EX-10.81 2 d880091dex1081.htm EX-10.81 EX-10.81

Exhibit 10.81

Final

AMENDED AND RESTATED

MASTER SERVICES AGREEMENT

Between

Health Net, Inc.

and

Cognizant Healthcare Services, LLC

Dated

November 21, 2014

“***” = CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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TABLE OF CONTENTS

 

                  Page  
  1.        PREAMBLE      1   
    1.1       Background and Purpose      1   
    1.2       Goals and Objectives      3   
    1.3       Structure of Agreement      4   
    1.4       Construction of Preamble      7   
  2.        DEFINITIONS      7   
    2.1       Defined Terms      7   
    2.2       Other Terms      16   
  3.        SERVICES      17   
    3.1       Provision of the Services      17   
    3.2       Implied Services      18   
    3.3       Evolution of the Services      18   
    3.4       Users of the Services      18   
    3.5       Non-Exclusive; Variability      19   
    3.6       Cooperation and Coordination with Other Parties      19   
    3.7       “Master” Nature of the Terms and Conditions      20   
    3.8       New Services      20   
    3.9       Joinder Agreements      21   
    3.10       Contract documents to be completed after Effective Date      22   
  4.        TERM AND REGULATORY APPROVALS      22   
    4.1       Initial Term      22   
    4.2       Renewal Terms      23   
    4.3       Regulatory and Customer Approvals      23   
  5.        PERFORMANCE      24   
    5.1       Performance, Generally      24   
    5.2       Place of Performance      24   
    5.3       Time of Performance      25   
    5.4       Manner of Performance      26   
    5.5       Quality Assurance and Continuous Improvement      27   
    5.6       Critical Deliverables      27   
  6.        SERVICE LEVELS      27   
    6.1       General      27   
    6.2       Failure to Perform      27   
    6.3       Removal of Performance Group Guarantee Customers      28   

 

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7.   SUPPLIER PERSONNEL   28   
  7.1    Provision of Suitable Personnel   28   
  7.2    Screening and Background Checks   28   
  7.3    Responsibility for Supplier Personnel, Generally   29   
  7.4    Key Supplier Positions   29   
  7.5    Removal and Replacement of Supplier Personnel   30   
  7.6    Controlling Turnover of Supplier Personnel   30   
  7.7    Subcontracting   31   
  7.8    Supplier Personnel No Longer on Health Net Account   32   
  7.9    Training   33   
8.   HEALTH NET RESPONSIBILITIES   33   
  8.1    Appointment of Health Net Program Management Office (PMO) Personnel   33   
  8.2    Health Net Cooperation Duties   33   
  8.3    Savings Clause   34   
  8.4    Minimum Revenue Commitment.   34   
9.   CHARGES   34   
  9.1    Pass-Through Expenses   34   
  9.2    Incidental Expenses   35   
  9.3    Taxes   35   
  9.4    Estimating Model   37   
  9.5    Most Favored Customer   37   
10.   INVOICING AND PAYMENT   37   
  10.1    Invoicing   37   
  10.2    Payment Due   38   
  10.3    Accountability   38   
  10.4    Proration   38   
  10.5    Refundable Items   38   
  10.6    Deductions   38   
  10.7    Disputed Charges   38   
11.   TRANSFER OR USE OF RESOURCES   39   
  11.1    Transfer of Resources   39   
  11.2    Use of Health Net Resources   39   
  11.3    Required Consents   44   
  11.4    Health Net Resources Provided to Supplier Personnel Working On-site   45   
  11.5    Service Description Update   46   

 

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12.   RESOURCE ACQUISITIONS DURING THE TERM   47   
  12.1    General Responsibility and Compatibility   47   
  12.2    Software Used to Provide the Services   48   
  12.3    Health Net Rights to Certain Software   48   
  12.4    Colocation Facilities.   53   
13.   TRANSITION   54   
  13.1    Overview   54   
  13.2    “Transition” Defined   54   
  13.3    Transition Changes   55   
  13.4    Transition Documents   56   
  13.5    Conduct of the Transition   57   
  13.6    Health Net Cooperation and Support   57   
  13.7    In Flight Projects   57   
  13.8    Completion of Transition Projects   57   
14.   DATA SECURITY AND PROTECTION   58   
  14.1    [Reserved.]   58   
  14.2    Health Net Data, Generally   58   
  14.3    Data Security   58   
  14.4    Intrusion Detection/Interception   60   
  14.5    Litigation and Investigation Requests   61   
  14.6    Compliance with Data Privacy and Data Protection Laws, Regulations and Policies   62   
  14.7    Security Breach   62   
  14.8    Import/Export Controls   64   
  14.9    Compliance with Gramm-Leach-Bliley   64   
15.   INTELLECTUAL PROPERTY RIGHTS   65   
  15.1    Certain IP-related Definitions   65   
  15.2    Independent IP, Generally   66   
  15.3    Rights in Deliverables   66   
  15.4    Incorporation of Third-Party Independent IP in a Deliverable   68   
  15.5    Work Products   69   
  15.6    Delivery of Deliverables and Other Materials   69   
  15.7    Use of Material Subject to Open Source Licenses   69   
  15.8    Intellectual Property Rights Agreements with Supplier Personnel   69   
  15.9    Bankruptcy   70   
  15.10    Mental Impressions   70   

 

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16.   TERMINATION   70   
  16.1    Termination By Health Net   70   
  16.2    Termination Related Payments.   73   
  16.3    Termination By Supplier   74   
  16.4    Extension of Termination/Expiration Date   74   
  16.5    Partial Termination   74   
  16.6    Disengagement Assistance   75   
  16.7    Survival   76   
  16.8    Bid Assistance   77   
17.   GOVERNANCE AND MANAGEMENT   78   
  17.1    Contract Governance Structure and Processes   78   
  17.2    Procedures Manual   78   
  17.3    Technology Plans   79   
  17.4    Action Plans and Step In Rights   80   
  17.5    Change Control   82   
18.   AUDITS AND RECORDS   84   
  18.1    Audit Rights   84   
  18.2    Supplier Audits   85   
  18.3    Supplier’s Internal Controls   87   
  18.4    Audit Follow-up   87   
  18.5    Confidentiality of Audits   87   
  18.6    Records Retention   87   
  18.7    Financial Reports   88   
  18.8    Overcharges   88   
19.   REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUPPLIER   88   
  19.1    Work Standards   88   
  19.2    Maintenance   89   
  19.3    Efficiency and Cost-Effectiveness   89   
  19.4    Deliverable   89   
  19.5    Documentation   89   
  19.6    Compatibility   89   
  19.7    Non-Infringement   90   
  19.8    Viruses   91   
  19.9    Disabling Code   91   

 

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  19.10    Date and Currency Compliance   91   
  19.11    Corporate Social Responsibility   91   
  19.12    Subcontractor Confidentiality and Data Protection   92   
  19.13    No Improper Inducements   92   
  19.14    Foreign Corrupt Practices Act   92   
  19.15    Claims Procedures, Appeals and External Review   93   
  19.16    ABS Platform   93   
20.

 

MUTUAL REPRESENTATIONS AND WARRANTIES; DISCLAIMER

  93   
  20.1    Mutual Representations and Warranties   93   
  20.2    Disclaimer   94   
21.

 

CONFIDENTIALITY

  94   
  21.1    “Confidential Information” Defined   94   
  21.2    Obligations of Confidentiality   95   
  21.3    No Implied Rights   96   
  21.4    Compelled Disclosure   96   
  21.5    Confidential Treatment of this Agreement   96   
  21.6    Disclosure of Information Concerning Tax Treatment   96   
  21.7    Return or Destruction   97   
  21.8    Duration of Confidentiality Obligations   97   
22.

 

INSURANCE

  98   
23.

 

INDEMNIFICATION

  98   
  23.1    Indemnification By Supplier   98   
  23.2    Infringement Indemnity Claims   100   
  23.3    Indemnification By Health Net   100   
  23.4    Indemnification Procedures   102   
  24.1    General Intent   106   
  24.2    Limitations of Liability   106   
  24.3    Force Majeure   110   
25.

 

RULES OF CONSTRUCTION

  111   
  25.1    Entire Agreement   111   
  25.2    Contracting Parties; No Third Party Beneficiaries   111   
  25.3    Contract Amendments and Modifications   111   
  25.4    Governing Law   112   
  25.5    Relationship of the Parties   112   
  25.6    Consents and Approvals   112   

 

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  25.7    Waiver   112   
  25.8    Remedies Cumulative   112   
  25.9    References   112   
  25.10    Rules of Interpretation   113   
  25.11    Order of Precedence   113   
  25.12    Severability   113   
  25.13    Counterparts   113   
  25.14    Reading Down   114   
26.

 

DISPUTE RESOLUTION

  114   
  26.1    Informal Dispute Resolution   114   
  26.2    Litigation   115   
  26.3    Continued Performance   115   
  26.4    Equitable Remedies   115   
  26.5    Waiver of Jury Trial   116   
  26.6    Disclaimer of Uniform Computer Information Transactions Act   116   
27.

 

GENERAL

  116   
  27.1    Binding Nature and Assignment   116   
  27.2    Ethics Hotline   117   
  27.3    Nondiscrimination   117   
  27.4    Beneficiary Hold Harmless   117   
  27.5    Notices   118   
  27.6    Non-solicitation of Employees   118   
  27.7    Compliance with Laws   119   
  27.8    Covenant of Good Faith   120   
  27.9    Public Disclosures   120   
  27.10    Service Marks   120   
  27.11    Guaranty   120   
  27.12    Mutually Negotiated   121   

 

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Master Services Agreement

This Master Service Agreement, dated November 21, 2014, but effective as of November 2, 2014 (the Effective Date”), is between Health Net, Inc., a Delaware corporation with its principal place of business located at 21650 Oxnard Street, Woodland Hills, CA 91367 (“Health Net), and Cognizant Healthcare Services, LLC (Supplier), a Delaware limited liability company having an office at 500 Frank W. Burr Blvd., Teaneck, New Jersey 07666 (each, a Partyand collectively, the Parties). The Parties agree that the following terms and conditions shall apply to the services to be provided by Supplier to Health Net under this Agreement, in consideration of certain payments to be made by Health Net, all as more specifically described below.

