Document:

exv10w3

Exhibit 10.3

Confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934 has been
requested with respect to portions of pages 12-14 of this contract exhibit. The omitted
confidential portions of the contract exhibit have been filed separately with the Commission.

STATE OF CALIFORNIA

STANDARD AGREEMENT AMENDMENT

STD 213A (DHS Rev 7/04)

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	 

	 	 	
AGREEMENT NUMBER
	 	 	
AMENDMENT NUMBER	 
	x CHECK HERE IF ADDITIONAL PAGES ARE ADDED 20 PAGES

	 	 	
05-46130 

	 	 	
A-01

	 
	 	 	 	 	 	 	 	 
	 	 	 	
REGISTRATION NUMBER:

	 
	 	 	 	 	 	 	 	 

									
	 1.	 	This Agreement is entered into between the State Agency and Contractor named below:
	 	 	 	 	 
	 

	 	STATE AGENCY’S NAME
	 	 	 	(Also referred to as CDHS, DHS, or the State)	 	 
	 	 	California Department of Health Services	 	 
	 	 	 	 	 
	 

	 	CONTRACTOR’S NAME
	 	 	 	(Also referred to as Contractor)	 	 
	 	 	Molina Healthcare of California Partner Plan, Inc.	 	 
	 	 	 
	 2.

	 	The term of this	 	 	 	 	 	 
	 	 	Agreement is	 	January 1, 2006      
      
through
           
December 31, 2008	 	 
	 	 	 
	 3.	 	The maximum amount	 	 $428,964,000	 	 
	 	 	of this Agreement is:	 	Four Hundred Twenty-eight Million Nine Hundred Sixty-four Thousand Dollars
	 	 	 
	 4.	 	The parties mutually agree to this amendment as follows. All actions noted below are
by this reference made a part of the Agreement and incorporated herein:

	 	1)	 	Amendment effective date: April 12, 2007
	 
	 	2)	 	Purpose of amendment: To amend quality improvement language; to add an additional
aid code; to remove some aid codes; to amend the Non-Contracting Emergency Service Providers language; to
remove Medicare
Part D as a Covered Service; to amend the Alcohol and Substance Abuse Treatment Services
language and to
add its related Attachment 10-C; to add the Erectile Dysfunction language and to add its
related Attachment 10-
D; to amend Attachment 10-B; to amend the Grievance language; to amend the enrollment
capacity; to amend
the Negotiation/ Determination of Rates language; to extend the contract term; to add the
Confidential Contract
Terms language; to add the Federal False Claim Act Compliance language; to amend payment
provision
language; to adjust rates and to adjust the encumbrances/amounts payable accordingly.
	 
	 	3)	 	Exhibit A, Attachment 4 Quality Improvement System, Section 9 External Quality
Review Requirements,
is amended to read:

(Continued on next page)

	 	All other terms and conditions shall remain the same.

IN
WITNESS WHEREOF, this Agreement has been executed by the parties
hereto.

							
	 	 	 	 	 
	
CONTRACTOR

	 	 	CALIFORNIA

Department of General Services
Use Only	 
	 	 	 	 
	CONTRACTOR’S NAME (If other than an individual, state whether a corporation, partnership, etc.)
	 	 	 
	 Molina Healthcare of California Partner Plan, Inc.	 	 	 
	 	 	 	 	 	 
	BY (Authorized Signature)

	 	DATE SIGNED (Do not type)	 	 	 	 
	 
	 	 	 	 	 	 
	 /s/ Stephen T. O’Dell
	 	4/25/07 	 	 	 	 
	 	 	 	 	 
	PRINTED NAME AND TITLE OF PERSON SIGNING
	 	 	 	 
	 
	 	 	 	 	 	 
	 Stephen T. O’Dell, President	 	 	 	 
	 	 	 	 	 
	ADDRESS
	 	 	 	 
	 One Golden Shore Drive	 	 	 	 
	 Long Beach, CA 90802	 	 	 	 
	 	 	 	 	 
	
STATE OF CALIFORNIA

	 	 	 	 
	 	 	 	 	 
	AGENCY NAME
	 	 	 	 
	 California Department of Health Services	 	 	 	 
	 	 	 	 	 	 
	BY (Authorized Signature)

	 	DATE SIGNED (Do not type)	 	 	 	 
	 
	 	 	 	 	 	 
	 /s/ Stan Rosenstein
	 	6/5/07 	 	 	 	 
	 	 	 	 	 
	PRINTED NAME AND TITLE OF PERSON SIGNING
	 	 	Exempt per:	 
	 
	 	 	 	 	o   Welfare and Institutions Code section 14087.55(c)
	 
	 Stan Rosenstein, Deputy Director, Medical Care Services	 	 	 
	 	 	 	 	 
	ADDRESS
	 	 	x   Welfare and Institutions Code section 14089.8(b)
	 
	 1501 Capitol Avenue, 6th Floor, MS 4000, PO Box 997413 
 Sacramento, CA 95899-7413	 	 	 
	 	 	 	 	 

 

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05-46130, A-01

	 	9.	 	External Quality Review Requirements

	 	D.	 	Quality Improvement Projects (QIPs)

	 	1)	 	For this Contract, Contractor is required to
conduct or participate in two Quality Improvement Projects (QIPs)
approved by DHS. If Contractor holds multiple managed care contracts
with DHS, Contractor is required to conduct or participate in two QIPs
for each contract.

	 	(a)	 	One QIP must be either an
internal quality improvement project (IQIP) or a small group
collaborative (SGC) facilitated by a health plan or DHS. The
SGC must include a minimum of two DHS health plan contractors
and must use standardized measures and clinical practice
guidelines. Additionally, all contracting health plans
participating in a SGC must agree to the same goal, timelines
for development, implementation, and measurement. Contracting
health plans participating in a SGC must also agree on the
nature of contracting health plan commitment of staff and other
resources to the collaborative project.
	 
	 	(b)	 	One QIP must be a DHS facilitated
Statewide Collaborative. If this Contract’s operation start
date is after the Statewide Collaborative has begun
implementation, upon DHS’ approval, Contractor may substitute a
SGC or an IQIP in place of the Statewide Collaborative.

	 	2)	 	If this Contract covers multiple counties,
Contractor must include all counties in a QIP unless otherwise approved
by DHS.
	 
	 	3)	 	Contractor shall comply with the MMCD All Plan
Letter 06010 and shall use the QIP reporting format designated therein
to request approval of proposed QIPs from DHS and to report at least
annually to DHS on the status of each QIP. The required documentation
for QIP proposals and for QIP status reports shall include but is not
limited to:

	 	a)	 	In-depth qualitative and
quantitative analysis of barriers and results.

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	 	b)	 	Evidence-based interventions and
best practices, when available, and system wide intervention,
when appropriate.
	 
	 	c)	 	Interventions that address health
disparities.
	 
	 	d)	 	Measurement of performance using
objective quality indicators.
	 
	 	e)	 	Strategies for sustaining and
spreading improvement beyond the duration of the QIP.

	4)	 	Exhibit A, Attachment 8 Provider Compensation Arrangements, Section 13 Non-Contracting
Emergency Service Providers, is amended to read:

	 	13.	 	Non-Contracting Emergency Service Providers

	 	A.	 	Contractor shall pay for Emergency Services received by a
Member from non-contracting providers. Payments to non-contracting providers
shall be for the treatment of the Emergency Medical Condition, including
Medically Necessary inpatient services rendered to a Member until the Member’s
condition has stabilized sufficiently to permit referral and transfer in
accordance with instructions from Contractor, or the Member is stabilized
sufficiently to permit discharge. The attending emergency physician, or the
provider treating the Member is responsible for determining when the Member is
sufficiently stabilized for transfer or discharge and that determination is binding on the Contractor. Emergency Services shall
not be subject to Prior Authorization by Contractor.
	 
	 	B.	 	At a minimum, Contractor must reimburse the non-contracting
emergency department and, if applicable, its affiliated providers for Physician
services at the lowest level of emergency department evaluation and management
CPT (Physician’s Current Procedural Terminology) codes, unless a higher level
is clearly supported by documentation, and for the facility fee and diagnostic
services such as laboratory and radiology.
	 
	 	C.	 	For all non-contracting providers, reimbursement by Contractor,
or by a subcontractor who is at risk for out-of-plan Emergency Services, for
properly documented claims for services rendered on or after January 1, 2007 by
a non-contracting provider pursuant to 

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	 	 	 	this provision shall be made in accordance with provision 5. Claims Processing, above, and 42 USC Section
1396u-2(b)(2)(D).

	 	D.	 	Contractor shall not refuse to cover reimbursement for
Emergency Services rendered by a non-contracting provider based on the
emergency room provider, hospital, or fiscal agent not notifying the Member’s
Primary Care Physician or Contractor of the Member’s screening and treatment
within 10 calendar days of presentation for emergency. Contractor shall not
limit what constitutes an Emergency Medical Condition solely on the basis of
lists of diagnoses or symptoms.
	 
