EXHIBIT 10.46 TO CURRENT REPORT ON FORM 8-K DATED AS OF APRIL 7, 2003
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STRATEGIC RELATIONSHIP AGREEMENT
This STRATEGIC RELATIONSHIP AGREEMENT ("Agreement") is made and entered
into this 7th day of April, 2003, by and between Health Net, Inc., a Delaware
corporation ("Health Net") and SafeGuard Health Enterprises, Inc., a Delaware
corporation ("SafeGuard").
RECITALS
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WHEREAS, Health Net, through its Subsidiaries, is authorized to offer the
Health Net Products (as defined herein) for sale in the Territory (as defined
herein);
WHEREAS, SafeGuard desires to make the Health Net Products available for
sale by the SafeGuard Marketing Force (as defined herein) in the Territory;
WHEREAS, Health Net is willing to make the Health Net Products available
for sale in the Territory by the SafeGuard Marketing Force;
WHEREAS, SafeGuard through its Subsidiaries is authorized to offer the
SafeGuard Dental Products (as defined herein) for sale in the Territory;
WHEREAS, SafeGuard is willing to make the Health Net Branded Products (as
defined herein) available for sale by the Health Net Marketing Force (as defined
herein) in the Territory; and
WHEREAS, pursuant to the Purchase and Sale Agreement by and between Health
Net and SafeGuard dated April 7, 2003, Health Net and SafeGuard agreed to enter
into a strategic relationship agreement at the Closing to promote and facilitate
the sale of Health Net Branded Products through the Health Net Marketing Force
and the sale of Health Net Products through the SafeGuard Marketing Force.
NOW THEREFORE, in consideration of the mutual agreements contained herein,
the sufficiency of which is hereby acknowledged, and in consideration of the
performance by the parties of their obligations under this Agreement, the
parties agree as follows:
ARTICLE I
DEFINITIONS
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Capitalized terms used in this Agreement and not otherwise defined shall
have the meanings given such terms in the Purchase and Sale Agreement. For
purposes of this Agreement, the following terms shall have the meanings
specified below (definitions are applicable to both the singular and the plural
form of each term defined herein).
"Ancillary SafeGuard Products" means dental HMO products, dental PPO and
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dental indemnity products developed by SafeGuard with benefit designs and rate
structures that differentiate such products from the SafeGuard Dental Products
offered generally by SafeGuard
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in the Territory and which shall be sold exclusively by the Health Net Marketing
Force only to Health Net Clients.
"Benchmark Products" means those SafeGuard Dental Products that are
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determined by the parties to be materially similar to the Health Net Branded
Products as of the Effective Date.
"Branding" shall have the meaning set forth in Section 2.7.
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"Change of Control" means the acquisition, in a single transaction or in a
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series of related transactions, by a person, an entity or a group of persons or
entities acting in concert of fifty-one percent (51%) or more of the voting
securities of a party, or fifty-one percent (51%) or more of the aggregate value
of the assets of a party.
"Contractholder" means an employer or individual in the Territory who or
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which executes an enrollment agreement with respect to any Product subject to
this Agreement.
"Dispute" shall have the meaning set forth in Section 9.1.
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"Eligible Employee" means an employee who is eligible to enroll in a group
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Product issued to a Contractholder.
"Effective Date" means the Closing Date of the Purchase and Sale Agreement
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by and between Health Net and SafeGuard dated as of April 7, 2003.
"Health Net Branded Products" means SafeGuard dental HMO Products,
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SafeGuard dental PPO Products or SafeGuard dental indemnity Products selected by
Health Net to market through the Health Net Marketing Force in the Territory
after the Effective Date with the Branding of Health Net and issued,
underwritten and administered by either SafeGuard Health Plans, Inc. or
SafeHealth Insurance Company.
"Health Net Clients" shall have the meaning set forth in Section 2.1.
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"Health Net Dental Products" means the dental HMO Products offered in the
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Territory as of the Effective Date by Health Net Dental, Inc., the dental PPO
Product offered in Oregon by Health Net Health Plan of Oregon, Inc., the dental
indemnity Product offered in Arizona by Health Net of Arizona, Inc. and the
dental PPO and dental indemnity Products offered in the Territory as of the
Effective Date by Health Net Life Insurance Company.
"Health Net Indemnities" shall have the meaning set forth in Section 8.1.
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"Health Net Marketing Force" means (i) employees of Health Net or its
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Subsidiaries who are licensed in one or more states within the Territory to sell
Products in any state within the Territory; (ii) any agents under contract with
any Health Net Subsidiary who or which are licensed in one or more states within
the Territory and authorized to sell Products on behalf of any Health Net
Subsidiary in any of the states within the Territory; and (iii) any independent
brokers who or which are licensed in one or more states within the Territory to
sell Products and who or which are authorized to represent specific purchasers
of Products.
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"Health Net Mark-Up" except as otherwise set forth in Section 5.5, means
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the dollar amount equal to [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION] of the
Net Price for Health Net Branded dental HMO Products and [SAFEGUARD-HEALTH NET
PROPRIETARY INFORMATION] of the Net Price for the Health Net Branded dental PPO
and dental indemnity Products.
"Health Net Products" means Medical Products, life insurance, vision and
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behavior health HMO, PPO and indemnity products offered by Health Net
Subsidiaries in the Territory.
"HMO" means a commercial contract for health care services provided by
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Health Net Subsidiaries to Contractholders in the Territory utilizing a network
of providers who or which are under direct or indirect contract with a Health
Net Subsidiary to provide health care services. "HMO" includes HMO plans with a
"point-of-service" feature that permits Enrollees to seek medical services from
providers outside the network of providers who or which are under direct or
indirect contract with a Health Net Subsidiary to provide health care services.
"JAMS" shall have the meaning set forth in Section 9.2.
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"Medical Products" means (i) PPO and indemnity health insurance contracts
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covering the medical costs or services of Subscribers and (ii) medical HMO
contacts.
"Most Favored Nation Price" means the Net Price plus the Health Net
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Mark-Up.
"Net Price" means the amount equal to the estimated health care costs per
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Subscriber established by SafeGuard for Health Net Branded Products multiplied
by an administrative expense factor of [SAFEGUARD-HEALTH NET PROPRIETARY
INFORMATION] for dental HMO Products and [SAFEGUARD-HEALTH NET PROPRIETARY
INFORMATION] for dental PPO and dental indemnity Products.
"Pooled Net Price" means the amount equal to the pooled estimated health
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care costs determined by SafeGuard for each Health Net Branded Product plan
design multiplied by an administrative expense factor of [SAFEGUARD-HEALTH NET
PROPRIETARY INFORMATION] for dental HMO Products and [SAFEGUARD-HEALTH NET
PROPRIETARY INFORMATION] for dental PPO and dental indemnity Products.
"Producer" means an insurance agent, broker or employee of either SafeGuard
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or Health Net or any of their Subsidiaries authorized to market and sell the
Products of a party in any state within the Territory.
"Product" means any Health Net Product, Health Net Branded Product,
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SafeGuard Dental Product or Ancillary Product offered for sale or sold pursuant
to this Agreement.
"SafeGuard Clients" shall have the meaning set forth in Section 2.4.
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"SafeGuard Dental Products" means the dental HMO products offered in the
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Territory by SafeGuard Health Plans, Inc., and the dental PPO and dental
indemnity products offered in the Territory by SafeHealth Life Insurance
Company.
