility determination.

If a member is enrolled twice with the same Contractor, recoupment will be made as soon as the
double capitation is identified. AHCCCSA reserves the right to modify its policy on capitation
recoupments at any time during the term of this contract.

          56. INCENTIVES

AHCCCSA will be implementing an incentive program that utilizes financial and/or non-financial
incentives to promote program quality. AHCCCSA will use contractor clinical performance indicators
in the development of an incentive program. Examples of incentive programs are listed below.

Auto assignment algorithm: Effective CYE ‘07, AHCCCSA will adjust the auto assignment algorithm
methodology to incorporate contractor’s clinical performance indicator results in the calculation
of target percentages. AHCCCSA will use the following performance indicators:

Prenatal Care in the First Trimester, measurement period CYE 2005, reported in CYE 2006
Well-Child Visits 3-6 Years, measurement period CYE 2005, reported in CYE 2006

Administrative requirements: AHCCCSA may elect to reduce Operational Financial Review (OFR)
requirements for high performing contractors.

          57. REINSURANCE

Reinsurance is a stop-loss program provided by AHCCCSA to the Contractor for the partial
reimbursement of covered services, as described below, for a member with an acute medical
condition, beyond an annual deductible level. AHCCCSA “self-insures” the reinsurance program
through a deduction to capitation rates that is intended to be budget neutral. Refer to the AHCCCSA
Reinsurance Claims Processing Manual for further details on the Reinsurance Program.

Inpatient Reinsurance

Inpatient reinsurance covers partial reimbursement of covered inpatient facility medical services.
See the table below for applicable deductible levels and coinsurance percentages. The coinsurance
percent is the rate at which AHCCCSA will reimburse the Contractor for covered inpatient services
incurred above the deductible. The deductible is the responsibility of the Contractor. Per diem
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	PROGRAM REQUIREMENTS
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provided within 30 days of an acute hospital stay, including room and board, provided in lieu of
hospitalization for up to 90 days in any contract year shall be eligible for reinsurance coverage.

The following table represents deductible and coinsurance levels:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Title XIX Waiver Group	 	 
	 	 	Annual Deductible*	 	Annual Deductible	 	 
	Statewide Plan	 	Prospective	 	Prospective	 	 
	Enrollment	 	Reinsurance	 	Reinsurance	 	Coinsurance
	0-34,999
	 	$	20,000	 	 	$	15,000	 	 	 	75	%
	35,000-49,999
	 	$	35,000	 	 	$	15,000	 	 	 	75	%
	50,000 and over
	 	$	50,000	 	 	$	15,000	 	 	 	75	%

 

			
	*	 	applies to all members except for Title XIX Waiver Group, SSDI-TMC and SOBRA Family Planning
members

a) Prospective Reinsurance: This coverage applies to prospective enrollment periods. The deductible
level is based on the Contractor’s statewide AHCCCS acute care enrollment (not including SOBRA
Family Planning Extension services) as of October 1st each contract year for all rate codes and
counties, as shown in the table above. AHCCCSA will adjust the Contractor’s deductible level at the
beginning of a contract year if the Contractor’s enrollment changes to the next enrollment level. A
Contractor at the $35,000 or $50,000 deductible level may elect a lower deductible prior to the
beginning of a new contract year. These deductible levels are subject to change by AHCCCSA during
the term of this contract. Any change will have a corresponding impact on capitation rates.

b) Prior Period Coverage Reinsurance: Effective October 1, 2006, AHCCCSA will no longer cover PPC
inpatient expenses under the reinsurance program for any members.

c) Title XIX Waiver Members: A separate reinsurance deductible for the Title XIX Waiver Group
applies for the prospective coverage time period.

Catastrophic Reinsurance

The reinsurance program includes a special Catastrophic Reinsurance program. This program
encompasses members receiving certain biotech drugs (listed below), and those members diagnosed
with hemophilia, von Willbrand’s Disease, Gaucher’s Disease. For additional detail and restrictions
refer to the AHCCCSA Reinsurance Claims Processing Manual and the AMPM. There are no deductibles
for catastrophic reinsurance cases. For those members diagnosed with hemophilia, von Willebrand’s
Disease and Gaucher’s Disease, all medically necessary covered services provided during the
contract year shall be eligible for reimbursement at 85% of the AHCCCS allowed amount or the
Contractor’s paid amount, depending on the subcap code. Reinsurance coverage for anti-hemophilic
blood factors will be limited to 85% of the AHCCCS contracted amount or the Contractor’s paid
amount, whichever is lower. For members receiving certain biotech drugs listed below, only the drug
costs will be covered under the Catastrophic Reinsurance Program. All catastrophic claims are
subject to medical review by AHCCCSA.

The Contractor shall notify AHCCCSA, Division of Health Care Management, Reinsurance Unit, of cases
identified for catastrophic reinsurance coverage within 30 days of (a) initial diagnosis, (b)
enrollment with the Contractor, and (c) the beginning of each contract year. Catastrophic
reinsurance will be paid for a maximum 30-day retroactive period from the date of notification to
AHCCCSA. The determination of whether a case or type of case is catastrophic shall be made by the
Director or designee based on the following criteria; 1) severity of medical condition, including
prognosis; and 2) the average cost or average length of hospitalization and medical care, or both,
in Arizona, for the type of case under consideration.

			
	 
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	PROGRAM REQUIREMENTS
	 	Contract/RFP No. YH04-0001
	 

HEMOPHILIA: Catastrophic reinsurance coverage is available for all members diagnosed with
Hemophilia (ICD9 codes 286.0, 286.1, 286.2).

VON WILLEBRAND’S DISEASE: Catastrophic reinsurance coverage is available for all members diagnosed
with non Willebrand’s Disease who are non-DDAVP responders and dependent on Plasma Factor VIII.

GAUCHER’S DISEASE: Catastrophic reinsurance is available for members diagnosed with Gaucher’s
Disease classified as Type I and are dependent on enzyme replacement therapy.

BIOTECH DRUGS: Effective October 1, 2007, catastrophic reinsurance is available to cover the cost
of certain biotech drugs when medically necessary. These drugs, collectively referred to as Biotech
Drugs, are the responsibility of the Contractor even if used in the treatment of a CRS covered
condition. Catastrophic reinsurance will cover the drug cost only. The drugs covered are Cerazyme,
Aldurazyme, Fabryzyme, Myozyme, and Elaprase. The Biotech Drugs covered under reinsurance will be
reviewed by AHCCCS at the start of each contract year. AHCCCS reserves the right to require the use
of a generic equivalent where applicable. AHCCCS will reimburse at the lesser of the Biotech Drug
or its generic equivalent for reinsurance purposes.

Transplants

This program covers members who are eligible to receive covered major organ and tissue
transplantation including bone marrow, heart, heart/lung, lung, liver, kidney, and other organ
transplantation. Bone grafts and cornea transplantation services are not eligible for transplant
reinsurance coverage but are eligible under the regular inpatient reinsurance program. Refer to the
AMPM for covered services for organ and tissue transplants. Reinsurance coverage for transplants is
limited to 85% of the AHCCCS contract amount for the transplantation services rendered, or 85% of
the Contractor’s paid amount, whichever is lower. The AHCCCS contracted transplantation rates may
be found in the Bidder’s Library. When a member is referred to a transplant facility for an
AHCCCS-covered organ transplant, the Contractor shall notify AHCCCSA, Division of Health Care
Management.

Other

For all reinsurance case types other than transplants, Contractors will be reimbursed 100% for all
medically necessary covered expenses provided in a contract year, after the reinsurance case
reaches $650,000.

Encounter Submission and Payments for Reinsurance

a) Encounter Submission: A Contractor shall prepare, review, verify, certify, and submit,
encounters for consideration to AHCCCSA. Upon submission, the Contractor certifies that the
services listed were actually rendered. The encounters must be submitted in the format prescribed
by AHCCCSA. The Contractor must initiate and evaluate an encounter for probable 1st and 3rd party
liability before submitting the encounter for reinsurance consideration, unless the encounter
involves underinsured or uninsured motorist liability insurance, 1st and 3rd party liability
insurance or a tort feasor.

The Contractor must maintain evidence that costs Incurred have been paid by the Contractor before
submitting reinsurance encounters. This information is subject to AHCCCSA review. Collections from
lst and 3rd parties should be reflected by the Contractor as reductions in
the encounters submitted on a dollar-for-dollar basis. For purposes of AHCCCSA reinsurance,
payments made by Contractor-purchased reinsurance are not considered 1st and
3rd party collections.

All reinsurance claims must reach a clean claim status within fifteen months from the end date of
service, or date of eligibility posting, whichever is later. Encounters for reinsurance claims that
have passed the fifteen

			
	 
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month deadline and are being adjusted due to a claim dispute or hearing decision must be submitted
and pass all encounter and reinsurance edits within 90 calendar days of the date of the claim
dispute decision or hearing decision, whichever is applicable. Failure to submit the encounter
within this timeframe will result in the loss of any related reinsurance dollars.

b) Encounter Processing: AHCCCSA will accept for processing only those encounters that are
submitted directly by an AHCCCS Contractor and that comply with the AHCCCSA Encounter Reporting
User Manual.

c) Payment of Impatient and Catastrophic Reinsurance Cases: AHCCCSA will reimburse a Contractor for
costs incurred in excess of the applicable deductible level, subject to coinsurance percentages and
Medicare/TPL payment, less any applicable quick pay discounts, slow payment penalties and interest.
Amounts in excess of the deductible level shall be paid based upon costs paid by the Contractor,
minus the coinsurance and Medicare/TPL payment, unless the costs are paid under a subcapitated
arrangement. In subcapitated arrangements, the Administration shall base reimbursement of
reinsurance encounters on the lower of the AHCCCS allowed amount or the reported health plan paid
amount, minus the coinsurance and Medicare/TPL payment and applicable quick pay discounts, slow
payment penalties and interest. Reimbursement for these reinsurance benefits will be made to the
Contractor each month.

When a member with an annual enrollment choice changes Contractors within a contract year, for
reinsurance purposes, all eligible inpatient costs, nursing facility costs and inpatient
psychiatric costs incurred for that member will follow the member to the receiving contractor.
Therefore, all submitted encounters from the contractor the member is leaving (for dates of service
within the current contract year) will be applied toward, but not exceed, the receiving
contractor’s deductible level. For further details regarding this policy and other reinsurance
policies refer to the AHCCCS Reinsurance Claims Processing Manual.

d) Payment of Transplant Reinsurance Cases: Reinsurance benefits are based upon the lower of the
AHCCCS contract amount or the Contractor’s paid amount, subject to coinsurance percentages.
Effective for dates of service on or after October 1, 2004, Contractors are required to submit all
supporting service encounters for transplant services. Reinsurance payments will be linked to
transplant encounter submissions. Please refer to the AHCCCS Reinsurance Claims Processing Manual
for the appropriate billing of transplant services. Reimbursement for these reinsurance benefits
will be made to the Contractor each month.

Reinsurance Audits

For CYE 2002, CYE 2003, CYE 2004, and CYE 2005, the Reinsurance Audit Process as described in
contract is discontinued. No audit related recoupments will be made on reinsurance payments made
for services delivered in the above listed contract years.

Pre-Audit: Beginning in CYE 2006 medical audits on prospective and prior period coverage
reinsurance cases will be conducted on a statistically significant random sample selected based on
utilization trends. The Division of Health Care Management will select reinsurance cases based on
encounter data received during the contract year to assure timeliness of the audit process. The
Contractor will be notified of the documentation required for the medical audit. For closed
contracts, a 100% audit may be conducted.

Audit: AHCCCSA will give the Contractor at least 45 days advance notice of any audit. The
Contractor shall have all requested medical records and financial documentation available to the
nurse auditors. Any documents not requested in advance by AHCCCSA shall be made available upon
request of the Audit Team during the course of the audit. The Contractor representative shall be
available to the Audit Team at all times during AHCCCSA audit activities. If an audit should be
conducted on-site, the Contractor shall provide the Audit Team with workspace, access to a
telephone, electrical outlets and privacy for conferences.

Audits may be completed without an on-site visit For these audits, the Contractor will be asked to
send the required documentation to AHCCCSA. The documentation will then be reviewed by AHCCCS.

			
	 
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Audit Considerations: Reinsurance consideration will be given to inpatient facility contracts and
hearing decisions rendered by the Office of Legal Assistance. Pre-hearing and/or hearing penalties
discoverable during the review process will not be reimbursed under reinsurance.

Per diem rates may be paid for nursing facility and rehabilitation services provided the services
are rendered within 30 days of an acute hospital stay, including room and board, provided in lieu
of hospitalization for up to 90 days in any contract year. The services rendered in these sub-acute
settings must be of an acute nature and, in the case of rehabilitative or restorative services,
steady progress must be documented in the medical record.

Audit Determinations: The Contractor will be furnished a copy of the Reinsurance Post-Audit Results
letter approximately 45 days after the audit and given an opportunity to comment and provide
additional medical or financial documentation on any audit findings. AHCCCSA may limit reinsurance
reimbursement to a lower or alternative level of care if the Director or designee determines that
the less costly alternative could and should have been used by the Contractor. A recoupment of
reinsurance reimbursements made to the Contractor may occur based on the results of the medical
audit.

A Contractor whose reinsurance case is reduced or denied shall be notified in writing by AHCCCSA
and will be informed of rationale for reduction or denial determination and the applicable
grievance and appeal process available.

          58. COORDINATION OF BENEFITS / THIRD PARTY LIABILITY

Pursuant to federal and state law, AHCCCSA is the payer of last resort. This means AHCCCSA shall be
used as a source of payment for covered services only after all other sources of payment have been
exhausted. The Contractor shall coordinate benefits in accordance with 42 CFR 433.135 et seq., ARS
36-2903, and A.A.C. R9-22-1001 et seq. so that costs for services otherwise payable by the
Contractor are cost avoided or recovered from a liable first or third-party payer. The Contractor
may require subcontractors to be responsible for coordination of benefits for services provided
pursuant to this contract.

The two methods used in the coordination of benefits are cost avoidance and post payment recovery.
The Contractor shall use these methods as described in A.A.C. R9-22-1001 et seq. and federal and
state law. See also Section D, Paragraph 60, Medicare Services and Cost Sharing.

Cost Avoidance: The Contractor shall take reasonable measures to determine the legal liability of
third parties who are liable to pay for covered services. The Contractor shall cost-avoid a claim
if it establishes the probable existence of a third party or has information that establishes that
third party liability exists. However, if the probable existence of third party liability cannot be
established or third party liability benefits are not available to pay the claim at the time the
claim is filed, the Contractor must process the claim.

If a third party insurer (other than Medicare) requires the member to pay any co-payment,
coinsurance or deductible, the Contractor is responsible for making these payments, even if the
services are provided outside of the Contractor network. The Contractor is not responsible for
paying coinsurance and deductibles that are in excess of what the Contractor would have paid for
the entire service per a written contract with the provider performing the service, or the AHCCCS
FFS payment equivalent. If the Contractor refers the member for services to a third-party insurer,
other than Medicare, and the insurer requires payment in advance of all co-payments, coinsurance
and deductibles, the Contractor must make such payments in advance.

If the Contractor knows that the third party insurer will not pay the claim for a covered service
due to untimely claim filing or as a result of the underlying insurance coverage (e.g. the service
is not a covered benefit), the Contractor shall not deny the service, deny payment of the claim
based on third party liability, or require a written denial letter if the service is medically
necessary. The Contractor shall communicate any known change in health insurance information,
including Medicare, to AHCCCS Administration, Division of Member

			
	 
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Services, not later than 10 days from the date of discovery using the approved AHCCCS
correspondence. Failure to report these cases may result in one of the remedies specified in
Section D, Paragraph 72, Sanctions. If the Contractor does not know whether a particular service is
covered by the third patty, and the service is medically necessary, the Contractor shall contact
the third party and determine whether or not such service is covered rather than requiring the
member to do so. In the event that the service is not covered by the third party, the Contractor
shall arrange for the timely provision of the service. (See also Section D, Paragraph 60, Medicare
Services and Cost Sharing.)

The requirement to cost-avoid applies to all AHCCCS covered services. For prenatal care and
preventive pediatric services, AHCCCS may require the Contractor to provide such service and then
coordinate payment with the potentially liable third party (“pay and chase”). In emergencies, the
Contractor shall provide the necessary services and then coordinate payment with the third-party
payer. The Contractor shall also provide medically necessary transportation so the member can
receive medical benefits. Further, if a service is medically necessary, the Contractor shall ensure
that its cost avoidance efforts do not prevent a member from receiving such service and that the
member shall not be required to pay any coinsurance or deductibles for use of the other insurer’s
providers.

Members with CRS condition;

A member with private insurance is not required to utilize CRSA. This includes members with
Medicare whether they are enrolled in Medicare FFS or a Medicare Managed Care Plan. If the member
uses the private insurance network or Medicare for a CRS covered condition, the Contractor is
responsible for all applicable deductibles and copayments. If the member is on Medicare, the AHCCCS
Policy 201- Medicare Cost Sharing for Members in Traditional Fee for Service Medicare and Policy
202 — Medicare Cost Sharing for Members in Medicare Managed Care Plans shall apply. When the
private insurance or Medicare is exhausted, or certain annual or lifetime limits are reached with
respect to CRS covered conditions, the Contractor shall refer the member to CRSA for determination
for CRS services. If the member with private insurance or Medicare chooses to enroll with CRS, CRS
becomes the secondary payer responsible for all applicable deductibles and copayments. The
Contractor is not responsible to provide services in instances when the CRS eligible member, who
has no primary insurance or Medicare, refuses to receive CRS covered services through the CRS
Program. If the Contractor becomes aware that a member with a CRS covered condition refuses to
participate in the CRS application process or refuses to receive services through the CRS Program,
the member may be billed by the provider in accordance with AHCCCS regulations regarding billing
for unauthorized services.

Post-payment Recoveries: Post-payment recovery is necessary in cases where the Contractor was not
aware of third-party coverage at the time services were rendered or paid for, or was unable to
cost-avoid. The Contractor shall identify, through the use of trauma code edits, utilizing
diagnostic codes 799.9 and 800 to 999.9 (excluding code 994.6), and other procedures. The
Contractor shall notify AHCCCSA’s authorized representative within 10 business days of the
identification of a third-party liability case with reinsurance or fee-for service payments made by
AHCCCS. Failure to report these cases may result in one of the remedies specified in Section D,
Paragraph 72, Sanctions. The Contractor shall identify all potentially liable third parties and
pursue reimbursement from them except in the circumstances below.