	 	E.	 	In accordance with California Code of Regulations, Title 28,
Section 1300.71.4, Contractor shall approve or disapprove a request for
post-stabilization inpatient services made by a non-contracting provider on
behalf of a Member within 30 minutes of the request. If Contractor fails to
approve or disapprove authorization within the required timeframe, the
authorization will be deemed approved. Contractor is financially responsible
for post-stabilization service payment as provided in subprovision C above.
	 
	 	F.	 	Disputed Emergency Services claims may be submitted to DHS,
Office of Administrative Hearings and Appeals, 1029 J Street, Suite 200,
Sacramento, California, 95814 for resolution under the provisions of Welfare
and Institutions Code Section 14454 and California Code of Regulations, Title 22, Section 53620 et. seq., except
Section 53698. Contractor agrees to abide by the findings of DHS in such
cases, to promptly reimburse the non-contracting provider within 30 calendar
days of the effective date of a decision that Contractor is liable for
payment of a claim and to provide proof of reimbursement in such form as the
DHS Director may require. Failure to reimburse the non-contracting provider
and provide proof of reimbursement to DHS within 30 calendar days shall
result in liability offsets in accordance with Welfare and Institutions Code
Sections 14454(c) and 14115.5, and California Code of Regulations, Title 22,
Section 53702.

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	5)	 	Exhibit A, Attachment 9 Access and Availability, Section 12 Cultural and Linguistic Program,
is amended to read:

	 	12.	 	Cultural and Linguistic Program
	 
	 	 	 	Contractor shall have a Cultural and Linguistic Services Program that monitors,
evaluates, and takes effective action to address any needed improvement in the
delivery of culturally and linguistically appropriate services. Contractor shall
review and update their cultural and linguistic services consistent with the group
needs assessment requirements stipulated below.

	 	A.	 	Written Description
	 
	 	 	 	Contractor shall implement and maintain a written description of its
Cultural and Linguistic Services Program, which shall include at minimum the
following:

	 	1)	 	An organizational commitment to deliver
culturally and linguistically appropriate health care services.
	 
	 	2)	 	Goals and objectives.
	 
	 	3)	 	A timetable for implementation and
accomplishment of the goals and objectives.
	 
	 	4)	 	An organizational chart showing the key staff
persons with overall responsibility for cultural and linguistic
services and activities. A narrative shall explain the chart and
describe the oversight and direction to the Community Advisory
Committee, provisions for support staff, and reporting relationships.
Qualifications of staff, including appropriate education, experience
and training shall also be described.
	 
	 	5)	 	Standards and Performance requirements for the
delivery of culturally and linguistically appropriate health care
services.

	 	B.	 	Linguistic Capability of Employees
	 
	 	 	 	Contractor shall assess, identify and track the linguistic capability of
interpreters or bilingual employees and contracted staff (clinical and
non-clinical).

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	 	C.	 	Group Needs Assessment (GNA)
	 
	 	 	 	Contractor shall conduct group needs assessments as specified below, to
identify the health education and cultural and linguistic needs of its
Members; and utilize the findings for continuous development and improvement
of contractually required health education and cultural linguistic programs
and services.

	 	1)	 	Contractor shall conduct a GNA and submit a GNA
Summary to DHS every five years. Contractor shall conduct an initial
GNA within 12 months from the commencement of the Operations Period
unless within the last five years, Contractor has conducted a GNA and
submitted a GNA Summary to DHS for this Service Area, in which case,
Contractor will have until the end of the five-year term to conduct its
next GNA.
	 
	 	2)	 	Contractor shall submit a GNA Summary Report to
DHS at the completion of each GNA. The summary report must include:

	 	a)	 	The objectives; methodology; data
sources; survey instruments; findings and conclusions; program
and policy implications; and references contained in the GNA.
	 
	 	b)	 	The findings and conclusions must
include the following information for Medi-Cal plan Members: 1)
demographic profile; 2) related health risks, problems and
conditions; 3) related knowledge, attitudes and practices
including cultural beliefs and practices; 4) perceived health
education needs including learning needs, preferred methods of
learning and literacy level; 5) culturally competent community
resources.

	 	3)	 	Contractor shall demonstrate that GNA and
summary report findings and conclusions in item 2(b) above are utilized
for continuous development of its health education and cultural and
linguistic services program. Contractor must maintain documentation of
program priorities, target populations and program goals/objectives as
they are revised to meet the identified and changing needs of the
Member population.

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	 	4)	 	Contractor shall annually update the GNA
summary report including a current update on the information required
in 2(b) above. The GNA summary report updates shall be maintain and
available for DHS review.

	 	D.	 	The results of the GNA shall be considered in the development
of any Marketing materials prepared by the Contractor.
	 
	 	E.	 	Cultural Competency Training
	 
	 	 	 	Contractor shall provide cultural competency, sensitivity, or diversity
training for staff, providers and subcontractors at key points of contact.
The training shall cover information about the identified cultural groups in
the Contractor’s Service Areas, such as the groups’ beliefs about illness and health; methods of interacting with
providers and the health care structure; traditional home remedies that may
impact what the provider is trying to do to treat the patient; and language
and literacy needs.
	 
	 	F.	 	Program Implementation and Evaluation
	 
	 	 	 	Contractor shall develop and implement policies and procedures for assessing
the performance of individuals who provide linguistic services as well as
for overall monitoring and evaluation of the Cultural and Linguistic
Services Program.

	6)	 	Exhibit A, Attachment 10 Scope of Services, Section 1 Covered Services, is amended to read:

	 	1.	 	Covered Services
	 
	 	 	 	Contractor shall provide or arrange for all Medically Necessary Covered Services for
Members. Covered Services are those services set forth in Title 22, CCR, Chapter 3,
Article 4, beginning with Section 51301, and Title 17, CCR, Division 1, Chapter 4,
Subchapter 13, beginning with Section 6840, unless otherwise specifically excluded
under the terms of this Contract.
	 
	 	 	 	Except as set forth in Attachment 3.1.B.1 (effective 1/1/2006) of the California
Medicaid State Plan or as otherwise authorized by Welfare & Institutions Code
Section 14133.23, effective January 1, 2006, drug benefits for full-benefit dual
eligible beneficiaries who are eligible for drug benefits under Part D of Title
XVIII of the Social Security Act (42 USC 

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	 	 	 	Section 1395w-101 et seq) are not a Covered Service under this Contract. Consequently, effective January 1, 2006, the
capitation rates shall not include reimbursement for such drug benefits and existing
capitation rates shall be adjusted accordingly, even if the adjustment results in a
change of less than one percent of cost to Contractor. Additionally, Contractor
shall comply with all applicable provisions of the Medicare Prescription Drug
Improvement and Modernization Act of 2003, 42 USC 1395(x) et seq.

	7)	 	Exhibit A, Attachment 10-B, is amended to read:
	 
	 	 	EXCLUDED DRUGS FOR THE TREATMENT OF HUMAN IMMUNODEFICIENCY VIRUS (HIV) AND ACQUIRED
IMMUNODEFICIENCY SYNDROME (AIDS)
	 
	 	 	Generic Name

Abacavir Sulfate (Ziagen)

Abacavir /Lamivudine (Epzicom)

Amprenavir (Agenerase) Oral

Amprenavir (Agenerase) Tabs/Caps

Atazanavir Sulfate (Reyataz)

Delavirdine Mesylate (Rescriptor)

Efavirenz (Sustiva)

Emtricitabine (Emtriva)

Enfuvirtide (Fuzeon)

Fosamprenavir (Lexiva)

Indinavir Sulfate (Crixivan)

Lamivudine (Epivir)

Lopinavir/Ritonavir (Kaletra)

Nelfinavir Mesylate (Viracept)

Nevirapine (Viramune)

Ritonavir (Norvir)

Saquinavir (Fortovase)

Saquinavir Mesylate (Invirase)

Stavudine (Zirit)

Tenofovir Disoproxil Fumarate (Viread)

Tenofovir Disoproxil-Emtricitabine (Trudada)

Tipranavir

Zidovudine/Lamivudine (Combivir)

Zidovudine/Lamivudine/Abac Sulf (Trizivir)

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	8)	 	Exhibit A, Attachment 11 Case Management and Coordination of Care, Section 6 Alcohol and
Substance Abuse Treatment Services, is amended to read:

	 	6.	 	Alcohol and Substance Abuse Treatment Services
	 
	 	 	 	Alcohol and substance abuse treatment services available through Drug Medi-Cal
Substance Abuse Services defined in Title 22, CCR, Section 51341.1, and outpatient
heroin detoxification services defined in Title 22, CCR, Section 51328 are excluded
from this Contract.
	 
	 	 	 	These excluded services include all drugs used for the treatment of alcohol and
substance abuse covered by State of California Department of Alcohol and Drug
Programs (ADP) Drug Medi-Cal Substance Abuse Services as well as the drugs listed in
Exhibit A, Attachment 10-C not currently covered by ADP, but reimbursed through the
Medi-Cal FFS program.
	 