References to “Supplier” in this Agreement may include Supplier Personnel where such interpretation is required by the context of the particular clause or provision in question. The interpretation will be adopted which best preserves the Parties’ mutual intention that certain Supplier obligations to Health Net pursuant to the Agreement are to be executed by Supplier Personnel performing such actions.

 

1. PREAMBLE

 

1.1 Background and Purpose

This Agreement is made and entered into with reference to the following:

 

  (a) Health Net is among the nation’s largest publicly traded managed health care companies. Its mission is to help people be healthy, secure and comfortable. The company’s health plans and government contracts subsidiaries provide health benefits to individuals across the country through group, individual, Medicare (including the Medicare prescription drug benefit commonly referred to as “Part D”), Medicaid, Department of Defense, including TRICARE, and Veterans Affairs programs. Health Net’s behavioral health services subsidiary, Managed Health Network, Inc., provides behavioral health, substance abuse and employee assistance programs to individuals, including Health Net’s own health plan members. Health Net’s subsidiaries also offer managed health care products related to prescription drugs, and offer managed health care product coordination for multi-region employers and administrative services for medical groups and self-funded benefits programs.

 

  (b) Supplier and its Affiliates are providers of business process and information technology outsourcing services and have provided various business process and information technology services to Health Net since 2006.

 

  (c) Health Net and Cognizant Technology Solutions U.S. Corporation (CTSUS) are parties to the following existing agreements (collectively, the “Existing Agreements”):

 

  (i) that certain Master Staff Augmentation and Application Development Services Agreement dated May 3, 2006, as amended (the “SA/AD Agreement”);

 

  (ii) that certain Master Services Agreement dated September 30, 2008, as amended (the “AO Agreement”); and

 

  (iii) that certain Master Services Agreement dated January 23, 2009, as amended (the “Original BPO Agreement”).

 

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  (d) Supplier is a wholly owned subsidiary of CTSUS, which is a wholly owned subsidiary of Cognizant Technology Solutions Corporation.

 

  (e) Supplier is interested in expanding its existing business process outsourcing offerings and establishing a business process as a service (“BPaaS”) service offering for health insurance companies, including to Health Net. Supplier plans to launch its BPaaS offering with Health Net (utilizing certain assets to be conveyed by Health Net to Supplier) to attract and engage BPaaS customers in the health care industry.

 

  (f) Supplier is also interested in providing IT and perhaps other types of services to Health Net, andHealth Net is interested in procuring such BPaaS services, IT services and perhaps other services from Supplier. After a comprehensive evaluation and negotiation process, Health Net selected Supplier to provide the Services described in this Agreement, during the Term of this Agreement and pursuant to the terms and conditions of this Agreement.

 

  (g) The Parties reached agreement on contract terms and entered into that certain Master Services Agreement effective as of November 2, 2014 (the “Original Agreement”). Concurrently with the execution of the Original Agreement, Supplier and Health Net entered into an Asset Purchase Agreement (“APA”) for the sale by Health Net to Supplier of the Acquired Assets, including the ABS Platform, for Supplier’s use in providing BPaaS Services under this Master Services Agreement.

 

  (h) After entering into the Original Agreement, the Parties agreed to make certain modifications to certain of the contract documents. The Parties are entering into this Amended and Restated Master Services Agreement to implement such modifications. The Parties further agree that:

 

  (i) the Effective Date of the Original Agreement (i.e., November 2, 2014) shall be the Effective Date of this Amended and Restated Master Services Agreement;

 

  (ii) this Amended and Restated Master Services Agreement replaces and supersedes in all respects the Original Agreement, and any remaining references herein to the Original Agreement (including references to the Master Services Agreement) shall be deemed to be a reference to this Amended and Restated Master Services Agreement;

 

  (iii) references in the following agreements relating to the Master Services Agreement dated as of November 2, 2014 shall be understood to refer to this Amended and Restated Master Services Agreement, as it may be amended from time to time in accordance with this Agreement: (A) Schedule V (Guaranty)(including the actual signed version of this agreement), (B) Schedule 1-A to the Supplemental Terms and Conditions for BPaaS Services (Escrow Agreement)(including the actual signed version of this agreement), (C) the Initial SOWs, (D) the APA, (E) the Business Associate Agreement, (F) the Transition Manual, and (G) Amendment #5 to Master Services Agreement (the AO Amendment); and

 

  (iv) the term “Amended and Restated Master Services Agreement” is interchangeable with the term “Agreement” as used throughout this Agreement.

 

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1.2 Goals and Objectives

 

  (a) Health Net and Supplier have the following over-arching goals and objectives associated with the execution of this Agreement and their performance hereunder:

 

  (i) Expand the Parties’ existing long term strategic relationship;

 

  (ii) A seamless transition of functions from Health Net and its vendors to Supplier in a manner that is designed to ensure minimal business disruption and business risk to both Parties;

 

  (iii) Convert Health Net’s existing BPO services model into an outcome-based service delivery model;

 

  (iv) Establish a relationship that could provide the basis for Supplier to create an industry-leading BPaaS delivery model for Supplier to then deliver BPaaS Services to Health Net as well as additional Supplier customers;

 

  (v) Through Supplier’s provision of the Services to Health Net, allow Health Net to focus its efforts on creating membership growth for its existing products and plans as well as driving business expansion into new service offerings (which may include dual eligibility and TRICARE);

 

  (vi) Improve the quality, effectiveness and efficiency of Health Net’s operations, including through Supplier’s modernization of the Acquired Assets, ABS Platform and the overall solution and service delivery method so as to:

 

  (A) more accurately track activities related to the compliance with Laws, including compliance with the Patient Protection Affordable Care Act (PPACA) and compliance of reporting Quality Improvement expenses; and

 

  (B) generally permit Health Net to focus on providing higher quality of care to its Beneficiaries.

 

  (vii) Improve customer service and stakeholder satisfaction including consistent repeatable process models to reduce compliance risk;

 

  (viii) Where applicable, provide Health Net with a predictable and inclusive pricing model based on Health Net business metrics;

 

  (ix) Redesign and streamline existing complex service level agreements to simplify service level administration while continuing to provide a quantifiable means by which Health Net can measure the accuracy, timeliness and quality of Supplier’s delivery of services;

 

  (x) A mutually beneficial relationship with a professional service provider;

 

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  (xi) Implement a smooth and timely Transition and Transformation of personnel, systems, suppliers and processes (including the transfer to Supplier of Health Net’s strategic information technology assets and process delivery knowledge) with no disruption in Supplier’s provision of service to Health Net and no disruption to Health Net in its general conduct of its business; and

 

  (xii) Support Supplier’s strategic goal of leveraging this industry leading delivery model developed by Supplier from Health Net’s existing delivery solution and the Acquired Assets to provide like services to other Supplier customers.

 

  (b) The goals and objectives set out in this Section 1.2 are intended to be a general introduction to, and statement of the spirit of, this Agreement. Although this Section 1.2 does not expand or reduce the scope of the Parties’ obligations under this Agreement, other portions of this Agreement may measure Supplier’s performance, in part, based on the extent to which Supplier achieves certain objectives.

 

1.3 Structure of Agreement

This document (the “Terms and Conditions”) sets out the basic terms and conditions under which the Parties will conduct the transactions contemplated by this Agreement. In addition, there will be a number of schedules attached to the Terms and Conditions, including:

Schedule A (Cross Functional Services)

Schedule A-1 (Cross Functional Solution Description)

Schedule A-2 [Reserved]

Schedule A-3 (Future SOW Template)

Schedule A-4 (IT Continuity and Disaster Recovery Services)

Schedule B (Service Levels)

Schedule B-1 (Certain Service Levels)

Schedule B-2 (Compliance Service Level Metrics)

Schedule B-3 (Performance Guarantee Group Service Level Metrics)

Schedule B-4 (Stakeholder Satisfaction Survey)

Schedule C (Charges)

Schedule C-1 (BPaaS—PMPM Variable Rates)

Schedule C-2 (BPaaS—Detailed LOB Structure and Tower-Level PMPM Variable Rates)

Schedule C-3 (Forecasted Supplier-Procured IT Assets Charge)

 

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Schedule C-4 (BPaaS Membership Baseline)

Schedule C-5 (AD Projects—Examples)

Schedule C-6 (IT SOW – Resource Categories)

Schedule C-7 (IT SOW – Annual Services Charge)

Schedule C-8 (IT SOW – Resource Baselines)

Schedule C-9 (IT SOW – ARC/RRC Rates)

Schedule C-10 (IT SOW – Supplier-Procured Assets)

Schedule C-10-1 (BOM with Pricing)

Schedule C-11 (Financial Responsibility Matrix)

Schedule C-12 (Termination Charges)

Schedule C-13 (BPO T&M Rates)

Schedule C-14 (IO T&M Rates)

Schedule C-15 (T&M Time Codes)

Schedule C-16 (Medical Management Rates)

Schedule C-17 (Pass-Through Expenses)

Schedule D (Key Supplier Positions)

Schedule E (Transitioned Employees)

Schedule F (Supplier Facilities)

Schedule G (Governance)

Schedule G-1 (Supplier Organization)

Schedule G-2 (Meeting Framework)

Schedule G-3 (Management Reports)

Schedule H (Change Control Process)

Schedule H-1 (Change Control Notice)

Schedule I (Insurance)

Schedule J (Project Framework)

 

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Schedule J-1 (Deliverable Acceptance Procedures)

Schedule J-2 (Form of Work Order)

Schedule J-3 (Project Estimation Model)

Schedule K (Regulatory Compliance Addendum)

Schedule K-1 (Supplemental Regulatory Detail)

Schedule K-2 (CMS Offshore Attestation Requirements)

Schedule K-3 (AHCCS Subcontract)

Schedule L (Disengagement Assistance)

Schedule M (Supplier Competitors)

Schedule N (Non-Disclosure Agreement)

Schedule O (Health Net Provided Resources)

Schedule P (Health Net Policies)

Schedule Q (Security Requirements)

Schedule R (Critical Deliverables)

Schedule S (Procedures Manual TOC)

Schedule T (Joinder Agreement)

Schedule U (Aspect Assignment and Assumption Agreement)