The Contractor shall not pursue reimbursement in the following circumstances, unless the case has
been referred to the Contractor by AHCCCSA or AHCCCSA’s authorized representative:

	 	 	 
	Uninsured/underinsured motorist insurance

	 	Restitution Recovery
	First-and third-party liability insurance

	 	Worker’s Compensation
	Tortfeasors, including casualty

	 	Estate Recovery
	Special Treatment Trust Recovery
	 	 

The Contractor shall report any cases involving the above circumstances to AHCCCSA’s authorized
representative should the Contractor identify such a situation. The Contractor shall cooperate with
AHCCCSA’s authorized representative in all collection efforts. In joint cases involving both AHCCCS
fee-

			
	 
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for-service or reinsurance and the Contractor, AHCCCSA’s authorized representative is responsible
for performing all research, investigation and payment of lien-related costs, subsequent to the
referral of any and all relevant case information to AHCCCSA’s authorized representative by the
Contractor. AHCCCSA’s authorized representative is also responsible for negotiating and acting in
the best interest of all parties to obtain a reasonable settlement in joint cases and may
compromise a settlement in order to maximize overall reimbursement, net of legal and other costs.
The Contractor will be responsible for their prorated share of the contingency fee. The
Contractor’s share of the contingency fee will be deducted from the settlement proceeds prior to
AHCCCSA remitting the settlement to the Contractor. For total plan cases involving only payments
made by the Contractor, the Contractor is responsible for performing all research, investigation,
the mandatory filing of initial liens on cases that exceed $250, lien amendments, lien releases,
and payment of other related costs in accordance with A.R.S. 36-2915 and A.R.S. 36-2916. The
Contractor shall use the AHCCCS approved casualty recovery correspondence when filing liens and
when corresponding to others in regard to casualty recovery. The Contractor may retain up to 100%
of its third-party collections if all of the following conditions exist:

	 	a.	 	Total collections received do not exceed the total amount of the
Contractor’s financial liability for the member,
	 
	 	b.	 	There are no payments made by AHCCCS related to fee-for-service,
reinsurance or administrative costs (i.e. lien filing, etc.); and
	 
	 	c.	 	Such recovery is not prohibited by state or Federal law.

Reporting: The Contractor may be required to report the amount of third-party collections and cost
avoidance. In addition, upon AHCCCSA’s request, the Contractor shall provide an electronic extract
of the Casualty cases, including open and closed cases. Data elements include, but are not limited
to: the member’s first and last name; AHCCCS ID; date of incident; claimed amount; paid/recovered
amount; and case status. The AHCCCSA TPL Section shall provide the format and reporting schedule
for this information to the Contractor. Prior to negotiating a settlement on a total plan case, the
Contractor shall notify AHCCCSA to ensure that there is no reinsurance or fee for service payments
that have been made by AHCCCS. For total plan cases, the contractor shall report settlement
information to AHCCCS, utilizing the AHCCCS approved casualty recovery Notification of Settlement
form, within 10 business days from the settlement date. Failure to report these cases may result in
one of the remedies specified in Section D, Paragraph 72, Sanctions.

AHCCCSA will provide the Contractor, on an agreed upon schedule, with a complete file of all
third-party coverage information (other than Medicare) for the purpose of updating the Contractor’s
files. The Contractor shall notify AHCCCSA of any known changes in coverage within deadlines and in
a format prescribed by AHCCCSA.

Title XXI (KidsCare), HIFA Parents and BCCTP: Eligibility for KidsCare, HIFA Parents and BCCTP
benefits require that the applicant/member not be enrolled with any other creditable health
insurance plan. If the Contractor becomes aware of any such coverage, the Contractor shall notify
AHCCCSA immediately. AHCCCSA will determine if the other insurance meets the creditable definition
in A.R.S. 36-2982(G).

Contract Termination: Upon termination of this contract, the Contractor will complete the existing
third party liability cases or make any necessary arrangements to transfer the cases to AHCCCSA’s
authorized TPL representative.

          59. COPAYMENTS

Most of the AHCCCS members remain exempt from copayments while others are subject to an optional
copayment. Those populations exempt or subject to optional copayments may not be denied services
for the inability to pay the copayment. [42 CFR 438.108]

Any copayments collected shall belong to the Contractor or its subcontractors.

			
	 
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Attachment L provides detail of the populations and their related copayment structure.

          60. MEDICARE SERVICES AND COST SHARING

AHCCCS has members enrolled who are eligible for both Medicaid and Medicare. These members are
referred to as “dual eligibles”. Generally, Contractors are responsible for payment of Medicare
coinsurance and/or deductibles for covered services provided to dual eligible members. However,
there are different cost sharing responsibilities that apply to dual eligible members based on a
variety of factors. Unless prior approval is obtained from AHCCCSA, the Contractor must limit their
cost sharing responsibility according to the ACOM Medicare Cost Sharing Policy. The Contractor
shall have no cost sharing obligation if the Medicare payment exceeds what the Contractor would
have paid for the same service of a non-Medicare member.

When a person with Medicare who is also eligible for Medicaid (dual eligible) is in a medical
institution that is funded by Medicaid for a full calendar month, the dual eligible person is not
required to pay co-payments for their Medicare covered prescription medications for the remainder
of the calendar year. To ensure appropriate information is communicated for these members to the
Center for Medicare and Medicaid Services (CMS), effective January 1, 2006 the Contractor must,
using the approved form, notify the AHCCCS Member File Integrity Section (MFIS), via fax at (602)
253-4807 as soon as it determines that a dual eligible person is expected to be in a medical
institution that is funded by Medicaid for a full calendar month, regardless of the status of the
dual eligible person’s Medicare lifetime or annual benefits. This includes:

	 	a.	 	Members who have Medicare part “B” only;
	 
	 	b.	 	Members who have used their Medicare part “A” life time
inpatient benefit;
	 
	 	c.	 	Members who are in a continuous placement in a single medical
institution or any combination of continuous placements in a medical
institution.

For purposes of the medical institution notification, medical institutions are defined as acute
hospitals, psychiatric hospital — Non IMD, psychiatric hospital — IMD, residential treatment
center — Non IMD, residential treatment center — IMD, skilled nursing facilities, and
Intermediate Care Facilities for the Mentally Retarded.

          61. MARKETING

The Contractor shall submit all proposed marketing and outreach materials and events that will
involve the general public to the AHCCCS Marketing Committee for prior approval in accordance with
the ACOM Marketing Outreach and Incentives Policy. [42 CFR 438.104] The Contractor must have signed
contracts with PCPs, specialists, dentists, and pharmacies in order for them to be included in
marketing materials.

          62. CORPORATE COMPLIANCE

In accordance with A.R.S. Section 36-2918.01, and AHCCCS Contractor Operation Manual, Chapter 100,
the subcontractors or providers are required to notify the AHCCCSA, Office of Program Integrity
immediately and submit report within 10 business days of discovery by completing the confidential
AHCCCS Referral For Preliminary Investigation form for any and all suspected fraud or abuse. [42
CFR 455.1(a)(l)] This shall include acts of suspected fraud or abuse that were resolved internally
but involved AHCCCS members or funds.

			
	 
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As stated in A.R.S. Section 13-2310, incorporated herein by reference, any person who knowingly
obtains any benefit by means of false or fraudulent pretenses, representations, promises, or
material omissions is guilty of a Class 2 felony.

The Contractor agrees to permit and cooperate with any onsite review. A review by the AHCCCS Office
of Program Integrity may be conducted without notice and for the purpose of ensuring program
compliance. The Contractor also agrees to respond to electronic, telephonic or written requests for
information within the timeframe specified by AHCCCS Administration.

The Contractor must have a mandatory compliance program, supported by other administrative
procedures, that is designed to guard against fraud and abuse. [42 CFR 438.608(a) and (b)] The
Contractor shall have written criteria for selecting a Compliance Officer and job description that
clearly outlines the responsibilities and authority of the position. The Compliance Officer shall
have the authority to assess records and independently refer suspected member fraud, provider fraud
and member abuse cases to AHCCCS, Office of Program Integrity or other duly authorized enforcement
agencies. [42 CFR 455.17]

The compliance program shall be designed to both prevent and detect suspected fraud or abuse.
The compliance program must include:

	 	1	 	The written designation of a compliance officer and a compliance committee that are
accountable to the Contractor’s top management.
	 
	 	2.	 	The Compliance Officer must be an onsite management official who reports directly
to top management.
	 
	 	3.	 	Effective training and education.
	 
	 	4.	 	Effective lines of communication between the compliance officer and the
organization’s employees.
	 
	 	5.	 	Enforcement of standards through well-publicized disciplinary guidelines.
	 
	 	6.	 	Provision for internal monitoring and auditing.
	 
	 	7.	 	Provision for prompt response to problems detected.
	 
	 	8.	 	Written policies, procedures, and standards of conduct that articulate the
organization’s commitment to comply with all applicable Federal and state standards.
	 
	 	9.	 	A Compliance Committee which shall be made up of, at a minimum, the Compliance
Officer, a budgetary official and other executive officials with decision making
authority, The Compliance Committee will assist the Compliance Officer in monitoring,
reviewing and assessing the effectiveness of the compliance program and timeliness of
reporting.
	 
	 	10.	 	Pursuant to the Deficit Reduction Act of 2005 (DRA), the Contractor, as a
condition for receiving payments shall establish written policies for employees
detailing:

	 	a.	 	The federal False Claims Act provisions;
	 
	 	b.	 	The administrative remedies for false claims and
statements;
	 
	 	c.	 	Any state laws relating to civil or criminal penalties
for false claims and statements;
	 
	 	d.	 	The whistleblower protections under such laws.

	 	11.	 	The Contractor must establish a process for training existing staff and new
hires on the compliance program and on the items in section 10. All training must be
conducted in such a manner that can be verified by AHCCCS.
	 
	 	12.	 	The Contractor must require, through documented policies and subsequent
contract amendments, that providers train their staff on the following aspects of the
Federal False Claims Act provisions:

	 	a.	 	The administrative remedies for false claims and
statements;
	 
	 	b.	 	Any state laws relating to civil or criminal penalties
for false claims and statements;
	 
	 	c.	 	The whistleblower protections under such laws.

The Contractor’s documented policies must be updated to include the requirements listed above
on or before January 1, 2008. Contracts must be amended according to the Contractor contract update
schedule, but no later than January 1, 2008

			
	 
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The Contractor is required to research potential overpayments identified by the AHCCCSA, Office of
Program Integrity. [42 CFR 455.1 (a)] After conducting a cost benefit analysis to determine if such
action is warranted, the Contractor should attempt to recover any overpayments identified. The
AHCCCS Office of Program Integrity shall be advised of the final disposition of the research and
advised of actions, if any, taken by the Contractor.

          63. RECORDS RETENTION

The Contractor shall maintain books and records relating to covered services and expenditures
including reports to AHCCCSA and working papers used in the preparation of reports to AHCCCSA. The
Contractor shall comply with all specifications for record keeping established by AHCCCSA. All
books and records shall be maintained to the extent and in such detail as required by AHCCCS Rules
and policies. Records shall include but not be limited to financial statements, records relating to
the quality of care, medical records, prescription files and other records specified by AHCCCSA.

The Contractor agrees to make available, at all reasonable times during the term of this contract,
any of its records for inspection, audit or reproduction by any authorized representative of
AHCCCSA, State or Federal government. The Contractor shall be responsible for any costs associated
with the reproduction of requested information.

The Contractor shall preserve and make available all records for a period of five years from the
date of final payment under this contract. HIPAA related documents must be retained for a period of
six years per 45 CFR 164.530(j).

If this contract is completely or partially terminated, the records relating to the work terminated
shall be preserved and made available for a period of five years from the date of any such
termination. Records which relate to grievances, disputes, litigation or the settlement of claims
arising out of the performance of this contract, or costs and expenses of this contract to which
exception has been taken by AHCCCSA, shall be retained by the Contractor for a period of five years
after the date of final disposition or resolution thereof.

          64. DATA EXCHANGE REQUIREMENTS

The Contractor is authorized to exchange data with AHCCCSA relating to the information requirements
of this contract and as required to support the data elements to be provided AHCCCSA in the formats
prescribed by AHCCCSA and in formats prescribed by the Health Insurance Portability and
Accountability Act (HIPAA). Details for the formats may be found in the draft HIPAA Transaction
Companion Documents & Trading Partner Agreements, and in the AHCCCS Technical Interface Guidelines,
available in the Bidder’s Library.

The information so recorded and submitted to AHCCCSA shall be in accordance with all procedures,
policies, rules, or statutes in effect during the term of this contract. If any of these
procedures, policies, rules, regulations or statutes are hereinafter changed both parties agree to
conform to these changes following appropriate notification to both parties by AHCCCSA.

The Contractor is responsible for any incorrect data, delayed submission or payment (to the
Contractor or its subcontractors), and/or penalty applied due to any error, omission, deletion, or
erroneous insert caused by Contractor-submitted data. Any data that does not meet the standards
required by AHCCCSA shall not be accepted by AHCCCSA.

The Contractor is responsible for identifying any inconsistencies immediately upon receipt of data
from AHCCCSA. If any unreported inconsistencies are subsequently discovered, the Contractor shall
be responsible for the necessary adjustments to correct its records at its own expense.

			
	 
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The Contractor shall accept from AHCCCSA original evidence of eligibility and enrollment in a form
appropriate for electronic data exchange. Upon request by AHCCCSA, the Contractor shall provide to
AHCCCSA updated date-sensitive PCP assignments in a form appropriate for electronic data exchange.

The Contractor shall be provided with a Contractor-specific security code for use in all data
transmissions made in accordance with contract requirements. Each data transmission by the
Contractor shall include the Contractor’s security code. The Contractor agrees that by use of its
security code, it certifies that any data transmitted is accurate and truthful, to the best of the
Contractor’s Chief Executive Officer, Chief Financial Officer or designee’s knowledge [42 CFR
438.606]. The Contractor further agrees to indemnify and hold harmless the State of Arizona and
AHCCCSA from any and all claims or liabilities, including but not limited to consequential damages,
reimbursements or erroneous billings and reimbursements of attorney fees incurred as a consequence
of any error, omission, deletion or erroneous insert caused by the Contractor in the submitted
input data. Neither the State of Arizona nor AHCCCSA shall be responsible for any incorrect or
delayed payment to the Contractor’s AHCCCS services providers (subcontractors) resulting from such
error, omission, deletion, or erroneous input data caused by the Contractor in the submission of
AHCCCS claims.

The costs of software changes are included in administrative costs paid to the Contractor. There is
no separate payment for software changes. A PMMIS systems contact will be assigned after contract
award. AHCCCSA will work with the contractors as they evaluate Electronic Data Interchange options.

Health Insurance Portability and Accountability Act (HIPAA): The Contractor shall comply with the
Administrative Simplification requirements of Subpart F of the HIPAA of 1996 (Public Law 107-191,
110 Statutes 1936) and all Federal regulations implementing that Subpart that are applicable to the
operations of the Contractor by the dates required by the implementing Federal regulations.

          65. ENCOUNTER DATA REPORTING

The accurate and timely reporting of encounter data is crucial to the success of the AHCCCS
program. AHCCCSA uses encounter data to pay reinsurance benefits, set fee-for-service and
capitation rates, determine disproportionate share payments to hospitals, and to determine
compliance with performance standards. The Contractor shall submit encounter data to AHCCCSA for
all services for which the Contractor incurred a financial liability and claims for services
eligible for processing by the Contractor where no financial liability was incurred, including
services provided during prior period coverage. This requirement is a condition of the CMS grant
award. [42 CFR 438.242(b)(l)]

A Contractor shall prepare, review, verify, certify, and submit, encounters for consideration to
AHCCCSA. Upon submission, the Contractor certifies that the services listed were actually rendered
[42 CFR 455.1(a)(2)]. The encounters must be submitted in the format prescribed by AHCCCSA.

Encounter data must be provided to AHCCCSA by electronic media and should be received by AHCCCSA no
later than 240 days after the end of the month in which the service was rendered, or the effective
date of the enrollment with the Contractor, whichever date is later. Requirements for encounter
data are described in the AHCCCSA Encounter Manual and the AHCCCSA Encounter Companion Document,
The Encounter Submission Requirements are included herein as Attachment I. Refer to Paragraph 64,
Data Exchange Requirements, for further information.

An Encounter Submission Tracking Report must be maintained and made available to AHCCCSA upon
request. The Tracking Report’s purpose is to link each claim to an adjudicated or pended encounter
returned to the Contractor. Further information regarding the Encounter Submission Tracking Report
may be found in The AHCCCSA Encounter Reporting User’s Manual.

			
	 
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In addition to the Encounter Submission Tracking Report, the Contractor must maintain a report
which reconciles financial fields of a claim (health plan paid, billed amount, health plan allowed,
etc.) with the financial fields of submitted encounters. This report shall be available to AHCCCS
upon request.

Twice each month AHCCCSA provides the Contractor with full replacement files containing provider
and medical procedure coding information. These files should be used to assist the Contractor in
accurate Encounter Reporting. Refer to Paragraph 64, Data Exchange Requirements, for further
information,

          66. ENROLLMENT AND CAPITATION TRANSACTION UPDATES

AHCCCSA produces daily enrollment transaction updates identifying new members and changes to
members’ demographic, eligibility and enrollment data, which the Contractor shall use to update its
member records. The daily enrollment transaction update, which is run prior to the monthly
enrollment and capitation transaction update, is referred to as the “last daily” and will contain
all rate code changes made for the prospective month, as well as any new enrollments and
disenrollments.

AHCCCSA also produces a daily Manual Payment Transaction, which identifies enrollment or
disenrollment activity that was not included on the daily enrollment transaction update due to
internal edits. The Contractor shall use the Manual Payment Transaction in addition to the daily
enrollment transaction update to update its member records.

A weekly capitation transaction will be produced to provide contractors with member-level
capitation payment information. This file will show changes to the prospective capitation payments,
as sent in the monthly file, resulting from enrollment changes that occur after the monthly file is
produced. This file will also identify mass adjustments to and/or manual capitation payments that
occurred at AHCCCS after the monthly file is produced.

The monthly enrollment and monthly capitation transaction updates are generally produced two days
before the end of every month. The update will identify the total active population for the
Contractor as of the first day of the next month. These updates contain the information used by
AHCCCSA to produce the monthly capitation payment for the next month. The Contractor will reconcile
their member files with the AHCCCS monthly update. After reconciling the monthly update
information, the Contractor resumes posting daily updates beginning with the last two days of the
month. The last two daily updates are different from the regular daily updates in that they pay
and/or recoup capitation into the next month. If the Contractor detects an error through the
monthly update process, the Contractor shall notify AHCCCSA, Division of Health Care Management.

Refer to Paragraph 64, Data Exchange Requirements, for further information,

          67. PERIODIC REPORT REQUIREMENTS

AHCCCSA, under the terms and conditions of its CMS grant award, requires periodic reports,
encounter data, and other information from the Contractor. The submission of late, inaccurate, or
otherwise incomplete reports shall constitute failure to report subject to the penalty provisions
described in this contract.

Standards applied for determining adequacy of required reports are as follows [42 CFR
438.242(b)(2)]:

	 	a.	 	Timeliness: Reports or other required data shall be received on or
before scheduled due dates.
	 
	 	b.	 	Accuracy: Reports or other required data shall be prepared in strict
conformity with appropriate authoritative sources and/or AHCCCS defined standards.
	 
	 	c.	 	Completeness: All required information shall be fully disclosed in a
manner that is both responsive and pertinent to report intent with no material
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AHCCCS requirements regarding reports, report content and frequency of submission of reports are
subject to change at any time during the term of the contract. The Contractor shall comply with all
changes specified by AHCCCSA,

The Contractor shall be responsible for continued reporting beyond the term of the contract. For
example, processing claims and reporting encounter data will likely continue beyond the term of the
contract because of lag time in filing source documents by subcontractors.

The Contractor shall comply with all financial reporting requirements contained in the Reporting
Guide for Acute Health Care Contractors with the Arizona Health Care Cost Containment System, a
copy of which may be found in the Bidder’s Library. The required reports, which are subject to
change during the contract term, are summarized in Attachment F, Periodic Report Requirements.

          68. REQUESTS FOR INFORMATION

AHCCCSA may, at any time during the term of this contract, request financial or other information
from the Contractor. Responses shall fully disclose all financial or other information requested.
Information may be designated as confidential but may not be withheld from AHCCCS as proprietary.
Information designated as confidential may not be disclosed by AHCCCS without the prior written
consent of the Contractor except as required by law. Upon receipt of such written requests for
information, the Contractor shall provide complete information as requested no later than 30 days
after the receipt of the request unless otherwise specified in the request itself.