	 	 	 	Contractor shall identify individuals requiring alcohol and or substance abuse
treatment services and arrange for their referral to the ADP, including outpatient
heroin detoxification providers, for appropriate services. Contractor shall assist
Members in locating available treatment service sites. To the extent that treatment
slots are not available in the ADP within the Contractor’s Service Area, the
Contractor shall pursue placement outside the area. Contractor shall continue to
cover and ensure the provision of primary care and other services unrelated to the
alcohol and substance abuse treatment and coordinate services between the primary
care providers and the treatment programs.

	9)	 	Exhibit A, Attachment 11 Case Management and Coordination of Care, Section 19 Erectile
Dysfunction (ED) Drugs and Other ED Therapies, is added:

	 	19.	 	Erectile Dysfunction (ED) Drugs and Other ED Therapies
	 
	 	 	 	Erectile dysfunction drugs and other ED therapies are excluded from this Contract.
These excluded drugs include all drugs used for the treatment of ED that are listed
in Exhibit A, Attachment 10-D (consisting of one page). The drugs listed in Exhibit
A, Attachment 10-D are covered by the Medi-Cal Fee-For-Service program.
	 
	 	 	 	Contractor shall identify individuals requiring ED drugs or ED therapies and arrange
for their referral for appropriate services. Contractor shall

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	 	 	 	assist Members in locating available treatment service sites. Contractor shall continue to cover and
ensure the provision of primary care and other services unrelated to the ED drugs or ED therapies and coordinate services between
the primary care providers and the treatment programs.

	10)	 	Exhibit A, Attachment 14 Member Grievance System, Section 3 Grievance Log and Quarterly
Grievance Report, is amended to read:

	 	3.	 	Grievance Log and Quarterly Grievance Report

	 	B.	 	Contractor shall submit the quarterly grievance report for
Medi-Cal Members only in the form that is required by and submitted to the
Department of Managed Health Care (DMHC) as set forth in Title 28, CCR, Section
1300.68(f).

	 	1)	 	In addition to the types or nature of
grievances listed in Title 28, CCR, Section 1300.68(f)(2)((D), the
report shall also include, but not be limited to, timely assignments to
a provider, issues related to cultural and linguistic sensitivity, and
difficulty with accessing specialists.
	 
	 	2)	 	For the Medi-Cal category of the report,
provide the following additional information: the average time it took
for the plan to respond to all Member grievances; a listing of the zip
codes, ethnicity, gender and primary language of the Members that filed
grievances; and the total number of grievances in which the
outcome/resolution was not in the Member’s favor.

	11)	 	Exhibit A, Attachment 16 Enrollments and Disenrollments, Section 2 Enrollment, is amended to
read:

	 	2.	 	Enrollment

	 	E.	 	Enrollment Capacity (only to specific contractors that choose
limitations)
	 
	 	 	 	All Eligible Beneficiaries shall be accepted by Contractor up to the limits
of Contractor’s Enrollment capacity approved by DHS. Contractor’s maximum enrollment capacity under this Contract shall not
exceed 207,000.

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	12)	 	Exhibit B, Budget Detail and Payment Provisions, Section 1 Budget Contingency Clause, is
amended to read:

	 	1.	 	Budget Contingency Clause

	 	A.	 	It is mutually agreed that if the Budget Act of the current
year and/or any subsequent years covered under this Contract does not
appropriate sufficient funds for the Medi-Cal program, this Contract shall be
of no further force and effect. In this event, the State shall have no
liability to pay any funds whatsoever to Contractor or to furnish any other
considerations under this Contract and Contractor shall not be obligated to
perform any provisions of this Contract.
	 
	 	 	 	All payments and rate adjustments are subject to appropriations of Medi-Cal
funds by the Legislature and may include Department of Finance approval.
Further, all payments are subject to the availability of Federal
congressional appropriation of funds.
	 
	 	B.	 	If funding for any fiscal year is reduced or deleted by the
Budget Act specifically for purposes of the Medi-Cal Geographic Managed Care
Program, the State shall have the option to either cancel this Contract with no
liability occurring to the State, or offer an amendment to Contractor to
reflect the reduced amount.

	13)	 	Exhibit B, Budget Detail and Payment Provisions, Section 2 Amounts Payable, is amended to
read:

	 	2.	 	Amounts Payable
	 
	 	 	 	The amounts payable under this Contract shall not exceed:

	 	A.	 	$42,040,000 for the 2005-06 Fiscal Year ending June 30, 2006.
	 
	 	B.	 	$87,840,900 for the 2006-07 Fiscal Year ending June 30, 2007.
	 
	 	C.	 	$92,023,800 for the 2007-08 Fiscal Year ending June 30, 2008.
	 
	 	D.	 	$46,011,900 for the 2008-09 Fiscal Year ending June 30, 2009.

	 	 	 	The maximum amount payable for this Contract shall not exceed $267,916,600.

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	14)	 	Exhibit B, Budget Detail and Payment Provisions, Section 4 Capitation Rates, is amended to
read:

	 	4.	 	Capitation Rates

	 	A.	 	DHS shall remit to Contractor a capitation payment each month
for each Medi-Cal Member that appears on the approved list of Members supplied
to Contractor by DHS. The capitation rate shall be the amount specified below.
The payment period for health care services shall commence on the first day of
the Operations Period. Capitation payments shall be made in accordance with
the following schedule of capitation payment rates at the end of the month for
the month of service:

	 	 	 	 	 
	From January 1, 2006 through June 30, 2006:	 	San Diego
	Groups	 	Aid Codes	 	Rate
	Family	 	01, 02, 03, 04, 08, 0A, 30,
    32, 33, 34, 35, 38, 39, 3A,
    3C, 3E, 3G, 3H, 3L, 3M, 3N,
    3P, 3R, 3U, 3W*, 40, 42, 45,
    47, 4A, 4C, 4F, 4G, 4K, 4M,
    54, 59, 5K, 5X, 72, 7A, 7J,
    7X, 82, 8P, 8R
	 	$**
	 
	 	 	 	 
	Disabled/
Medi-Cal Only	 	20, 24, 26, 2E, 36, 60, 64,
    66, 6A, 6C, 6E, 6H, 6J, 6N,
    6P, 6V
	 	$**
	 
	 	 	 	 
	Aged/
Medi-Cal Only	 	10, 14, 16, 1E, 1H
	 	$**
	 
	 	 	 	 
	Adult	 	86	 	$**
	 
	 	 	 	 
	Breast and
Cervical Cancer

Treatment

Program 

(BCCTP)	 	0N, 0P	 	$**
	 
	 	 	 	 
	Disabled/
Dual Eligible	 	20, 24, 26, 2E, 36, 60, 64,
    66, 6A, 6C, 6E, 6H, 6J, 6N,
    6P, 6V	 	$**
	 
	 	 	 	 
	Aged/
Dual Eligible	 	10, 14, 16, 1E, 1H	 	$**
	 
	 	 	 	 

 

			
	*	 	The effective date of the addition of Aid Code 3W is January 1, 2006.

			
	**	 	In accordance with the requirements of California Government Code Section 6254(q),
confidential treatment has been requested for the redacted rate information pursuant to Rule 24b-2 of the Securities Exchange
Act of 1934. The redacted rate information has been filed separately with the Commission.

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	From July 1, 2006 through June 30, 2007:	 	San Diego
	Groups	 	Aid Codes	 	Rate
	Family	 	01, 02, 03, 04, 08, 0A, 30,
    32, 33, 34, 35, 38, 39, 3A,
    3C, 3E, 3G, 3H, 3L, 3M, 3N,
    3P, 3R, 3U, 3W, 40, 42, 45,
    47, 4A, 4C, 4F, 4G, 4K, 4M,
    54, 59, 5K, 5X, 72, 7A, 7J,
    7X, 82, 8P, 8R	 	$**
	 
	 	 	 	 
	Disabled/
Medi-Cal Only	 	20, 24, 26, 2E, 36, 60, 64,
    66, 6A, 6C, 6E, 6H, 6J, 6N,
    6P, 6V	 	$**
	 
	 	 	 	 
	Aged/
Medi-Cal Only	 	10, 14, 16, 1E, 1H	 	$**
	 
	 	 	 	 
	Adult	 	86	 	$**
	 
	 	 	 	 
	Breast and
Cervical Cancer

Treatment

Program

(BCCTP)	 	0N, 0P	 	$**
	 
	 	 	 	 
	Disabled/
Dual Eligible	 	20, 24, 26, 2E, 36, 60, 64,
    66, 6A, 6C, 6E, 6H, 6J, 6N,
    6P, 6V	 	$**
	 
	 	 	 	 
	Aged/
Dual Eligible	 	10, 14, 16, 1E, 1H	 	$**
	 
	 	 	 	 

 

			
	**	 	In accordance with the requirements of California Government Code Section 6254(q),
confidential treatment has been requested for the redacted rate information pursuant to Rule 24b-2 of the Securities Exchange
Act of 1934. The redacted rate information has been filed separately with the Commission.