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"SafeGuard Indemnities" shall have the meaning set forth in Section 8.2.
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"SafeGuard Subcapitation Amount" means the dollar amount arrived at by
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multiplying the total number of Subscribers covered under Health Net Branded
Products issued on or after the Effective Date by the Net Price of their
respective Health Net Branded Products. The number of Subscribers used to
calculate the SafeGuard Subcapitation Amount shall be subject to adjustment
based on SafeGuard's standard retroactivity adjustment policy as of the
adjustment date.
"Supplemental Subcapitation Amount" means that dollar amount calculated in
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the manner described in Section 5.5.
"Subscriber" means the persons including, but not limited to, Eligible
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Employees, who meet the eligibility requirements for a Product and who have
enrolled in such Product.
"Territory" means Arizona, Oregon and California for dental PPO and dental
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indemnity Products and California for dental HMO Products.
"Term" means that period of time commencing on the Effective Date and
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ending on the termination date of this Agreement.
ARTICLE II
MARKETING AND SALES
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Section 2.1 Marketing and Sale of the Health Net Branded Products to Health
Net Clients. Subject to the terms, conditions and limitations of this Agreement,
Health Net shall have the right to utilize the Health Net Marketing Force to
offer Health Net Branded Products to existing and prospective individual, small
group [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION], mid-market group
[SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION], large group and government
clients of Health Net in the Territory (jointly referred to herein as "Health
Net Clients") when the Health Net Marketing Force has or is offering to sell a
Medical Product to such Health Net Clients.
Section 2.2 Development of Ancillary Dental Products. SafeGuard and Health
Net shall develop jointly Ancillary SafeGuard Products that Health Net
reasonably determines would provide a marketing opportunity for the Health Net
Marketing Force in the Territory. Any Ancillary SafeGuard Products developed
jointly by Health Net and SafeGuard shall be offered exclusively by the Health
Net Marketing Force only as Health Net Branded Products to Health Net Clients in
the Territory.
Section 2.3 Exclusive Agreement.
(a) Except with Health Net's prior written consent and except as provided
in this Section 2.3(a) and Section 7.3(f), during the Term SafeGuard shall not
enter into any agreement substantially similar to this Agreement with any entity
other than Health Net for the purpose of offering Medical Products for sale to
SafeGuard Clients in the Territory, provided, however, that nothing
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contained in this Agreement shall limit SafeGuard's right to market SafeGuard
Dental
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Products or any other products not subject to this Agreement directly to
SafeGuard Clients through the SafeGuard Marketing Force and provided further
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that the provisions of this Section 2.3(a) shall have no further force or effect
if Health Net or a Health Net Subsidiary acquires ownership, merges or
consolidates with an entity that offers or operates a dental HMO or dental
insurance business in the Territory, or ownership of Health Net is acquired by
an entity that offers or operates a dental HMO or a dental insurance business in
the Territory and the dental HMO and dental insurance business of the combined
entities accounts for more than [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]
percent of the annual gross revenues of the combined entities.
(b) Except with SafeGuard's prior written consent and except as provided in
this Section 2.3(b) and Section 7.3(f), during the Term Health Net shall not
enter into any agreement substantially similar to this Agreement with any entity
other than SafeGuard for the purpose of offering any dental HMO, dental PPO or
dental indemnity insurance products for sale to Health Net Clients in the
Territory, provided, however, nothing contained in this Agreement shall limit
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Health Net's right to market Health Net Products or any other products not
subject to this Agreement directly to Health Net Clients through the Health Net
Marketing Force and provided further that the provisions of this Section 2.3(b)
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shall have no further force or effect if SafeGuard or a SafeGuard Subsidiary
acquires ownership, merges or consolidates with an entity that offers or
operates a health insurance business that provides Medical Products in the
Territory, or ownership of SafeGuard is acquired by an entity that offers or
operates a health insurance business that provides Medical Products in the
Territory and the health insurance business of the combined entities accounts
for more than [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION] of the annual gross
revenues of the combined entities.
(c) Health Net shall have the option to expand the exclusive strategic
relationship described in this Agreement to additional states in which SafeGuard
is appropriately licensed to offer the Health Net Branded Products, provided
that SafeGuard has no prior commitments in such additional states that would
conflict with the obligations of SafeGuard under this Agreement. SafeGuard shall
provide notice to Health Net of its intent to enter into an exclusive strategic
relationship in any state outside the Territory that would be substantially
similar to its relationship with Health Net described in this Agreement. Health
Net shall have twenty (20) days from the date of the SafeGuard notice to
exercise its option to expand its exclusive strategic relationship with
SafeGuard into the states identified in the SafeGuard notice, provided, however,
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Health Net shall not have the option to exercise its option to expand this
strategic relationship in either Texas or Florida unless Health Net has at least
[SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION] Subscribers enrolled in its
Medical Products in the relevant state at the time Health Net exercises its
option to expand this strategic relationship to such state.
Section 2.4 Marketing and Sale of Health Net Products by SafeGuard. Subject
to the terms and conditions of this Agreement, the SafeGuard Marketing Force
shall have the right to market Health Net Products to existing and prospective
individual and group accounts of SafeGuard Dental Products or SafeGuard vision
products in the Territory ("SafeGuard Clients").
Section 2.5 Identification of Health Net Branded Products. Subject to the
requirements and limitations of Section 2.7 of this Agreement and all applicable
Law, the Health
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Net Branded Products shall be marketed under the collective designation "Health
Net Dental." Each Health Net Branded Product shall be assigned a specific trade
name, to be agreed to by the parties. Notwithstanding the foregoing, the Health
Net Branded Products shall be marketed in a way that clearly indicates that the
benefits provided under Health Net Branded Products are obligations of SafeGuard
Health Plans, Inc. or SafeHealth Life Insurance Company, as appropriate, and
does not suggest that such benefits are obligations of Health Net or any Health
Net Subsidiary.
Section 2.6 Marketing Materials. Each party shall bear the cost of its own
marketing and promotional efforts, including but not limited to, the development
and production of any marketing and collateral materials used to promote or
market their respective Products. Any marketing and collateral materials
developed by a party to promote or market Products pursuant to this Agreement
shall be approved by the other party prior to use.
Section 2.7 Branding. Neither party shall make use of the other party's
trade marks, service marks, trade names or logos, including domain names,
electric or written content or other materials, descriptions or representations
of any kind that mentions the other party or its Affiliates, or refers to any
Products or services of the other party (collectively referred to as "Branding")
without obtaining the prior written consent of such other party. The parties
shall use commercially reasonable efforts to provide the other party with such
consent to utilize their respective Branding where reasonably necessary for the
other party to perform its duties and exercise its rights under this Agreement
and any such consent granted to utilize a party's Branding shall constitute a
non-exclusive, revocable license that is limited to use of the Branding of the
party in the Territory consistent with this Agreement.
Section 2.8 Training. Health Net and SafeGuard shall develop jointly
programs or prepare materials to train all necessary Health Net and SafeGuard
personnel and the respective Marketing Forces of the parties regarding the
marketing and administration of the Products.
ARTICLE III
UNDERWRITING, RATES AND ADMINISTRATION
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Section 3.1 Authority Regarding Products.