          69. DISSEMINATION OF INFORMATION

Upon request, the Contractor shall assist AHCCCSA in the dissemination of information prepared by
AHCCCSA or the Federal government to its members. The cost of such dissemination shall be borne by
the Contractor. All advertisements, publications and printed materials that are produced by (he
Contractor and refer to covered services shall state that such services are funded under contract
with AHCCCSA.

          70. OPERATIONAL AND FINANCIAL READINESS REVIEWS

AHCCCSA may conduct Operational and Financial Readiness Reviews on all contractors and will,
subject to the availability of resources, provide technical assistance as appropriate. The
Readiness Reviews will be conducted prior to the start of business. The purpose of Readiness
Reviews is to assess new Contractors’ readiness and ability to provide covered services to members
at the start of the contract year and current Contractors’ readiness to expand to new geographic
service areas. A new Contractor will be permitted to commence operations only if the Readiness
Review factors are met to AHCCCSA’s satisfaction.

          71. OPERATIONAL AND FINANCIAL REVIEWS

In accordance with CMS requirements, AHCCCSA, or an independent external agent, will conduct annual
Operational and Financial Reviews for the purpose of (but not limited to) ensuring operational and
financial program compliance [42 CFR 438.204]. The reviews will identify areas where improvements
can be made and make recommendations accordingly, monitor the Contractor’s progress towards
implementing mandated programs and provide the Contractor with technical assistance if necessary.
The Contractor shall comply with all other medical audit provisions as required by AHCCCS Rule
R9-22-521 and R9-31-521.

The type and duration of the Operational and Financial Review will be solely at the discretion of
AHCCCSA. Except in cases where advance notice is not possible or advance notice may render the
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AHCCCSA will give the Contractor at least three weeks advance notice of the date of the on-site
review. In preparation for the on-site Operational and Financial Reviews, the Contractor shall
cooperate fully with AHCCCSA and the AHCCCSA Review Team by forwarding in advance such policies,
procedures, job descriptions, contracts, logs and other information that AHCCCSA may request. The
Contractor shall have all requested medical records on-site. Any documents, not requested in
advance by AHCCCSA, shall be made available upon request of the Review Team during the course of
the review. The Contractor personnel, as identified in advance, shall be available to the Review
Team at all times during AHCCCSA on-site review activities. While on-site, the Contractor shall
provide the Review Team with workspace, access to a telephone, electrical outlets and privacy for
conferences. Certain documentation submission requirements may be waived at the discretion of
AHCCCSA, if the Contractor has obtained accreditation from NCQA, JCAHO or any other nationally
recognized accrediting body. The Contractor must submit the entire accreditation report to AHCCCSA
for such waiver consideration.

The Contractor will be furnished a draft copy of the Operational and Financial Review Report and
given an opportunity to comment on any review findings prior to AHCCCSA publishing the final
report. Operational and Financial Review findings may be used in the scoring of subsequent bid
proposals by that Contractor. Recommendations, made by the Review Team to bring the Contractor into
compliance with Federal, State, AHCCCS, and/or contract requirements, must be implemented by the
Contractor. AHCCCSA may conduct a follow-up Operational and Financial Review to determine the
Contractor’s progress in implementing recommendations and achieving program compliance. Follow-up
reviews may be conducted at any time after the initial Operational and Financial Review.

The Contractor shall not distribute or otherwise make available the Operational and Financial
Review Tool, draft Operational and Financial Review Report nor final report to other AHCCCS
Contractors.

AHCCCSA may conduct an Operational and Financial Review in the event the Contractor undergoes a
merger, reorganization, change in ownership or makes changes in three or more key staff positions
within a 12-month period.

AHCCCSA may request, at the expense of the Contractor, to conduct on-site reviews of functions
performed at out-of-state locations. AHCCCSA will coordinate travel arrangements and accommodations
with the Contractor at their request.

          72. SANCTIONS

AHCCCSA may impose monetary sanctions, suspend, deny, refuse to renew, or terminate this contract
or any related subcontracts in accordance with AHCCCS Rules R9-22-606, ACOM Sanctions Policy and
the terms of this contract and applicable Federal or State law and regulations. [42 CFR 422.208, 42
CFR 438.700, 702, 704 and 45 CFR 92.36(i)(l)] Written notice will be provided to the Contractor
specifying the sanction to be imposed, the grounds for such sanction and either the length of
suspension or the amount of capitation prepayment to be withheld. The Contractor may dispute the
decision to impose a sanction in accordance with the process outlined in A.A.C. 9-34-401 et seq.
Intermediate sanctions may be imposed, but are not limited to the following actions:

	a.	 	Substantial failure to provide medically necessary services that the Contractor is required
to provide under the terms of this contract to its enrolled members.
	 
	b.	 	Imposition of premiums or charges in excess of the amount allowed under the AHCCCS 1115
Waiver.
	 
	c.	 	Discrimination among members on the basis of their health status of need for health care
services.
	 
	d.	 	Misrepresentation or falsification of information furnished to CMS or AHCCCSA.
	 
	e.	 	Misrepresentation or falsification of information furnished to an enrollee, potential
enrollee, or provider.
	 
	f.	 	Failure to comply with the requirement for physician incentive plan as delineated in
Paragraph 42.
	 
	g.	 	Distribution directly, or indirectly through any agent or independent contractor, of
marketing materials that have not been approved by AHCCCSA or that contain false or materially
misleading information.

			
	 
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	h.	 	Failure to meet AHCCCS Financial Viability Standards.
	 
	i.	 	Material deficiencies in the Contractor’s provider network.
	 
	j.	 	Failure to meet quality of care and quality management requirements.
	 
	k.	 	Failure to meet AHCCCS encounter standards.
	 
	l.	 	Violation of other applicable State or Federal laws or regulations.
	 
	m.	 	Failure to fund accumulated deficit in a timely manner.
	 
	n.	 	Failure to increase the Performance Bond in a timely manner.
	 
	o.	 	Failure to comply with any provisions contained in this contract.
	 
	p.	 	Failure to report third party liability cases as described in Paragraph 58.

AHCCCS A may impose the following types of intermediate sanctions:

	a.	 	Civil monetary penalties
	 
	b.	 	Appointment of temporary management for a Contractor as provided in 42 CFR 438.706 and A.R.S.
§36-2903 (M).
	 
	c.	 	Granting members the right to terminate enrollment without cause and notifying the affected
members of their right to disenroll [42 CFR 438.702(a)(3)].
	 
	d.	 	Suspension of all new enrollment, including auto assignments after the effective date of the
sanction.
	 
	e.	 	Suspension of payment for recipients enrolled after the effective date of the sanction until
CMS or AHCCCSA is satisfied that the reason for imposition of the sanction no longer exists
and is not likely to recur.
	 
	f.	 	Additional sanctions allowed under statue or regulation that address areas of noncompliance.

Cure Notice Process: Prior to the imposition of a sanction for non-compliance, AHCCCSA may provide
a written cure notice to the Contractor regarding the details of the non-compliance. The cure
notice will specify the period of time during which the Contractor must bring its performance back
into compliance with contract requirements. If, at the end of the specified time period, the
Contractor has complied with the cure notice requirements, AHCCCSA will take no further action. If,
however, the Contractor has not complied with the cure notice requirements, AHCCCSA may proceed
with the imposition of sanctions. Refer to the ACOM Sanctions Policy for details.

          73. BUSINESS CONTINUITY AND RECOVERY PLAN

The Contractor shall adhere to all elements of the ACOM Business Continuity and Recovery Plan
Policy. The Contractor shall develop a Business Continuity and Recovery Plan to deal with
unexpected events that may affect its ability to adequately serve members. This plan shall, at a
minimum, include planning and training for:

	 	•	 	Electronic/telephonic failure at the Contractor’s main place of business
	 
	 	•	 	Complete loss of use of the main site and satellite offices out of state
	 
	 	•	 	Loss of primary computer system/records
	 
	 	•	 	Communication between the Contractor and AHCCCSA in the event of a business disruption
	 
	 	•	 	Periodic Testing

The Business Continuity and Recovery Plan shall be updated annually. The Contractor shall submit a
summary of the plan as specified in the ACOM Business Continuity and Recovery Plan Policy 15 days
after the start of the contract year. All key staff shall be trained and familiar with the Plan.

          74. TECHNOLOGICAL ADVANCEMENT

Contractors must have a website with links to the following information:

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	 	1.	 	Formulary
	 
	 	2.	 	Provider manual
	 
	 	3.	 	Member handbook
	 
	 	4.	 	Provider listing
	 
	 	5.	 	When available, Member and Provider Survey Results
	 
	 	6.	 	Performance Measure Results

Contractors must be able to perform the following functions electronically:

	 	1.	 	Enrollment Verification
	 
	 	2.	 	Claims inquiry
	 
	 	3.	 	Accept HIPAA compliant electronic claims transactions (See paragraph 38)
	 
	 	4.	 	Make Claims payments via electronic funds transfer (See paragraph 38)

Contractors must also provide searchable provider directories on their web site Web based
directories must include the following search functions and must be updated at least monthly, if
necessary:

	 	1.	 	Name
	 
	 	2.	 	Specialty/Service
	 
	 	3.	 	Languages spoken by Practitioner
	 
	 	4.	 	Office locations (e.g. county, city or zip code)

The formulary, members handbook and searchable provider directory must be located on the
contractors website in a manner that consumers can easily find and navigate (e.g. “Consumer Page”
from the Contractor’s home page).

Use of Website: Contractors are required to post their clinical performance indicators compared to
AHCCCS standard and statewide averages on their website. In addition, AHCCCSA will post contractor
performance indicators on its website.

Arizona Health-e Connection

In February of 2007, AHCCCS was awarded a CMS Transformation Grant of $11.7M to build a health
information exchange (HIE) and a web based suite of applications for accessing electronic health
records (EHR). The HIE will serve to provide real time patient health information and clinical care
automation for AHCCCS contracted health care providers, in accordance with the Governor’s executive
order #2005-25 on Arizona Health-e Connection Roadmap.

AHCCCS will develop a unified approach for AHCCCS health plans and program contractors to meet the
goal of the executive order and to connect AHCCCS, AHCCCS Contractors, ancillary subcontractors and
registered providers into a common web based electronic health information data exchange that will
meet the standards established by State and Federal governments. AHCCCS health plans and program
contractors will cooperate in assisting AHCCCS with developing the Health-e project plan and shall
implement required data exchange interfaces as required to meet the goals of the Governor’s
executive order.

CMS will provide grants to state Medicaid agencies to support development of IT infrastructure and
applications to achieve the goal of health information data exchange. AHCCCS Contractors will be
required to:

	 	1)	 	Encourage lab, pharmacy and ancillary subcontractors to develop common
electronic interfaces for the exchange of data using standards based transactions.
	 
	 	2)	 	AHCCCS may issue Minimum Subcontract language that will require
subcontractors to participate in the e-Health Initiative. Contractors must amend
all provider subcontracts to include the amended Minimum Subcontract provisions
within six (6) months of issuance.

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	 	3)	 	Contractors will cooperate in passing on any AHCCCS professional fee or facility
reimbursement rate adjustments to primary care providers, nursing facility
contractor, hospitals and any other providers determined by AHCCCS to be eligible
for reimbursement for participation in the health information data exchange.

AHCCCS will continually work to enhance the functionality of the health information exchange,
electronic health records and web based applications. AHCCCS health plan and program contractors
are expected to deploy upgrades and enhancements as necessary to contracted providers.

          75. PENDING LEGISLATIVE /OTHER ISSUES

The following constitute pending items that may be resolved after the issuance of this contract.
Any program changes due to the resolution of the issues will be reflected in future amendments to
the contract. Capitation rates may also be adjusted to reflect the financial impact of program
changes.

1115 Waiver Changes:

AHCCCS is in negotiations with. CMS to renew the 1115 waiver that enables AHCCCS to operate a
mandatory managed care program. These negotiations may result in changes to the program. AHCCCS
will either amend the contract or incorporate changes in policies incorporated in the contract by
reference.

          76. BALANCED BUDGET ACT OF 1997 (BBA)

In August 2002, CMS issued final regulations for the implementation of the BBA. AHCCCS continues to
review all areas of the regulations to ensure fill compliance with the BBA; however, there are some
issues that may require further clarification from CMS. Any program changes due to the resolution
of the issues will be reflected in amendments to the contract. Capitation rates may also be
adjusted to reflect the Financial impact of the program changes.

          77. RESERVED

          78. MEDICARE MODERNIZATION ACT (MMA)

The Medicare Modernization Act of 2003 created a prescription drug benefit called Medicare Part D
for individuals who are eligible for Medicare Part A and/or enrolled in Medicare Part B. Beginning
January 1, 2006, AHCCCS no longer covers prescription drugs that are covered under Part D for dual
eligible members. AHCCCS will not cover prescription drugs for this population whether or not they
are enrolled in Medicare Part D. Capitation rates reflect this coverage.

Drugs Excluded from Medicare Part D: AHCCCS does cover those drugs ordered by a PCP, attending
physician, dentist or other authorized prescriber and dispensed under the direction of a licensed
pharmacist subject to limitations related to prescription supply amounts, contractor formularies
and prior authorization requirements if they are excluded from Medicare Part D coverage.
Medications that are covered by Part D, but are not on a specific Part D Health Plan’s formulary
are not considered excluded drugs and will not be covered by AHCCCS.

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SECTION E: CONTRACT CLAUSES

1) APPLICABLE LAW

Arizona
Law —The law of Arizona applies to this contract including, where applicable, the Uniform
Commercial Code, as adopted in the State of Arizona.

Implied Contract Terms — Each provision of law and any terms required by law to be in this contract
are a part of this contract as if fully stated in it.

2) AUTHORITY

This contract is issued under the authority of the Contracting Officer who signed this contract.
Changes to the contract, including the addition of work or materials, the revision of payment
terms, or the substitution of work or materials, directed by an unauthorized state employee or made
unilaterally by the Contractor are violations of the contract and of applicable law. Such changes,
including unauthorized written contract amendments, shall be void and without effect, and the
Contractor shall not be entitled to any claim under this contract based on those changes.

3) ORDER OF PRECEDENCE

The parties to this contract shall be bound by all terms and conditions contained herein. For
interpreting such terms and conditions the following sources shall have precedence in descending
order: The Constitution and laws of the United States and applicable Federal regulations; the terms
of the CMS 1115 waiver for the State of Arizona; the Constitution and laws of Arizona, and
applicable State rules; the terms of this contract, including any attachments and executed
amendments and modifications; and AHCCCSA policies and procedures.

4) CONTRACT INTERPRETATION AND AMENDMENT

No Parol Evidence —This contract is intended by the parties as a final and complete expression of
their agreement. No course of prior dealings between the parries and no usage of the trade shall
supplement or explain any term used in this contract.

No Waiver —Either party’s failure to insist on strict performance of any term or condition of the
contract shall not be deemed a waiver of that term or condition even if the party accepting or
acquiescing in the non-conforming performance knows of the nature of the performance and fails to
object to it.

Written Contract Amendments — The contract shall be modified only through a written contract
amendment within the scope of the contract signed by the procurement officer on behalf of the
State.

5) SEVERABILITY

The provisions of this contract are severable to the extent that any provision or application held
to be invalid shall not affect any other provision or application of the contract, which may remain
in effect without the invalid provision, or application.

6) RELATIONSHIP OF PARTIES

The Contractor under this contract is an independent contractor. Neither party to this contract
shall be deemed to be the employee or agent of the other party to the contract.

7) ASSIGNMENT AND DELEGATION

The Contractor shall not assign any right nor delegate any duty under this contract without prior
written approval of the Contracting Officer, who will not unreasonably withhold such approval.

8) INDEMNIFICATION

Contractor/Vendor Indemnification (Not Public Agency)

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The parties to this contract agree that the State of Arizona, its departments, agencies, boards and
commissions shall be indemnified and held harmless by the Contractor for the vicarious liability of
the State as a result of entering into this contract. However, the parties further agree that the
State of Arizona, its departments, agencies, boards and commissions shall be responsible for its
own negligence. Each party to this contract is responsible for its own negligence.

Contractor/Vendor Indemnification (Public Agency)

Each party (“as indemnitor”) agrees to indemnify, defend, and hold harmless the other party (“as
indemnitee”) from and against any and all claims, losses, liability, costs, or expenses (including
reasonable attorney’s fees) (hereinafter collectively referred to as ‘claims’) arising out of
bodily injury of any person (including death) or property damage but only to the extent that such
claims which result in vicarious/derivative liability to the indemnitee, are caused by the act,
omission, negligence, misconduct, or other fault of the indemnitor, its officers, officials,
agents, employees, or volunteers.

9) INDEMNIFICATION — PATENT AND COPYRIGHT

The Contractor shall defend, indemnify and hold harmless the State against any liability including
costs and expenses for infringement of any patent, trademark or copyright arising out of contract
performance or use by the State of materials furnished or work performed under this contract. The
State shall reasonably notify the Contractor of any claim for which it may be liable under this
paragraph.

10) COMPLIANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS

The Contractor shall comply with all applicable Federal and State laws and regulations including
Title VI of the Civil Rights Act of 1964; Title IX of the Education Amendments of 1972 (regarding
education programs and activities); the Age Discrimination Act of 1975; the Rehabilitation Act of
1973 (regarding education programs and activities), and the Americans with Disabilities Act; EEO
provisions; Copeland Anti-Kickback Act; Davis-Bacon Act; Contract Work Hours and Safety Standards;
Rights to Inventions Made Under a Contract or Agreement; Clean Air Act and Federal Water Pollution
Control Act; Byrd Anti-Lobbying Amendment. The Contractor shall maintain all applicable licenses
and permits.

11) ADVERTISING AND PROMOTION OF CONTRACT

The Contractor shall not advertise or publish information for commercial benefit concerning this
contract without the prior written approval of the Contracting Officer.

12) PROPERTY OF THE STATE

Except as otherwise provided in this contract, any materials, including reports, computer programs
and other deliverables, created under this contract are the sole property of AHCCCSA. The
Contractor is not entitled to maintain any rights on those materials and may not transfer any
rights to anyone else. The Contractor shall not use or release these materials without the prior
written consent of AHCCCSA.

If a Contractor declares information to be confidential, AHCCCSA will maintain the information as
confidential and will not disclose it unless it is required by law or court order.

13) THIRD PARTY ANTITRUST VIOLATIONS

The Contractor assigns to the State any claim for overcharges resulting from antitrust violations
to the extent that those violations concern materials or services supplied by third parties to the
Contractor toward fulfillment of this contract.

14) RIGHT TO ASSURANCE

If AHCCCSA, in good faith, has reason to believe that the Contractor does not intend to perform or
continue performing this contract, the procurement officer may demand in writing that the
Contractor give a written assurance of intent to perform. The demand shall be sent to the
Contractor by certified mail, return receipt required. Failure by the Contractor to provide written
assurance within the number of days specified in the demand may, at the State’s option, be the
basis for terminating the contract.

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15) TERMINATION FOR CONFLICT OF INTEREST

AHCCCSA may cancel this contract without penalty or further obligation if any person significantly
involved in initiating, negotiating, securing, drafting or creating the contract on behalf of
AHCCCSA is, or becomes at any time while the contract or any extension of the contract is in
effect, an employee of, or a consultant to, any other party to this contract with respect to the
subject matter of the contract. The cancellation shall be effective when the Contractor receives
written notice of the cancellation unless the notice specifies a later time.