Schedule V (Guaranty)

Schedule W (Glossary)

Schedule X (In-Flight and Accelerated Projects)

Schedule X-1 (In-Flight Project List)

Schedule X-2 (Accelerated Project List)

Schedule Y (Offshore Prohibitions and Requirements)

Schedule Z (Transition)

Schedule Z-1 (Acceptance of Transition Deliverables and Milestones)

Schedule Z-2 (Summary of Onshore and Offshore Counts and Ratios)

 

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Schedule Z-3 (Health Net Transition Support Role Descriptions)

Schedule Z-4 (Health Net Transition Support Personnel Levels)

Schedule Z-5 (Health Net Provided Transition Work Space)

Schedule Z-6 (Ramp-Down Plan)

Schedule Z-7 (Offshore Ramp-Up Plan)

Schedule Z-8 (Required Onshore Positions)

Schedule Z-9 (Staff Augmentation Plan)

Schedule Z-10 (Consolidated BPaaS Transition Plans)

Schedule Z-11 (IT Transition Plan)

Schedule Z-12 (Call Center Transition Plan)

Annex 1 (Supplemental Terms and Conditions for BPaaS Services)

Schedule 1-A (Escrow Agreement)

 

1.4 Construction of Preamble

The provisions of this Section 1 (Preamble) are intended to provide a general introduction to this Agreement and a context in which to interpret this Agreement’s terms and conditions in circumstances where their meanings are unclear or ambiguous. It is not intended to alter the plain meaning of this Agreement or to alter the scope of the Parties’ express obligations under it.

 

2. DEFINITIONS

 

2.1 Defined Terms

The following capitalized terms, when used in this Agreement, will have the meanings given them below:

 

  (a) ABS Platform” has the meaning given to it in the APA.

 

  (b) Accelerated Projects” has the meaning given in Schedule C (Charges).

 

  (c) Adverse Change in Supplier’s Financial Circumstances” means if Supplier (i) files a petition in bankruptcy; (ii) has an involuntary petition in bankruptcy filed against it which is not challenged within twenty (20) days and dismissed within sixty (60) days; (iii) becomes insolvent; (iv) makes a general assignment for the benefit of creditors; (v) admits in writing its inability to pay its debts as they mature; or (vi) has a receiver appointed for its assets.

 

  (d) Affected Employees” has the meaning given in Schedule E (Transitioned Employees).

 

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  (e) Affected Services” mean Services for which Health Net is requesting Disengagement Assistance.

 

  (f) Affiliate” means, with respect to an entity, any other entity or person Controlling, Controlled by or under common Control with such entity.

 

  (g) Agreement” means this Terms and Conditions document as well as all Schedules, Annexes and attachments attached hereto, and any SOWs entered into pursuant to this Agreement as well as all Exhibits thereto, the Transition Manual, all as may be amended by the Parties from time to time in accordance with Section 27.5 (Contract Amendments & Modifications) or as otherwise provided in the Agreement.

 

  (h) APA” has the meaning given in Section 1.1(g).

 

  (i) Application” or “Application Software” means Software that performs specific End User-related data processing, data management and telecommunications tasks.

 

  (j) Acquired Assets” will have the meaning set forth in the APA.

 

  (k) Auditor” has the meaning set forth in Section 18.1 of the Agreement.

 

  (l) Beneficiary” means a person who has enrolled in and/or is eligible to receive services under a Benefit Program at the time services are rendered. The Parties acknowledge that the term “member,” “enrollee” and “insured” may be used by Health Net, and for purposes of this Agreement, the term Beneficiary includes the term “member,” “enrollee” and “insured” wherever used.

 

  (m) Benefit Program” means a plan offered or administered by Health Net, its Affiliates or any of their respective customers whereby any of the foregoing are obligated to provide or arrange for health care services, or compensation therefore, to Beneficiaries in accordance with the provisions contained in such plans.

 

  (n) BPaaS Discretionary Projects” has the meaning given in Schedule C (Charges).

 

  (o) BPaaS Non-Discretionary Projects” has the meaning given in Schedule C (Charges).

 

  (p) BPaaS Roadmap Projects” has the meaning given in Schedule C (Charges).

 

  (q) BPaaS Services Commencement Date” shall mean the later to occur of (i) the date that is ten (10) Business Days after the date that Health Net receives the last required approval from the Regulators to proceed with the transactions contemplated by this Agreement, and (ii) March 1, 2015.

 

  (r) BPaaS Services” means collectively the Services to be provided by Supplier under this Agreement, excluding the Non-BPaaS IT Services and any other Services that may be expressly designated as not part of the BPaaS Services in any Future SOWs.

 

  (s) Breakup Fee” means a fee in the amount of *** to be paid by Health Net if Health Net exercises its right to terminate this Agreement pursuant to Section 16.1(n).

 

  (t) Business Day” has the meaning given in Schedule B (Service Levels).

 

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  (u) Business Hours” means 08:00 – 17:00, local time (from the perspective of the applicable Service Recipient), during a Business Day, provided that the foregoing shall not supersede any business, operational or similar hours set forth in a SOW (including Solution documents attached thereto).

 

  (v) Commercially Available” means Software that is routinely licensed to the general public by Supplier or a third party, as applicable, through separately established standard terms and conditions and standard charges, and for which such Software Supplier or the third party (as applicable) provides ongoing maintenance, support and Software Updates.

 

  (w) Commercially Reasonable Efforts” means taking all such steps and performing in such a manner as a well-managed company would undertake where it was acting in a determined, prudent and reasonable manner to achieve a particular desired result for its own benefit.

 

  (x) Control” and its derivatives, such as “Controlling” means with regard to any entity the legal, beneficial or equitable ownership, directly or indirectly, of: (i) fifty percent (50%) or more of the capital stock (or other ownership interest if not a stock corporation) of such entity ordinarily having voting rights; or (ii) (A) twenty percent (20%) or more of the capital stock (or other ownership interest if not a stock corporation) and (B) either (1) a greater percentage than any other juridical person or (2) management control in fact or by agreement.

 

  (y) Disengagement Assistance” means, collectively, the Functions that Health Net requests from Supplier to enable an orderly transfer of Services from Supplier to Health Net or its designees without interruption or adverse effect to Health Net in connection with the reduction or cessation of any Services (in whole or in part), or the expiration or earlier termination (for any reason) of this Agreement (in whole or in part) or any SOW (in whole or in part), including (i) the Functions described in Section 16.5 (Disengagement Assistance) and Schedule L (Disengagement Assistance), and (ii) as requested by Health Net, any or all of the Affected Services provided by Supplier prior to the effective date of reduction, cessation, termination or expiration of the Affected Services, which for clarity Health Net may require Supplier to perform after expiration or termination of the Agreement with respect to such Affected Services.

 

  (z) Disengagement Assistance Period” means, for each request by Health Net for Disengagement Assistance, the period of time requested by Health Net for Supplier to provide Disengagement Assistance pursuant to Section 16.6 (Disengagement Assistance), provided that in no event shall any Disengagement Assistance Period extend beyond the date that is *** following the effective date of expiration or termination of this Agreement in whole, as such effective date may be extended pursuant to Section 16.4.

 

  (aa) DMHC” means the Department of Managed Health Care of the State of California.

 

  (bb) Documentation” means written materials (including materials published on an Internet or Intranet site or otherwise online) that are available or necessary to instruct or assist End Users, operators or systems personnel in the installation, development, maintenance, operation, use or modification of any Equipment, Software, system, or Deliverable (including applicable functional and technical specifications), as such documentation is updated from time to time.

 

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  (cc) Effective Date” has the meaning set forth in the first paragraph of the Terms and Conditions of this Agreement.

 

  (dd) Employee Transfer Date” has the meaning given in Schedule E (Transitioned Employees).

 

  (ee) End Users” means direct users of the Services provided under this Agreement.

 

  (ff) Equipment” means any computer and telecommunications machines or other hardware (without regard to the entity owning or leasing it), including all associated attachments, features, accessories and peripheral devices and related services (e.g., maintenance and support services, upgrades, and subscriptions services). For purposes of allocating financial, operational, management, or other responsibilities with respect to Equipment, references to Equipment shall also include any associated maintenance and services agreements relating to such Equipment that are in effect and disclosed by the contracting Party to the other Party.

 

  (gg) Exchange” shall mean the California Health Benefit Exchange (“Covered California”) and any Laws applicable to such entity, and any other comparable entity operating in a state in which Health Net or a Health Net Affiliate conducts business.

 

  (hh) Exchange Agreement” shall mean the agreement between Health Net and the Exchange in California that establishes the terms under which Health Net shall participate in the Exchange’s Covered California program, and any comparable agreement between Health Net or a Health Net Affiliate and an Exchange in a state in which Health Net or a Health Net Affiliate conducts business.

 

  (ii) Financial Responsibility” means having responsibility for furnishing, maintaining and paying for resources (or certain services related to such resources) without seeking reimbursement from the other Party.

 

  (jj) Former Health Net Affiliatemeans: (i) any entity Affiliated with Health Net at any time during the Term (such designation expiring at the end of the twenty-fourth (24th) month after the date that such entity ceases to Control, be Controlled by, or be under common Control with, Health Net); or (ii) the purchaser of all or substantially all of the assets and/or customers of any line of business of Health Net or any of its Affiliates (such designation (A) applying only with respect to the business or customers so acquired; and (B) expiring at the end of the twenty-fourth (24th) month after the date of such purchase.) At Health Net’s option, each Former Health Net Affiliate shall be deemed to be an Affiliate of Health Net.

 

  (kk) Functions” has the meaning given in Section 3.1(a) (Services, Defined).

 

  (ll) Health Insurance Portability and Accountability Act” or “HIPAA” means Public Law 104-191 and its implementing regulations.

 

  (mm) Health Net Data” means all data and information in any form (and all Derivative Works thereof), including Confidential Information, payment card information, Protected Health Information and Personally Identifiable Information, belonging to or concerning any of Health Net; its Affiliates; its Service Recipients; and each of their respective and prospective members, customers, employees, providers or other suppliers that (i) is present in Software or Equipment operated by Supplier for the benefit of Health Net, a Health Net

 

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     Affiliate or another Service Recipient, or (ii) is directly or indirectly accessed or obtained by Supplier from, in connection with, or as a result of the Services, or is derived therefrom. For the avoidance of doubt, “Health Net Data” does not include publicly available information or Supplier Confidential Information.