(a) Except as provided below and in Article V, nothing in this
Agreement confers or is intended to confer on a party any authority with respect
to the Products of the other party, including but not limited to (i)
underwriting criteria; (ii) pricing; (ii) participation requirements; (iii)
minimum employer contributions; (iv) approval of applications; or (v) the
authority to issue policies, contracts or any other documents conferring
coverage under a Product of the other party. Except as otherwise provided
herein, each party reserves the right, in its sole discretion, to amend, change
or abolish coverage forms, premium rates or fees, underwriting guidelines,
eligibility criteria and other internal rules and regulations with respect to
its own Products.
(b) Subject to any limitations imposed by applicable Law, the respective
Marketing Forces of the parties shall be permitted to obligate the other party
to provide coverage to their respective Clients under the Products offered for
sale pursuant to this Agreement if such Clients
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meet the eligibility and underwriting criteria established by the party
providing the Product. In the event a Client does not meet the eligibility and
underwriting criteria established by the party providing the Product, the
Marketing Force of the other party shall not have the authority to obligate the
party providing the Product to provide coverage without the prior consent of the
party providing the Product. Except as provided in this Section 3.1(b), each
party retains the exclusive right, exercisable without permission from the other
party, to accept or reject any application or enrollment request, or to cancel
the coverage with respect to their respective Products. Notwithstanding the
foregoing, neither party shall impose any limitations or criteria with respect
to a Product offered for sale pursuant to this Agreement that is more
restrictive than the limitations and criteria applicable generally to the
Products offered for sale by the party in the Territory.
Section 3.2 Product Administration.
(a) Except as specifically provided herein, each party shall be responsible
for the design and implementation of all administrative services and procedures
with respect to its respective Products, including without limitation,
enrollment, applications, setting the Net Price, underwriting, reporting,
coverage determinations, claims, grievances, correspondence and communication
with eligible and covered persons, employers, Contractholders, Subscribers,
providers and Governmental Authorities, compliance, record keeping, eligibility
verification, and providing any notices required by applicable Law, provided,
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however, the parties shall attempt to coordinate enrollment, underwriting and
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the application process to the extent possible and permitted by Law under the
circumstances.
(b) To the extent permitted by applicable Law, the parties may elect to
coordinate the provision of one or more administrative service to minimize
duplication of resources and to promote greater profitability of the Products.
The fees payable for such services, if any, shall be separately negotiated by
the parties.
Section 3.3 Enrollment. Health Net shall enroll Health Net Clients in the
Health Net Branded Products sold by the Health Net Marketing Force when such
Health Net Branded Products are sold to a Health Net Client together with any
Health Net Medical Product. In the event the Health Net Marketing Force sells
any Health Net Branded Product to a Health Net Client without contemporaneously
selling such Health Net Client a Health Net Medical Product, SafeGuard shall be
responsible for enrolling the Eligible Employees in such Health Net Branded
Products. Health Net and SafeGuard shall cooperate and coordinate in conducting
employee on-site enrollment meetings.
Section 3.4 Enrollment Materials. Each party shall be responsible for the
preparation and distribution of Product booklets, certificates, provider
directories, identification cards, and all other materials relating to the
party's respective Products. All enrollment agreements, forms and other
materials, including Subscriber handbooks and identification cards, used for
Contractholders and Subscribers shall be either Health Net's or SafeGuard's
existing approved forms, as appropriate, modified as necessary to reflect the
terms of this Agreement and the administrative requirements of Health Net and
SafeGuard, respectively. All such materials shall specify the Subsidiary of
Health Net that is the underwriter of the Health Net Products, and the
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Subsidiary of SafeGuard that is the underwriter of SafeGuard Products, including
but not limited to, the Health Net Branded Products. Neither party shall use
enrollment materials using the name of the other party, without the other
party's written approval.
Section 3.5 Enrollment Reports. Health Net and SafeGuard shall prepare
periodic and timely reports showing all Products sold, renewed or terminated
pursuant to this Agreement, and other enrollment information required by either
party to perform its duties with respect to such Products. Such reports shall be
made by each party on a periodic and timely basis within five (5) Business Days
following the end of the month in which the transactions or other matters
occurred, and shall be transmitted by electronic transmission in a form
reasonably acceptable to the receiving party. Health Net and SafeGuard shall
each prepare periodic reconciliations of the enrollment information in their
possession.
Section 3.6 Books and Records. Each party shall keep and maintain true and
complete records of all transactions pursuant to this Agreement. Each party
shall permit the other party reasonable access during normal business hours to
its records related to its rights and obligations under this Agreement for
inspection and copying by the other party or its authorized representatives, or
by a legally authorized and properly identified Governmental Authority. Each
party shall furnish the other party, upon its written request, all reasonably
required information in the party's possession regarding any and all matters,
transactions or activities pertaining to the Products of the other party
including information required for financial reporting purposes, at such times
and in such formats as mutually agreed upon by the parties.
ARTICLE IV
MANAGED CARE SERVICES AND PRODUCTS
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Section 4.1 Network Management.
(a) Except as otherwise provided in the Network Access Agreement by and
between Health Net Life Insurance Company and SafeHealth Life Insurance Company
dated April 7, 2003, (i) all terms and conditions of provider contracts,
including all compensation arrangements and/or negotiated fees, shall be the
sole responsibility of the party contracting with the providers, and (ii)
provider network recruitment and management, credentialing protocols, quality
assurance, utilization management, case management, and other managed care
services with respect to each party's Products shall be designed, managed and
performed by the party providing the Product with which the services are to be
associated. Each party may recommend to the other additions to or deletions from
such party's provider networks, provided, however, that the decision to
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include or exclude any provider shall be the decision solely of the party
responsible for making the network of providers available.
(b) Neither party shall be required to disclose to the other party its
proprietary information, including without limitation, information with respect
to utilization review, case management, procedure specific protocols, physician
and provider profiling, credentialing criteria, software systems or any other
information which that party, in its sole discretion, designates as proprietary.
If a party elects to disclose any such proprietary information, such information
shall be deemed Confidential Information subject to the limitations of Section
10.16.
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ARTICLE V
PRODUCT PRICING, COMPENSATION AND EXPENSES
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Section 5.1 Determination of Benchmark Products. Promptly after the
Effective Date, SafeGuard and Health Net shall compare the Health Net Dental
Products to the SafeGuard Dental Products and determine which Health Net Dental
Products are materially similar to comparable SafeGuard Dental Products, and any
such SafeGuard Dental Products determined to be materially similar to the Health
Net Dental Products and selected by Health Net to be a Health Net Branded
Product shall be considered "Benchmark Products." If, as of the Effective Date,
there is no Health Net Dental Product materially similar to an existing
SafeGuard Dental Product, at the request of Health Net, SafeGuard shall develop
a Health Net Branded Product substantially similar to such SafeGuard Dental
Product. Health Net Branded dental HMO products created by SafeGuard at the
request of Health Net to match the SafeGuard Dental Products shall have features
identical to the features of the "Health Net Advantage" suite of products. As
SafeGuard develops new Dental Products, Health Net shall have the option to
request SafeGuard to develop an identical Health Net Branded Product. A
SafeGuard Product for which a Health Net Branded Product is created by SafeGuard
at the request of Health Net pursuant to this Section 5.1 shall be considered a
Benchmark Product.