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	Commencing July 1, 2007:	 	San Diego
	Groups	 	Aid Codes	 	Rate
	Family	 	01, 02, 03, 04, 08, 0A, 30,
    32, 33, 34, 35, 38, 39, 3A,
    3C, 3E, 3G, 3H, 3L, 3M, 3N,
    3P, 3R, 3U, 3W, 40, 42, 45,
    47, 4A, 4C, 4F, 4G, 4K, 4M,
    54, 59, 5K, 5X, 72, 7A, 7J,
    7X, 82, 8P, 8R	 	$**
	 
	 	 	 	 
	Disabled/
Medi-Cal Only	 	20, 24, 26, 2E, 36, 60, 64,
    66, 6A, 6C, 6E, 6H, 6J, 6N,
    6P, 6V	 	$**
	 
	 	 	 	 
	Aged/
Medi-Cal Only	 	10, 14, 16, 1E, 1H	 	$**
	 
	 	 	 	 
	Adult	 	86	 	$**
	 
	 	 	 	 
	Breast and
Cervical Cancer

Treatment

Program

(BCCTP)	 	0N, 0P	 	$**
	 
	 	 	 	 
	Disabled/
Dual Eligible	 	20, 24, 26, 2E, 36, 60, 64,
    66, 6A, 6C, 6E, 6H, 6J, 6N,
    6P, 6V	 	$**
	 
	 	 	 	 
	Aged/
Dual Eligible	 	10, 14, 16, 1E, 1H	 	$**

	15)	 	Exhibit B, Budget Detail and Payment Provisions, Section 6 Negotiation/ Determination of
Rates, is amended to read:

	 	6.	 	Negotiation/Determination of Rates

	 	A.	 	The capitation rates included in this Contract result from
voluntary negotiations between the Contractor and California Medical Assistance
Commission (CMAC). CMAC negotiates rates from an actuarial based range as
determined by DHS actuaries.
	 
	 	B.	 	Subject to subprovision A above, CMAC and Contractor for each
rate year shall review and renegotiate the capitation rates to determine
whether such rates should be increased, decreased, or remain the same. If it
is determined by CMAC and Contractor that the capitation rates should be
increased or decreased, such increase or decrease shall be effectuated through
an amendment to this Contract in accordance with the provisions of Exhibit E,
Attachment 2, provision 4, and subject to provision 8 of this Exhibit.

 

			
	**	 	In accordance with the requirements of California Government Code Section 6254(q),
confidential treatment has been requested for the redacted rate information pursuant to Rule 24b-2 of the Securities Exchange
Act of 1934. The redacted rate information has been filed separately with the Commission.

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	16)	 	Exhibit B, Budget Detail and Payment Provisions, Section 7 Rate Year and Rate Determination
Date, is amended to read:

	 	7.	 	Rate Year and Rate Determination Date
	 
	 	 	 	The rate year for this Contract is July 1 through June 30, and this Contract’s rate
determination date is July 1 of each subsequent year.

	17)	 	Exhibit B, Budget Detail and Payment Provisions, Section 8 Implementation of Rate Amendments,
is amended to read:

	 	8.	 	Implementation of Rate Amendments

	 	A.	 	Upon final approval of a fully executed, negotiated rate
amendment, DHS will implement the rate adjustment(s) to commence on the
effective date(s) as specified in the approved rate amendment.
	 
	 	B.	 	In the event there is a delay in the determination between CMAC
and Contractor under Provision 6 to modify the rates for a particular rate year
or there is a delay in DHS’ implementation of a negotiated rate amendment
approved by CMAC, the payment to Contractor shall continue at the rates then in
effect. Those continued payments shall constitute interim payments until such
time as the rate amendment, if any, is approved by CMAC and DHS’ implementation
of the new rate(s) occurs. DHS shall make adjustments for those months for
which interim payments were made as follows:

	 	1)	 	Any underpayment by the State shall be paid to
Contractor within 60 calendar days after final approval of the fully
executed rate amendment.
	 
	 	2)	 	Any overpayment to Contractor shall be
recaptured by the State’s withholding the amount due from Contractor’s
next capitation check. If the amount to be withheld from that
capitation check exceeds 25 percent of the capitation payment for that
month, amounts up to 25 percent shall be
withheld from successive capitation payments until the overpayment is
fully recovered by the State.

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	18)	 	Exhibit E, Additional Provisions, Section 1 Additional Incorporated Exhibits, is amended to
read:

	 	1.	 	Additional Incorporated Exhibits
	 
	 	 	 	The following additional exhibits are attached, incorporated herein, and made a part
hereof by this reference:

	 	 	 	 	 
	1) Exhibit A

	 	Scope of Work
	 	2 pages
	 

	 	Attachment 1 — Organization and Administration of the Plan
	 	4 pages
	 

	 	Attachment 2 — Financial Information
	 	4 pages
	 

	 	Attachment 3 — Management Information System
	 	2 pages
	 

	 	Attachment 4 — Quality Improvement System
	 	12 pages
	 

	 	Attachment 5 — Utilization Management
	 	4 pages
	 

	 	Attachment 6 — Provider Network
	 	8 pages
	 

	 	Attachment 7 — Provider Relations
	 	2 pages
	 

	 	Attachment 8 — Provider Compensation Arrangements
	 	6 pages
	 

	 	Attachment 9 — Access and Availability
	 	11 pages
	 

	 	Attachment 10 — Scope of Services
	 	19 pages
	 

	 	Attachment 11 — Case Management and Coordination of Care
	 	13 pages
	 

	 	Attachment 12 — Local Health Department Coordination
	 	3 pages
	 

	 	Attachment 13 — Member Services
	 	11 pages
	 

	 	Attachment 14 — Member Grievance System
	 	3 pages
	 

	 	Attachment 15 — Marketing
	 	5 pages
	 

	 	Attachment 16 — Enrollments and Disenrollments
	 	5 pages
	 

	 	Attachment 17 — Reporting Requirements
	 	2 pages
	 

	 	Attachment 18 — Implementation Plan and Deliverables
	 	15 pages
	2) Exhibit B

	 	Budget Detail and Payment Provisions
	 	8 pages
	3) Exhibit
C*

	 	General Terms and Conditions:
Notwithstanding provisions 15 and 18, which do not apply to this Contract.
	 	GTC 306*
	 

	 	Attachment 1 — Certifications:
Notwithstanding provisions 4, 5, and 7, which do not apply to this Contract.
	 	CCC-1005*

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Molina Healthcare of California Partner Plan, Inc.

05-46130, A-01

	 	 	 	 	 
	 

	 	Attachment 2 — Doing Business with the State of California:
Notwithstanding provisions 4 and 6, which do not apply to this Contract.
	 	CCC-1005*
	4) Exhibit
D(F)

	 	Special Terms and Conditions:
Notwithstanding provisions 2, 3, 4, 5, 6, 7, 10, 11, 12, 14, 15, 16,
18, 22, 25, 27, 29, 30, and 31, which do not apply to this Contract.
	 	10 pages
	5) Exhibit E

	 	Additional Provisions
	 	3 pages
	 

	 	Attachment 1 — Definitions
	 	17 pages
	 

	 	Attachment 2 — Program Terms and Conditions
	 	24 pages
	 

	 	Attachment 3 — Duties of the State
	 	5 pages
	6) Exhibit F

	 	Contractor’s Release
	 	1 page
	7) Exhibit G

	 	Health Insurance Portability and Accountability Act
	 	5 pages

Items shown above with an Asterisk (*), are hereby incorporated by reference
and made part of this agreement as if attached hereto. These documents can be
viewed at http://www.dgs.ca.gov/contracts.

	19)	 	Exhibit E, Attachment 1 Definitions, Section 34 Eligible Beneficiary, is amended to read:

	 	34.	 	Eligible Beneficiary means any Medi-Cal beneficiary who is residing in the
Contractor’s Service Area with one of the following aid codes:
	 
	 	 	 	Mandatory Aid Codes:
	 
	 	 	 	Family - 01, 02, 08, 0A, 30, 32, 33, 34, 35, 38, 39, 3A, 3C, 3E, 3G, 3H, 3L, 3M, 3N,
3P, 3R, 3U, 3W, 47, 54, 59, 5X, 72, 7A, 7X, 82, 8P, 8R
	 
	 	 	 	Non-Mandatory Aid Codes:
	 
	 	 	 	Family - 03, 04, 40, 42, 45, 4A, 4C, 4F, 4G, 4K, 4M, 5K, 7J
	 
	 	 	 	Aged — 10, 14, 16, 1E, 1H
	 
	 	 	 	Disabled - 20, 24, 26, 2E, 36, 60, 64, 66, 6A, 6C, 6E, 6H, 6J, 6N, 6P, 6V
	 
	 	 	 	Adult — 86
	 
	 	 	 	Breast and Cervical Cancer Treatment Program (BCCTP) - 0N, 0P

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	 	 	 	An Eligible Beneficiary may continue to be a Member following any redetermination of
Medi-Cal eligibility that determines that the individual is eligible for, and the
individual thereafter enrolls in, the BCCTP.
	 