 

  (nn) Health Net Facilities” means facilities that are owned or leased by Health Net (or a Health Net Affiliate).

 

  (oo) Health Net Leased Equipment” means Equipment leased by Health Net (or a Health Net Affiliate).

 

  (pp) Health Net Licensed Software” means Software owned (i.e., in which the copyright is owned) by a party other than Health Net (or a Health Net Affiliate) that is licensed by Health Net (or a Health Net Affiliate).

 

  (qq) Health Net Owned Equipmentmeans Equipment owned by Health Net (or a Health Net Affiliate).

 

  (rr) Health Net Owned Software” means Software owned (i.e., in which the copyright is owned) by Health Net (or a Health Net Affiliate).

 

  (ss) Health Net Policies” means the applicable standards, policies and procedures of Health Net (and its Affiliates) provided to Supplier in connection with this Agreement (including by Health Net providing Supplier a link to an online repository where they may be accessed), whether existing as of the Effective Date (including those policies identified in Schedule P (Health Net Policies) or in any SOW) or adopted by Health Net during the Term, and in each case as may be modified by Health Net during the Term.

 

  (tt) Health Net Third Party Service Contractsmeans third party service contracts of Health Net (or a Health Net Affiliate). For clarity, maintenance and support and services agreements relating to Software that are in effect and that are disclosed by Health Net to Supplier shall be deemed to be part of the Software and not Health Net Third Party Service Contracts.

 

  (uu) Identity-Related Costs” means the following costs that are reasonable and incurred by Health Net relating to a Security Breach: ***

 

  (vv) Indemnity Claim” means any demand, or any civil, criminal, administrative or investigative notice, inquiry, claim, action, or proceeding (including arbitration) sent to, or commenced or threatened against, an entity or person.

 

  (ww) Initial SOWs” shall mean collectively the following Statements of Work:

 

  (i) Statement of Work # 1 (Claims Management Services),

 

  (ii) Statement of Work # 2 (Membership and Configuration Services),

 

  (iii) Statement of Work # 3 (Contact Center Services),

 

  (iv) Statement of Work # 4 (IT Services),

 

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  (v) Statement of Work # 5 (Quality Assurance Services),

 

  (vi) Statement of Work # 6 (Appeals and Grievances Services), and

 

  (vii) Statement of Work # 7 (Medical Management Services).

 

  (xx) IPRs” or “Intellectual Property Rights” means all intellectual and industrial property rights recognized in any jurisdiction, including copyrights, mask work rights, moral rights, trade secrets, patent rights, rights in inventions, trademarks, trade names and service marks (including applications for, and registrations, extensions, renewals, and re-issuances of, the foregoing).

 

  (yy) Law” means, if and to the extent applicable: (i) any law, statute, regulation, ordinance or subordinate legislation in force from time to time, including any such item that relates to TRICARE, the Veteran’s Administration, and the Centers for Medicare and Medicaid (“CMS”); (ii) the common law; (iii) any binding court order, judgement or decree (including consent agreements); (iv) any directive, policy, rule, order, corrective action plan, communication, standards or other mandate that is made or given by any government, an agency thereof, or any regulatory body (including an Exchange, the DMHC and the U.S. Department of Health and Human Services), of any country, the European Union, or other national, federal, commonwealth, state, provincial or local jurisdiction, and of any exchange or association (including the New York Stock Exchange, the National Association of Securities Dealers whose regulations are binding on either Party pursuant to a self-regulating mechanism approved by a governmental entity; and (v) any communication from a Regulator to Health Net or Supplier indicating a course of action be taken or not taken that, if disclosed by the Regulator to Health Net is thereafter disclosed by Health Net to Supplier.

 

  (zz) Line of Business” means the lines of business established by Health Net into which its operations relevant to the scope of the Services are organized for certain purposes. As of the Effective Date, there are five (5) such Lines of Business, as follows: (i) Individual – Commercial; (ii) Group – Commercial; (iii) Medicare; (iv) State Health Programs; and (v) Duals. The Lines of Business shall also include any additional Lines of Business for which pricing is developed pursuant to Schedule C (Charges).

 

  (aaa) Lossesmeans all losses, liabilities, damages, liens, claims and costs, and all related expenses and other charges suffered or reasonably incurred as a result of or in connection with an Indemnity Claim, including reasonable attorneys’ fees and disbursements, costs of investigation, litigation, settlement, and judgment, and any taxes, interest, penalties, and fines.

 

  (bbb) Minimum Revenue Commitment” or “MRC” has the meaning given in Schedule C (Charges).

 

  (ccc) Non-BPaaS IT Projects” has the meaning given in Schedule C (Charges).

 

  (ddd) Non-BPaaS IT Services” has the meaning in SOW #4 (IT Services).

 

  (eee) Non-Commercially Available” means, with respect to Software, Software that is not Commercially Available.

 

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  (fff) Object Code” shall mean Software code resulting from the translation or processing of Software in Source Code form by a computer into machine language, which is a form that is not convenient to human understanding of the Software.

 

  (ggg) Open Source Code” means any Software that requires as a condition of its use, modification or distribution that it be disclosed or distributed in source code form or made available at no charge. Open Source Code includes software licensed under the GNU General Public License (GPL) or the GNU Lesser/Library GPL.

 

  (hhh) Open Source License” means a license to Software that complies with the Open Source Initiative’s definition of “Open Source.”

 

  (iii) Out-of-Pocket Expenses” means reasonable, demonstrable and actual out-of-pocket expenses incurred by Supplier for Equipment, materials, supplies, or services provided to or for Health Net that are expressly subject to reimbursement by Health Net pursuant this Agreement, but not including Supplier’s actual or allocated overhead costs, administrative expenses or other mark-ups.

 

  (jjj) Protected Health Information” and “PHI” shall have the meaning given to such term at 45 C.F.R. § 160.103, as may be amended by Law from time to time.

 

  (kkk) Personally Identifiable Information” means any information about an individual including any information that could be used to identify an individual such as Protected Health Information.

 

  (lll) Proprietary Business Rules” shall have the definition in the APA.

 

  (mmm) Regulator” means any governmental or quasi-governmental entity (i) with investigatory or oversight capability regarding Health Net, a Health Net Affiliate, or a Former Health Net Affiliate, or of any Services under this Agreement, including CMS, DMHC and Arizona Health Care Cost Containment System (“AHCCCS”), or (ii) that is party to a Regulatory Contract.

 

  (nnn) Regulatory Contract” means any contract between Health Net and a governmental or quasi-governmental entity under which the governmental or quasi-governmental entity is paying for services provided to Beneficiaries (e.g., Medicaid, Medi-Cal, CHIPs), but excluding contracts in which the governmental or quasi-governmental entity is merely acting as the employer paying for health insurance coverage for its employees.

 

  (ooo) Related SOW” shall mean a SOW that is impacted by the event that gives rise to the right to terminate under Section 16, such as the SOW under which the breach or Service Level Failure occurred. Related SOW shall also include any SOW which Health Net, in its reasonable discretion, determines should also be terminated because of business, operational or financial reasons, including that the Services provided under the immediately impacted SOW should be grouped with Services under other SOWs in order to achieve a desired business, operational or financial result.

 

  (ppp) Required Consents” means such consents as may be required for (i) the assignment to a Party, or the grant to a Party of rights of access and use, of resources otherwise provided to or licensed by the other Party, and (ii) with respect to any resource (e.g., Software, Equipment, third party services) for which the corresponding contract is to be assigned to

 

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     Health Net or its designee pursuant to Disengagement Assistance (including any resource utilized or introduced after the Effective Date during the Term), the disclosure of the corresponding contract terms to Health Net or its designee, or the assignment of such contract to Health Net or it designee, as part of Disengagement Assistance.

 

  (qqq) Security Breach” means (i) any actual circumstance that compromises the privacy and/or security of any Health Net Data or Health Net Software or systems which are possessed or operated by (or for) or are under the control of Supplier or a third party that received such Health Net Data (directly or indirectly) through Supplier (with the exception of a third party to which Health Net directs Supplier in writing to provide Health Net Data, including auditors, regulators and contractors but excluding Subcontractors); or (ii) any loss or unauthorized acquisition, access, destruction, alteration, disclosure or use (in all cases whether intentional or not) of, or the inability to locate, Health Net Data which was delivered to, created, maintained or accessed by, Supplier or a third party that received such Health Net Data (directly or indirectly) through Supplier (with the exception of a third party to which Health Net directs Supplier in writing to provide Health Net Data, but excluding Subcontractors). For purposes of defining “in control” as that term is used in clause (i) of this definition, Supplier shall be deemed to be in control of Health Net Data, Health Net Software or systems in the IBM data center to the extent (A) Supplier provides or is required to provide systems monitoring or related management or other Services that affect the security of such Health Net Data, Health Net Software or systems, (B) Supplier is obligated to manage IBM or any other third party under this Agreement, (C) the provisions set forth in Schedule Q (Security) are applicable to the Services to be provided by Supplier with respect to such Health Net Data, Health Net Software or systems, or (D) any other circumstance in which Supplier’s acts or omissions could have prevented the Security Breach if Supplier had exercised due care and complied with is obligations under this Agreement.

 

  (rrr) Service Towermeans the Services to be provided by Supplier under each Statement of Work, as well as the Cross Functional Services to support such Service Tower. The Service Towers as of the Effective Date are:

 

  (i) Cross Functional Services Tower means the Cross Functional Services as defined in Schedule A (Cross Functional Services);

 

  (ii) Claims Service Tower means the Claims Services as defined in Statement of Work # 1 (Claims Management Services);

 

  (iii) Membership Service Tower means the Membership and Configuration Services as defined in Statement of Work # 2 (Membership and Configuration Services);

 

  (iv) Contact Center Service Tower means the Contact Center Services as defined in Statement of Work # 3 (Contact Center Services);

 

  (v) Non-BPaaS IT Service Tower means the IT Services as defined in Statement of Work # 4 ( IT Services);

 

  (vi) Quality Assurance Service Tower means the Quality Assurance Services as defined in Statement of Work # 5 (Quality Assurance Services);

 

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  (vii) Appeals and Grievances Service Tower means the Appeals and Grievances Services as defined in Statement of Work # 6 (Appeals and Grievances Services); and

 

  (viii) Medical Management Service Tower means the Medical Management Services as defined in Statement of Work # 7 (Medical Management Services).