Section 5.2 Pricing of Benchmark Products. During the Term, SafeGuard shall
not sell any Benchmark Product in the Territory for a price less than the Net
Price of the comparable Health Net Branded Products plus the Health Net Mark-Up.
Section 5.3 Pricing of Health Net Branded Products. The Health Net
Marketing Force shall be permitted to offer the Health Net Branded Products to
individual, small group [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION] and
mid-market group [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION] Health Net
Clients at prices to be determined by Health Net in its sole discretion.
Section 5.4 Pricing of Large Group and Government Clients. In those
circumstances where the Health Net Marketing Force has or is providing a quote
to a Large Group or Government account on one or more Health Net Medical
Products within the Territory, the Health Net Marketing Force shall be permitted
to offer the Health Net Branded Products to such Large Group or Government
account at rates that are competitive in the relevant market within the
Territory and based upon the health care costs of each Large Group or Government
account offered the Health Net Branded Product. The Net Price for such groups
shall be established by SafeGuard and based on the estimated health care costs
of the Subscribers covered under the Health Net Branded Products issued to the
group multiplied by an administrative expense factor of [SAFEGUARD-HEALTH NET
PROPRIETARY INFORMATION] for dental HMO Products and an administrative expense
factor of [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION] for dental PPO and
dental indemnity insurance Products.
Section 5.5 Replacement of Health Net Dental Products.
(a) Health Net shall use commercially reasonably efforts to replace any
Health Net Dental Product with a Health Net Branded Product for any Health Net
Client that also purchased
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prior to the Effective Date one or more Health Net Medical Products. Health Net
shall receive an adjusted Health Net Mark-Up and SafeGuard shall receive a
Supplemental Subcapitation Amount equal to the Supplemental Subcapitation
percentages set forth below multiplied by the Pooled Net Price for those Health
Net Subscribers set forth in Schedule 5.5 (i) who are covered by both a Health
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Net Dental Product and a Health Net Medical Product prior to the Effective Date,
(ii) who are covered under both such Products on the Effective Date, and (iii)
whose Health Net Dental Product is replaced by a Health Net Branded Product
after the Effective Date as follows:
[SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]
(b) For those Health Net Subscribers set forth on Schedule 5.5 whose
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Health Net Dental Products are not converted to a Health Net Branded Product
after the Effective Date, all revenue attributable to the Health Net Dental
Product less Producer commissions shall be paid to SafeGuard as a Supplemental
Subcapitation Amount.
(c) Health Net shall use commercially reasonable efforts to replace the
Health Net Dental Products with Health Net Branded Products for any Subscriber
of Health Net Health Plans of Oregon, Inc. who or which also purchased a Health
Net Medical Product prior the Effective Date. Health Net shall use commercially
reasonable efforts to effect such replacement upon the first renewal date of the
Health Net Dental Products following the Effective Date, but in no event later
than December 31, 2004. The Health Net Marketing Force shall be authorized to
sell the Health Net Branded Products to such Subscribers of Health Net Health
Plan of Oregon, Inc. at prices to be determined by Health Net in its sole
discretion. Any Subscriber of Health Net Health Plans of Oregon, Inc. who or
which purchased only a Health Net Dental Product shall be offered a SafeGuard
Dental Product upon the first renewal date of such Health Net Dental Products.
(d) Health Net shall use commercially reasonable efforts to replace the
Health Net Dental Products with Health Net Branded Products for any Subscriber
of Health Net of Arizona, Inc. or Health Net Life Insurance Company residing in
Arizona upon the first renewal date of the Health Net Dental Products following
the Effective Date. The Health Net Marketing Force shall be authorized to sell
the Health Net Branded Products to such Arizona Subscribers at prices to be
determined by Health Net in its sole discretion.
(e) Any Health Net Dental Product purchased prior to the Effective Date by
a Subscriber of Health Net of California, Inc. in conjunction with a "Seniority
Plus" plan shall be considered a Health Net Branded Product as of the Effective
Date and SafeGuard shall be entitled to receive the SafeGuard Subcapitation
Amount with respect to such Health Net Dental Products commencing as of the
Effective Date.
Section 5.6 Stand Alone Presentation of Benchmark Products. In the event a
member of the SafeGuard Marketing Force presents a price quote to a prospective
account only for one or more Benchmark Product and a member of the Health Net
Marketing Force also presents a price quote to the same account for both a
Medical Product and one or more Health Net Branded Products which match the
Benchmark Products quoted by the SafeGuard Marketing Force,
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Health Net shall be permitted to sell the Health Net Branded Products which
match the Benchmark Products offered by SafeGuard to the account for the lowest
price SafeGuard offered such Benchmark Products to the account. If SafeGuard
lowers the price of the Benchmark Products offered to an account described in
this Section 5.6, SafeGuard shall promptly notify Health Net of such price
reduction and adjust the Net Price of the comparable Health Net Branded Products
offered to the account by the Health Net Marketing Force to match the reduced
price of the Benchmark Products offered to the account by SafeGuard.
Section 5.7 Health Net Sales of Health Net Branded Products. Health Net
shall receive the Health Net Mark-Up on any Health Net Branded Products
purchased by Health Net Subscribers as a result of the efforts of the Health Net
Marketing Force subsequent to the Effective Date, provided, however, Health Net
shall not be entitled to the Health Net Mark-Up (i) for any Health Net
Subscribers who are also SafeGuard Subscribers; (ii) if the Health Net Marketing
Force sells a Medical Product to an account who or which is a Contractholder
under a SafeGuard Dental Product; or (iii) if SafeGuard sells a Health Net
Medical Product together with a SafeGuard Dental Product or a SafeGuard vision
product to a new SafeGuard Client after the Effective Date.
Section 5.8 Compensation to SafeGuard for Sale of Health Net Products. If a
member of the SafeGuard Marketing Force sells a SafeGuard Subscriber a Health
Net Product after the Effective Date, Health Net shall pay SafeGuard
[SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION] of the collected first year
premium (net of Producer commission) for any such Health Net Product not later
than the tenth (10th) calendar day of the month of eligibility for the
Subscribers. The SafeGuard Marketing Force shall offer Health Net Products to
SafeGuard Subscribers only at the price authorized by Health Net.
ARTICLE VI
BILLING AND COLLECTION OF PREMIUMS; PAYMENT OF COMMISSIONS
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Section 6.1 Billing and Collection of Premiums.
(a) Health Net shall bill and collect premium and contract fees for all
Health Net Branded Products sold by the Health Net Marketing Force to a Health
Net Client. Health Net shall bill and collect all premium and contract fees
attributable to Health Net Products sold to SafeGuard Clients by the SafeGuard
Marketing Force.
(b) Health Net shall notify SafeGuard if Health Net determines that an
individual or group who or which purchased a Health Net Branded Product is
ineligible for any reason including, but not limited to, failure to pay
premiums. Any adjustments to the eligible Subscribers and the resulting
SafeGuard Subcapitation Amount shall be subject to the standard retroactivity
adjustment policy of SafeGuard at the time of the adjustment.
Section 6.2 Commissions.
(a) Health Net shall make payment of all commissions (i) owing to members
of the Health Net Marketing Force to the extent that such commissions become due
as a result of the sale of Health Net Medical Products or Health Net Branded
Products pursuant to this Agreement,
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and (ii) owing to SafeGuard to the extent such commissions become due as a
result of the sale of Health Net Medical Products to SafeGuard Clients by a
member of the SafeGuard Marketing Force. SafeGuard shall make payment of all
commissions to members of the SafeGuard Marketing Force to the extent such
commissions become due as a result of the sale of Health Net Medical Products to
SafeGuard Clients.