	 	 	 	The following exclusions apply to all the above:

	 	A.	 	Individuals who have been approved by the Medi-Cal Field Office
or the California Children Services Program for any major organ transplant that
is a Medi-Cal FFS benefit except kidney transplants.
	 
	 	B.	 	Individuals who elect and are accepted to participate in the
following Medi-Cal waiver programs: In-Home Medical Care Waiver, the Nursing
Facility Subacute Waiver, and the Nursing Facility A/B Waiver.
	 
	 	C.	 	Individuals determined by the Medi-Cal Field Office to be in
need of long term care and residing in a Skilled Nursing Facility for 30
calendar days past the month of admission.
	 
	 	D.	 	Individuals who have commercial or Medicare HMO coverage,
unless the Medicare HMO is a provider under this Contract and DHS has agreed,
as a term of the HMO’s contract, that these individuals may be enrolled.
Individuals with Medicare fee-for-service coverage are not excluded from
enrolling under this Contract.

	20)	 	Exhibit E, Attachment 2 Program Terms and Conditions, Section 13 Term, is amended to read:

	 	13.	 	Term
	 
	 	 	 	The Contract will become effective January 1, 2006, and will continue in full force
and effect through December 31, 2008, subject to the provisions of Exhibit B,
provision 1. Budget Contingency Clause and Exhibit D(F), provision 9. Federal
Contract Funds.
	 
	 	 	 	The term of the Contract consists of the following three periods: 1) The
Implementation Period, which ended as of the effective date of this Contract; 2) The
Operations Period shall commence at the conclusion of the Implementation Period,
subject to DHS acceptance of the Contractor’s readiness to begin the Operations
Period. The term of the Operations
Period is subject to the termination provisions of provision 16. Termination, and
provision 18. Sanctions, and subject to the limitation

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	 	 	 	provisions of Exhibit B, provision 1. Budget Contingency Clause; and 3) The Phaseout
Period shall extend for six (6) months from the end of the Operations Period,
subject to provision 15. Contract Extension, in which case the Phaseout Period shall
apply to the six (6) month period beginning with the first day after the end of the
Operations Period, as extended.

	21)	 	Exhibit E, Attachment 2 Program Terms and Conditions, Section 34 Confidential Contract Terms,
is added:

	 	34.	 	Confidential Contract Terms
	 
	 	 	 	The terms of this Contract are confidential and may be disclosed by the Contractor
or its providers and subcontractors only in accordance with the disclosure time
limits set forth in Government Code section 6254(q).

	22)	 	Exhibit E, Attachment 2 Program Terms and Conditions, Section 35 Federal False Claim Act
Compliance, is added:

	 	35.	 	Federal False Claim Act Compliance
	 
	 	 	 	Effective January 1, 2007, Contractor shall comply with 42 USC Section 1396a(a)(68),
Employee Education About False Claims Recovery, as a condition of receiving payments
under this Contract. Upon request by DHS, Contractor shall demonstrate compliance
with this provision, which may include providing DHS with copies of Contractor’s
applicable written policies and procedures and any relevant employee handbook
excerpts.

	23)	 	All rights, duties, obligations and liabilities of the parties hereto otherwise remain
unchanged.

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ATTACHMENT 10-C

EXCLUDED DRUGS FOR ALCOHOL AND HEROIN (OPIOID) DEPENDENCE TREATMENT

Generic Name

Buprenorphine HCL

Buprenorphine HCL and Naloxone HCL dihydrate

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ATTACHMENT 10-D

EXCLUDED DRUGS FOR THE TREATMENT OF

ERECTILE DYSFUNCTION (ED)

Generic Name

Alprostadil

Papaverine Injection

Phentolamine Mesylate

Sildenafil Citrate 25mg

Sildenafil Citrate 50mg

Sildenafil Citrate 100mg

Tadalafil

Vardenafil HCL

Yohimbine HCL

Yohimbine HCL/Strychnine

Yohimbine HCL/Zinc Sulfate

21EX-10.1 Employment Agreement

Exhibit 10.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of June 11,
2008 by and between Securus Technologies, Inc., a Delaware corporation (the “Corporation”),
and Richard A. Smith (the “Executive”).

RECITALS

     WHEREAS, the Corporation desires to employ the Executive in the capacity, hereinafter stated
(referred to in Section 1 below), and the Executive desires to become employed by the Corporation
in such capacity for the period and on the terms and conditions set forth herein; and

     WHEREAS, the Executive and the Corporation each acknowledge and agree that the terms and
conditions of employment set forth below are reasonable and necessary in order to protect the
legitimate business interests of the Corporation and to compensate the Executive for information,
knowledge and experience brought to or gained from the Corporation.

     NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth below,
the parties hereby agree as follows:

     1. EMPLOYMENT / NOMINATION. Effective on June 23, 2008 (the “Effective Date”) the
Corporation hereby agrees to employ the Executive as its Chairman and Chief Executive Officer, and
the Executive hereby accepts such employment, on the terms and conditions hereinafter set forth.
So long as the Executive continues to be employed by the Corporation, the Corporation agrees to
cause the Executive to be nominated for election as a member of the Board of Directors (the
“Board”) of the Corporation. The Executive’s
appointment as Chairman shall be on January 6, 2009.

     2. EMPLOYMENT PERIOD. The period of employment of the Executive by the Corporation hereunder
(the “Employment Period”) shall commence on the Effective Date, and the Employment Period
shall terminate on the earlier of (i) July 1, 2012 (the “Termination Date”) or (ii) the
date Executive’s employment hereunder is earlier terminated in accordance with Section 5 of this
Agreement.

     3. POSITION AND DUTIES. The Executive shall devote substantially all of his business time,
attention, skills and energies during the Employment Period to the business of the Corporation,
performing such specific functions on behalf of the Corporation that are generally incident to and
consistent with the Executive’s position as the Board may direct. The Executive shall hold the
position of President and Chief Executive Officer of the Corporation and shall report directly to
the Board and have all powers and duties which are associated with such position in the industries
in which the Corporation is engaged. The Executive shall not, without prior written consent from
the Board (which consent shall not be unreasonably withheld):

          (a) serve as or be a consultant to or employee, officer, agent or director of any corporation,
partnership or other entity other than the Corporation and/or its subsidiaries (other than civic,
charitable, or other public service organizations); or

1

 

          (b) have more than a five percent (5%) ownership interest in any enterprise other than the
Corporation if such ownership interest would have a material adverse effect upon the ability of the
Executive to perform his duties hereunder.

Nothing herein shall preclude the Executive from performing charity work and managing his own
personal investments and affairs so long as such activities do not materially interfere with the
performance of the Executive’s duties hereunder.

     4. COMPENSATION AND RELATED MATTERS.

          (a) BASE SALARY. During the Employment Period, the Corporation shall pay the Executive a base
salary at the rate specified in Exhibit A (the “Base Salary”), which Base Salary
shall be paid in equal installments in accordance with the Corporation’s payroll policy, subject to
Section 5 below.

          (b) BONUS. During the Employment Period, the Executive shall receive the bonuses as specified
in Exhibit A.

          (c) RESTRICTED SHARES. The Executive shall be awarded restricted shares of the Corporation’s
Class B Common Stock, no par value, per share (the “Class B Stock”), of the Corporation as
specified in Exhibit A.

          (d) OTHER BENEFITS. During the Employment Period, the Executive shall be entitled to and
eligible for group health insurance coverage and any other fringe benefits in accordance with
policies applicable generally to salaried employees of the Corporation. The Executive shall also
be entitled to five (5) weeks paid vacation and other paid absences during the Employment Period in
accordance with policies applicable generally to salaried employees of the Corporation. The
Executive shall be reimbursed for reasonable expenses incurred in connection with and directly
related to the business of the Corporation and the performance of his duties hereunder in
accordance with the policies established by the Corporation for reimbursement of such expenses.

          (e) MOVING EXPENSE REIMBURSEMENT. The Corporation shall reimburse the Executive up to $50,000
for reasonable documented expenses to relocate himself and his immediate family to Dallas, Texas,
which shall be paid as soon as practicable following the submission of appropriate documentation,
but no later than the end of the year following the year in which the expenses are incurred.

          (f) LIFE INSURANCE PREMIUMS. During the Employment Period, the Corporation shall reimburse
the Executive up to $3,500 annually for premiums of an insurance policy on the life of the
Executive, which shall be paid as soon as practicable following the submission of appropriate
documentation, but no later than the end of the year following the year in which the expenses are
incurred.

          (g) BI-ANNUAL PHYSICAL. The Corporation shall pay up to $10,000 bi-annually of the direct
costs of an executive physical examination at the Mayo Clinic, which shall be paid as soon as
practicable following the submission of appropriate documentation, but no later than the end of the
year following the year in which the expenses are incurred.

2

 

          (h) HOME AND WIRELESS INTERNET. The Executive shall be entitled to receive an expense
reimbursement of up to $150 per month for home and wireless internet services during the Employment
Period, which shall be paid as soon as practicable following the submission of appropriate
documentation, but no later than the end of the year following the year in which the expenses are
incurred.