If the Contractor is a political subdivision of the Stale, it may also cancel this contract as
provided by A.R.S. 38-511.

16) GRATUITIES.

AHCCCSA may, by written notice to the Contactor, immediately terminate this contract if it
determines that employment or a gratuity was offered or made by the Contractor or a representative
of the Contractor to any officer or employee of the State for the purpose of influencing the
outcome of the procurement or securing the contract, an amendment to the contract, or favorable
treatment concerning the contract, including the making of any determination or decision about
contract performance. AHCCCSA, in addition to any other rights or remedies, shall be entitled to
recover exemplary damages in the amount of three times the value of the gratuity offered by the
Contractor.

17) SUSPENSION OR DEBARMENT

The Contractor shall not employ, consult, subcontract or enter into any agreement for Title XIX
services with any person or entity who is debarred, suspended or otherwise excluded from Federal
procurement activity or from participating in non-procurement activities under regulations issued
under Executive Order No. 12549 or under guidelines implementing Executive Order 12549 [42 CFR
438.610(a) and (b)]. This prohibition extends to any entity which employs, consults, subcontracts
with or otherwise reimburses for services any person substantially involved in the management of
another entity which is debarred, suspended or otherwise excluded from Federal procurement
activity.

The Contractor shall not retain as a director, officer, partner or owner of 5% or more of the
Contractor entity, any person, or affiliate of such a person, who is debarred, suspended or
otherwise excluded from Federal procurement activity.

AHCCCSA may, by written notice to the Contractor, immediately terminate this contract if it
determines that the Contractor has been debarred, suspended or otherwise lawfully prohibited from
participating in any public procurement activity.

18) TERMINATION FOR CONVENIENCE

AHCCCSA reserves the right to terminate the contract in whole or in part at any time for the
convenience of the State without penalty or recourse. The Contracting Officer shall give written
notice by certified mail, return receipt requested, to the Contractor of die termination at least
90 days before the effective date of the termination. In the event of termination under this
paragraph, all documents, data and reports prepared by the Contractor under the contract shall
become the property of and be delivered to AHCCCSA. The Contractor shall be entitled to receive
just and equitable compensation for work in progress, work completed and materials accepted before
the effective date of the termination.

19) TEMPORARY MANAGEMENT/OPERATION OF A CONTRACTOR AND TERMINATION

Temporary Management/Operation by AHCCCSA: Pursuant to the Balanced Budget Act of 1997, 42 CFR
438.700 et seq. and State Law ARS §36-2903, AHCCCSA is authorized to impose temporary management
for a Contractor under certain conditions. Under federal law, temporary management may be imposed
if AHCCCS determines that there is continued egregious behavior by the Contractor, including but
not limited to the following: substantial failure to provide medically necessary services the
Contractor is required to provide; imposition on enrollees premiums or charges that exceed those
permitted by AHCCCSA, discrimination

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among enrollees on the basis of health status or need for health care services; misrepresentation
or falsification of information to AHCCCSA or CMS; misrepresentation or falsification of
information furnished to an enrollee or provider; distribution of marketing materials that have not
been approved by AHCCCS or that are false or misleading; or behavior contrary to any requirements
of Sections 1903(m) or 1932 of the Social Security Act. Temporary management may also be imposed if
AHCCCSA determines that there is substantial risk to enrollees’ health or that temporary management
is necessary to ensure the health of enrollees while the Contractor is correcting the deficiencies
noted above or until there is an orderly transition or reorganization of the Contractor. Under
federal law, temporary management is mandatory if AHCCCSA determines that the Contractor has
repeatedly failed to meet substantive requirements in Sections 1903(m) or 1932 of the Sociai
Security Act. In these situations, AHCCCSA shall not delay imposition of temporary management to
provide a hearing before imposing this sanction.

State law ARS §36-2903 authorizes AHCCCSA to operate a Contractor as specified in this contract.
Prior to operation of the Contractor by AHCCCSA pursuant to state statute the Contractor shall have
the opportunity for a hearing. If AHCCCSA determines that emergency action is required, operation
of the Contractor may take place prior to hearing. Operation by AHCCCSA shall occur only as long as
it is necessary to assure delivery of uninterrupted care to members, to accomplish orderly
transition of those members to other contractors, or until the Contractor reorganizes or otherwise
corrects contract performance failure.

Termination: AHCCCSA reserves the right to terminate this contract in whole or in part due to the
failure of the Contractor to comply with any term or condition of the contract and as authorized by
the Balanced Budget Act of 1997 and 42 CFR 438.708. If the Contractor is providing services under
more than one contract with AHCCCSA, AHCCCSA may deem unsatisfactory performance under one contract
to be cause to require the Contractor to provide assurance of performance under any and all other
contracts. In such situations, AHCCCSA reserves the right to seek remedies under both actual and
anticipatory breaches of contract if adequate assurance of performance is not received. The
Contracting Officer shall mail written notice of the termination and the reason(s) for it to the
Contractor by certified mail, return receipt requested. Pursuant to the Balanced Budget Act of 1997
and 42 CFR 438.708, AHCCCSA shall provide the contractor with a pre-termination hearing before
termination of the contract.

Upon termination, all documents, data, and reports prepared by the Contractor under the contract
shall become the property of and be delivered to AHCCCSA on demand.

AHCCCSA may, upon termination of this contract, procure on terms and in the manner that it deems
appropriate, materials or services to replace those under this contract. The Contractor shall be
liable for any excess costs incurred by AHCCCSA in re-procuring the materials or services.

20) TERMINATION — AVAILABILITY OF FUNDS

Funds are not presently available for performance under this contract beyond the current fiscal
year. No legal liability on the part of AHCCCSA for any payment may arise under this contract until
funds are made available for performance of this contract.

Notwithstanding any other provision in the Agreement, this Agreement may be terminated by AHCCCSA,
if, for any reason, there are not sufficient appropriated and available monies for the purpose of
maintaining this Agreement. In the event of such termination, the Contractor shall have no further
obligation to AHCCCSA, except as otherwise provided in this contract.

21) RIGHT OF OFFSET

AHCCCSA shall be entitled to offset against any amounts due the Contractor any expenses or costs
incurred by AHCCCSA concerning the Contractor’s non-conforming performance or failure to perform
the contract.

22) NON-EXCLUSIVE REMEDIES

The rights and the remedies of AHCCCSA under this contract are not exclusive.

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23) NON-DISCRIMINATION

The Contractor shall comply with State Executive Order No. 99-4, which mandates that all persons,
regardless of race, color, religion, gender, national origin or political affiliation, shall have
equal access to employment opportunities, and all other applicable Federal and state laws, rules
and regulations, including the Americans with Disabilities Act and Title VI. The Contractor shall
take positive action to ensure that applicants for employment, employees, and persons to whom it
provides service are not discriminated against due to race, creed, color, religion, gender,
national origin or disability.

24) EFFECTIVE DATE

The effective date of this contract shall be the date referenced on page 1 of this contract.

25) INSURANCE

A certificate of insurance naming the State of Arizona and AHCCCSA as the “additional insured” must
be submitted to AHCCCSA within 10 days of notification of contract award and prior to commencement
of any services under this contract. This insurance shall be provided by carriers rated as “A+” or
higher by the A.M. Best Rating Service. The following types and levels of insurance coverage are
required for this contract:

	a.	 	Commercial General Liability: Provides coverage of at least $1,000,000 for each occurrence
for bodily injury and property damage to others as a result of accidents on the premises of or
as the result of operations of the Contractor.
	 
	b.	 	Commercial Automobile Liability: Provides coverage of at least $1,000,000 for each occurrence
for bodily injury and property damage to others resulting from accidents caused by vehicles
operated by the Contractor.
	 
	c.	 	Workers Compensation: Provides coverage to employees of the Contractor for injuries sustained
in the course of their employment Coverage must meet the obligations imposed by Federal and
State statutes and must also include Employer’s Liability minimum coverage of $100,000.
Evidence of qualified self- insured status will also be considered.
	 
	d.	 	Professional Liability (if applicable): Provides coverage for alleged professional misconduct
or lack of ordinary skills in the performance of a professional act of service.

The above coverages may be evidenced by either one of the following:

	a.	 	The State of Arizona Certificate of Insurance: This is a form with the special conditions
required by the contract already pre-printed on the form. The Contractor’s agent or broker
must fill in the pertinent policy information and ensure the required special conditions are
included in the Contractor’s policy.
	 
	b.	 	The Accord form: This standard insurance industry certificate of insurance does not contain
the pre-printed special conditions required by this contract. These conditions must be entered
on the certificate by the agent or broker and read as follows:
	 
	 	 	The State of Arizona and Arizona Health Care Cost Containment System are hereby added as
additional insureds. Coverage afforded under this Certificate shall be primary and any
insurance carried by the State or any of its agencies, boards, departments or commissions
shall be in excess of that provided by the insured Contractor. No policy shall expire, be
canceled or materially changed without 30 days written notice to the State. This Certificate
is not valid unless countersigned by an authorized representative of the insurance company.

26) DISPUTES

Contract claims and disputes shall be adjudicated in accordance with AHCCCS rules.

Except as provided by 9AAC Chapter 28, Article 6, the exclusive manner for the Contractor to assert
any dispute against AHCCCSA shall be in accordance with the process outlined in 9 AA.C. Chapter 22
and ARS §36-2903.01. Pending the final resolution of any disputes involving this contract, the
Contractor shall proceed

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	 	Contract/RFP No. YH04-0001
	 

with performance of this contract in accordance with AHCCCSA’s instructions, unless AHCCCSA
specifically, in writing, requests termination or a temporary suspension of performance.

27) RIGHT TO INSPECT PLANT OR PLACE OF BUSINESS

AHCCCSA may, at reasonable times, inspect the part of the plant or place of business of the
Contractor or subcontractor that is related to the performance of this contract, in accordance with
A.R.S. §41-2547.

28) INCORPORATION BY REFERENCE

This soiicitation and all attachments and amendments, the Contractor’s proposal, best and Final
offer accepted by AHCCCSA, and any approved subcontracts are hereby incorporated by reference into
the contract.

29) COVENANT AGAINST CONTINGENT FEES

The Contractor warrants that no person or agency has been employed or retained to solicit or secure
this contract upon an agreement or understanding for a commission, percentage, brokerage or
contingent fee. For violation of this warranty, AHCCCSA shall have the right to annul this contract
without liability.

30) CHANGES

AHCCCSA may at any time, by written notice to the Contractor, make changes within the general scope
of this contract. If any such change causes an increase or decrease in the cost of, or the time
required for, performance of any part of the work under this contract, the Contractor may assert
its right to an adjustment in compensation paid under this contract. The Contractor must assert its
right to such adjustment within 30 days from the date of receipt of the change notice. Any dispute
or disagreement caused by such notice shall constitute a dispute within the meaning of Section E,
Paragraph 26, Disputes, and be administered accordingly.

When AHCCCSA issues an amendment to modify the contract, the provisions of such amendment will be
deemed to have been accepted 60 days after the date of mailing by AHCCCSA, even if the amendment
has not been signed by the Contractor, unless within that time the Contractor notifies AHCCCSA in
writing that it refuses to sign the amendment. If the Contractor provides such notification,
AHCCCSA will initiate termination proceedings.

31) TYPE OF CONTRACT

Firm Fixed-Price stated as capitated per member per month, except as otherwise provided

32) AMERICANS WITH DISABILITIES ACT

People with disabilities may request special accommodations such as interpreters, alternative
formats or assistance with physical accessibility. Requests for special accommodations must be made
with at least three days prior notice by contacting the Solicitation Contact person.

33) WARRANTY OF SERVICES

The Contractor warrants that all services provided under this contract will conform to the
requirements stated herein. AHCCCSA’s acceptance of services provided by the Contractor shall not
relieve the Contractor from its obligations under this warranty. In addition to its other remedies,
AHCCCSA may, at the Contractor’s expense, require prompt correction of any services failing to meet
the Contractor’s warranty herein. Services corrected by the Contractor shall be subject to all of
the provisions of this contract in the manner and to the same extent as the services originally
furnished.

34) NO GUARANTEED QUANTITIES

AHCCCSA does not guarantee the Contractor any minimum or maximum quantity of services or goods to
be provided under this contract.

35) CONFLICT OF INTEREST

The Contractor shall not undertake any work that represents a potential conflict of interest, or
which is not in the best interest of AHCCCSA or the State without prior written approval by
AHCCCSA. The Contractor shall fully and completely disclose any situation that may present a
conflict of interest. If the Contractor is now performing or elects to perform during the term of
this contract any services for any AHCCCS contractor,

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provider or Contractor or an entity owning or controlling same, the Contractor shall disclose this
relationship prior to accepting any assignment involving such party.

36) DISCLOSURE OF CONFIDENTIAL INFORMATION

The Contractor shall not, without prior written approval from AHCCCSA, either during or after the
performance of the services required by this contract, use, other than for such performance, or
disclose to any person other than AHCCCSA personnel with a need to know, any information, data,
material, or exhibits created, developed, produced, or otherwise obtained during the course of the
work required by this contract. This nondisclosure requirement shall also pertain to any
information contained in reports, documents, or other records furnished to the Contractor by
AHCCCSA.

37) COOPERATION WITH OTHER CONTRACTORS

AHCCCSA may award other contracts for additional work related to this contract and Contractor shall
fully cooperate with such other contractors and AHCCCSA employees or designated agents, and
carefully fit its own work to such other contractors’ work. The Contractor shall not commit or
permit any act which will interfere with the performance of work by any other contractor or by
AHCCCSA employees.

38) ASSIGNMENT OF CONTRACT AND BANKRUPTCY

This contract is voidable and subject to immediate cancellation by AHCCCSA upon the Contractor
becoming insolvent or filing proceedings in bankruptcy or reorganization under the United States
Code, or assigning rights or obligations under this contract without the prior written consent of
AHCCCSA.

39) OWNERSHIP OF INFORMATION AND DATA

Any data or information system, including all software, documentation and manuals, developed by the
Contractor pursuant to this contract, shall be deemed to be owned by AHCCCSA. The Federal
government reserves a royalty-free, nonexclusive, and irrevocable license to reproduce, publish, or
otherwise use and to authorize others to use for Federal government purposes, such data or
information system, software, documentation and manuals. Proprietary software which is provided at
established catalog or market prices and sold or leased to the general public shall not be subject
to the ownership or licensing provisions of this section.

Data, information and reports collected or prepared by the Contractor in the course of performing
its duties and obligations under this contract shall be deemed to be owned by AHCCCSA. The
ownership provision is in consideration of the Contractor’s use of public funds in collecting or
preparing such data, information and reports. These items shall not be used by the Contractor for
any independent project of the Contractor or publicized by the Contractor without the prior written
permission of AHCCCSA. Subject to applicable state and Federal laws and regulations, AHCCCSA shall
have full and complete rights to reproduce, duplicate, disclose and otherwise use all such
information. At the termination of the contract, the Contractor shall make available all such data
to AHCCCSA within 30 days following termination of the contract or such longer period as approved
by AHCCCSA, Office of the Director. For purposes of this subsection, the term “data” shall not
include member medical records.

Except as otherwise provided in this section, if any copyrightable or patentable material is
developed by the Contractor in the course of performance of this contract, the Federal government,
AHCCCSA and the State of Arizona shall have a royalty-free, nonexclusive, and irrevocable right to
reproduce, publish, or otherwise use, and to authorize others to use, the work for state or Federal
government purposes. The Contractor shall additionally be subject to the applicable provisions of
45 CFR Part 74 and 45 CFR Parts 6 and 8.

40) AHCCCSA RIGHT TO OPERATE CONTRACTOR

If, in the judgment of AHCCCSA, the Contractor’s performance is in material breach of the contract
or the Contractor is insolvent, AHCCCSA may directly operate the Contractor to assure delivery of
care to members enrolled with the Contractor until cure by the Contractor of its breach, by
demonstrated financial solvency or until the successful transition of those members to other
contractors.

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If AHCCCS undertakes direct operation of the Contractor, AHCCCS, through designees appointed by the
Director, shall be vested with full and exclusive power of management and control of the Contractor
as necessary to ensure the uninterrupted care to persons and accomplish the orderly transition of
persons to a new or existing Contractor, or until the Contractor corrects the Contract Performance
failure to the satisfaction of AHCCCS. AHCCCS shall have the power to employ any necessary
assistants, to execute any instrument in the name of the Contractor, to commence, defend and
conduct in its name any action or proceeding in which the Contractor may be a party.

All reasonable expenses of AHCCCS related to the direct operation of the Contractor, including
attorney fees, cost of preliminary or other audits of the Contractor and expenses related to the
management of any office or other assets of the Contractor, shall be paid by the Contractor or
withheld from payment due from AHCCCS to the Contractor.

41) AUDITS AND INSPECTIONS

The Contractor shall comply with all provisions specified in applicable AHCCCS Rule R9-22-521 and
AHCCCS policies and procedures relating to the audit of the Contractor’s records and the inspection
of the Contractor’s facilities. The Contractor shall fully cooperate with AHCCCSA staff and allow
them reasonable access to the Contractor’s staff, subcontractors, members, and records. [42 CFR
438.6(g)]

At any time during the term of this contract, the Contractor’s or any subcontractor’s books and
records shall be subject to audit by AHCCCSA and, where applicable, the Federal government, to the
extent that the books and records relate to the performance of the contract or subcontracts. [42
CFR 438.242(b)(3)]

AHCCCSA, or its duly authorized agents, and the Federal government may evaluate through on-site
inspection or other means, the quality, appropriateness and timeliness of services performed under
this contract.

42) LOBBYING

No funds paid to the Contractor by AHCCCSA, or interest earned thereon, shall be used for the
purpose of influencing or attempting to influence an officer or employee of any Federal or State
agency, a member of the United States Congress or State Legislature, an officer or employee of a
member of the United States Congress or State Legislature in connection with awarding of any
Federal or State contract, the making of any Federal or State grant, the making of any Federal or
State loan, the entering into of any cooperative agreement, and the extension, continuation,
renewal, amendment or modification of any Federal or State contract, grant, loan, or cooperative
agreement. The Contractor shall disclose if any funds, other than those paid to the Contractor by
AHCCCSA, have been used or will be used to influence the persons and entities indicated above and
will assist AHCCCSA in making such disclosures to CMS.

43) CHOICE OF FORUM

The parties agree that jurisdiction over any action arising out of or relating to this contract
shall be brought or filed in a court of competent jurisdiction located in the State of Arizona.

44) DATA CERTIFICATION

The Contractor shall certify that financial and encounter data submitted to AHCCCS is complete,
accurate and truthful. Certification of financial and encounter data must be submitted concurrently
with the data. Certification may be provided by the Contractor CEO, CFO or an individual who is
delegated authority to sign for, and who report directly to the CEO or CFO. 42 CFR 438.604 et seq.

45) OFF SHORE PERFORMANCE OF WORK PROHIBITED

Due to security and identity protection concerns, direct services under this contract shall be
performed within the borders of the United States. Any services that are described in the
specifications or scope of work that directly serve the State of Arizona or its clients and may
involve access to secure or sensitive data or personal client data or development or modification
of software for the State shall be performed within the borders of the United States. Unless
specifically stated otherwise in the specifications, this definition does not apply to

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indirect or “overhead” services, redundant back-up services or services that are incidental to the
performance of the contract. This provision applies to work performed by subcontractors at all
tiers.