 

  (sss) Software” means (i) program code (in Object Code and Source Code forms) and all supporting documentation, media, on-line help facilities and tutorials, including any Software Updates, (ii) frameworks, utilities, macros, software configurations, templates and tools used to deliver services or enhance the productivity or quality of services, and (iii) Derivative Work of any item described in clauses (i) and (ii). For purposes of allocating financial, operational, management, or other responsibilities with respect to Software, references to Software shall also include any associated maintenance and support agreements relating to such Software that are in effect and are disclosed by the contracting Party to the other Party.

 

  (ttt) Software Update” means any modification, enhancement, upgrade, update, new version or release, or Derivative Work of Software.

 

  (uuu) SOW Effective Date” means, (i) with respect to the Initial SOWs, the Effective Date of this Agreement, and (ii) with respect to any Future SOW, the effective date set forth in the applicable SOW.

 

  (vvv) SOW Service Commencement Date” means, with respect to Future SOWs, the date set forth in the applicable SOW that Supplier Personnel shall commence performing the applicable SOW Services in a live production environment.

 

  (www) SOW Services” means, for each SOW, (i) the Services described in such SOW, and (ii) the Services described in Schedule A (Cross Functional Services) and elsewhere in the Agreement as they apply to the Services described in such SOW.

 

  (xxx) SOW Term” has the meaning given in Section 4.1 (Initial Term).

 

  (yyy) Source Code” means the computer code of Software in programming languages, including all comments and procedural code, and all related development documents (e.g., flow charts, schematics, statements of principles of operations, End User manuals, architectural standards, documentation, and any other specification that are used to create or that comprise the computer code, of the Software concerned).

 

  (zzz) Statement of Work” or “SOW” has the meaning given in Section 3.7(a).

 

  (aaaa) Subcontractormeans (i) a third party engaged by Supplier to provide any portion of the Services, (ii) any entity to which a Subcontractor further subcontracts (or otherwise sub-delegates) any of its subcontracted duties or obligations, and (iii) any other entity to which any such subcontracted duties or obligations are further subcontracted (or otherwise sub-delegated), below the level of the agreement between Supplier and a Subcontractor.

 

  (bbbb) Supplier Competitormeans those entities listed in Schedule M (Supplier Competitor).

 

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  (cccc) Supplier Personnel” means, collectively, any and all personnel furnished or engaged by Supplier to perform any part of the Services, including: (i) the employees of Supplier; (ii) Subcontractors; and (iii) the employees of such Subcontractors.

 

  (dddd) Supplier Provided Software” means Software that is used by Supplier to provide the Services that is either (i) made available by Supplier to Health Net, its Affiliates, Former Health Net Affiliates and Service Recipients to receive or use the Services, or (ii) reasonably necessary for Health Net and its Affiliates’ and their respective service providers to provide and deliver, and for Health Net, its Affiliates, Former Health Net Affiliates and Service Recipients to receive and use, services that are substantially similar to the Services, during the Disengagement Assistance Periods and for two years thereafter as contemplated by Section 12.3.

 

  (eeee) Supplier Softwaremeans any Software that is owned by Supplier or its Affiliates.

 

  (ffff) Technology Platform” has the meaning given in Annex 1 (Supplemental Terms and Conditions for BPaaS Services).

 

  (gggg) Terms and Conditions” means this document, which is identified in the footer as the Terms and Conditions.

 

  (hhhh) Third Party Softwaremeans any Software that is owned by a third party (i.e., not Health Net or its Affiliates or Supplier or its Affiliates).

 

  (iiii) Transition Documents” has the meaning given in Section 13.4(a).

 

  (jjjj) Transition Manual” shall mean that certain manual containing Transition-related plans and material agreed to by the Parties on or about the Effective Date.

 

  (kkkk) Transitioned Employees” has the meaning given in Schedule E (Transitioned Employees).

 

  (llll) Use” means to access, use, execute, display, copy, perform, distribute copies of, maintain, modify, enhance, and create Derivative Works of the subject material(s).

 

2.2 Other Terms

 

  (a) Other Capitalized Terms. Other capitalized terms used in this Agreement but not defined above are defined where they are used and have the meanings there indicated, and in the Glossary attached hereto as Schedule W (Glossary). Those terms, acronyms, and phrases utilized in the business process outsourcing or health and wellness industries which are not otherwise defined in this Agreement shall be interpreted in accordance with their generally understood meaning in such industry or business context.

 

  (b) References to Schedules. References to a Schedule include such Schedules at the Terms and Conditions level and the corresponding Exhibit covering the same topic at the SOW level. For example, a reference to Schedule P (Health Net Policies) also includes Exhibit F (Health Net Policies) to any SOW.

 

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3. SERVICES

 

3.1 Provision of the Services

 

  (a) Services, Defined. Supplier will provide the following services, functions, obligations, responsibilities, activities and tasks (collectively, “Functions”) as they may be supplemented, enhanced, modified or replaced pursuant to this Agreement (collectively, the “Services”):

 

  (i) the Functions described in Schedule A (Services), each SOW, and elsewhere in this Agreement, other than (1) those expressly designated as Functions for which Health Net is responsible, and (2) those prohibited by Law to be delegated by Health Net to a third party for performance;

 

  (ii) any Functions performed during the twelve (12) months preceding the applicable SOW Effective Date:

 

  (A) by Supplier pursuant to any of the Existing Agreements, excluding the SA/AD Agreement; or

 

  (B) by Health Net’s or its Affiliates’ personnel (including employees and contractors) performing in a Service Tower who were displaced pursuant to this Agreement, or whose Functions were displaced pursuant to this Agreement;

 

  (iii) any other Functions required in order for Supplier to be in compliance with the requirements of each Health Plan, product and provider network (collectively, “Health Net Plans”), whether existing as of the Effective Date or created by Health Net during the Term, and in each case as same may be modified by Health Net during the Term.

 

  (b) Services Commencement.

 

  (i) Initial SOWs. For the Initial SOWs, Supplier shall commence performance of the applicable SOW Services on the BPaaS Services Commencement Date.

 

  (ii) Future SOWs. For each Future SOW, Supplier shall commence performance of the applicable SOW Services on the applicable SOW Service Commencement Date.

 

  (c) Relationship to the BPO Agreement.

For clarity, the BPO Agreement shall remain in effect until the BPaaS Services Commencement Date, at which time the BPO Agreement shall be automatically terminated and of no further force or effect, at no charge or cost to Health Net; provided, however, that such termination shall be without prejudice to any rights and remedies that may have accrued prior to the effective date of such termination.

 

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3.2 Implied Services

If any Functions (other than those Functions either (i) expressly retained as a Function to be performed by Health Net under this Agreement or (ii) prohibited by Law to be delegated by Health

Net to a third party for performance thereof), are reasonably required for, and incidental to or inherent in, the proper performance and provision of the Services (regardless of whether they are specifically described in this Agreement) they shall be deemed to be implied by and included within the scope of the Services to be provided by Supplier to the same extent and in the same manner as if specifically described in this Agreement.

 

3.3 Evolution of the Services

Throughout the Term, Supplier will seek to improve the quality, efficiency and effectiveness of the Services to keep pace with technological, business process outsourcing and Medicare Part D advances and support Health Net’s (and its Affiliates’) evolving business needs and efforts to maintain competitiveness in the markets in which it (and they) competes. Without limiting the generality of the foregoing, Supplier will: (i) identify and apply ‘best practice’ techniques and methodologies in performing and delivering the Services; and (ii) train Supplier Personnel in new techniques and technologies used generally within Supplier’s organization or the business process outsourcing services industry, and (ii) make investments to maintain the currency of Supplier’s tools, infrastructure and other resources used by Supplier to render the Services. Changes in the Services pursuant to this Section 3.3 will not be considered New Services (as defined in Section 3.8(a)).

 

3.4 Users of the Services

 

  (a) Supplier will provide the Services to Health Net and, as designated by Health Net from time to time, its Affiliates, Former Health Net Affiliates, licensees, customers, providers (e.g., physicians, medical groups, hospitals., etc), contractors and other entities with which Health Net has a business relationship (each such entity a “Service Recipient”). For purposes of this Agreement, Services provided to such entities shall be deemed to be Services provided to Health Net. The following apply with respect to all Service Recipients:

 

  (i) Health Net shall be directly responsible for (A) the payment of all Charges associated with Supplier’s provision of Services to Service Recipients under this Agreement and (B) as and to the extent related to any Service Recipient’s use of the Services, the performance, breach or other wrongful conduct of any such Service Recipient; and

 

  (ii) notice provided by Supplier to Health Net under this Agreement will constitute notice to Service Recipients, and Service Recipients will send notices required by this Agreement to Supplier only through Health Net.

 

  (b) With respect to Former Health Net Affiliates, Supplier will continue to provide the Services being provided as of the date of divestiture as is requested by Health Net for as long as such entity continues to meet the definition of “Former Health Net Affiliate” (or such shorter period of time designated by Health Net). There shall be no additional charge or fee (i.e., in addition to the charges for the actual Services as provided in this Agreement) for the provision of Services to Former Health Net Affiliates.

 

  (c) The Services provided to Health Net, Health Net Affiliates and Former Health Net Affiliates under this Agreement may be utilized by Health Net, Health Net Affiliates and Former Health Net Affiliates for the benefit of members of health plans owned by Health Net, a Health Net Affiliate, a Former Health Net Affiliate or any third party (including any

 

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third party which may have purchased such health plan from Health Net, a Health Net Affiliate or a Former Health Net Affiliate), or to meet its obligations under any contract that Health Net, a Health Net Affiliate or a Former Health Net Affiliate has with a third party to provide services of the type provided under this Agreement (including administrative services only (ASO) arrangements).