     5. TERMINATION.

          (a) TERMINATION FOR CAUSE. Prior to the end of the Employment Period, the Corporation may
terminate the Executive’s employment under this Agreement for “Cause.” For purposes of this
Agreement, the Corporation shall have Cause to terminate the Executive’s employment hereunder in
the event that: (i) the Executive becomes habitually addicted to alcohol or illegal drugs and such
addiction materially and adversely affects (A) the performance of the Executive’s obligations under
this Agreement or (B) the Corporation; (ii) the Executive discloses confidential information in
violation of paragraph 6(a) and such disclosure has a material adverse effect on the Corporation,
(iii) the Executive engages in competition in violation of paragraph 6(d) or 6(e); (iv) the
Executive has committed any act of willful misconduct, embezzlement or wrongful conversion of money
or property belonging to the Corporation or its subsidiaries, or any act of fraud against the
Corporation or its subsidiaries or in the performance of his duties for the Corporation that
adversely affects the business of the Corporation; (v) the Executive is convicted of a felony at
any time hereafter, which is reasonably likely to either (A) have an adverse effect on the
Corporation or its business or (B) result in the incarceration of the Executive; (vi) the Executive
has failed to comply with any lawful (as determined by the Corporation’s outside counsel) and
material directive of the Board related to and consistent with his employment duties promptly
following notice to the Executive of such failure; (vii) the Executive has willfully failed to
substantially perform his duties hereunder (other than any such failure resulting from the
Executive’s death or health), and such failure continues for more than 15 days after written notice
thereof to the Executive; or (viii) the Executive has been convicted of any criminal act of
egregious misconduct involving serious moral turpitude to the extent that the Executive’s
credibility and reputation no longer conform to the standard of the Corporation’s executives. Any
determination of whether the Executive has failed to substantially perform his duties shall not be
based solely on the performance or financial condition of the Corporation. The Executive will be
furnished an opportunity upon at least 15 days prior written notice to state his case to the Board
with counsel prior to any termination for “Cause.” If the Executive’s employment is terminated by
the Corporation for Cause or the Executive voluntarily resigns other than as a result of
Constructive Discharge, the Corporation shall pay the Executive any Base Salary accrued or owing to
the Executive hereunder through the date of termination and shall reimburse the Executive for any
expenses incurred prior to the date of termination and otherwise reimbursable pursuant to Section
4(e), less any amounts owed by the Executive to the Corporation, and the Corporation shall have no
further liability or obligation to the Executive hereunder or in respect of his employment. Any
amount due under this Section 5(a) shall be paid in a lump sum within 30 days after the end of the
Employment Period.

3

 

          (b) TERMINATION WITHOUT CAUSE. Prior to the end of the Employment Period, (i) the Corporation
may terminate the Executive’s employment under this
Agreement for a reason other than Cause or no reason whatsoever (i.e., without Cause); or (ii)
the Executive may terminate his employment under this Agreement due to Constructive Discharge (as
defined below) so long as the Executive gives the Board written notice of the event giving rise to
such Constructive Discharge within sixty (60) days of the occurrence thereof and such Constructive
Discharge remains uncured by the Corporation thirty (30) days after the Board’s receipt of such
notice; provided that if the Corporation has not cured a breach of this Agreement within
the thirty (30) day period referenced in clause (iii) of the definition of Constructive Discharge
set forth below this sentence will not be deemed to grant the Corporation an additional thirty (30)
day cure period with respect to such breach. If the Executive’s employment is terminated without
Cause or by Constructive Discharge pursuant to this Section 5(b) prior to the expiration of the
Employment Period, the Corporation shall pay to the Executive an amount equal to (A) the lesser of
(1) two-times the Executive’s annual Base Salary or (2) the amount of remaining Base Salary that
would have been payable to the Executive from the date of such termination of employment through
the Termination Date; provided that such amount shall not be less than one-times the Executive’s
annual Base Salary, plus (B) the benefits set forth in Sections 4(d) and 4(f) (other than accrued
but unused vacation pay) which were paid to the Executive in the year prior to the year in which
his employment was terminated, plus (C) a pro-rated bonus for the year in which Executive was
terminated (based on the number of months the Executive was employed by the Corporation in such
year), if the bonus target for such year was being achieved on the date of termination (on a pro
rata basis, based on the number of months the Executive was employed by the Corporation in such
year) (collectively, the “Severance Payment”); provided that the Severance Payment
shall be conditioned upon the Executive’s voluntary execution of a written general release
substantially in the form of Exhibit B hereto (the “Release”); provided
further, that the Corporation shall have the right to modify the Release to reflect facts
and circumstances existing at the time of the Executive’s termination. The Corporation shall pay
fifty percent (50%) of the Severance Payment in one payment within thirty (30) days after the end
of the Employment Period provided that such release has been in full force and effect for at least
ten (10) days, and pay the remaining portion of the Severance Payment on the date that is twelve
(12) months after the last day of the Employment Period; provided, however, that if the Executive
is a “specified employee” within the meaning of Internal Revenue Code Section 409A(a)(2)(B)(i), no
portion of the Severance Payment that is deferred compensation subject to Section 409A will be made
before the date that is six (6) months after the payment date provided in the previous clause. For
purposes of this Section 5(b), the term “Constructive Discharge” means:

               (i) a material adverse reduction in the Executive’s job function, authority, duties or
responsibilities, or a similar change in the Executive’s reporting relationships;

               (ii) a required relocation of Executive of more than seventy (70) miles outside of Dallas/Ft.
Worth, Texas;

               (iii) any breach of any of the material terms of this Agreement by the Corporation which is
not cured within thirty (30) days following written notice thereof by the Executive to the
Corporation; or

4

 

               (iv) during the Employment Period, any failure to nominate and/or elect the Executive as a
member of the Board and/or any removal of the Executive as a member of the Board (other than for
Cause or pursuant to applicable law).

     6. CONFIDENTIAL INFORMATION, REMOVAL OF DOCUMENTS, DEVELOPMENTS AND NON-COMPETITION, RELEASE.

          (a) CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the
benefit of the Corporation and its subsidiaries all trade secrets, confidential information,
proprietary information, knowledge and data relating to the Corporation and/or the businesses or
investments of the Corporation which was obtained by the Executive in connection with the
Executive’s employment by the Corporation and its subsidiaries including such information with
respect to any products, improvements, formulas, designs or styles, processes, services, customers,
suppliers, marketing techniques, methods, know-how, data, future plans or operating practices
(“Confidential Information”); provided that “Confidential Information” shall not
include information that (i) is or becomes generally available to the public other than as a result
of a disclosure by the Executive or (ii) is or becomes available to the Executive on a
non-confidential basis from a source that is not known to the Executive to be prohibited from
disclosing such information to the Executive by a legal, contractual or fiduciary obligation.
Except as may be required or appropriate in connection with his carrying out his duties under this
Agreement, the Executive shall not, without the prior written consent of the Corporation or as may
otherwise be required by law or legal process, communicate or divulge any such Confidential
Information to anyone other than the Corporation and those designated by the Corporation. The
Corporation, understands, acknowledges and agrees that, notwithstanding this Section 6, the
Executive may disclose to his advisors the terms and conditions of this Agreement to the extent
reasonably necessary to enforce this Agreement.

          (b) REMOVAL OF DOCUMENTS. All records, files, drawings, letters, memoranda, reports, computer
data, computer disks, electronic storage media, documents, models and the like relating to the
business of the Corporation and/or the business of any of its subsidiaries, which the Executive
prepares, uses or comes into contact with and which contain Confidential Information shall be the
exclusive property of the Corporation to be used by the Executive only in the performance of his
duties for the Corporation and shall not be removed by the Executive from the premises of the
Corporation (without the written consent of the Corporation) during or after the Employment Period
unless such removal shall be required or appropriate in connection with his carrying out his duties
under this Agreement, and, if so removed by the Executive, shall be returned to the Corporation
immediately upon termination of the Executive’s employment hereunder, or earlier request by the
Corporation (with the Executive retaining no copies thereof nor any notes or other records relating
thereto).

          (c) DEVELOPMENTS. The Executive will make full and prompt disclosure to the Corporation of
all inventions, improvements, discoveries, methods, developments, software and/or works of
authorship relating in any way to the business, activities or affairs of the Corporation or any of
its subsidiaries, whether patentable or not, which are created, made, conceived or reduced to
practice (in whole or in part) by the Executive or under his direction or jointly with others
during the Employment Period, whether or not during normal working hours or on the premises of the
Corporation (collectively, “Developments”); provided that (i)

5

 

“Developments” shall not include processes that (A) are not information or communication
technology-related and (B) the Executive utilized at least 70% of the components of such processes
prior to his employment with the Corporation; provided further that the Corporation
shall be entitled to use any such processes after the Executive ceases to be employed by the
Corporation. The Executive agrees to assign and does hereby assign to the Corporation all of his
right, title and interest in and to all Developments and related patents, copyrights and
applications thereto. The Executive shall do all permissible things, and take all permissible
action, necessary or advisable, in the Corporation’s sole discretion and at the Corporation’s
expense, to cause any other person related to the Executive or an entity controlled by the
Executive having an interest in a Development to assign to the Corporation all of such person’s or
entity’s right, title and interest in and to such Development and related patents, copyrights and
applications therefor. The Executive agrees to cooperate fully with the Corporation at the
Corporation’s expense, both during and after the termination of the Employment Period, with respect
to the procurement, maintenance and enforcement of copyrights and patents (both in the United
States and foreign countries) relating to Developments.