46) FEDERAL IMMIGRATION AND NATIONALITY ACT

The Contractor shall comply with all federal, state and local immigration laws and regulations
relating to the immigration status of their employees during the term of the contract. Further, the
Contractor shall flow down this requirement to all subcontractors utilized during the term of the
contract. The State shall retain the right to perform random audits of Contractor and subcontractor
records or to inspect papers of any employee thereof to ensure compliance. Should the State
determine that the Contractor and/or any subcontractors be found noncompliant, the State may pursue
all remedies allowed by law, including, but not limited to; suspension of work, termination of the
contract for default and suspension and/or debarment of the Contractor.

47) IRS W-9 FORM

In order to receive payment under any resulting contract, the Contractor shall have a current IRS
W-9 Form on file with the State of Arizona.

48) CONTINUATION OF PERFORMANCE THROUGH TERMINATION

The Contractor shall continue to perform, in accordance with the requirements of the contract, up
to the date of termination and as directed in the termination notice.

[END OF SECTION E]

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	INDEX - PROGRAM REQUIREMENTS
   AND CONTRACT CLAUSES
	 	Contract/RFP No. YH08-0001
	 

SECTION F: INDEX — PROGRAM REQUIREMENTS AND CONTRACT CLAUSES

 
A

Accumulated Fund Deficit, 65

Advance Directives, 40

Advances, 66

Ambulatory, 23, 27

Annual Enrollment, 21

Appointment Standards, 54

Auto-Assignment, 19, 20, 21

Auto-Assignment Algorithm, 19, 20, 21
 

 
B

BBA,
21, 26, 88

Behavioral Health, 23, 24, 25, 27, 32, 33,

34, 35, 36, 37, 54, 56

Breast and Cervical Cancer, 17, 19, 68, 77

Business Continuity Plan, 86
 

 
C

Capitalization,
64

Capitation, 20, 21, 65, 67, 68, 69, 70, 82, 85

Chiropractic, 25

Claims

Clean, 60, 73

Payment, 59, 62

Compensation, 67

Contraceptive, 27

Convalescent Care, 29, 31

Coordination of Benefits, 74

Coordination of Care, 33

Copayment, 54, 70

Copayments, 77

Cost Avoidance, 75

Cost Sharing, 17, 19, 56, 75, 77

Covered Services, 23, 33

Credentialing, 41, 49

CRS, 22, 24

Cultural Competency, 39

Cure Notice, 85
 

 
D

Data
Exchange, 81

Denials, 60, 74

Dental, 23, 25, 54, 56

Dialysis, 22, 25

Disenrollment, 82

Distributions, 66

DME, 22, 28, 29

Dual Eligibles, 56, 77
 

 
E

Eligibility

CRS,
24

Emergency, 17, 25, 26, 28, 31, 54, 55, 58

Encounter, 36, 55, 56, 59, 68, 69, 73, 81, 82, 83, 85

Enrollment, 18, 21, 82

Annual, 18, 21, 22, 73

Guarantees, 20

Open, 18, 21

EPSDT, 25, 27, 29, 33, 36, 37, 45, 54, 56
 

 
F

Family
Planning, 17, 19, 26, 27, 56, 67

Fee-for-Service, 23, 29, 63, 76, 82

Financial Viability Standards, 66

Formulary, 30, 33, 86

FQHC, 55

Fraud and Abuse, 40, 56, 78

Freedom to Work, 17, 19
 

 
G

Geographic
Service Area, 16, 19, 21, 49, 62, 64,

66, 68, 84

Grievance, 47
 

 
H

HIFA,
18, 19, 20, 68, 77

HIFA Parents, 18, 19, 20, 68, 77

HIFA PARENTS, 18, 19, 20, 77

HIPAA, 81

HIV/AIDS, 27, 28, 40, 52, 67, 68, 69

Home Health, 22, 27, 40, 54

Hospice, 27, 40

Hospital Subcontracting, 61

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	INDEX – PROGRAM REQUIREMENTS
   AND CONTRACT CLAUSES
	 	Contract/RFP No. YH08-0001
	 

 

 
I

IBNR.16

Identification Cards, 21

Immunizations, 27, 35, 56

Indian Health Service, 17, 18, 20, 22, 28, 31

Inpatient, 25, 27, 28, 30, 31, 32, 33, 36, 48, 54,

69, 71, 72, 73, 74

Investments, 66
 

 
K

KidsCare,
18, 19, 68, 77
 

 
L

Laboratory,
27, 28, 33, 54, 56

Limited English Proficiency (LEP), 38

Loans, 66
 

 
M

Management
Services, 33, 63, 64

Maternity, 28, 53, 55, 56

Medicaid in the Public Schools (MIPS), 34, 35

Medical Expense Deduction, 67

Medical Foods, 28

Member

Education, 32

Handbook, 38

Information, 37, 38, 52

Mainstreaming, 21

Surveys, 39

Transition, 22

Midwives, 28, 53
 

 
N

Network
Management, 50

Non-Contracting Provider, 65

Nurse Practitioners, 28, 52, 53

Nursing Facility, 22, 29, 40, 62, 63, 71, 73, 74

Nutrition, 29
 

 
O

Observation,
27

Omission, 81

Optometry, 26

Outpatient, 23, 25, 27, 30, 31, 54, 61
 

 
P

Performance
Bond, 64, 65

Performance Standards, 25, 27, 43, 44, 45, 82

Periodicity Schedule, 25, 27, 33, 45

Pharmacy, 42, 48, 69

Physician Assistants, 28, 53

Physician Incentives, 63

Podiatry, 29

Postpartum Care, 28, 44, 53

Post-stabilization, 26, 29, 30

Pregnancy, 22, 26, 28, 30, 53

Terminations, 30

Prenatal Care, 28, 55, 70, 75

Prescription Drugs, 30, 54, 80

Prescription Medication, 25, 30, 33, 54, 80

Primary Care Physician, 25, 28, 29, 30, 33, 34,

39, 40, 41, 48, 52, 53, 54, 55, 56, 81

Prior Authorization, 22, 25, 30, 42, 56, 60, 62

Prior Period Coverage, 20, 33, 67, 68, 69, 71, 72, 82

Provider, 50, 52, 53, 55, 56

Provider Manual, 55, 59

Provider Registration, 56
 

 
Q

QMB,
19

Quality Management, 35, 36, 37, 41
 

 
R

Radiology,
27, 30, 54

Rate Code, 69, 71, 82

RBHA, 32, 33, 56

Referral, 25, 31, 32, 33, 36, 37, 52, 53, 54, 56,

76, 77 Rehabilitation, 24, 29, 30, 74

Reinsurance, 56, 62, 67, 68, 71, 72, 73, 74, 76, 82

Related Party, 61

Reporting Requirements, 81, 83

Respiratory, 30

Reviews, 84

RFP, 84, 85, 88

Risk Sharing, 27, 69

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	INDEX–PROGRAM REQUIREMENTS
   AND CONTRACT CLAUSES
	 	Contract/RFP No. YH08-0001
	 

Roster, 19, 82
 

 
S

Sanctions,
44, 63, 66, 85

SOBRA, 17, 18, 27, 65, 67, 68, 71

SOBRA Family Planning, 17, 27, 67, 71

SSI, 17, 18, 19, 68

Staff Requirements, 35

Sterilization, 27

Subcontract, 22, 28, 55, 57, 58, 59, 60, 62, 93

Subcontractor, 22, 56, 57, 58, 59, 95, 98

Supplies, 25, 27, 28, 29, 54
 

 
T

TANF,
17

Technological Advancement, 86

Third Party, 16, 35, 59, 62, 68, 74, 75, 77, 92-

Third Party Liability, 74

Ticket to Work, 17, 19

Title XTX, 17, 18, 19, 20, 28, 33, 55, 67, 68, 69,

71, 72, 93

Title XTX Waiver, 17, 18, 67, 68, 69, 71, 72

Title XXI, 17, 18, 19, 20, 28, 33, 77

Transplants, 22, 25, 30, 72

Transportation, 22, 26, 31, 33, 35, 55, 75

Triage, 31, 33
 

 
U

Utilization
Management, 37, 42
 

 
V

Vaccine
for Children, 35

Vision, 26, 56

[END OF SECTION F]

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	ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS
	 	Contract/RFP No. YH04-0001
	 

ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS

For the sole purpose of this Attachment, the following definitions apply:

“Subcontract” means any contract between the Contractor and a third party for the performance of
any or all services or requirements specified under the Contractor’s contract with AHCCCS.

“Subcontractor” means any third party with a contract with the Contractor for the provision of any
or all services or requirements specified under the Contractor’s contract with AHCCCS.

Subcontractors who provide services under both the AHCCCS ALTCS and the Acute Care Program please
see the following:

	 	•	 	Rules for the ALTCS are found in Arizona Administrative Code (AAC) Title 9, Chapter
28. AHCCCS statutes for long term care are generally found in Arizona Revised Statue
(ARS) 36, Chapter 29, Article 2.
	 
	 	•	 	Rules for the Acute Care Program are found in AAC Title 9, Chapter 22. AHCCCS statutes
for the Acute Care Program are generally found in ARS 36, Chapter 29, Article 1, Rules
for the KidsCare Program are found in AAC Title 9, Chapter 31 and the statutes for
KidsCare Program may be found in ARS 36, Chapter 29, Article 4.

All statutes, rules and regulations cited in this attachment are listed for reference purposes only
and are not intended to be all inclusive.

[The following provisions must be included verbatim in every contract.]

1. ASSIGNMENT AND DELEGATION OF RIGHTS AND RESPONSIBILITIES

No payment due the Subcontractor under this subcontract may be assigned without the prior approval
of the Contractor. No assignment or delegation of the duties of this subcontract shall be valid
unless prior written approval is received from the Contractor. (AAC R2-7-305)

2. AWARDS OF OTHER SUBCONTRACTS

AHCCCSA and/or the Contractor may undertake or award other contracts for additional or related work
to the work performed by the Subcontractor and the Subcontractor shall fully cooperate with such
other contractors, subcontractors or state employees. The Subcontractor shall not commit or permit
any act which will interfere with the performance of work by any other contractor, subcontractor or
state employee. (AAC R2-7-308)

3. CERTIFICATION OF COMPLIANCE — ANTI-KICKBACK AND LABORATORY TESTING

By signing this subcontract, the Subcontractor certifies that it has not engaged in any violation
of the Medicare Anti-Kickback statute (42 USC §§1320a-7b) or the “Stark I” and “Stark II” laws
governing related-entity referrals (PL 101-239 and PL 101-432) and compensation there from. If the
Subcontractor provides laboratory testing, it certifies that it has complied with 42 CFR §411.361
and has sent to AHCCCSA simultaneous copies of the information required by that rule to be sent to
the Centers for Medicare and Medicaid Services. (42 USC §§1320a-7b;PL 101-239 and PL 101-432; 42
CER §411.361)

4. CERTIFICATION OF TRUTHFULNESS OF REPRESENTATION

By signing this subcontract, the Subcontractor certifies that all representations set forth herein
are true to the best of its knowledge.

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	ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS
	 	Contract/RFP No. YH04-0001
	 

5. CLINICAL LABORATORY IMPROVEMENT AMENDMENTS OF 1988

The Clinical Laboratory Improvement Amendment (CLIA) of 1988 requires laboratories and other
facilities that test human specimens to obtain either a CLIA Waiver or CLIA Certificate in order to
obtain reimbursement from the Medicare and Medicaid (AHCCCS) programs. In addition, they must meet
all the requirements of 42 CFR 493, Subpart A.

To comply with these requirements, AHCCCSA requires all clinical laboratories to provide
verification of CLIA Licensure or Certificate of Waiver during the provider registration process.
Failure to do so shall result in either a termination of an active provider ID number or denial of
initial registration. These requirements apply to all clinical laboratories.

Pass-through billing or other similar activities with the intent of avoiding the above requirements
are prohibited. The Contractor may not reimburse providers who do not comply with the above
requirements. (CLIA of 1988; 42 CFR493, Subpart A)

6. COMPLIANCE WITH AHCCCSA RULES RELATING TO AUDIT AND INSPECTION

The Subcontractor shall comply with all applicable AHCCCS Rules and Audit Guide relating to the
audit of the Subcontractor’s records and the inspection of the Subcontractor’s facilities. If the
Subcontractor is an inpatient facility, the Subcontractor shall file uniform reports and Title
XVIII and Title XIX cost reports with AHCCCSA. (ARS 41-2548; 45 CFR 74.48 (d))

7. COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS

The Subcontractor shall comply with all federal, State and local laws, rules, regulations,
standards and executive orders governing performance of duties under this subcontract, without
limitation to those designated within this subcontract (42 CFR 434.70) [42 CFR 438.6(1)]

8. CONFIDENTIALITY REQUIREMENT

Confidential information shall be safeguarded pursuant to 42 CFR Part 431, Subpart F, ARS §36-107,
36-2932, 41-1959 and 46-135, AHCCCS Rules and the Health Insurance Portability and Accountability
Act (CFR 164).

9. CONFLICT IN INTERPRETATION OF PROVISIONS

In the event of any conflict in interpretation between provisions of this subcontract and the
AHCCCS Minimum Subcontract Provisions, the latter shall take precedence.

10. CONTRACT CLAIMS AND DISPUTES

Contract claims and disputes shall be adjudicated in accordance with AHCCCS Rules.

11. ENCOUNTER DATA REQUIREMENT

If the Subcontractor does not bill the Contractor (e.g., Subcontractor is capitated), the
Subcontractor shall submit encounter data to the Contractor in a form acceptable to AHCCCSA.

12. EVALUATION OF QUALITY, APPROPRIATENESS, OR TIMELINESS OF SERVICES

AHCCCSA or the U.S. Department of Health and Human Services may evaluate, through inspection or
other means, the quality, appropriateness or timeliness of services performed under this
subcontract.

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	ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS
	 	Contract/RFP No. YH04-0001
	 

13. FRAUD AND ABUSE

If the Subcontractor discovers, or is made aware, that an incident of suspected fraud or abuse has
occurred, the Subcontractor shall report the incident to the prime Contractor as well as to
AHCCCSA, Office of Program Integrity. All incidents of potential fraud should be reported to
AHCCCSA, Office of the Director, Office of Program Integrity.

14. GENERAL INDEMNIFICATION

The parties to this contract agree that AHCCCS shall be indemnified and held harmless by the
Contractor and Subcontractor for the vicarious liability of AHCCCS as a result of entering into
this contract. However, the parties further agree that AHCCCS shall be responsible for its own
negligence. Each party to this contract is responsible for its own negligence.

15. INSURANCE

[This provision applies only if the Subcontractor provides services directly to AHCCCS members]

The Subcontractor shall maintain for the duration of this subcontract a policy or policies of
professional liability insurance, comprehensive general liability insurance and automobile
liability insurance in amounts that meet Contractor’s requirements. The Subcontractor agrees that
any insurance protection required by this subcontract, or otherwise obtained by the Subcontractor,
shall not limit the responsibility of Subcontractor to indemnify, keep and save harmless and defend
the State and AHCCCSA, their agents, officers and employees as provided herein. Furthermore, the
Subcontractor shall be fully responsible for all tax obligations, Worker’s Compensation Insurance,
and all other applicable insurance coverage, for itself and its employees, and AHCCCSA shall have
no responsibility or liability for any such taxes or insurance coverage. (45 CFR Part 74) The
requirement for Worker’s Compensation Insurance does not apply when a Subcontractor is exempt under
ARS 23-901, and when such Subcontractor executes the appropriate waiver (Sole
Proprietor/Independent Contractor) form.

16. LIMITATIONS ON BILLING AND COLLECTION PRACTICES

Except as provided in federal and state law and regulations, the Subcontractor shall not bill, or
attempt to collect payment from a person who was AHCCCS eligible at the time the covered service(s)
were rendered, or from the financially responsible relative or representative for covered services
that were paid or could have been paid by the System.

17. MAINTENANCE OF REQUIREMENTS TO DO BUSINESS AND PROVIDE SERVICES

The Subcontractor shall be registered with AHCCCSA and shall obtain and maintain all licenses,
permits and authority necessary to do business and render service under this subcontract and, where
applicable, shall comply with all laws regarding safety, unemployment insurance, disability
insurance and worker’s compensation.

18. NON-DISCRIMINATION REQUIREMENTS

The Subcontractor shall comply with State Executive Order No. 99-4, which mandates that all
persons, regardless of race, color, religion, gender, national origin or political affiliation,
shall have equal access to employment opportunities, and all other applicable Federal and state
laws, rules and regulations, including the Americans with Disabilities Act and Title VI. The
Subcontractor shall take positive action to ensure that applicants for employment, employees, and
persons to whom it provides service are not discriminated against due to race, creed, color,
religion, sex, national origin or disability. (Federal regulations, State Executive order #99-4)

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	ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS
	 	Contract/RFP No. YH04-0001
	 

19. PRIOR AUTHORIZATION AND UTILIZATION MANAGEMENT

The Contractor and Subcontractor shall develop, maintain and use a system for Prior Authorization
and Utilization Review that is consistent with AHCCCS Rules and the Contractor’s policies.

20. RECORDS RETENTION

The Subcontractor shall maintain books and records relating to covered services and expenditures
including reports to AHCCCSA and working papers used in the preparation of reports to AHCCCSA. The
Subcontractor shall comply with all specifications for record keeping established by AHCCCSA. All
books and records shall be maintained to the extent and in such detail as required by AHCCCS Rules
and policies. Records shall include but not be limited to financial statements, records relating to
the quality of care, medical records, dental records, prescription files and other records
specified by AHCCCSA.

The Subcontractor agrees to make available at its office at all reasonable times during the term of
this contract and the period set forth in the following paragraphs, any of its records for
inspection, audit or reproduction by any authorized representative of AHCCCSA, State or Federal
government.

The Subcontractor shall preserve and make available all records for a period of five years from the
date of final payment under this contract unless a longer period of time is required by law.,

If this contract is completely or partially terminated, the records relating to the work terminated
shall be preserved and made available for a period of five years from the date of any such
termination. Records which relate to grievances, disputes, litigation or the settlement of claims
arising out of the performance of this contract, or costs and expenses of this contract to which
exception has been taken by AHCCCSA, shall be retained by the Subcontractor for a period of five
years after the date of final disposition or resolution thereof unless a longer period of time is
required by law. (45 CFR 74.53; 42 CFR 431.17; ARS 41-2548)

21. SEVERABILITY

If any provision of these standard subcontract terms and conditions is held invalid or
unenforceable, the remaining provisions shall continue valid and enforceable to the full extent
permitted by law.

22. SUBJECTION OF SUBCONTRACT

The terms of this subcontract shall be subject to the applicable material terms and conditions of
the contract existing between the Contractor and AHCCCSA for the provision of covered services.

23. TERMINATION OF SUBCONTRACT

AHCCCSA may, by written notice to the Subcontractor, terminate this subcontract if it is found,
after notice and hearing by the State, that gratuities in the form of entertainment, gifts, or
otherwise were offered or given by the Subcontractor, or any agent or representative of the
Subcontractor, to any officer or employee of the State with a view towards securing a contract or
securing favorable treatment with respect to the awarding, amending or the making of any
determinations with respect to the performance of the Subcontractor; provided, that the existence
of the facts upon which the state makes such findings shall be in issue and may be reviewed in any
competent court. If the subcontract is terminated under this section, unless the Contractor is a
governmental agency, instrumentality or subdivision thereof, AHCCCSA shall be entitled to a
penalty, in addition to any other damages to which it may be entitled by law, and to exemplary
damages in the amount of three times the cost incurred by the Subcontractor in providing any such
gratuities to any such officer or employee. (AAC R2-5-501; ARS 41-2616 C; 42 CFR 434.6, a. (6))

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	ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS
	 	Contract/RFP No. YH04-0001
	 

24. VOIDABELITY OF SUBCONTRACT

This subcontract is voidable and subject to immediate termination by AHCCCSA upon the Subcontractor
becoming insolvent or filing proceedings in bankruptcy or reorganization under the United States
Code, or upon assignment or delegation of the subcontract without AHCCCSA’s prior written approval.