(b) Each party shall be responsible for ensuring that each member of its
respective Marketing Force is appropriately licensed and appointed, as
necessary, to sell the Products and to receive commissions. The parties shall
not authorize any person or entity to solicit sales of Products pursuant to this
Agreement in any state unless such person or entity is properly licensed in that
state. All payments of commissions to members of the marketing forces of the
respective parties shall comply with applicable Law.
Section 6.3 Subcapitation Payments to SafeGuard. The SafeGuard
Subcapitation Amount plus any Supplemental Subcapitation Amount shall be the
sole compensation payable by Health Net to SafeGuard in connection with the
Health Net Branded Products sold by the Health Net Marketing Force pursuant to
this Agreement. The SafeGuard Subcapitation Amount shall be paid to SafeGuard no
later than the tenth (10th) calendar day of the month of eligibility for the
Subscribers under the Health Net Branded Products sold pursuant to this
Agreement.
Section 6.4 Accounting and Reporting. Each party shall prepare and supply
the other party with any accounting reports and reports of activities with
respect to the Products and sales activities pursuant to this Agreement
reasonably requested by the other party.
ARTICLE VII
TERM AND TERMINATION
--------------------
Section 7.1 Term. This Agreement shall become effective on the Effective
Date and shall continue in effect for sixty (60) months unless terminated
pursuant to the terms of this Article VII. Unless this Agreement has been
terminated pursuant to the terms of this Article VII, Health Net shall have the
option to extend this Agreement on the same terms and conditions for an
additional sixty (60) months by providing written notice to SafeGuard no less
than one hundred and eighty (180) days prior to the expiration of the initial
sixty (60) months.
Section 7.2 Termination on Mutual Consent. This Agreement may be terminated
at any time by mutual agreement of the parties hereto in writing.
Section 7.3 Termination for Cause. Either party may terminate this
Agreement for cause by providing the other party written notice of its intention
to terminate upon the occurrence of any of the following:
(a) If a party fails to remit any amounts due under this Agreement within
twenty-five (25) days of the date such amount is due and payable.
(b) If a party breaches a material term, covenant or condition of this
Agreement and fails to cure such breach within thirty (30) days of receiving
written notice of such breach from the non-breaching party. The written notice
of such breach shall make specific reference to the
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action causing breach. If the breaching party fails to cure its breach to the
reasonable satisfaction of the non-breaching party during the thirty (30) day
cure period, this Agreement shall terminate at the option of the non-breaching
party. In the event such cure cannot reasonably be completed within such thirty
(30) day period, then commencement of such cure within such thirty (30) days and
its diligent prosecution to completion shall, subject to the party's other
rights to terminate the Agreement, extend the period to cure the breach for an
additional period reasonably necessary to complete the cure.
(c) If a party shall engage in fraudulent, illegal or grossly negligent
conduct with respect to its duties and obligations under this Agreement, the
other party shall have the right to terminate this Agreement, upon delivery of
written notice of such termination to the defaulting party, which shall be
effective upon receipt, without prejudice to any other rights or remedies
available to the non-defaulting party by reason of the defaulting party's
conduct.
(d) If a party shall become unable to perform its obligations under their
respective Products because of financial impairment or loss of authority to act
under Law, or by action of any Governmental Authority, the other party shall
have the right to terminate this Agreement immediately.
(e) In the event of a Change of Control of one party, the other party shall
have the right to terminate this Agreement effective as of the effective date of
the Change of Control.
(f) If the parties fail to reach the membership acquisition targets for a
state other than California set forth in Schedule 7.3, either party shall have
------------
the right to enter into an agreement with a third party substantially similar to
this Agreement with respect to such state and the exclusivity provisions of
Section 2.3 (a) and (b) with respect to such state shall have no further force
and effect. If the parties fail to reach the membership acquisition target for
California specified in Schedule 7.3, either party shall have the right to
-------------
terminate this Agreement in its entirety upon ninety (90) days written notice to
the other party.
Section 7.4 Post-Termination Rights and Responsibilities. Termination of
this Agreement shall not terminate rights and obligations of the parties which
by their nature extend beyond the term. Termination of this Agreement for any
reason shall not release any party from any liability which has already accrued
to another party at the time of termination. In the event this Agreement is
terminated, the parties shall continue to perform all customary and necessary
services regarding their respective Products in accordance with the provisions
of this Agreement until all such Products have been completely canceled,
transitioned, nonrenewed, or otherwise terminated.
ARTICLE VIII
INDEMNIFICATION
---------------
Section 8.1 Indemnification by SafeGuard. SafeGuard shall defend,
indemnify and hold harmless Health Net and its directors, officers, employees,
shareholders, and Affiliates ("Health Net Indemnities") from and against any and
all loss, claim, damage, liability, or action in respect hereof which is caused
by or results from the malfeasance, negligence, action or
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inaction of SafeGuard of its duties and obligations under this Agreement. If
any claim, demand, action, suit, or proceeding is made or brought against any of
the Health Net Indemnities with respect to matters that are the subject of this
indemnity, SafeGuard shall assume the defense thereof with counsel reasonably
satisfactory to the Health Net Indemnities and shall pay all costs of such
defense.
Section 8.2 Indemnification by Health Net. Health Net shall defend,
indemnify and hold harmless SafeGuard and its directors, officers, employees,
shareholders, and Affiliates ("SafeGuard Indemnities") from and against any and
all loss, claim, damage, liability, or action in respect hereof which is caused
by or results from the malfeasance, negligence, action or inaction of Health Net
of its duties and obligations under this Agreement. If any claim, demand,
action, suit, or proceeding is made or brought against any of the SafeGuard
Indemnities with respect to matters that are the subject of this indemnity,
Health Net shall assume the defense thereof with counsel reasonably satisfactory
to the SafeGuard Indemnities and shall pay all costs of such defense.
Section 8.3 Liability under SafeGuard's Products. Health Net is not a
guarantor, insurer, or reinsurer of, or joint venturer with, SafeGuard and
Health Net shall have no risk of loss for, nor provide any indemnification to
SafeGuard, any Contractholder or Subscriber, any provider or any other person
with respect to any SafeGuard Product. SafeGuard shall indemnify Health Net for
all liabilities, losses, suits, damages, costs and expenses (including
reasonable fees of Health Net's attorneys, and other expenses of litigation),
net of recoveries from third parties, arising in connection with a SafeGuard
Product, including action or failure to act by SafeGuard, or its employees or
agents.
Section 8.4 Liability under Health Net Products. SafeGuard is not a
guarantor, insurer, or reinsurer of, or joint venturer with, Health Net and
SafeGuard shall have no risk of loss, nor provide any indemnification to Health
Net, any Contractholder or Subscriber, any provider or any other person with
respect to a Health Net Product. Health Net shall indemnify SafeGuard for all
liabilities, losses, suits, damages, costs and expenses (including reasonable
fees of SafeGuard's attorneys, and other expenses of litigation), net of
recoveries from third parties, arising in connection with a Health Net Product,
including action or failure to act by Health Net, or its employees or agents.
Section 8.5 Survival of Article. This Article VIII shall survive the
termination of this Agreement.