          (d) NON-COMPETITION. During (i) the Executive’s employment with the Corporation and (ii) the
Post-Employment Non-Competition Period, the Executive (A) shall not engage, anywhere within the
geographical areas in which the Corporation or any of its subsidiaries is then conducting its
business operations, directly or indirectly, alone, in association with or as a shareholder,
principal, agent, partner, officer, director, executive or consultant of any other organization, in
any business which involves or relates to providing services to a Competitive Business (defined
below); (B) shall not solicit or encourage any officer, executive, independent contractor, vendor
or consultant of the Corporation or any of its subsidiaries to leave the employ of, or otherwise
cease his relationship with, the Corporation or any of its subsidiaries; provided that a
general solicitation not targeted at any such officer, executive, contractor, vendor or consultant
shall not violate this Section 6(d); and (C) shall not solicit, divert or take away, or attempt to
divert or to take away, the business or patronage of any of the customers or accounts, of the
Corporation or any of its subsidiaries which were served by any such entity within twenty-four (24)
months of the time the Executive ceases to be employed by the Corporation. This Section 6(d) shall
not prohibit the Executive from owning less than 5% of the common stock of any entity whose common
stock is listed on a national exchange, interdealer quotation system, or over-the-counter bulletin
board; provided that the Executive is not an officer, director, employee, agent or consultant to
such entity. If the Executive violates any of the provisions of this Section 6(d), following his
termination of employment, the computation of the time period provided herein shall be tolled from
the first date of the breach until the earlier of (i) the date judicial relief is obtained by the
Corporation, (ii) the Corporation states in writing that it will seek no judicial relief for said
violation, or (iii) the Executive provides satisfactory evidence to the Corporation that such
breach has been remedied. If, at any time, the provisions of this Section 6(d) shall be determined
to be invalid or unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 6(d) shall be considered divisible and shall become and be
immediately amended to only such area, duration and scope of activity as shall be determined to be
reasonable and enforceable by the court or other body having jurisdiction over the matter; and the
Executive agrees that this Section 6(d) as so amended shall be valid and binding as though any
invalid or unenforceable provision had not been included herein. For purposes of this Section 6,
Executive and the Corporation agree that:

6

 

“Competitive Business” shall mean (i) the inmate telephone business, (ii)
the business of selling, leasing or otherwise providing law enforcement or offender
management systems, jail management systems and/or other tracking or record systems
to inmate, jail, probationary or correctional facilities, (iii) the billing,
collection and/or validation business within the inmate telephone industry, and/or
(iv) any material line of business that the Corporation or any of its subsidiaries
are engaged in on the date of termination, expiration or non-extension of the
Employment Period; provided, however, that Competitive Business
shall not include an organization where the activities described in (i) through (iv)
do not represent a material portion of such organization’s revenues and (I) the
Executive’s duties do not relate to such activities or (II) the Executive does not
participate in such activities; and

“Post-Employment Non-Competition Period” shall mean the earlier of (a) the
three (3) year period immediately following the expiration or earlier termination of
the Employment Period and (b) the period after the termination of the Employment
Period and ending on the thirty first (31st) day after the Executive notifies the
Board in writing of any material breach by the Corporation of this Agreement if such
breach has not been cured within such 31 day period.

          (e) NON-COMPETITION IN EXPANSION MARKETS. The Executive acknowledges that a valuable asset of
the Corporation is the plan of the Corporation to extend and expand its business, by acquisition or
otherwise, to areas of the United States of America which the Corporation does not yet serve as of
the date hereof. Accordingly, during (i) the Executive’s employment with the Corporation and (ii)
Post-Employment Non-Competition Period, the Executive shall not engage, anywhere in the United
States of America, directly or indirectly, alone, in association with or as a shareholder,
principal, agent, partner, officer, director, executive or consultant of any other organization, in
any Competitive Business. If the Executive violates any of the provisions of this Section 6(e),
following his termination of employment, the computation of the time period provided herein shall
be tolled from the first date of the breach until the earlier of (i) the date judicial relief is
obtained by the Corporation, (ii) the Corporation states in writing that it will seek no judicial
relief for said violation, or (iii) the Executive provides satisfactory evidence to the Corporation
that such breach has been remedied. If, at any time, the provisions of this Section 6(e) shall be
determined to be invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 6(e) shall be considered divisible and shall become and
be immediately amended to only such area, duration and scope of activity as shall be determined to
be reasonable and enforceable by the court or other body having jurisdiction over the matter; and
the Executive agrees that this Section 6(e) as so amended shall be valid and binding as though any
invalid or unenforceable provision had not been included herein.

          (f) CONTINUING OPERATION. Any termination of the Executive’s employment or of this Agreement
shall have no effect on the continuing operation of this Section 6.

          (g) LEGITIMATE BUSINESS INTERESTS. The Executive has carefully read and considered the
provisions of this Section 6 and, having done so, agrees that the
restrictions set forth herein, including, without limitation, the time and geographic
restrictions set forth above, are fair and reasonable and are reasonably required for the
protection of the legitimate business interests and goodwill of the Corporation.

7

 

          (h) REMEDIES. The Executive acknowledges that any violation of any of the covenants and
agreements contained in this Section 6 may result in irreparable and continuing harm and damage to
the Corporation which would be extremely difficult to quantify and for which money damages alone
would not be adequate compensation. Consequently, the Executive agrees that, in the event he
violates or threatens to violate any of these covenants and agreements, the Corporation shall be
entitled to seek: (1) entry of an injunction enjoining such violation and/or requiring the
Executive to return all materials or other proprietary information of the Corporation and (2) money
damages insofar as they can be determined. In addition to the foregoing, within five (5) days of a
determination that the Executive has violated Section 6, the Executive shall repay the Corporation
50% of any Severance Payments the Executive has received as of the date of such violation. Nothing
in this Agreement shall be construed to prohibit the Corporation and its subsidiaries from also
pursuing any other legal or equitable remedy, the parties having agreed that all remedies that are
not inconsistent are cumulative.

     7. SEVERABILITY. Whenever possible, each provision and term of this Agreement will be
interpreted in a manner to be effective and valid, but if any provision or term of this Agreement
is held to be prohibited or invalid, then such provision or term will be ineffective only to the
extent of such prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term or the remaining provisions or terms of this
Agreement.

     8. WAIVER. The rights and remedies of the parties to this Agreement are, to the extent not
inconsistent, cumulative and not alternative. Neither the failure nor any delay by any party in
exercising any right, power or privilege under this Agreement will operate as a waiver of such
right, power or privilege, and no single or partial exercise of any such right, power or privilege
will preclude any other or further exercise of such right, power or privilege. To the maximum
extent permitted by applicable law, (a) no claim or right arising out of this Agreement can be
waived, released or discharged by one party, in whole or in part, by a waiver, release or
renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for which it is given;
and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement.

     9. BINDING AGREEMENT. This Agreement shall be binding upon the Corporation and its
affiliates, and the Executive and his assigns, heirs and legal representatives. Each of the
Corporation’s subsidiaries shall be third party beneficiaries of this Agreement and may
independently enforce and benefit from the terms hereof.

8

 

     10. OTHER AGREEMENTS; INDEMNIFICATION. The Executive hereby represents that the Executive is
not bound by the terms of any agreement with any previous employer or other party to refrain from
using or disclosing any trade secret or confidential or proprietary information in the course of
the Executive’s employment with the Corporation or to
refrain from competing, directly or indirectly, with the business of such previous employer or
any other party. The Executive further represents that his performance of all of the terms of this
Agreement does not and will not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by the Executive in confidence or in trust prior to the date of this
Agreement, and the Executive will not disclose to the Corporation or any subsidiary or knowingly
induce the Corporation or any subsidiary to use any confidential or proprietary information or
material belonging to any previous employer of the Executive or to any other person or entity. The
Executive hereby indemnifies and agrees to defend and hold the Corporation and its subsidiaries
harmless from and against any and all damages, liabilities, losses, costs and expenses (including,
without limitation, reasonable attorneys’ fees) resulting or arising directly from any breach of
the representations and covenants contained in the immediately preceding sentence; provided that
the Executive shall not be required to indemnify the Corporation for payment of his own salary
solely because of time that he spends defending a claim against him. The Executive shall be
indemnified and held harmless to the fullest extent permitted by applicable law, including § 145 of
the General Corporation Law of the State of Delaware, from and against any and all damages,
liabilities, losses, costs and expenses (including, without limitation, reasonable attorneys’ fees
and the costs of investigation) resulting or arising directly or indirectly as a consequence of the
Executive’s service as an officer and/or director of the Corporation or any of its subsidiaries.
Such indemnification will be provided pursuant to the terms of a mutually agreeable indemnification
agreement which will obligate the Corporation to pay expenses (within thirty (30) days of invoice)
incurred by the Executive in connection with any matter with respect to which the Executive
reasonably claims entitlement to indemnification; provided that the Executive executes an
undertaking to repay any amount of indemnification to which he is not entitled pursuant to such
indemnification agreement. The Corporation shall maintain at all times during the Employment
Period and for a period of no less than three (3) years thereafter, directors and officers
liability insurance (including the Executive as a beneficiary) having terms not less favorable than
the policies in effect on the date hereof.