 

3.5 Non-Exclusive; Variability

 

  (a) This Agreement is non-exclusive. Subject to the minimum revenue commitment requirements set forth in Schedule C (Charges), nothing in this Agreement shall be construed to limit in any way Health Net’s ability to reduce the volumes of the Services being provided by Supplier, or to provide itself, or have other third parties provide (or propose to provide), services that are the same as or similar to the Services, including with respect to any in-scope Functions. Nothing in this Agreement shall limit Supplier’s ability to provide, or propose to provide, services to third parties that are the same as or similar to the Services, including with respect to any in-scope outsourcing Functions. Health Net (and its Affiliates) may contract with other suppliers for any products and services, including products and services that are similar to or competitive with the Services or that are part of the Services. In the case of Health Net’s withdrawal of portions of the Services from Supplier (including a withdrawal by Health Net of any volumes of Services or in-scope Functions from the scope of this Agreement), the charges shall be adjusted in accordance with the terms provided in Schedule C (Charges) and the unit rates set forth therein.

 

  (b) The Services are variable in volume. Such variations are provided for in the charging mechanisms set forth in Schedule C (Charges). Supplier shall be responsible for adjusting the resources used to provide the Services to accommodate the changes in volume (regardless of the amount of time remaining in the Term) in such a manner as to comply with all Service Levels. In the case of Health Net’s addition of Services to Supplier (including an increase by Health Net of any volumes of Services or in-scope Functions to the scope of this Agreement), the charges shall be adjusted in accordance with the terms provided in Schedule C (Charges) and the unit rate set forth therein. Supplier shall not be entitled to receive an adjustment to the Charges resulting from such variations in volume except as set forth in the applicable SOWs or Schedule C (Charges).

 

  (c) Except as set forth in Schedule C (Charges) regarding the minimum revenue commitment, Health Net (and its Affiliates) makes no commitment for any minimum or maximum volume, scope, or value of the Services under this Agreement or to any minimum or maximum payments to be made to Supplier.

 

3.6 Cooperation and Coordination with Other Parties

 

  (a) If Health Net performs itself, or retains a third party other than Supplier to perform, any services that interface or interact with the Services, or that formerly were part of the Services, Supplier will, in accordance with and subject to Section 3.6(b), cooperate and coordinate with Health Net or such third party as reasonably required for Health Net or the third party to perform such services subject in each case to the applicable requirements of Section 21.2 that pertain to the third party entering into a Non-Disclosure Agreement relating to Supplier’s Confidential Information. Supplier’s cooperation and coordination will include, as applicable: (i) providing reasonable access to the facilities being used by Supplier to provide the Services as necessary for Health Net or the third party to perform its

 

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work; (ii) providing reasonable access to the Equipment and Software used in providing the Services except to the extent prohibited under any applicable agreements with third parties; provided that this clause (ii) shall not limit Health Net’s rights under Sections 12 and 15; and (iii) providing such information regarding the operating environment, system constraints and other operating parameters as a person with reasonable commercial skills and expertise would find reasonably necessary for Health Net or the third party to perform its work.

 

  (b) Health Net shall require that third parties retained by Health Net who utilize Supplier’s resources comply with Supplier’s reasonable security and confidentiality requirements and, as relevant, with Supplier’s reasonable work standards, methodologies and procedures, if provided in writing by Supplier to Health Net and such third parties. Supplier shall immediately notify Health Net if an act or omission of such a third party may cause a problem or delay in providing the Services and shall work with Health Net to prevent or circumvent such problem or delay.

 

3.7 MasterNature of the Terms and Conditions

 

  (a) The Parties intend that these Terms and Conditions serve as a “master” agreement which will govern the Services and any additional services which the Parties agree will be provided by Supplier to Health Net under this Agreement. The Parties shall enter into statements of work (each a “Statement of Work” or “SOW”) that will reflect the terms under which Services shall be provided by Supplier to Health Net.

 

  (i) As of the Effective Date, the Parties are entering into the Initial SOWs.

 

  (ii) If, after the Effective Date, the Parties agree upon additional services that they desire to be governed by these Terms and Conditions, they shall enter into additional SOWs (“Future SOWs”) each in substantially the same format and containing the same information as in the Initial SOWs and required by Schedule A-3 (SOW Template).

 

  (A) Upon execution of any Future SOW, such Future SOW shall be governed by and subject to these Terms and Conditions and the other terms of this Agreement; provided, however, that a Future SOW may override any provision of these Terms and Conditions or any such other term of this Agreement only if, and to the extent that: (i) such Future SOW expressly identifies the provision(s) the Parties intend to override, (ii) such change applies solely to such SOW; and (iii) the executed version of such Future SOW has been approved by legal counsel for both Parties, as evidenced in writing on the executed version of it.

 

  (B) With respect to each Future SOW, Health Net and Supplier will jointly determine whether it is necessary or desirable to update any schedule(s) to the Terms and Conditions.

 

3.8 New Services

 

  (a) New Services” means Functions Health Net requests Supplier to perform under this Agreement

 

  (i) that are materially different from, and in addition to, the Services; and

 

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  (ii) for which there is no existing charging mechanism in this Agreement.

 

  (b) Supplier will not perform any additional Functions that would constitute New Services prior to informing Health Net what the additional charges would be for performing them, and receiving Health Net’s prior written authorization to proceed, all in accordance with Section 17.5 and the Change Control Process. If Supplier does perform the additional Functions without Health Net’s prior written authorization, they will be deemed to have been performed as part of the Services at no charge.

 

3.9 Joinder Agreements

 

  (a) General.

 

  (i) The Parties acknowledge and agree that certain Health Net Affiliates desire to contract directly with Supplier for the Services to be provided to such Health Net Affiliates. The Parties agree that any such Health Net Affiliate that wishes to do so may enter into a joinder agreement with Supplier in the form attached hereto as Schedule T (Joinder Agreement) (each such agreement a “Joinder Agreement”, and each party to a Joinder Agreement, a “Joinder Party”).

 

  (ii) Except as provided in Section 3.9(d), any such Health Net Affiliate that enters into a Joinder Agreement (each, a “Health Net Joinder Party”) shall be solely responsible for the Charges with respect to such Services provided to such Health Net Joinder Party by Supplier, and the Joinder Parties shall comply with the terms of such Joinder Agreement. For the avoidance of doubt, in no event shall a Health Net Joinder Party be responsible for any Charges for Services provided by Supplier to Health Net or any other Health Net Affiliate.

 

  (iii) Except as otherwise expressly provided in a Joinder Agreement, all applicable provisions of this Agreement, as the same may be amended or modified from time to time in accordance with Section 25.3, shall be binding on the Joinder Parties to such Joinder Agreement. Any such amendment or modification to this Agreement shall be binding on such Joinder Parties without any further action by the Parties or such Joinder Parties.

 

  (b) Resolution of Joinder Disputes.

Unless otherwise required by Law, any claim or dispute arising out of or related to a Joinder Agreement (“Joinder Disputes”) may be brought pursuant to Section 26 by the applicable Joinder Party against the corresponding Joinder Party under such Joinder Agreement.

 

  (c) Relationship of this Agreement and Joinder Agreements.

This Agreement and any Joinder Agreements are separate, but related agreements. In no event shall this Agreement or any Joinder Agreement be or form the basis for an agreement, directly or indirectly, between Health Net and any Health Net Joinder Party. All Joinder Agreements shall expire upon termination (for any reason) or expiration of this Agreement. This Agreement shall remain in effect notwithstanding the termination (for any reason) or expiration of a Joinder Agreement.

 

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  (d) Guaranty.

Health Net hereby guarantees the payment of all sums payable by Health Net Joinder Party to Supplier under the Joinder Agreement and shall cause the due and punctual performance and observance by Health Net Joinder Party of all acts and obligations to be performed or observed by Health Net Joinder Party under the Joinder Agreement.

 

3.10 Contract documents to be completed after Effective Date

The Parties agree that they will work in good faith and cooperate with each other to complete the following documents within thirty (30) days after the Effective Date:

 

  (a) Schedule A-3 (Future SOW Template);

 

  (b) Schedule J (Project Framework);

 

  (i) Schedule J-1 (Deliverable Acceptance Procedures);

 

  (ii) Schedule J-2 (Form of Work Order Project);

 

  (iii) and Schedule J-3 (Project Estimation Model); and

 

  (c) Schedule W (Glossary);

 

  (d) Schedule U (Aspect Assignment and Assumption Agreement).

Upon agreement in writing by the Parties to any such Schedule, it shall be deemed to be attached to this Agreement without the need for an amendment.

 

4. TERM AND REGULATORY APPROVALS

 

4.1 Initial Term

 

  (a) The term of this Agreement shall commence on the Effective Date and expire on the date that is seven (7) years after the BPaaS Services Commencement Date, unless it is terminated earlier or is extended pursuant to the terms of this Agreement (such period, together with all extensions thereof, the “Term”).

 

  (b) The term of each SOW shall commence on the SOW Effective Date for such SOW. The Initial SOWs shall expire on the date that this Agreement expires, unless this Agreement or such Initial SOW is terminated earlier or is extended pursuant to the terms of this Agreement. The Future SOWs shall expire on the date set forth in such Future SOWs, unless such Future SOW is terminated earlier or is extended pursuant to the terms of this Agreement. The foregoing period, together with all extensions thereof, is known as the “SOW Term”; provided, however, that no SOW Term will extend beyond the Term of this Agreement.

 

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4.2 Renewal Terms

 

  (a) By giving notice to Supplier no less than three (3) months prior to the then-existing expiration date of this Agreement, Health Net may extend the Term for a period designated by Health Net of up to one (1) year (“Renewal Period”)on the terms and conditions (including any productivity improvements) then in effect, provided however, that the Parties agree that the charges in effect during any such renewal period shall be subject to the mutual agreement of the Parties.

 

  (b) Health Net shall have two (2) such extension options of up to one (1) year each. With respect to each SOW, Health Net shall have the same rights to extend the applicable SOW Term that it has to extend this Agreement under this Section; provided, however, that no SOW Term will extend beyond the Term of this Agreement.