ARTICLE IX
ARBITRATION
-----------
Section 9.1 Arbitration. In the event of any dispute between the
parties hereto relating to, arising out of, or in connection with any provision
of this Agreement (hereinafter a "Dispute"), the parties to this Agreement and
their representatives, designees, successors and assigns agree that any such
Dispute shall be settled by binding arbitration to take place in Orange County,
California; provided, however, that nothing herein shall preclude the parties
from
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seeking equitable judicial relief pending arbitration, including but not limited
to injunctive or other provisional relief.
Section 9.2 Selection of Arbitrator. Any arbitration hereunder shall be
conducted by a single arbitrator chosen from the panel of arbitrators of the
Judicial Arbitration & Mediation Services ("JAMS") with experience and expertise
in the dental HMO or dental indemnity insurance business. If a JAMS arbitrator
with specific experience in the dental HMO or dental indemnity insurance
business is not available, the arbitrator must have general experience in the
health insurance industry. Within ten (10) days of notice of a Dispute from
Health Net to SafeGuard or notice from SafeGuard to Health Net, SafeGuard and
Health Net shall use their best efforts to choose a mutually agreeable
arbitrator. If Health Net and SafeGuard cannot agree on an arbitrator, the
arbitrator shall promptly be selected by JAMS.
Section 9.3 Procedures. The party submitting a Dispute to arbitration
hereunder shall present its case to the arbitrator and the other party hereto in
written form within twenty (20) days after the appointment of the arbitrator.
The other party hereto shall then have twenty (20) days to submit a written
response to the arbitrator and the original party who submitted the Dispute to
arbitration. After timely receipt of each party's case, the arbitrator shall
have twenty (20) days to render his or her decision.
Section 9.4 Applicable Law. The arbitrator is relieved from judicial
formalities and, in addition to considering the rules of law, the limitations
contained in this Agreement and the customs and practices of the health care
industry, shall make his or her award with a view to effectuating the intent of
this Agreement. The decision of the arbitrator shall be final and binding upon
the parties, and judgment may be entered thereon in a court of competent
jurisdiction.
Section 9.5 Expenses. Each party shall bear its own cost of arbitration,
and the costs of the arbitrator shall be shared equally among each party to a
Dispute.
Section 9.6 Survival of Article. This Article IX shall survive termination
of this Agreement.
ARTICLE X
MISCELLANEOUS
-------------
Section 10.1 Misunderstandings and Oversights. If any delay, omission,
error or failure to perform any act required by this Agreement is unintentional
and caused by misunderstanding or oversight, the parties shall adjust the
situation to what it would have been had the misunderstanding or oversight not
occurred. The party that first discovers such oversight or incorrect act as a
result of the misunderstanding will notify the other party in writing promptly
upon discovery of the misunderstanding or oversight. The parties shall act to
correct the error, omission or oversight within thirty (30) days of notification
of the problem. This Section 10.1 shall not be construed as a waiver by either
party of its right to enforce strictly the terms of this Agreement.
-15-
Section 10.2 Performance by Affiliates. The parties acknowledge that
certain obligations required to be performed may, by their nature, require
specific legal authority to perform or will be more effectively performed by the
parties' Affiliates. The parties will, to the extent required in order for their
respective Affiliates to perform the obligations of the respective parties under
this Agreement, cause their respective Affiliates to perform such obligations
hereunder as if such Affiliates were themselves parties hereto. In connection
with the performance of such obligations, the parties' respective Affiliates
shall be subject to the terms and conditions of this Agreement as if such
Affiliates were themselves parties hereto.
Section 10.3 Regulatory Approval. Performance of the obligations of either
party under this Agreement shall be subject to the receipt of any necessary
regulatory approvals under the applicable Law and practices of Governmental
Authorities in the Territory. Health Net and SafeGuard shall cooperate in
attempting to obtain expeditiously any necessary regulatory approvals from
Governmental Authorities. Each party will bear its own expenses in obtaining
such approvals.
Section 10.4 Compliance with Laws. Each party shall, in the performance of
their obligations set forth in this Agreement, comply with all applicable Law
and the rules and regulations of all Governmental Authorities with jurisdiction
over the parties and each party shall maintain all licenses or certificates
necessary or appropriate for the performance of the functions set forth in this
Agreement. Each party shall conform its actions under this Agreement to any
orders concerning the activities covered by this Agreement by Governmental
Authorities having jurisdiction over the parties' Products, business affairs and
operations. Each party shall take all actions and make all filing, applications
and provide all notices required by applicable Law to maintain their respective
Products in compliance in all material respects with existing and future
applicable Law. Each party shall promptly notify the other party of any
complaint, inquiry or lawsuit by any Governmental Authority relating to the
Products or to this Agreement.
Section 10.5 Audits. Each party shall have the right, upon reasonable
notice to the other party, and at the requesting party's expense, to audit the
books and records of the other party relating to this Agreement during regular
business hours at the premises of the audited party where such records are
normally maintained, including but not limited to, verifying that SafeGuard is
providing Health Net Clients the Most Favored Nation Price. The audited party
shall reasonably cooperate in any such audit.
Section 10.6 Headings and Schedules. Headings used herein are not part of
this Agreement. Any Schedules or Exhibits attached hereto are incorporated by
this reference and made a part of this Agreement.
Section 10.7 Force Majeure. No party hereto shall be liable for any delay
or failure in the performance of any obligation under this Agreement or for any
loss or damage (including indirect or consequential damage) to the extent that
such nonperformance, delay, loss or damage results from any contingency which is
beyond the control of such party, provided such contingency is not caused by the
fault or negligence of such party. A contingency for purposes of this Agreement
shall be acts of God, fires, floods, earthquakes, explosions, storms, wars,
hostilities, acts of terrorism, blockades, public disorders, quarantines,
restrictions, embargoes,
-16-
strikes or other labor disturbances, and compliance with any Law, order or
control of, or insistence of any Governmental Authority or military authority.
Section 10.8 Successors and Assigns; Binding Effect. This Agreement shall
not be assigned by Health Net or SafeGuard without the prior written approval of
the other party. The provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective permitted successors and assigns.
Section 10.9 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which will be deemed an original, but all of
which will constitute one and the same agreement.
Section 10.10 Entire Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties with respect to the strategic relationship
of the parties, and supersedes any previous written or oral agreements. This
Agreement shall be amended only by written agreement signed by a duly authorized
officer of each of Health Net and SafeGuard, and any change to this Agreement
shall be null and void unless made by such written agreement; provided, however,
that where, under insurance, health or other applicable Law, the approval of any
such amendment to this Agreement by one or more Governmental Authority is
required, the amendment shall not take effect unless and until all such
necessary approvals have been obtained and received by both Health Net and
SafeGuard. In the event that any such approval is required, Health Net and
SafeGuard shall each take all necessary actions in order to obtain such
approval.
Section 10.11 Waivers. The waiver by either of the parties of the other
party's prompt and complete performance, or breach or violation, of any
provisions of this Agreement and related documents shall not operate or be
construed as a waiver of any subsequent breach or violation, and the waiver by
any of the parties to exercise any right or remedy which it may possess
hereunder shall not operate or be construed as a bar to the exercise of such
right or remedy by such party upon the occurrence of any subsequent breach or
violation.