25. WARRANTY OF SERVICES

The Subcontractor, by execution of this subcontract, warrants that it has the ability, authority,
skill, expertise and capacity to perform the services specified in this contract.

26. OFF-SHORE PERFORMANCE OF WORK PROHIBITED

Due to security and identity protection concerns, direct services under this contract shall be
performed within the borders of the United States. Any services that are described in the
specifications or scope of work that directly serve the State of Arizona or its clients and may
involve access to secure or sensitive data or personal client data or development or modification
of software for the State shall be performed within the borders of the United States. Unless
specifically stated otherwise in specifications, this definition does not apply to indirect or
“overhead” services, redundant back-up services or services that are incidental to the performance
of the contract. This provision applies to work performed by subcontractors at all tiers.

27. FEDERAL IMMIGRATION AND NATIONALITY ACT

The Subcontractor shall comply with all federal, state and local immigration laws and regulations
relating to the immigration status of their employees during the term of the contract. Further, the
Subcontractor shall flow down this requirement to all subcontractors utilized during the term of
the contract. The State shall retain the right to perform random audits of Contractor and
subcontractor records or to inspect papers of any employee thereof to ensure compliance. Should the
State determine that the Contractor and/or any subcontractors be found noncompliant, the State may
pursue all remedies allowed by law, including, but not limited to; suspension of work, termination
of the contract for default and suspension and/or debarment of the Contractor.

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	ATTACHMENT B: MINIMUM NETWORK STANDARDS
	 	Contract/RFP No. YH04-0001
	 

ATTACHMENT B: MINIMUM NETWORK STANDARDS (By Geographic Service Area)

INSTRUCTIONS:

Contractors shall have in place an adequate network of providers capable of meeting contract
requirements. The information that follows describes the minimum network requirements by Geographic
Service Area (GSA). in some GSA’s there are required service sites located outside of the
geographical boundary of a GSA. The reason for this relates to practical access to care. In certain
instances, a member must travel a much greater distance to receive services within their assigned
GSA, if the member were not allowed to receive services in an adjoining GSA or state.

Split zip codes occur in some counties. Split zip codes are those which straddle two different
counties. Enrollment for members residing in these zip codes is based upon the county and GSA to
which the entire zip code has been assigned by AHCCCS. The Contractor shall be responsible for
providing services to members residing in the entire zip code that is assigned to the GSA for which
the Contractor has agreed to provide services. The split zip codes GSA assignments are as follows:

	 	 	 	 	 	 	 	 	 
	 	 	SPLIT BETWEEN	 	COUNTY ASSIGNED	 	 
	ZIP CODE	 	THESE COUNTIES	 	TO	 	ASSIGNED GSA
	 
	85220

	 	Pinal and Maricopa
	 	Maricopa
	 	 	12	 
	85242

	 	Final and Maricopa
	 	Maricopa
	 	 	12	 
	85292

	 	Gila and Pinal
	 	Gila
	 	 	8	 
	85342

	 	Yavapai and Maricopa
	 	Maricopa
	 	 	12	 
	85358

	 	Yavapai and Maricopa
	 	Maricopa
	 	 	12	 
	85390

	 	Yavapai and Maricopa
	 	Maricopa
	 	 	12	 
	85643

	 	Graham and Cochise
	 	Cochise
	 	 	14	 
	85645

	 	Pima and Santa Cruz
	 	Santa Cruz
	 	 	10	 
	85943

	 	Apache and Navajo
	 	Navajo
	 	 	4	 
	86336

	 	Coconino and Yavapai
	 	Yavapai
	 	 	6	 
	86351

	 	Coconino and Yavapai
	 	Coconino
	 	 	4	 
	86434

	 	Mohave and Yavapai
	 	Yavapai
	 	 	6	 
	86340

	 	Coconino and Yavapai
	 	Yavapai
	 	 	6	 

If outpatient specialty services (OB, family planning, and pediatrics) are not included in the
primary care provider contract, at least one subcontract is required for each of these specialties
in the service sites specified.

In Tucson (GSA 10) and Metropolitan Phoenix (GSA 12), the Contractor must demonstrate its ability
to provide PCP, dental and pharmacy services so that members don’t need to travel more than 5 miles
from their residence. Metropolitan Phoenix is defined on the Minimum Network Standard page specific
to GSA # 12.

At a minimum, the Contractor shall have a physician with admitting and treatment privileges with
each hospital in its network. Contractors in GSA 10 and/or GSA 12 must have at least one hospital
contract in each service district. This requirement is part of the Hospital Subcontracting and
Reimbursement Pilot Program, described more fully in Section D, Paragraph 35, Hospital
Reimbursement. A list of Phoenix and Tucson area hospitals are included.

Provider categories required at various service delivery sites included in the Service Area Minimum
Network Standards are indicated as follows:

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	ATTACHMENT B: MINIMUM NETWORK STANDARDS
	 	Contract/RFP No. YH04-0001
	 

	 	 	 
	H

	 	Hospitals
	P

	 	Primary Care Providers (physicians, certified nurse practitioners and physician assistants)
	D

	 	Dentists
	Ph

	 	Pharmacies

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	ATTACHMENT B: MINIMUM NETWORK STANDARDS
	 	Contract/RFP No. YH04-0001
	 

HOSPITALS IN PHOENIX METROPOLITAIN AREA (By service district, by zip code)

DISTRICT 1

	 	 	 
	85006

	 	Banner Good Samaritan Medical Center
	 

	 	St. Luke’s Medical Center
	85008

	 	Maricopa Medical Center
	85013

	 	St. Joseph’s Hospital & Medical Center
	85020

	 	John C. Lincoln Hospital — North Mountain

DISTRICT 2

	 	 	 
	85015

	 	Phoenix Baptist Hospital & Medical Center
	85027

	 	John C. Lincoln Hospital — Deer Valley
	85037

	 	Banner Estrella Medical Center
	85306

	 	Banner Thanderbird Medical Center
	85308

	 	Arrowhead Community Hospital & Medical Center
	85338

	 	West Valley Hospital
	85351

	 	Walter O. Boswell Memorial Hospital
	85375

	 	Del E. Webb Memorial Hospital

DISTRICT 3

	 	 	 
	85031

	 	Paradise Valley Hospital
	85054

	 	Mayo Clinic Hospital
	85251

	 	Scottsdale Healthcare — Osborn
	85261

	 	Scottsdale Healthcare — Shea

DISTRICT 4

	 	 	 
	85201

	 	Mesa General Hospital Medical Center
	 

	 	Mesa Lutheran Hospital
	 

	 	Banner Mesa Medical Center
	85202

	 	Banner Desert Medical Center
	85206

	 	Valley Lutheran Hospital
	85224

	 	Chandler Regional Hospital
	85281

	 	Tempe St. Luke’s Hospital

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	ATTACHMENT B: MINIMUM NETWORK STANDARDS
	 	Contract/RFP No. YH04-0001
	 

HOSPITALS IN TUCSON METROPOLITAN AREA (By service district, by zip code)

DISTRICT 1

	 	 	 
	85719

	 	University Medical Center
	85741

	 	Northwest Hospital
	85745

	 	Carondelet St. Mary’s Hospital

DISTRICT 2

	 	 	 
	85711

	 	Carondelet St. Joseph’s Hospital
	85712

	 	El Dorado Hospital
	 

	 	Tucson Medical Center
	85713

	 	Kino Community Hospital

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	ATTACHMENT F: PERIODIC REPORT REQUIREMENTS

	 	Contract/RFP No. YH04-0001
	 

ATTACHMENT F: PERIODIC REPORT REQUIREMENTS

The following table is a summary of the periodic reporting requirements for AHCCCS acute care
contractors and is subject to change at any time during the term of the contract. The table is
presented for convenience only and should not be construed to limit the Contractor’s
responsibilities in any manner. “Reporting Guide" refers to the Reporting Guide for
Acute Health Care Contractors with the Arizona Health Care Cost Containment System.

	 	 	 	 	 	 	 
	REPORT	 	WHEN DUE	 	SOURCE/REFERENCE	 	SEND TO:
	 
	 	 	 	 	 	 
	DHCM Finance
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Monthly Financial 

Reporting Package

	 	30 days after the end
of the month, only when
required by AHCCCSA
	 	Reporting Guide
	 	Financial Manager
	 
	 	 	 	 	 	 
	Quarterly Financial 

Reporting Package

	 	60 days after the end
of each quarter
	 	Reporting Guide
	 	Financial Manager
	 
	 	 	 	 	 	 
	FQHC Member 

Information

	 	60 days after the end
of each quarter
	 	Reporting Guide
Section D, Paragraph
34
	 	Financial Manager
	 
	 	 	 	 	 	 
	HIV/AIDS Report

	 	60 days after the end
of each quarter
	 	Reporting Guide
Section D, Paragraph
53
	 	Financial Manager
	 
	 	 	 	 	 	 
	Draft Annual 

Financial Reporting 

Package

	 	90 days after the end
of each fiscal year
	 	Reporting Guide
	 	Financial Manager
	 
	 	 	 	 	 	 
	Final Annual 

Financial Reporting 

Package

	 	120 days after the end
of each fiscal year
	 	Reporting Guide
	 	Financial Manager
	 
	 	 	 	 	 	 
	Non-Transplant 

Catastrophic 

Reinsurance covered 

Diseases

	 	Annually, within 30
days of the beginning
of the contract year,
enrollment to the plan,
and when newly
diagnosed.
	 	Section D, Paragraph 57
	 	Reinsurance Manager
	 
	 	 	 	 	 	 
	Cost Allocation Plans

	 	Within 30 days of the
effective date
	 	Section D, Paragraph 43
	 	Financial Manager
	 
	 	 	 	 	 	 
	Subcontracts

	 	As required per Contract
	 	Section D, Paragraph 37
	 	Financial Manager
	 
	 	 	 	 	 	 
	TPA Subcontracts

	 	Within 30 days of the
effective date
	 	Section D, Paragraph 37
	 	Financial Manager
	 
	 	 	 	 	 	 
	Physician Incentive
Plan (PIP) reporting

	 	Suspended by CMS
	 	Section D, Paragraph 42
	 	Financial Manager
	 
	 	 	 	 	 	 
	Advances/Loans/Equity 

Distributions

	 	Submit for approval
prior to effective date
	 	Section D, Paragraph 49
	 	Financial Manager
	 
	 	 	 	 	 	 
	DHCM Health Plan 

Operations
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Report of all
subcontracts which
delegate Contractor
duties and
responsibilities

	 	90 days after the
beginning of the
contract year
	 	Section D, Paragraph 37
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	Provider 

Affiliation 

Transmission

	 	15 days after the
end of each quarter
	 	Provider Affiliation
Transmission Manual,
submitted to PMMIS
Provider-to-Contractor
FTP
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	Claims Dashboard

	 	15th day
of each month
following the
reporting period
	 	Section D, Paragraph 38
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	Claim recoupments

>$50,000

	 	Upon identification

by Contractor
	 	Section D, Paragraph 38
	 	Operations and
Compliance Officer

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	ATTACHMENT F: PERIODIC REPORT REQUIREMENTS

	 	Contract/RFP No. YH04-0001
	 

	 	 	 	 	 	 	 
	REPORT	 	WHEN DUE	 	SOURCE/REFERENCE	 	SEND TO:
	 
	 	 	 	 	 	 
	Administrative 

Measures

	 	15th day of
each month following
the reporting period
	 	Section D, Paragraph 24
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	Grievance System 

Report

	 	See Grievance System

Reporting Guide for

frequency
	 	Section D, Paragraph 26
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	Enrollee Grievance 

Report

	 	See Grievance System

Reporting Guide for

frequency
	 	Section D, Paragraph 26
	 	DHCM/CQM
	 
	 	 	 	 	 	 
	Provider Network
Development and
Management Plan

	 	45 days after the
first day of a new
contract year
	 	Section D, Paragraph 27
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	Cultural Competency 

Plan

	 	45 days after the
first day of a new
contract year
	 	ACOM Cultural

Competency Policy
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	Business Continuity
and Recovery Plan

	 	15 days after the
beginning of each
contract year
	 	ACOM Business
Continuity and
Recovery Plan Policy
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	Marketing 

Attestation 

Statement

	 	45 days after the
beginning of each
contract year
	 	ACOM Marketing
Outreach and
Incentives Policy
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	Marketing and
Outreach Materials

	 	30 days prior to
dissemination
	 	ACOM Marketing
Outreach and
Incentives Policy
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	Member Handbook

	 	By August
l5th of
contract year, or
within 4 weeks of
receiving annual
amendment, whichever
is later.
	 	Section D, Paragraph 18
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	Provider Network
—Material Change

	 	Submit change for
approval prior to
effective date
	 	Section D, Paragraph 29
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	Provider Network
—Unexpected change

	 	Within one business day
	 	Section D, Paragraph 29
	 	Operations and
Compliance Officer
	 
	 	 	 	 	 	 
	System Change Plan

	 	Six months prior to
implementation
	 	Section D, Paragraph 38
	 	Operations and
Compliance Officer

	 	 	 	 	 	 	 
	REPORT	 	WHEN DUE	 	SOURCE/REFERENCE	 	SEND TO:
	 
	 	 	 	 	 	 
	DHCM Data Analysis
and Research
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Corrected Pended 

Encounter Data

	 	Monthly, according
to established
schedule
	 	Encounter Manual
	 	Encounter

Administrator
	 
	 	 	 	 	 	 
	New Day Encounter

	 	Monthly, according
to established
schedule
	 	Encounter Manual
	 	Encounter

Administrator
	 
	 	 	 	 	 	 
	Medical Records for 

Data Validation

	 	90 days after the
request received
from AHCCCSA
	 	RFP Attachment I,

Encounter

Submission

Requirements
	 	Encounter

Administrator

	 	 	 	 	 	 	 
	REPORT	 	WHEN DUE	 	SOURCE/REFERENCE	 	SEND TO:
	 
	 	 	 	 	 	 
	DHCM Clinical Quality 

Management
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Comprehensive EPSDT 

Plan including 

Dental

	 	Annually on December

15th
	 	RFP Section D,
Paragraph 24
	 	DHCM/CQM
	 
	 	 	 	 	 	 
	EPSDT Progress Report

	 	15 days after the end of
	 	AMPM, Chapter 400
	 	DHCM/CQM

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	ATTACHMENT F: PERIODIC REPORT REQUIREMENTS

	 	Contract/RFP No. YH04-0001
	 

	 	 	 	 	 	 	 
	REPORT	 	WHEN DUE	 	SOURCE/REFERENCE	 	SEND TO:
	 
	 	 	 	 	 	 
	including 

Dental -Quarterly 

Update

	 	each quarter	 	 	 	 
	 
	 	 	 	 	 	 
	Quality Management
Plan and Evaluation

	 	Annually on December 15th
	 	AMPM, Chapter 900
	 	DHCM/CQM
	 
	 	 	 	 	 	 
	Monthly Pregnancy 

Termination Report

	 	End of the month following the
pregnancy termination
	 	AMPM, Chapter 400
	 	DHCM/CQM
	 
	 	 	 	 	 	 
	Maternity Care Plan

	 	Annually on December 15th
	 	AMPM, Chapter 400
	 	DHCM/CQM
	 
	 	 	 	 	 	 
	Sterilization

	 	Immediately following procedure
	 	AMPM, Chapter 400
	 	DHCM/CQM
	 
	 	 	 	 	 	 
	Semi-annual report
of number of
pregnant women who
are HIV/AIDS
positive

	 	30 days after the end of the
2nd and 4th
quarter of each contract year
	 	AMPM, Chapter 400
	 	DHCM/CQM
	 
	 	 	 	 	 	 
	Performance
Improvement Project
Proposal
(initial/baseline
year of the
project)

	 	Annually on December 15th
	 	AMPM, Chapter 900
	 	DHCM/CQM
	 
	 	 	 	 	 	 
	Performance 

Improvement Project 

Re-measurement 

Report

	 	Annually on December 15th
	 	AMPM, Chapter 900
	 	DHCM/CQM
	 
	 	 	 	 	 	 
	Performance 

Improvement Project 

Final Report

	 	Within 180 days of the end of the
project, as defined in the project
proposal approved by AHCCCS DHCM
	 	AMPM, Chapter 900
	 	DHCM/CQM
	 
	 	 	 	 	 	 
	QM Quarterly Report

	 	45 Days after the end of each quarter
	 	Section D, Paragraph 23
	 	DHCM/CQM
	 
	 	 	 	 	 	 
	Pediatric 

Immunization Audit

	 	As requested
	 	Section D, Paragraph 24
	 	DHCM/CQM

	 	 	 	 	 	 	 
	REPORT	 	WHEN DUE	 	SOURCE/REFERENCE	 	SEND TO:
	 
	 	 	 	 	 	 
	DHCM Medical 

Management
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Quarterly Inpatient 

Hospital Showing

	 	15 days after the end of each quarter
	 	State Medicaid Manual
and the AMPM, Chapter
1000
	 	DHCM/MM
	 
	 	 	 	 	 	 
	Utilization
Management Plan and
Evaluation

	 	Annually on December 15th
	 	AMPM, Chapter 900
	 	DHCM/MM
	 
	 	 	 	 	 	 
	UM Quarterly Report

	 	45 Days after the end of each quarter
	 	Section D, Paragraph 23
	 	DHCM/MM
	 
	 	 	 	 	 	 
	HIV Specialty 

Provider List

	 	Annually, on December 15th
	 	AMPM, Chapter 300
	 	DHCM/MM
	 
	 	 	 	 	 	 
	Transplant Report

	 	15 days after the end of each month
	 	AMPM, Chapter 1000
	 	DHCM/MM

	 	 	 	 	 	 	 
	REPORT	 	WHEN DUE	 	SOURCE/REFERENCE	 	SEND TO:
	 
	 	 	 	 	 	 
	Office of Program
Integrity
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Provider Fraud/Abuse

	 	Immediately following
	 	Section D, Paragraph 62
	 	Office of Program

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	ATTACHMENT F: PERIODIC REPORT REQUIREMENTS

	 	Contract/RFP No. YH04-0001
	 

	 	 	 	 	 	 	 
	REPORT	 	WHEN DUE	 	SOURCE/REFERENCE	 	SEND TO:
	 
	 	 	 	 	 	 
	Report

	 	discovery
	 	 	 	Integrity Manager
	 
	 	 	 	 	 	 
	Eligible Person 

Fraud/Abuse Report

	 	Immediately following

discovery
	 	Section D, Paragraph 62
	 	Office of Program
Integrity Manager

	 	 	 	 	 	 	 
	REPORT	 	WHEN DUE	 	SOURCE/REFERENCE	 	SEND TO:
	 
	 	 	 	 	 	 
	As Required/Needed
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Contract Termination 

Reports

	 	5 days after the end of each
month
	 	Section D, Paragraph 1
	 	Financial Manager
	 
	 	 	 	 	 	 
	Nursing Facility Stay

	 	When a member has been
residing in a nursing
facility for 75 days
	 	Section D, Paragraph
10, Nursing Facility
	 	Division of Member
Services Assistant
Director
	 
	 	 	 	 	 	 
	Key Position Change

	 	Within 7 days after an
employee leaves and as soon
as new hire has taken place
	 	Section D, Paragraph 16
	 	DHCM Assistant

Director
	 
	 	 	 	 	 	 
	Third Party Liability 

Updates

	 	Within 10 days of discovery
	 	Section D, Paragraph 58
	 	TPL Administrator
	 
	 	 	 	 	 	 
	Third Party Liability 

Case Identification

	 	Within 10 days of discovery
	 	Section D, Paragraph 58
	 	TPL Administrator
	 
	 	 	 	 	 	 
	Certificate of Insurance

	 	Within 10 days of contract
award
	 	Section E, #25
	 	Contract Manager
	 
	 	 	 	 	 	 
	Generic Extra Credit 

Requirement

	 	As required per your contract
	 	Per Contract Award

Requirement
	 	Per Your Contract

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	ATTACHMENT G: AUTO-ASSIGNMENT ALGORITHM    

	 	Contract/RFP No. YH04-0001
	 

ATTACHMENT G: AUTO-ASSIGNMENT ALGORITHM

Members who do not have the right to choose a Contractor or members who have the right to choose
but do not exercise this right, are assigned to a Contractor through an auto-assignment algorithm.
The algorithm is a mathematical formula used to distribute members to the various Contractors in a
manner that is predictable and consistent with AHCCCSA goals.