 

  (c) Supplier shall follow the following process in connection with establishing the charges during the Renewal Periods.***

 

4.3 Regulatory and Customer Approvals

 

  (a) The Parties acknowledge that Health Net must obtain both regulatory approvals and customer consents in order for the Functions that the Parties contemplate to be included in the scope of this Agreement to be actually included in the scope of this Agreement after the Effective Date. Health Net will keep Supplier informed of progress in obtaining such approvals Health Net will notify Supplier of any regulatory filing or information request, prior to filing or disclosure, in which any Confidential Information of Supplier (not including this Agreement or the terms hereof) may be disclosed. In the event that any Confidential Information of Supplier will be disclosed, Health Net will request and use reasonable efforts to obtain confidential treatment of such information, if requested by Supplier.

 

  (b) In the event that Health Net is not able to obtain such a consent or approval, or in the event that Health Net obtains a regulatory approval or customer consent that is later revoked, (i) Health Net will notify Supplier and provide such information regarding such denial or revocation as is reasonably requested by Supplier (which information will be deemed Health Net Confidential Information), (ii) Health Net shall have the right to remove any impacted Services, reduce any volumes associated with such Services, reduce the number of Supplier Personnel associated with such Services (and otherwise modify their skill mix) and remove any impacted Functions from the scope of this Agreement, and (iii) Health Net shall have the right to terminate this Agreement (in whole or in part) or any SOW (in whole or in part) as of a date specified by Health Net by giving Supplier at least ninety (90) days prior written notice of such termination.

 

  (c) The Parties hereby agree that if any Regulator sends to Health Net an email, letter, or other written statement which indicates, in effect, that such Regulator considers the outsourcing of the Services which the Parties have added or may add after the Effective Date, the volumes associated with such Services, the business process Functions associated with such Services, or Supplier’s solution to provide such Services (e.g., location from which such Services will be performed), to make Health Net out of compliance with such Regulator, then (i) Health Net shall provide copies of such notices to Supplier, and (ii) in order to maintain compliance with such Regulator, Health Net shall have the right to remove any impacted Services, reduce any volumes associated with such Services, reduce

 

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the number of Supplier Personnel associated with such Services and otherwise modify their skill mix, and remove any impacted Functions associated with such Services, from the scope of this Agreement, and (iii) terminate this Agreement (in whole or in part) or any SOW (in whole or in part) as of a date specified by Health Net by giving Supplier at least ninety (90) days prior written notice of such termination.

 

  (d) ***

 

  (ii) If Health Net provides Supplier with notice that Health Net is exercising its right under clauses 4.3(b)(ii) or 4.3(c)(ii) after the BPaaS Services Commencement Date, then such modification shall be addressed via the Change Control Process and any Charges associated with such Change Order shall be governed by Section 19.1(a) of Schedule C (Charges).

 

  (iii) If Health Net provides Supplier with notice that Health Net is exercising its right under clauses 4.3(b)(iii) or 4.3(c)(iii) after the BPaaS Services Commencement Date, then Section 18.1 of Schedule C (Charges) shall govern.

 

  (e) To the extent relevant to the performance of the Services or any of Supplier’s other obligations under this Agreement, Supplier shall comply with provisions arising out of Health Net’s contracts for federal business, including restrictions against providing services from offshore and audit requirements, as such provisions are set forth in this Agreement, included in the Health Net Policies, or otherwise communicated to Supplier.

 

5. PERFORMANCE

 

5.1 Performance, Generally

Supplier is responsible for managing and successfully performing, completing, and delivering the Services, subject to the overall direction of Health Net and with the cooperation and support of Health Net as specified in this Agreement.

 

5.2 Place of Performance

 

  (a) Schedule F (Supplier Facilities) sets forth the Supplier and Approved Subcontractor facilities from which Supplier will perform the Services (collectively, the “Supplier Facilities”). Section 1 of Schedule F (Supplier Facilities) sets forth the offshore Supplier Facilities. Section 2 of Schedule F (Supplier Facilities) sets forth the onshore Supplier Facilities. Schedule F (Supplier Facilities) also sets forth the type of Services that Supplier is permitted to provide from each such Supplier Facility.

 

  (i) Supplier may not provide Services from a Supplier Facility unless (A) such Service is expressly permitted to be provided from such Supplier Facility as described in Schedule F (Supplier Facilities), or (B) Supplier has received Health Net’s prior written consent for such Services to be provided from such Supplier Facility.

 

  (ii) Health Net may specify, upon prior written notice to Supplier from time to time during the Term, which (if any) Services must be performed on-shore, and Supplier shall comply with any such notice; provided, that any cost impact from such request, including the costs of performing the Services that are relocated, shall be addressed through the Change Control Process.

 

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  (iii) Supplier shall perform the Services at (i) offshore Supplier Facilities in space that is dedicated to Health Net and with secure access; and (ii) at onshore Supplier Facilities in space that has secure access.

 

  (iv) Supplier may also perform certain of the Services from Health Net Facilities, as described in Section 11.2(f).

 

  (b) During the Term, Supplier will not change any location from which it provides Services to Health Net, or materially reallocate the volume or nature of work processed between locations from which it provides Services to Health Net, without Health Net’s prior written approval, which approval (i) may be granted or withheld in Health Net’s discretion and (ii) may be conditioned upon Health Net (or the applicable Health Net Affiliate or Health Net lines of business) providing prior notification to, and receiving approval from, applicable Regulator(s) and customers.

 

  (c) Supplier will manage any approved relocations in accordance with this Agreement and provide a migration plan to be prepared by Supplier and approved in writing by Health Net. Prior to seeking Health Net’s approval of any proposed relocation, Supplier will fully examine and evaluate the risks and anticipated effects of the contemplated relocation on the Services and Health Net, including the operational, technical, security, regulatory, and other effects, and will prepare and submit to Health Net an analysis of such effects. Supplier will be responsible for all costs, taxes and other expenses incurred by Supplier. Supplier will also be responsible for any new or additional costs, taxes and other expenses incurred by Health Net and reasonably demonstrated to Supplier that are related to any Supplier-initiated relocation of an operational facility from which the Services are provided, except such new or additional costs, taxes and other expenses incurred by Health Net, if any, that Health Net has expressly agreed in writing in its discretion to bear and not seek reimbursement from Supplier in connection with such Supplier proposed relocation.

 

5.3 Time of Performance

 

  (a) Supplier will (and will provide the resources necessary to) perform and complete the Services diligently and in a timely manner and in accordance with any applicable time schedules set forth in this Agreement. The Parties agree that any “hard coded” dates set forth in this Agreement (i.e., references to specific calendar dates (such as a reference to “April 1, 2015” rather than a reference to “thirty (30) days after the BPaaS Services Commencement Date”), shall be extended on a day-for-day basis reflecting the number of days after March 1, 2015 that the BPaaS Services Commencement Date actually occurs unless and to the extent that the Parties agree otherwise in writing.

 

  (b) Supplier will promptly notify Health Net upon becoming aware of any circumstances that may reasonably be expected to jeopardize the timely and successful completion (or delivery) of any Service or other obligation of Supplier. Supplier will use Commercially Reasonable Efforts to avoid or minimize any delays in performance and will inform Health Net of the steps Supplier is taking or will take to do so, and the projected actual completion (or delivery) time.

 

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  (c) If Supplier believes a delay in performance by Health Net (or a third party service provider engaged by or on behalf of Health Net other than Supplier, Supplier’s Affiliates or subcontractors, or a Supplier Managed Third Party) has caused or will cause Supplier to be unable to perform its obligations on time, Supplier will promptly so notify Health Net and use Commercially Reasonable Efforts to perform its obligations on time notwithstanding Health Net’s (or such third party service provider’s) failure to perform. If Supplier’s use of Commercially Reasonable Efforts to perform on time in such a circumstance would cause Supplier to incur Out-of-Pocket Expenses, Supplier will so notify Health Net. In that case, Supplier’s obligation to continue its efforts to work around the Health Net-caused delay will be subject to Health Net agreeing to reimburse Supplier for its additional Out-of-Pocket Expenses incurred in the course of such efforts.

 

5.4 Manner of Performance

 

  (a) Except as this Agreement expressly provides otherwise, Supplier will perform the Services and cause the Technology Platform to operate in compliance with the following:

 

  (i) all applicable Service Levels, whether existing as of the Effective Date or added during the Term in accordance with the methodologies and processes set forth in Schedule B (Service Levels),

 

  (ii) the Procedures Manual;

 

  (iii) the Health Net Policies, provided that:

 

  (A) Supplier’s obligation to comply with any Health Net Policy that is not listed in Schedule P (Health Net Policies) on the Effective Date (including the link to the on line repository for Health Net Policies as of the Effective Date) or is not listed in the applicable SOW as of the SOW Effective Date or with respect to any change to any Health Net Policy whether listed in Schedule P (Health Net Policies) or in an SOW, will commence ten (10) Business Days after the new Health Net Policy is disclosed to Supplier, or such shorter period of time as required by the circumstances;

 

  (B) Health Net will deliver to Supplier copies of any changes made by Health Net (excluding changes proposed by Supplier) to Health Net Policies with which Supplier will be expected to comply, sufficiently in advance of the date such changes are to be effective to allow Supplier to plan for and implement changes in its procedures or performance to comply with the changes in the Health Net Policies; and

 

  (C) Health Net shall utilize the Change Control Procedure to implement any modified or new Health Net Policy that can reasonably be expected to increase the expenses or obligations of Supplier in any non-de minimis way, provided that financial responsibility for modified and new Health Net Policies relating to a change in or a new Law shall be governed by Section 17.5(e)(ii)(B);

 

  (iv) all other compliance obligations of Supplier under this Agreement, including compliance with data security requirements in Section 14 and compliance with Law obligations in Section 27.7;

 

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  (v) the terms of Annex 1 (Supplemental Terms and Conditions for BPaaS Services), and Schedule Y (Offshore Prohibitions and Requirements); and

 

  (vi) in cases where this Agreement does not prescribe or otherwise regulate the manner of Supplier’s performance of the Services, proven best practices followed by the leading providers of similar services.

 

  (b) In cases where this Agreement does not prescribe or otherwise regulate the manner or quality of Supplier’s performance, Supplier will render the Services with at least the same degree of accuracy, quality, timeliness, responsiveness and efficiency as was generally achieved or obtained by (or for) Health Net (and its Affiliates) prior to Supplier assuming responsibility under this Agreement for the affected Functions.