Section 10.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the Law of the state of California, without giving
effect to the principles of conflicts of laws thereof.
Section 10.13 Severability. In the event any section or provision of this
Agreement or related documents is found to be void and unenforceable by a court
of competent jurisdiction, the remaining sections and provisions of this
Agreement or related documents shall nevertheless be binding upon the parties
with the same force and effect as though the void or unenforceable part had not
been severed or deleted.
Section 10.14 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered by certified
process server, certified or registered mail (postage prepaid and return receipt
requested), by a nationally recognized overnight courier service (appropriately
marked for overnight delivery) or by facsimile (with request for immediate
confirmation of receipt in a manner customary for communications of such
respective type). Notices shall be effective upon receipt and shall be addressed
as follows:
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(a) if to SafeGuard to:
SafeGuard Health Enterprises, Inc.
00 Xxxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxx X. Xxxxxxx
President and Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxx
Senior Vice President and General Counsel
SafeGuard Health Enterprises, Inc.
00 Xxxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
and
Xxxxx X. Xxxxxxxxx
Xxxxxxxxxxx and Price, LLP
000 Xxxx Xxxxxx, Xxx. 0000
Xxxxxx, Xxxxx 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
(b) if to Health Net to:
Health Net, Inc.
Attn: General Counsel
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxxxx
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
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Section 10.15 Notice of Legal Proceedings. If either party receives a
notice of the commencement of any legal proceedings involving the other party's
Products or actions pursuant to this Agreement, any communication from any
Governmental Authority, or any person identifying a complaint by a
Contractholder or Subscriber (other than a routine inquiry not involving a
communication from a Governmental Authority or the suggestion of any legal
action), the party receiving such notice shall immediately advise the other
party of such notice and shall thereafter forward promptly to the other party
any correspondence or information pertaining to any such legal proceeding or
communication.
Section 10.16 Confidentiality.
(a) Neither Health Net nor SafeGuard shall disclose any proprietary or
confidential information of the other party to a third party without the express
written consent of the other party to this Agreement. For purposes of this
Agreement, "proprietary and confidential" information will include, without
limitation, all internal business practices and business records, information
concerning products and pricing, contracts, computer hardware and software or
business methods in any form whatsoever, peer review, quality assurance and
grievance procedures, any aspect of utilization review programs, provider fee
schedules, reimbursement schedules or discounts, and advertising or marketing
information, but not including information otherwise available to the public.
Neither party shall use any proprietary and confidential information of the
other party for its own benefit. Upon termination of this Agreement, each party
will immediately return to the other party any confidential information, except
confidential information necessary for the continued administration of any
Product.
(b) The parties shall maintain the confidentiality of any personal
information, including health information, pertaining to Subscribers including,
without limitation, files, records, reports, and other information prepared and
maintained in connection with this Agreement, in accordance with all applicable
Law.
(c) Each party shall obtain any necessary consent or authorization from
Subscribers with respect to the release to the other party of any non-public
personal information, including health information, relating to such
Subscribers, by means of general or specific releases, as appropriate. Each
party shall notify the other if it becomes aware that proper releases have not
been obtained.
(d) To the extent that either of the parties performs functions,
activities, or services for, or on behalf of, the other party to this Agreement
involving the use or disclosure of Protected Health Information, as that term is
defined in 45 CFR 164.501, the parties shall comply with the Business Associate
Addendum set forth in Schedule 10.16 hereto.
---------------
Section 10.17 Press Releases. No public statement or press release
regarding the existence of this Agreement shall be made by either party without
obtaining the prior written consent of the other party, except as required by
applicable Law.
Section 10.18 Relationship of Parties. The parties to this Agreement are
and shall remain independent contractors. Neither party is the employee or agent
of the other party, except
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as set forth herein, and neither party has an express or implied right to bind
the other party. The parties do not intend to form a joint venture,
partnership, or to be governed by Law relating to any relationship other than
that of independent contractors. Neither party is authorized to modify, alter
or waive the terms of any Product issued by the other party.
Section 10.19 No Third Party Rights. This Agreement has been made for the
benefit of the parties hereto and respective successors and permitted assigns
and nothing in this Agreement is intended to confer any rights or remedies under
or by reason of this Agreement on any other person other than the parties to it
and their respective successors and permitted assigns. Nothing in this Agreement
is intended to relieve or discharge the obligations or liability of any third
person to any party to this Agreement.
Section 10.20 Expenses. Except as otherwise provided herein, each party
shall be responsible for the expenses it incurs in connection with this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
HEALTH NET, INC.
By: /s/ X. Xxxxxx Xxxxxx
-------------------------------------
Name: X. Xxxxxx Xxxxxx
Title: Senior Vice President, General
Counsel and Secretary
SAFEGUARD HEALTH ENTERPRISES, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President and Chief Executive
Officer
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President and
Chief Operating Officer
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SCHEDULE 5.5
REPLACEMENT OF HEALTH NET DENTAL PRODUCTS
To be determined as of the Effective Date
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SCHEDULE 7.3
MEMBERSHIP ACQUISITION TARGETS
STATE NET NEW MEMBERS PER YEAR
----- ----------------------------
CALIFORNIA [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]
OREGON [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]
ARIZONA [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]
TEXAS (If applicable) [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]
FLORIDA (If applicable) [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]
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SCHEDULE 10.16
BUSINESS ASSOCIATE ADDENDUM
This Business Associate Addendum (the "Addendum") supplements and is made a part
of the Strategic Relationship Agreement by and between Health Net, Inc. and
SafeGuard Health Enterprises, Inc. (the "Agreement"), and is effective as of the
Effective Date of the Agreement.
RECITALS
A. The parties may disclose certain information to each other pursuant to the
terms of the Agreement, some of which may constitute Protected Health
Information, as defined below.
B. The parties intend to protect the privacy and provide for the security of
Protected Health Information in compliance with the Health Insurance
Portability and Accountability Act of 1996, Public law No. 104-191
("HIPAA") and the regulations promulgated thereunder by the U.S. Department
of Health and Human Services (the "HIPAA Regulations") and other applicable
laws.
C. The purpose of this Addendum is to satisfy certain standards and
requirements of HIPAA and the HIPAA Regulations, including, but not limited
to, 45 CFR 164.502(e) and 45 CFR 164.504(e).
In consideration of the mutual promises below and the exchange of information
pursuant to the Agreement and this Addendum, the parties agree as follows:
1. Definitions
(a) "Business Associate" means the party performing functions, activities,
or services for, or on behalf of, a Covered Entity pursuant to the Agreement
involving the use or disclosure of Protected Health Information.
(b) "Covered Entity" means the party for whom, or on whose behalf,
functions, activities, or services are performed pursuant to the Agreement
involving the use or disclosure of Protected Health Information.
(c) "Privacy Rule" means the Standards for Privacy of Individually
Identifiable Health Information at 45 CFR part 160 and part 164, subparts A and
E.
(d) "Protected Health Information" has the same meaning as the term
"protected health information" in 45 CFR 164.501, limited to the information
created or received by Business Associate from or on behalf of Covered Entity.
(e) Capitalized terms used but not otherwise defined in this Addendum have
the same meaning as those terms in the Privacy Rule.
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2. Obligations and Activities of Business Associate
(a) Business Associate shall not use or disclose Protected Health
Information other than as permitted or required by this Addendum or as Required
By Law.