The algorithm employs a data table and a formula to assign cases (a case may be a member or a
household of members) to Contractors using the target percentages developed. The algorithm data
table consists of all the geographic service areas (GSA) in the state, all Contractors serving each
GSA, and the target percentages by risk group within each GSA.

The Contractor farthest away from its target percentage within a GSA and risk group, the largest
negative difference, is assigned the next case for that GSA. The equation used is:

                              (t/T)-P = d

t = The total members assigned to the GSA, per risk group category for the Contractor

T = The total members assigned to the GSA, per risk group category, all Contractors combined

P = The target percentage of members per risk group for the Contractor

d = The difference

The algorithm is calculated after each assignment to give a new difference for each Contractor,
When more than one Contractor has the same difference, and their differences are greater than all
other Contractors, the Contractor with the lowest Health Plan I.D. Number will be assigned the
case.

Assignment by the algorithm applies to:

	 	1.	 	Members that are newly eligible to the AHCCCS program that did not choose a
Contractor within the
prescribed time limits.
	 
	 	2.	 	Members whose assigned health plan is no longer available after the member moves to
a new GSA and
did not choose a new Contractor within the prescribed time limits,
	 
	 	3.	 	Members whose assigned plan is no longer available at the beginning of a contract
cycle that did not
choose a Contractor within the prescribed time limits.

All Contractors, within a given geographic service area (GSA) and for each risk group, will have a
placement in the algorithm and will receive members accordingly. A Contractor with a more favorable
target percentage in the algorithm will receive proportionally more members. Conversely, a
Contractor with a lower target percentage in the algorithm will receive proportionally fewer
members. The algorithm favors Contractors with both lower final bids and awarded rates. The
algorithm also favors those Contractors that score higher on selected Performance Measures (See
Section D, Paragraph 24, Performance Measures).

For Contractors in the Maricopa and Pima/Santa Cruz GSAs with fewer than 25,000 members statewide,
a temporary adjustment will be made to the algorithm formula in order to ensure a minimum
membership (see the discussion entitled “Adjustment Methodology for Contractors with Fewer than
25,000 Members” for more information).

Development of the Target Percentages

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	ATTACHMENT G: AUTO-ASSIGNMENT ALGORITHM    

	 	Contract/RFP No. YH04-0001
	 

Beginning in CYE ‘06, the algorithm target percentages will be developed using the methodology
described below. However, for subsequent years, AHCCCS reserves the right to change the algorithm
methodology to assure assignments are made in the best interest of the AHCCCS program and the
State.

A Contractor’s placement in the algorithm is based upon the following three factors, which are
weighted as follows:

	 	 	 	 	 	 	 
	#	 	Factor	 	Weighting
	1

	 	The final capitation rate bid submitted by the
Contractor. Final bids that are below the bottom of the
rate range will be assigned to the bottom of the rate
range for development of the target percentages.
	 	 	30	%
	 
	 	 	 	 	 	 
	2

	 	The Contractor’s final awarded rate from AHCCCSA.
	 	 	30	%
	 
	 	 	 	 	 	 
	3

	 	The Contractor’s ranking in Well-Child visits, 3, 4, 5,
and 6 Years of Age (weighted 75%) and Timeliness of
Prenatal Care (weighted 25%) Performance measures as
reported from the Data Warehouse at AHCCCS (measurement
period CYE 2005, reported in CYE 2006).
	 	 	40	%

Points will be assigned to each Contractor by risk group by GSA. Based on the rankings of the final
bid rates and the final awarded rates, each Contractor will be assigned a number of points for each
of these two components separately as follows:

TABLE FOR FACTORS #1 AND #2

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2nd	 	3rd	 	4th	 	5th	 	6th	 	7th
	Number of	 	Lowest	 	Lowest	 	Lowest	 	Lowest	 	Lowest	 	Lowest	 	Lowest
	Awards in GSA	 	Rate	 	Rate	 	Rate	 	Rate	 	Rate	 	Rate	 	Rate
	2
	 	 	60	 	 	 	40	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	3
	 	 	44	 	 	 	32	 	 	 	24	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	4
	 	 	35	 	 	 	28	 	 	 	22	 	 	 	15	 	 	 	 	 	 	 	 	 	 	 	 	 
	5
	 	 	30	 	 	 	25	 	 	 	20	 	 	 	15	 	 	 	10	 	 	 	 	 	 	 	 	 
	6
	 	 	26	 	 	 	23	 	 	 	19	 	 	 	15	 	 	 	11	 	 	 	6	 	 	 	 	 
	7
	 	 	25	 	 	 	20	 	 	 	17	 	 	 	14	 	 	 	11	 	 	 	8	 	 	 	5	 

Contractors that have equal bids in a GSA for the same risk group will be given an equal percentage
of the points for all of the positions combined.

The third component of the calculation, Performance Measure Rates (PMR), will be assigned a number
of points based on the Contractor’s ranking among the rates for the selected Performance Measures.
The higher the rate, the more points assigned. AHCCCS may update the algorithm assignment annually
based on the results of Factor #3. For this component, points will be assigned as follows:

TABLE FOR FACTOR #3

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2nd	 	3rd	 	4th	 	5th	 	6th	 	7th
	Number of	 	Highest	 	Highest	 	Highest	 	Highest	 	Highest	 	Highest	 	Highest
	Awards in GSA	 	PMR	 	PMR	 	PMR	 	PMR	 	PMR	 	PMR	 	PMR
	2
	 	 	60	 	 	 	40	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	3
	 	 	44	 	 	 	32	 	 	 	24	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	4
	 	 	35	 	 	 	28	 	 	 	22	 	 	 	15	 	 	 	 	 	 	 	 	 	 	 	 	 
	5
	 	 	30	 	 	 	25	 	 	 	20	 	 	 	15	 	 	 	10	 	 	 	 	 	 	 	 	 
	6
	 	 	26	 	 	 	23	 	 	 	19	 	 	 	15	 	 	 	11	 	 	 	6	 	 	 	 	 
	7
	 	 	25	 	 	 	20	 	 	 	17	 	 	 	14	 	 	 	11	 	 	 	8	 	 	 	5	 

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	ATTACHMENT G: AUTO-ASSIGNMENT ALGORITHM    

	 	Contract/RFP No. YH04-0001
	 

Contractors that have equal Performance Measure Rates will be given an equal percentage of the
points for all of the positions combined.

The points awarded for the three components will be combined as follows to give the target
percentage for each Contractor by GSA by risk group:

Final Bid
Points (.30) + Awarded Bid Points (.30) + Performance Measure Points (40) = TARGET

 

            
                        
                        
PERCENTAGE 100

Adjustment Methodology for Contractors with Fewer than 25,000 Members

At the beginning of the new contract cycle, the auto-assignment algorithm for the Maricopa and
Pima/Santa Cruz GSAs will be adjusted to favor Contractors with fewer than 25,000 members
statewide. The adjusted algorithm will be utilized until a target membership of 25,000 members
statewide, per Contractor, is reached.

The adjustment will be made to the final percentages developed using the methodology above. A
pre-determined percentage, based on the table below, will be added to the affected Contractor(s)
and subtracted evenly from the other Contractors.

	 	 	 	 	 	 	 	 	 
	 	 	Percentage	 	 
	 	 	Added	 	 
	Number of Contractors Below	 	To	 	Percentage To Be Evenly
	25,000	 	New Contractor	 	Subtracted From Remaining
	Statewide Minimum Enrollment	 	Target	 	Bidders
	1

	 	 	20	%	 	 	20	%
	2

	 	 	15	%	 	 	30	%
	3

	 	 	10	%	 	 	30	%

 

			
	*	 	In the event that there are more than three affected Contractors, AHCCCS will disclose adjustment
methodology by July 1, 2003.

In the event that a Contractor only receives an award in rural GSAs, AHCCCS reserves the right to
make a temporary adjustment to the auto-assignment target to favor the new Contractor until a
minimum enrollment is reached.

AHCCCSA reserves the right to adjust capitation rates for potential changes to the populations risk
due to the adjusted algorithm.

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	ATTACHMENT H:

GRIEVANCE SYSTEM AND STANDARDS  

	 	Contract/RFP No. YH04-0001
	 

ATTACHMENT H (1): ENROLLEE GRIEVANCE SYSTEM STANDARDS AND POLICY

The Contractor shall have a written policy delineating its Grievance System which shall be in
accordance with applicable Federal and State laws, regulations and policies, including, but not
limited to 42 CFR Part 438 Subpart F. The Contractor shall provide the ACOM Enrollee Grievance
Policy to all providers and subcontractors at the time of contract. The Contractor shall also
furnish this information to enrollees within a reasonable time after the Contractor receives notice
of the enrollment. Additionally, the Contractor shall provide written notification of any
significant change in this policy at least 30 days before the intended effective date of the
change.

The written information provided to enrollees describing the Grievance System including the
grievance process, the appeals process, enrollee rights, the grievance system requirements and
timeframes, shall be in each prevalent non-English language occurring within the subcontractor’s
service area and in an easily understood language and format. The Contractor shall inform enrollees
that oral interpretation services are available in any language, that additional information is
available in prevalent non-English languages upon request and how enrollees may obtain this
information.

Written documents, including but not limited to the Notice of Action, the Notice of Appeal
Resolution, Notice of Extension for Resolution, and Notice of Extension of Notice of Action shall
be translated in the enrollee’s language if information is received by the Contractor, orally or in
writing, indicating that the enrollee has a limited English proficiency. Otherwise, these documents
shall be translated in the prevalent non-English language(s) or shall contain information in the
prevalent non-English language(s) advising the enrollee that the information is available in the
prevalent non-English language(s) and in alternative formats along with an explanation of how
enrollees may obtain this information. This information must be in large, bold print appearing in a
prominent location on the first page of the document.

At a minimum, the Contractor’s Grievance System Standards and Policy shall specify:

	1.	 	That the Contractor shall maintain records of all grievances and appeals and requests for
hearing.
	 
	2.	 	Information explaining the grievance, appeal, and fair hearing procedures and timeframes.
This information shall include a description of the circumstances when there is a right to a
hearing, the method for obtaining a hearing, the requirements which govern representation at
the hearing, the right to file grievance and appeals and the requirements and timeframes for
filing a grievance, appeal, or request for hearing.
	 
	3.	 	The availability of assistance in the filing process and the Contractor’s toll-free numbers
that an enrollee can use to file a grievance or appeal by phone if requested by the enrollee.
	 
	4.	 	That the Contractor shall acknowledge receipt of each grievance and appeal. For Appeals, the
Contractor shall acknowledge receipt of standard appeals in writing within five business days
of receipt and within one business day of receipt of expedited appeals.
	 
	5.	 	That the Contractor shall permit both oral and written appeals and grievances and that oral
inquiries appealing an action are treated as appeals.
	 
	6.	 	That the Contractor shall ensure that individuals who make decisions regarding grievances and
appeals are individuals not involved in any previous level of review or decision making and
that individuals who make decisions regarding: 1) appeals of denials based on lack of medical
necessity, 2) a grievance regarding denial of expedited resolution of an appeal or 3)
grievances or appeals involving clinical issues are health care professionals as defined in 42
CFR 438.2 with the appropriate clinical expertise in treating the enrollee’s condition or
disease.

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	ATTACHMENT H:

GRIEVANCE SYSTEM AND STANDARDS  

	 	Contract/RFP No. YH04-0001
	 

	7.	 	The resolution timeframes for standard appeals and expedited appeals may be extended up to
14 days if the enrollee requests the extension or if the Contractor establishes a need for
additional information and that the delay is in the enrollee’s interest.
	 
	8.	 	That if the Contractor extends the timeframe for resolution of an appeal when not requested
by the enrollee, the Contractor shall provide the enrollee with written notice of the reason
for the delay.
	 
	9.	 	The definition of grievance as a member’s expression of dissatisfaction with any aspect of
their care, other than the appeal of actions.
	 
	10.	 	That an enrollee must file a grievance with the Contractor and that the enrollee is not
permitted to file a grievance directly with the State.
	 
	11.	 	That the Contractor must dispose of each grievance in accordance with the ACOM Enrollee
Grievance Policy, but in no case shall the timeframe exceed 90 days.
	 
	12.	 	The definition of action as the [42 CFR438.400(b)]:

	 	a.	 	Denial or limited authorization of a requested service,
including the type or level of service;
	 
	 	b.	 	Reduction, suspension, or termination of a previously
authorized service;
	 
	 	c.	 	Denial, in whole or in part, of payment for a service;
	 
	 	d.	 	Failure to provide services in a timely manner;
	 
	 	e.	 	Failure to act within the timeframes required for standard
and expedited resolution of appeals and standard disposition of grievances; or
	 
	 	f.	 	Denial of a rural enrollee’s request to obtain services
outside the Contractor’s network under 42 CFR 438.52(b)(2)(ii), when the
contractor is the only Contractor in the rural area.

	13.	 	The definition of a service authorization request as an enrollee’s request for the provision
of a service [42 CFR 431.201].
	 
	14.	 	The definition of appeal as the request for review of an action, as defined above.
	 
	15.	 	Information explaining that a provider acting on behalf of an enrollee and with the
enrollee’s written consent, may file an appeal.
	 
	16.	 	That an enrollee may file an appeal of: 1) the denial or limited authorization of a requested
service including the type or level of service, 2) the reduction, suspension or termination of
a previously authorized service, 3) the denial in whole or in part of payment for service, 4)
the failure to provide services in a timely manner, 5) the failure of the Contractor to comply
with the timeframes for dispositions of grievances and appeals and 6) the denial of a rural
enrollee’s request to obtain services outside the Contractor’s network under 42 CFR
438.52(b)(2)(ii) when the Contractor is the only Contractor in the rural area.
	 
	17.	 	The definition of a standard authorization request. For standard authorization decisions, the
Contractor must provide a Notice of Action to the enrollee as expeditiously as the enrollee’s
health condition requires, but not later than 14 days following the receipt of the
authorization with a possible extension of up to 14 days if the enrollee or provider requests
an extension or if the Contractor establishes a need for additional information and delay is
in the enrollee’s best interest [42 CFR 438.210(d)(l)]. The Notice of Action must comply with
the advance notice requirements when there is a termination or reduction of a previously
authorized service OR when there is a denial of an authorization request and the physician
asserts that the requested service/treatment is a necessary continuation of a previously
authorized service.

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	ATTACHMENT H:

GRIEVANCE SYSTEM AND STANDARDS  

	 	Contract/RFP No. YH04-0001
	 

	18.	 	The definition of an expedited authorization request. For expedited authorization
decisions, the Contractor must provide a Notice of Action to the enrollee as expeditiously as
the enrollee’s health condition requires, but not later than 3 business days following the
receipt of the authorization with a possible extension of up to 14 days if the enrollee or
provider requests an extension or if the Contractor establishes a need for additional
information and delay is in the enrollee’s interest. [42 CFR 438.2l0(d)(2)]
	 
	19.	 	That the Notice of Action for a service authorization decision not made within the standard
or expedited timeframes, whichever is applicable, will be made on the date that the timeframes
expire. If the Contractor extends the timeframe to make a standard or expedited authorization
decision, the contractor must give the enrollee written notice of the reason to extend the
timeframe and inform the enrollee of the right to file a grievance if the enrollee disagrees
with the decision. The Contractor must issue and carry out its decision as expeditiously as
the enrollee’s health condition requires and no later than the date the extension expires.
	 
	20.	 	That the Contractor shall notify the requesting provider of the decision to deny or reduce a
service authorization request. The notice to the provider need not be written.
	 
	21.	 	The definition of a standard appeal and that the Contractor shall resolve standard appeals no
later than 30 days from the date of receipt of the appeal unless an extension is in effect.
	 
	22.	 	The definition of an expedited appeal and that the Contractor shall resolve all expedited
appeals not later than three business days from the date the Contractor receives the appeal
(unless an extension is in effect) where the Contractor determines (for a request from the
enrollee), or the provider (in making the request on the enrollee’s behalf indicates) that the
standard resolution timeframe could seriously jeopardize the enrollee’s life or health or
ability to attain, maintain or regain maximum function. The Contractor shall make reasonable
efforts to provide oral notice to an enrollee regarding an expedited resolution appeal.
	 
	23.	 	That if the Contractor denies a request for expedited resolution, it must transfer the appeal
to the 30-day timeframe for a standard appeal. The Contractor must make reasonable efforts to
give the enrollee prompt oral notice and follow-up within two days with a written notice of
the denial of expedited resolution.
	 
	24.	 	That an enrollee shall be given 60 days from the date of the Contractor’s Notice of Action to
file an appeal.
	 
	25.	 	That the Contractor shall mail a Notice of Action: 1) at least 10 days before the date of a
termination, suspension or reduction of previously authorized AHCCCS services, except as
provided in (a)-(e) below; 2) at least 5 days before the date of action in the case of
suspected fraud; 3) at the time of any action affecting the claim when there has been a denial
of payment for a service, in whole or in part; 4) within 14 days from receipt of a standard
service authorization request and within three business days from receipt of an expedited
service authorization request, unless an extension is in effect. For service authorization
decisions, the Contractor shall also ensure that the Notice of Action provides the enrollee
with advance notice and the right to request continued benefits for all terminations and
reductions of a previously authorized service and for denials when the physician asserts that
the requested service/treatment which has been denied is a necessary continuation of a
previously authorized service. As described below, the Contractor may elect to mail a Notice
of Action no later than the date of action when:

	 	a.	 	The Contractor receives notification of the death of an
enrollee;
	 
	 	b.	 	The enrollee signs a written statement requesting service
termination or gives information requiring termination or reduction of
services (which indicates understanding that the termination or reduction will
be the result of supplying that information);
	 
	 	c.	 	The enrollee is admitted to an institution where he is
ineligible for further services;
	 
	 	d.	 	The enrollee’s address is unknown and mail directed to the
enrollee has no forwarding address;
	 
	 	e.	 	The enrollee has been accepted for Medicaid in another local
jurisdiction;

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	ATTACHMENT H:

GRIEVANCE SYSTEM AND STANDARDS  

	 	Contract/RFP No. YH04-0001
	 

	26.	 	That the Contractor include, as parties to the appeal, the enrollee, the enrollee’s legal
representative, or the legal representative of a deceased enrollee’s estate,
	 
	27.	 	That the Notice of Action must explain: 1) the action the Contractor has taken or intends to
take, 2) the reasons for the action, 3) the enrollee’s right to file an appeal with the
Contractor, 4) the procedures for exercising these rights, 5) circumstances when expedited
resolution is available and how to request it and 6) the enrollee’s right to receive continued
benefits pending resolution of the appeal, how to request continued benefits and the
circumstances under which the enrollee may be required to pay for the cost of these services.
	 