     11. WITHHOLDING. Any payments provided for in this Agreement shall be paid net of any
applicable withholding of taxes required under federal, state or local law.

     12. RECITALS; HEADINGS; CONSTRUCTION. The Recitals set forth in the preamble of this
Agreement shall be deemed to be included and form an integral part of this Agreement. The headings
of Sections in this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to “Section” or “Sections” refer to the
corresponding Section or Sections of this Agreement unless otherwise specified. All words used in
this agreement will be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word “including” does not limit the preceding words or
terms. All references herein to the word “or” shall mean “and/or.” The parties, in acknowledgment
that all of them have been represented by counsel and that this Agreement has been carefully
negotiated, agree that the construction and interpretation of this Agreement and other documents
entered into in connection herewith shall not be affected by the identity of the party or parties
under whose direction or at whose expense this Agreement and such documents were prepared or
drafted.

9

 

     13. TIME OF ESSENCE. With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.

     14. GOVERNING LAW. This Agreement shall be governed by the substantive laws of the State of
Texas, without regard to its conflicts of laws principle; in particular, Texas substantive law will
govern any controversy or claim between or among the parties hereto, including any claim arising
out of or relating to this Agreement or based on or arising from an alleged tort; provided
that any controversy or claim between or among the parties hereto based on or arising under the
indemnification provisions of Section 10 shall be governed by the laws of the State of Delaware.
This Agreement is intended to reflect certain provisions of Internal Revenue Code Section 409A and
IRS Notice 2005-1 and shall be construed in good faith compliance with those requirements. In the
event any provisions of this Agreement are determined to be in conflict with the requirements of
Internal Revenue Code Section 409A, IRS Notice 2005-1, or subsequent Treasury guidance, the
Agreement will be administered and amended to be compliance with such requirements.

     15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter of this Agreement and supersedes all prior written and oral
agreements and understandings between the parties with respect to the subject matter of this
Agreement. This Agreement may not be amended except by a written agreement executed by both
parties.

     16. NOTICES. Any notice, demand or other communication which may or is required to be given
under this Agreement shall be in writing and shall be: (a) personally delivered; (b) transmitted by
United States postage prepaid mail, registered or certified mail, return receipt requested; (c)
transmitted by reputable overnight courier service such as Federal Express; or (d) transmitted by
legible facsimile (with answer back confirmation) to the parties’ respective addresses as set forth
opposite their signatures hereto). Except as otherwise specified herein, all notices and other
communications shall be deemed to have been duly given on (I) the date of receipt if delivered
personally, (ii) two (2) calendar days after the date of posting if transmitted by registered or
certified mail, return receipt requested, (iii) the first business day after the date of deposit if
transmitted by reputable overnight courier service or (iv) the date of transmission with confirmed
answer back if transmitted by facsimile, whichever shall first occur. A notice or other
communication not given as herein provided shall only be deemed given if and when such notice or
communication is actually received in writing by the party to whom it is required or permitted to
be given. The parties may change their address for purposes hereof by notice given to the other
parties in accordance with the provisions of this Section, but such notice shall not be deemed to
have been duly given unless and until it is actually received by the other party.

     17. COMMON LAW OR OTHER DUTIES. The Executive’s and the Corporation’s duties obligations, and
agreements hereunder are in addition to (and not in limitation of) any duties or obligations under
common law or statute owed to the Corporation or its subsidiaries by the Executive or by the
Corporation to the Executive by reason of his position as officer, director or Executive, as
applicable, of the Corporation or its subsidiaries; provided that in no event shall the Executive
be entitled to any compensation in respect of his employment other than as specifically set forth
in this Agreement.

     18. COUNTERPARTS. This Agreement may be executed in two or more counterparts (including by
means of telecopied pages), each of which will be deemed to be an
original copy of this Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement.

10

 

     IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first
above written.

	 	 	 	 	 
	 	 	SECURUS TECHNOLOGIES, INC.
	 
	 	 	 	 
	 

	 	By:	 	/s/ Richard Falcone 
	 

	 	 	 	 
	 

	 	Title:	 	Chairman and CEO 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Address:	 	 
	 
	 	 	 	 
	 	 	Securus Technologies, Inc.
	 	 	c/o H.I.G. Capital, LLC
	 	 	1001 Brickell Bay Drive
	 	 	27th Floor
	 	 	Miami, Florida 33131
	 	 	Attn: Lewis Schoenwetter
	 	 	Facsimile: (305) 379-2322
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	/s/
Richard A. Smith 
	 	 	Richard A. Smith
	 
	 	 	 	 
	 

	 	Address:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 	 	Facsimile No.:

11

 

EXHIBIT A

     (a) Base Salary: The Executive shall receive, for each 12-consecutive month period beginning
on the execution of this Agreement and each anniversary thereof, a rate of salary that is not less
than $450,000 per year, payable in substantially equal monthly or more frequent installments and
subject to normal tax withholding. During the Employment Period the Executive’s salary rate shall
be reviewed by the Board’s Compensation Committee contemporaneously with all other Executive
Officers of the Corporation (but not less frequently than once each calendar year) to determine
whether an increase in the Executive’s rate of compensation is appropriate.

     (b) Bonus: A bonus program will be established. The bonus program shall be based upon
mutually agreed objectives for each year. The Executive’s target bonus shall equal $500,000 which
shall be earned upon achievement of such objectives. The bonus program will be established as part
of the Corporation’s annual forecasts each year. Such bonus program will include a reasonable and
businesslike sliding scale of bonus payments established for performance below specified
objectives. If a Change of Control (as hereinafter defined) of the Corporation occurs, the
Executive shall be entitled to a pro-rated bonus for the year in which such change occurred (based
upon the number of months Executive was employed in such year prior to such change) if the bonus
target for such year was being achieved on the date of such change (on a pro-rated basis, based
upon the number of months in such year prior to such change). Any bonus payment under this
paragraph (b) shall be paid in a lump sum within thirty (30) days from the date that the Executive
becomes entitled to a specific bonus amount each year. As used herein the term “Change of
Control” will mean a change in the ownership of a corporation which shall be deemed to occur on
the date that any one person or more than one person acting as a group that did not at the time of
determination own more than 50% of the voting power of the stock of such corporation acquires
ownership of stock of such corporation that, together with stock already held by such person or
group, constitutes more than 50 percent of the total voting power of the stock of such corporation.
However, if any one person, or more than one person acting as a group, is considered to own more
than 50 percent of the total voting power of the stock of a corporation, the acquisition of
additional stock by the same person or persons is not considered to cause a change in the ownership
of the corporation (or to cause a change in the effective control of the corporation.

     (c) Shares: Subject to the terms of the Corporation’s 2004 Restricted Stock Purchase Plan, the
Executive shall be eligible to receive shares of the Corporation’s Class B Common Stock pursuant to
the Restricted Stock Agreement attached hereto as Exhibit C.

     (d) Signing Bonus: Provided that the Executive sells his primary residence in Arizona to an
unaffiliated party on or before December 31, 2008, the Corporation shall pay him a one-time payment
of $100,000, subject to normal withholding taxes, within 30 days of the consummation of such sale,
but not later than December 31, 2008.

     (e) Termination Bonus: The Executive shall be entitled to receive a one-time payment of
$200,000 upon the earlier to occur of (i) the Termination Date if the Executive is and has been
continuously employed by the Corporation on such date, (ii) the date that the
Corporation terminates the Executive’s employment prior to the Termination Date without Cause,
or (iii) the date that the Executive resigns prior to the Termination Date as a direct result of a
Constructive Discharge (each, a “Termination Event”). In no event shall the Executive be
entitled to any payment under this Section (e) if the Corporation terminates his employment for
Cause or if he voluntarily resigns other than for Constructive Discharge. The Executive shall
return the $200,000 to the Corporation if he fails to comply with the terms of Section 6, which
shall be in addition to any injunctive or other equitable relief to which the Corporation may be
entitled. Any payment made under this paragraph (e) shall be paid in a lump sum within 30 days
after a Termination Event occurs and shall be in addition to any other payments and benefits that
Executive may receive under this Agreement or otherwise.

1

 

EXHIBIT B

SEPARATION AND RELEASE AGREEMENT

2

 

EXHIBIT C

RESTRICTED STOCK AGREEMENT

3

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