(b) Business Associate shall use appropriate safeguards to prevent use or
disclosure of the Protected Health Information other than as provided for by the
Agreement and this Addendum.
(c) Business Associate agrees to mitigate, to the extent practicable, any
harmful effect that is known to Business Associate of a use or disclosure of
Protected Health Information by Business Associate in violation of the
requirements of this Addendum.
(d) Business Associate shall report to Covered Entity any use or disclosure
of the Protected Health Information not provided for by this Addendum of which
it becomes aware.
(e) Business Associate shall ensure that any agent, including a
subcontractor, to whom it provides Protected Health Information received from,
or created or received by Business Associate on behalf of, Covered Entity agrees
to the same restrictions and conditions that apply through this Addendum to
Business Associate with respect to such information.
(f) Business Associate shall provide access, at the request of Covered
Entity, and in the time and manner designated by Covered Entity, to Protected
Health Information in a Designated Record Set, to Covered Entity or, as directed
by Covered Entity, to an Individual in order to meet the requirements under 45
CFR 164.524
(g) Business Associate agrees to make any amendment(s) to Protected Health
Information in a Designated Record Set that the Covered Entity directs or agrees
to pursuant to 45 CFR 164.526 at the request of Covered Entity or an Individual,
and in the time and manner designated by Covered Entity.
(h) Business Associate agrees to make its internal practices, books, and
records, including policies and procedures, relating to the use and disclosure
of Protected Health Information received from, or created or received by
Business Associate on behalf of, Covered Entity available to the Secretary, in a
time and manner designated by the Secretary, for purposes of the Secretary
determining Covered Entity's compliance with the Privacy Rule.
(i) Business Associate agrees to document such disclosures of Protected
Health Information and information related to such disclosures as would be
required for Covered Entity to respond to a request by an Individual for an
accounting of disclosures of Protected Health Information in accordance with 45
CFR 164.528.
(j) Business Associate agrees to provide to Covered Entity, in the time and
manner designated by Covered Entity, information collected in accordance with
Section (2)(i) of this Addendum, to permit Covered Entity to respond to a
request by an Individual for an accounting of disclosures of Protected Health
Information in accordance with 45 CFR 164.528.
3. Permitted Uses and Disclosures by Business Associate General Use and
Disclosure Provisions
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Except as otherwise limited in this Addendum, Business Associate may use or
disclose Protected Health Information to perform functions, activities, or
services for, or on behalf of, Covered Entity as specified in the Agreement,
provided that such use or disclosure would not violate the Privacy Rule if done
by Covered Entity.
4. Specific Use and Disclosure Provisions
(a) Except as otherwise limited in this Addendum, Business Associate may use
Protected Health Information for the proper management and administration of
Business Associate or to carry out the legal responsibilities of Business
Associate.
(b) Except as otherwise limited in this Addendum, Business Associate may
disclose Protected Health Information for the proper management and
administration of Business Associate, provided that disclosures are Required By
Law, or Business Associate obtains reasonable assurances from the person to whom
the information is disclosed that it will remain confidential and used or
further disclosed only as Required By Law or for the purpose for which it was
disclosed to the person (which purpose shall be consistent with the limitations
imposed by this Addendum) and the person notifies the Business Associate of any
instances of which it is aware in which the confidentiality of the information
has been breached.
(c) Except as otherwise limited in this Addendum, Business Associate may use
Protected Health Information to provide Data Aggregation services to Covered
Entity as permitted by 42 CFR 164.504(e)(2)(i)(B).
(d) Business Associate may use Protected Health Information to report
violations of law to appropriate Federal and State authorities, consistent with
45 CFR 164.502(j)(1).
5. Obligations of Covered Entity Provisions for Covered Entity To Inform
Business Associate of Privacy Practices and Restrictions
(a) Covered Entity shall notify Business Associate of any limitation in its
notice of privacy practices in accordance with 45 CFR 164.520, to the extent
that such limitation may affect Business Associate's use or disclosure of
Protected Health Information.
(b) Covered Entity shall notify Business Associate of any changes in, or
revocation of, permission by an Individual to use or disclose Protected Health
Information, to the extent that such changes may affect Business Associate's use
or disclosure of Protected Health Information.
(c) Covered Entity shall notify Business Associate of any restriction on the
use or disclosure of Protected Health Information that Covered Entity has agreed
to in accordance with 45 CFR 164.522, to the extent that such restriction may
affect Business Associate's use or disclosure of Protected Health Information.
(d) Covered Entity shall not request Business Associate to use or disclose
Protected Health Information in any manner that would not be permissible under
the Privacy Rule if done by Covered Entity, except as permitted by Sections 4(b)
and 4(c) of this Addendum.
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6. Term and Termination
(a) This Addendum shall be effective as of the Effective Date of the
Agreement, and shall terminate when all of the Protected Health Information
provided by Covered Entity to Business Associate, or created or received by
Business Associate on behalf of Covered Entity, is destroyed or returned to
Covered Entity, or, if it is infeasible to return or destroy Protected Health
Information, protections are extended to such information, in accordance with
the termination provisions in this Section.
(b) Upon Covered Entity's knowledge of a material breach of this Addendum by
Business Associate, Covered Entity shall either: (i) provide an opportunity for
Business Associate to cure the breach or end the violation and terminate this
Addendum, and the provision for performance of functions, activities, or
services for, or on behalf of Covered Entity under the Agreement, if Business
Associate does not cure the breach or end the violation within the time
specified by Covered Entity; (ii) immediately terminate this Addendum, and the
provision for performance of functions, activities, or services for, or on
behalf of Covered Entity under the Agreement, if Business Associate has breached
a material term of this Addendum and cure is not possible; or (iii) if neither
termination nor cure is feasible, report the violation to the Secretary.
(c) Effect of Termination.
(i) Except as provided in paragraph (ii) of this section, upon termination
of this Addendum, for any reason, Business Associate shall return or
destroy all Protected Health Information received from Covered Entity, or
created or received by Business Associate on behalf of Covered Entity, and
shall retain no copies of the Protected Health Information. This provision
shall apply to Protected Health Information that is in the possession of
subcontractors or agents of Business Associate.
(ii) In the event that Business Associate determines that returning or
destroying the Protected Health Information is infeasible, Business
Associate shall provide to Covered Entity notification of the conditions
that make return or destruction infeasible. Upon mutual agreement that
return or destruction of Protected Health Information is infeasible,
Business Associate shall extend the protections of this Addendum to such
Protected Health Information and limit further uses and disclosures of such
Protected Health Information to those purposes that make the return or
destruction infeasible, for so long as Business Associate maintains such
Protected Health Information.
7. Miscellaneous
(a) Regulatory References. A reference in this Addendum to a section in the
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Privacy Rule means the section as in effect or as amended.
(b) Amendment. The Parties agree to take such action as is necessary to
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amend this Addendum from time to time as is necessary for Covered Entity to
comply with the requirements of the Privacy Rule and the HIPAA.
(c) Survival. The respective rights and obligations of Business Associate
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under Section 6(c) of this Addendum shall survive the termination of this
Addendum.
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(d) Interpretation. The provisions of this Addendum shall prevail over any
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provisions in the Agreement that may conflict with or appear inconsistent with
any provision of this Addendum. Any ambiguity in this Addendum shall be
resolved to permit Covered Entity to comply with the Privacy Rule.
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