	28.	 	That benefits shall continue until a hearing decision is rendered if: 1) the enrollee files
an appeal before the later of a) 10 days from the mailing of the Notice of Action or b) the
intended date of the Contractor’s action, 2) a) the appeal involves the termination,
suspension, or reduction of a previously authorized course of treatment or b) the appeal
involves a denial and the physician asserts that the requested service/treatment is a
necessary continuation of a previously authorized service, 3) the services were ordered by an
authorized provider and 4) the enrollee requests a continuation of benefits.
	 
	 	 	For purposes of this paragraph, benefits shall be continued based on the authorization which
was in place prior to the denial, termination, reduction, or suspension which has been
appealed.
	 
	29.	 	That for appeals, the Contractor provides the enrollee a reasonable opportunity to present
evidence and allegations of fact or law in person and in writing and that the Contractor
informs the enrollee of the limited time available in cases involving expedited resolution.
	 
	30.	 	That for appeals, the Contractor provides the enrollee and his representative the opportunity
before and during the appeals process to examine the enrollee’s case file including medical
records and other documents considered during the appeals process.
	 
	31.	 	That the Contractor must ensure that punitive action is not taken against a provider who
either requests an expedited resolution or supports an enrollee’s appeal.
	 
	32.	 	That the Contractor shall provide written Notice of Appeal Resolution to the enrollee and the
enrollee’s representative or the representative of the deceased enrollee’s estate which must
contain: 1) the results of the resolution process, including the legal citations or
authorities supporting the determination, and the date it was completed, and 2) for appeals
not resolved wholly in favor of enrollees: a) the enrollee’s right to request a State fair
hearing (including the requirement that the enrollee must file the request for a hearing in
writing) no later than 30 days after the date the enrollee receives the Contractor’s notice of
appeal resolution and how to do so, b) the right to receive continued benefits pending the
hearing and how to request continuation of benefits and c) information explaining that the
enrollee may be held liable for the cost of benefits if the hearing decision upholds the
Contractor,
	 
	33.	 	That the Contractor continues extended benefits originally provided to the enrollee until any
of the following occurs: 1) the enrollee withdraws appeal, 2) the enrollee has not
specifically requested continued benefits pending a hearing decision within 10 days of the
Contractor mailing of the appeal resolution notice, or 3) the AHCCCS Administration issues a
state fair hearing decision adverse to the enrollee.
	 
	34.	 	That if the enrollee files a request for hearing the Contractor must ensure that the case
file and all supporting documentation is received by the AHCCCSA, Office of Legal Assistance
(OLA) as specified by OLA. The file provided by the Contractor must contain a cover letter
that includes:

	 	a.	 	Enrollee’s name
	 
	 	b.	 	Enrollee’s AHCCCS I.D. number

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	ATTACHMENT H:

GRIEVANCE SYSTEM AND STANDARDS  

	 	Contract/RFP No. YH04-0001
	 

	 	c.	 	Enrollee’s address
	 
	 	d.	 	Enrollee’s phone number (if applicable)
	 
	 	e.	 	date of receipt of the appeal
	 
	 	f.	 	summary of the Contractor’s actions undertaken to resolve the appeal
and summary of the appeal resolution

	35.	 	The following material shall be included in the file sent by the Contractor:

	 	a.	 	the Enrollee’s written request for hearing
	 
	 	b.	 	copies of the entire appeal file which includes all supporting
documentation including pertinent findings and medical records;
	 
	 	c.	 	the Contractor’s Notice of Appeal Resolution
	 
	 	d.	 	other information relevant to the resolution of the appeal

	36.	 	That if the Contractor or the State fair decision reverses a decision to deny, limit or delay
services not furnished during the appeal or the pendency of the hearing process, the
Contractor shall authorize or provide the services promptly and as expeditiously as the
enrollee’s health condition requires irrespective of whether the Contractor contests the
decision.
	 
	37.	 	That if the Contractor or State fair hearing decision reverses a decision to deny
authorization of services and the disputed services were received pending appeal, the
Contractor shall pay for those services, as specified in policy and/or regulation.
	 
	38.	 	That if the Contractor or State fair hearing decision upholds a decision to deny
authorization of services and the disputed services were received pending appeal, the
Contractor may recover the cost of those services from the enrollee.

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	ATTACHMENT H:

GRIEVANCE SYSTEM AND STANDARDS  

	 	Contract/RFP No. YH04-0001
	 

ATTACHMENT H(2) PROVIDER CLAIM DISPUTE STANDARDS AND POLICY

The Contractor shall have in place a written claim dispute policy for providers. The policy shall
be in accordance with applicable Federal and State laws, regulations and policies. The claim
dispute policy shall include the following provisions:

	 	1.	 	The Provider Claim Dispute Policy shall be provided to all subcontractors at the
time of contract. For providers without a contract, the claim dispute policy may be
mailed with a remittance advice, provided the remittance is sent within 45 days of
receipt of a claim.
	 
	 	2.	 	The Provider Claim Dispute Policy must specify that all claim disputes challenging
claim payments, denials or recoupments must be filed in writing with the Contractor no
later than 12 months from the date of service, 12 months after the date of eligibility
posting or within 60 days after the payment, denial or recoupment of a timely claim
submission, whichever is later.
	 
	 	3.	 	Specific individuals are appointed with authority to require corrective action and
with requisite experience to administer the claim dispute process.
	 
	 	4.	 	A log is maintained for all claim disputes containing sufficient information to
identify the Complainant, date of receipt, nature of the claim dispute and the date the
claim dispute is resolved. Separate logs must be maintained for provider and behavioral
health recipient claim disputes.
	 
	 	5.	 	Within five business days of receipt, the Complainant is informed by letter that
the claim dispute has been received.
	 
	 	6.	 	Each claim dispute is thoroughly investigated using the applicable statutory,
regulatory, contractual and policy provisions, ensuring that facts are obtained from all
parties.
	 
	 	7.	 	All documentation received by the Contractor during the claim dispute process is
dated upon receipt.
	 
	 	8.	 	All claim disputes are filed in a secure designated area and are retained for five
years following the Contractor’s decision, the Administration’s decision, judicial appeal
or close of the claim dispute, whichever is later, unless otherwise provided by law.
	 
	 	9.	 	A copy of the Contractor’s Notice of Decision (hereafter referred to as Decision)
will be communicated in writing to all parties. The Decision must include and describe in
detail, the following:

	 	a.	 	the nature of the claim dispute
	 
	 	b.	 	the issues involved
	 
	 	c.	 	the reasons supporting the Contractor’s Decision, including
references to applicable statute, rule, applicable contractual provisions,
policy and procedure
	 
	 	d.	 	the Provider’s right to request a hearing by filing a written
request for hearing to the Contractor no later than 30 days after the date the
Provider receives the Contractor’s decision.
	 
	 	e.	 	If the claim dispute is overturned, the requirement that the
Contractor shall reprocess and pay the claim(s) in a manner consistent with
the decision within 15 business days of the date of the Decision.

	10.	 	If the Provider files a written request for hearing, the Contractor must ensure that all
supporting documentation is received by the AHCCCSA, Office of Legal Assistance, no later than
five business days from the date the Contractor receives the provider’s written hearing
request. The file sent by the Contractor must contain a cover letter that includes:

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	ATTACHMENT H:

GRIEVANCE SYSTEM AND STANDARDS  

	 	Contract/RFP No. YH04-0001
	 

	 	a.	 	Provider’s name
	 
	 	b.	 	Provider’s AHCCCS ID number
	 
	 	c.	 	Provider’s address
	 
	 	e.	 	Provider’s phone number (if applicable)
	 
	 	e.	 	the date of receipt of claim dispute
	 
	 	f.	 	a summary of the Contractor’s actions undertaken to resolve the claim
dispute and basis of the determination

     11. The following material shall be included in the file sent by the Contractor:

	 	a.	 	written request for hearing filed by the Provider
	 
	 	b.	 	copies of the entire file which includes pertinent records; and the
Contractor’s Decision
	 
	 	c.	 	other information relevant to the Notice of Decision of the claim
dispute

	12.	 	If the Contractor’s decision regarding a claim dispute is reversed through the appeal
process, the Contractor shall reprocess and pay the claim (s) in a manner consistent with the
decision within 15 business days of the date of the Decision.

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	ATTACHMENT I: ENCOUNTER SUBMISSION

REQUIREMENTS    

	 	Contract/RFP No. YH04-0001
	 

ATTACHMENT I: ENCOUNTER SUBMISSION REQUIREMENTS

The Contractor will be assessed sanctions for noncompliance with encounter submission requirements.
AHCCCSA may also perform special reviews of encounter data, such as comparing encounter reports to
the Contractor’s claims files. Any findings of incomplete or inaccurate encounter data may result
in the imposition of sanctions or requirement of a corrective action plan.

Pended Encounter Corrections

The Contractor must resolve all pended encounters within 120 days of the original processing date.
Sanctions will be imposed according to the following schedule for each encounter pended for more
than 120 days unless the pend is due to AHCCCSA error:

	 	 	 	 	 	 	 	 	 
	0—120 days

	 	121—180 days
	 	181—240 days
	 	241—360 days
	 	361 + days
	No sanction

	 	$5 per month
	 	$10 per month
	 	$15 per month
	 	$20 per month

“AHCCCSA error” is defined as a pended encounter, which (1) AHCCCSA acknowledges to be the result
of its own error, and (2) requires a change to the system programming, an update to the database
reference table, or further research by AHCCCSA. AHCCCSA reserves the right to adjust the sanction
amount if circumstances warrant.

When the Contractor notifies AHCCCSA, in writing, that the resolution of a pended encounter depends
on AHCCCSA rather than the Contractor, AHCCCSA will respond in writing within 30 days of receipt of
such notification. The AHCCCSA response will report the status of each pending encounter problem or
issue in question.

Pended encounters will not qualify as AHCCCSA errors if AHCCCSA reviews the Contractor’s
notification and asks the Contractor to research the issue and provide additional substantiating
documentation, or if AHCCCSA disagrees with the Contractor’s claim of AHCCCSA error. If a pended
encounter being researched by AHCCCSA is later determined not to be caused by AHCCCSA error, the
Contractor may be sanctioned retroactively.

Before imposing sanctions, AHCCCSA will notify the Contractor, in writing, of the total number of
sanctionable encounters pended more than 120 days. Pended encounters shall not be deleted by the
Contractor as a means of avoiding sanctions for failure to correct encounters within 120 days. The
Contractor shall document deleted encounters and shall maintain a record of the deleted CRNs with
appropriate reasons indicated. The Contractor shall, upon request, make this documentation
available to AHCCCSA for review.

Encounter Validation Studies

Per CMS requirement, AHCCCSA will conduct encounter validation studies of the Contractor’s
encounter submissions, and sanction the Contractor for noncompliance with encounter submission
requirements. The purpose of encounter validation studies is to compare recorded utilization
information from a medical record or other source with the Contractor’s submitted encounter data.
Any and all covered services may be validated as part of these studies. Encounter validation
studies will be conducted at least yearly.

AHCCCSA may revise study methodology, timelines, and sanction amounts based on agency review or as
a result of consultations with CMS. The Contractor will be notified in writing of any significant
change in study methodology.

AHCCCSA will conduct two encounter validation studies. Study “A” examines non-institutional
services (form HCFA 1500 encounters), and Study “B” examines institutional services (form UB-92
encounters).

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	ATTACHMENT I: ENCOUNTER SUBMISSION

REQUIREMENTS    

	 	Contract/RFP No. YH04-0001
	 

AHCCCSA will notify the Contractor in writing of the sanction amounts and of the selected data
needed for encounter validation studies. The Contractor will have 90 days to submit the requested
data to AHCCCSA. In the case of medical records requests, the Contractor’s failure to provide
AHCCCSA with the records requested within 90 days may result in a sanction of $1,000 per missing
medical record. If AHCCCSA does not receive a sufficient number of medical records from the
Contractor to select a statistically valid sample for a study, the Contractor may be sanctioned up
to 5% of its annual capitation payment.

The criteria used in encounter validation studies may include timeliness, correctness, and omission
of encounters. These criteria are defined as follows:

Timeliness: The time elapsed between the date of service and the date that the encounter is
received at AHCCCS. For all encounters for which timeliness is evaluated, a sanction per encounter
error extrapolated to the population of encounters may be assessed if the encounter record is
received by AHCCCSA more than 240 days after the end of the month in which the service was
rendered, or the effective date of the enrollment. It is anticipated that the sanction amount will
be $1.00 per error extrapolated to the population of encounters; however, sanction amounts may be
adjusted if AHCCCSA determines that encounter quality has changed, or if CMS changes sanction
requirements. The Contractor will be notified of the sanction amount in effect for the studies at
the time the studies begin.

Correctness: A correct encounter contains a complete and accurate description of AHCCCS covered
services provided to a member. A sanction per encounter error extrapolated to the population of
encounters may be assessed if the encounter is incomplete or incorrectly coded. It is anticipated
that the sanction amount will be $1.00 per error extrapolated to the population of encounters;
however, sanction amounts may be adjusted if AHCCCSA determines that encounter quality has changed,
or if CMS changes sanction requirements. The Contractor will be notified of the sanction amount in
effect for the studies at the time the studies begin.

Omission of data: An encounter not submitted to AHCCCSA or an encounter inappropriately deleted
from AHCCCSA’s pending encounter file or historical files in lieu of correction of such record. For
Study “A” and for Study “B”, a sanction per encounter error extrapolated to the population of
encounters may be assessed for an omission. It is anticipated that the sanction amount will be
$5.00 per error extrapolated to the population of encounters for Study “A” and $10.00 per error
extrapolated to the population of encounters for Study “B”; however, sanction amounts may be
adjusted if AHCCCSA determines that encounter quality has changed, or if CMS changes sanction
requirements. The Contractor wilt be notified of the sanction amount in effect for the studies at
the time the studies begin.

For encounter validation studies, AHCCCSA will select all approved and pended encounters to be
studied no earlier than 240 days after the end of the month in which the service was rendered. Once
AHCCCSA has selected the Contractor’s encounters for encounter validation studies, subsequent
encounter submissions for the period being studied will not be considered.

AHCCCSA may review all of the Contractor’s submitted encounters, or may select a sample. The sample
size, or number of encounters to be reviewed, will be determined using statistical methods in order
to accurately estimate the Contractor’s error rates. Error rates will be calculated by dividing the
number of errors found by the number of encounters reviewed. A 95% confidence interval will be used
to account for limitations caused by sampling. The confidence interval shows the range within which
the true error rate is estimated to be. If error rates are based on a sample, the error rate used
for sanction purposes will be the lower limit of the confidence interval.

Encounter validation methodology and statistical formulas are provided in the AHCCCS Encounter Data
Validation Technical Document, which is available in the Bidders Library. This document also
provides

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	ATTACHMENT I: ENCOUNTER SUBMISSION

REQUIREMENTS    

	 	Contract/RFP No. YH04-0001
	 

examples, which illustrate how AHCCCSA determines study sample sizes, error rates, confidence
intervals, and sanction amounts.

Written preliminary results of all encounter validation studies will be sent to the Contractor for
review and comment. The Contractor will have a maximum of 30 days to review results and provide
AHCCCSA with additional documentation that would affect the final calculation of error rates and
sanctions. AHCCCSA will examine the Contractor’s documentation and may revise study results if
warranted. Written final results of the study will then be sent to the Contractor and communicated
to CMS, and any sanctions will be assessed.

The Contractor may file a written challenge to sanctions assessed by AHCCCSA not more than 35 days
after the Contractor receives final study results from AHCCCSA. Challenges will be reviewed by
AHCCCSA and a written decision will be rendered no later than 60 days from the date of receipt of a
timely challenge. Sanctions shall not apply to encounter errors successfully challenged. A
challenge must be filed on a timely basis and a decision must be rendered by AHCCCSA prior to
filing a claim dispute and request for hearing pursuant to A.A.C. 9-34-401 et seq. Sanction amounts
will be deducted from the Contractor’s capitation payment.

Encounter Corrections

Contractors are required to submit replacement or voided encounters in the event that claims are
subsequently corrected following the initial encounter submission. This includes corrections as a
result of inaccuracies identified by fraud and abuse audits or investigations conducted by AHCCCSA
or the Contractor. Contractors shall refer to the Encounter Reporting User Manual for instructions
regarding submission of corrected encounters.

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	ATTACHMENT L: COST SHARING COPAYMENTS

	 	Contract/RFP No. YH04-0001
	 

ATTACHMENT L: COST SHARING COPAYMENTS

	 	I.	 	EXEMPT POPULATIONS (REGARDLESS OF RATE CODE)

The following populations are exempt from copayments for ALL services ($0 copay):

	 	•	 	All members under the age of 19, including all KidsCare members
	 
	 	•	 	All Pregnant Women
	 
	 	•	 	All ALTCS enrolled members
	 
	 	•	 	All persons with Serious Mental Illness receiving RBHA services
	 
	 	•	 	All members who are receiving CRS services
	 
	 	•	 	SOBRA Family Planning Services Only members

Additionally, no member may be asked to make a copayment for family planning services or
supplies.

	 	II.	 	STANDARD COPAYMENTS APPLY TO THE TITLE XIX WAIVER GROUP

Services to this population may not be denied for failure to pay copayment.

The standard copayments apply to the Title XIX Waiver Group, including RBHA General
Mental Health and Substance Abuse service members. The standard copayments are as
follows:

	 	 	 	 	 
	Service	 	Copayment
	Generic Prescriptions or Brand Name if generic not available
	 	$0 per Rx
	Brand Name Prescriptions when generic is available
	 	$	0	 
	Non Emergency Use of ER
	 	$	1	 
	Physician Office Visits
	 	$	1	 

	 	III.	 	STANDARD COPAYMENTS APPLY TO THE FOLLOWING POPULATIONS

Services to this population may not be denied for failure to pay copayment.

	 	•	 	AHCCCS for Families with Children
	 
	 	•	 	Supplemental Security Income with and without Medicare

	 	 	 	 	 
	Service	 	Copayment
	Generic Prescriptions or Brand Name if generic not available
	 	$	0	 
	Brand Name Prescriptions when generic is available
	 	$	0	 
	Non Emergency Use of ER
	 	$	1	 
	Physician Office Visits
	 	$	1	 

	 	IV.	 	OTHER CO-PAYS
	 
	 	 	 	HIFA Parents (Parents of KidsCare and SOBRA Children)

	 	•	 	Copayment is not mandatory
	 
	 	•	 	EXCEPTION: Native American Contractor Enrolled Parents are exempt from any
copayment

	 	 	 	 	 
	Service	 	Copayment
	Generic Prescriptions or Brand Name if generic not available
	 	$	0	 
	Brand Name Prescriptions when generic is available
	 	$	0	 
	Non Emergency Use of ER
	 	$	1	 
	Physician Office Visits
	 	$	0	 

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