 

  (c) Supplier shall conduct a risk assessment, no less than annually, that is consistent with and that supports Health Net’s Enterprise Risk Assessment program and processes, which identifies risks to the proper performance of the Services and report on the results of such risk assessment to Health Net, along Supplier’s plans to monitor and mitigate any identified risks.

 

5.5 Quality Assurance and Continuous Improvement

In performing the Services, Supplier will follow commercially reasonable quality assurance procedures designed to ensure that the Services are performed with a high degree of professional quality and reliability. Such procedures shall include checkpoint reviews, testing, acceptance, and other procedures for Health Net to confirm the quality of Supplier’s performance. Supplier, as part of its total quality management process, will provide continuous quality assurance and quality improvement through: (i) the identification and application of proven techniques and tools from other installations within its operations; and (ii) the implementation of concrete programs, practices and measures designed to improve performance (including the Service Levels). Supplier will utilize project management tools, including productivity aids and project management systems, as appropriate in performing the Services.

 

5.6 Critical Deliverables

Supplier shall provide the Critical Deliverables to Health Net in accordance with Schedule R (Critical Deliverables).

 

6. SERVICE LEVELS

 

6.1 General

Quantitative performance standards for certain of the Services (“Service Levels”) are set forth in Schedule B (Service Levels). Supplier’s obligation to pay Service Level Credits is further described in Schedule B (Service Levels).

 

6.2 Failure to Perform

Supplier will place the Amount at Risk (as defined in Schedule B (Service Levels)) at risk each month for Service Level Credits. Health Net may allocate the Pool Percentage Available for Allocation among Critical Service Levels for the purpose of calculating Service Level Credits, as further described in Schedule B (Service Levels).

 

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6.3 Removal of Performance Group Guarantee Customers.

 

  (a) If Supplier fails to meet the annual Performance Guarantee Group Service Levels with respect to a Performance Guarantee Group such that the failure for such Performance Guarantee Group is *** Health Net shall have the right to withdraw such Performance Guarantee Group from this Agreement. ***

 

  (b) ***

 

  (c) A withdrawal under this Section 6.3 shall be implemented via the Change Control Process.

 

7. SUPPLIER PERSONNEL

 

7.1 Provision of Suitable Personnel

Subject to any lesser qualifications of any Transitioned Employees, Supplier will assign an adequate number of Supplier Personnel to perform the Services who are properly educated, trained, familiar with and fully qualified for the Services they are assigned to perform, and Supplier shall ensure (to the extent reasonably possible) that any outgoing Supplier Personnel leaving the Health Net account spend a reasonable period of time training the new Supplier Personnel who will be replacing such outgoing personnel. Supplier is responsible for taking action at its own expense such that Supplier Personnel assigned to perform Services have the legal right to work in the countries in which they are assigned to work.

 

7.2 Screening and Background Checks

 

  (a) Supplier shall, at no additional expense to Health Net, and prior to placing any Supplier Personnel (other than a Transferred Personnel) at Health Net or on the Health Net account, complete background checks for all such personnel (“Background Checks”). Background Checks shall include, without limitation, verification of work history, I-9 completion (to the extent required by the laws of the United States), verification of passports, reference checks from at least three (3) prior employers (if such personnel have had three prior employers, and if not then from such personnel’s prior employers), drug testing and such other background checks as Health Net may request. Background Checks shall also identify State, county, federal and other applicable jurisdictions felonies and misdemeanor convictions and verify the social security number of such personnel, if applicable to such personnel. The personnel will be asked for education and, with respect to United States resident personnel, the last seven (7) years of residences. Background Checks shall also include a determination as to whether the person has been identified by the Department of Treasury Office of Foreign Assets Control (OFAC) as an individual with whom U.S. persons are prohibited from engaging in transactions. Also, all Supplier Personnel’s background checks will be done by an external agency that is contracted with Supplier.

 

  (b) Unless otherwise prohibited by applicable Law, Supplier Personnel may be tested for drugs and/or alcohol whenever Supplier or Health Net has reasonable suspicion that the personnel is under the influence of drugs and/or alcohol in the workplace or has violated the Health Net Policy on substance abuse. Such personnel have the right to refuse to submit to drug or alcohol testing; however, any personnel who do so will be subject to removal from the Health Net account. Results of Background Checks and drug testing will remain Supplier’s Confidential Information and will not be provided to Health Net, but any negative or questionable Background Check or drug test of personnel will require Supplier

 

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to remove or not assign such personnel. Supplier shall hire all Supplier Personnel and other personnel involved in the Health Net account strictly in accordance with all Laws applicable to the hiring and employment of individuals including, without limitation, the Fair Labor Standards Act, Immigration Reform and Control Act and all equal employment opportunity Laws.

 

7.3 Responsibility for Supplier Personnel, Generally

Supplier will manage, supervise and provide direction to Supplier Personnel and cause them to comply with the obligations and restrictions applicable to Supplier under this Agreement. Supplier will make Supplier Personnel aware of, and cause them to comply with, Health Net Policies, including those pertaining to safety and security. As between Supplier and Health Net, Supplier is responsible for all wages, salaries and other amounts due Supplier Personnel, and for all tax withholdings, unemployment insurance premiums, pension and social welfare plan contributions, and other employer obligations with respect to Supplier Personnel. Supplier is responsible for the acts and omissions of Supplier Personnel under or relating to this Agreement.

 

7.4 Key Supplier Positions

 

  (a) Key Supplier Positions” means the Supplier positions identified in Schedule D (Key Supplier Personnel—Account Level) and in each SOW. The Supplier Personnel approved by Health Net as of the Effective Date to fill the Key Supplier Positions are identified, as applicable, in Schedule D (Key Supplier Personnel—Account Level) and in each SOW. Notwithstanding anything to the contrary in Section 25.3, the Parties agree that such Supplier Personnel approved to fill Key Supplier Positions may be changed by either (i) amendment to the Agreement or the applicable SOW or (ii) an email exchange between the Parties. If any individual designated to fill a Key Supplier Position as of the Effective Date turns out to be out of scope before the BPaaS Services Commencement Date and therefore is not hired by Supplier, and (1) if such designated individual was a not a Transitioned Personnel, then the Parties will backfill that position and Health Net shall have the right to recommend a replacement for such person and Supplier shall give priority to such recommended replacement, or (2) if such designated individual was a Transitioned Personnel, then Health Net shall have the right to designate a replacement for such person from other rebadged personnel, provided Health Net engages in good faith discussions with Supplier as to such selection.

 

  (b) Supplier will cause each of the Supplier Personnel filling the Key Supplier Positions (whether as of the Effective Date, or replacement personnel filling such Key Supplier Position during the Term) to devote full time and effort to the provision of the Services, except as otherwise indicated in Schedule D (Key Supplier Personnel—Account Level).

 

  (c) Before the initial and each subsequent assignment of an individual to a Key Supplier Position, Supplier will notify Health Net of the proposed assignment, introduce the individual to appropriate Health Net representatives and, consistent with Supplier’s personnel practices, provide Health Net a curriculum vitae and other information about the individual reasonably requested by Health Net. Upon request, Supplier will provide Health Net representatives an opportunity to meet with the individual. If Health Net in good faith objects to the proposed assignment, the Parties will attempt to resolve Health Net’s concerns on a mutually agreeable basis. If the Parties have not been able to resolve Health Net’s concerns within five (5) Business Days, Supplier may not assign the individual to that position and must propose the assignment of another suitably qualified individual.

 

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  (d) Health Net may from time to time change the positions designated as Key Supplier Positions under this Agreement. However, without Supplier’s consent, the number of Key Supplier Positions may not exceed the then-current total number of Key Supplier Positions.

 

  (e) Without prior written approval by Health Net, Supplier will not reassign or replace any person assigned to a Key Supplier Position until (i) in the case of the Supplier Personnel initially assigned to a Key Supplier Position, one year after the completion of the Transition of the Functions for which such Key Supplier Position is responsible, and (ii) in the case of replacements of Supplier Personnel assigned to a Key Supplier Position, one year after the individual’s assignment to the Key Supplier Position. Subject to the preceding sentence, Supplier will give Health Net, where reasonably possible, at least sixty (60) days advance notice of a proposed change in personnel filling a Key Supplier Position, and will discuss with Health Net any objections Health Net may have. Supplier will arrange, at no charge for the proposed replacement to work side-by-side with the individual being replaced during the notice period to effectuate a seamless transfer of knowledge prior to the incumbent leaving the Key Supplier Position. Individuals filling Key Supplier Positions may not be transferred or re-assigned until a suitable replacement has been approved by Health Net, and no such re-assignment or transfer may occur at a time or in a manner that would have an adverse impact on delivery of the Services or Health Net’s operations. Supplier will establish and maintain an up-to-date succession plan for the individuals serving in Key Supplier Positions. Supplier may remove an individual filling a Key Supplier Position after notification to Health Net for reasons of death, disability, resignation or termination from employment by Supplier, or otherwise as mutually agreed by the Parties. In addition, Supplier may suspend an individual filling a Key Supplier Position after notification to Health Net if the individual is under investigation in connection with a Security Breach.

 

7.5 Removal and Replacement of Supplier Personnel

 

  (a) Health Net may immediately remove any Supplier Personnel from any Health Net Facilities if the person is threatening or abusive, commits a crime, engages in an act of dishonesty while performing Services for Health Net or violates any Health Net Policy pertaining to safety, security or use of Health Net Facilities. If Health Net determines in good faith that the continued assignment to Health Net’s account of any of the Supplier Personnel is not in the best interests of Health Net, then, at Health Net’s request, Supplier shall promptly remove such Supplier Personnel from the Health Net account.

 

  (b) Supplier shall not reassign any Supplier Personnel providing services under the AO Agreement to work on the TriZetto platform or provide services to a Supplier customer utilizing the TriZetto platform for two (2) years after the Effective Date without first obtaining Health Net’s prior written consent. No Supplier Personnel performing services under the AO Agreement shall be removed until there has been proper and sufficient knowledge transfer to his or her designated replacement.

 

7.6 Controlling Turnover of Supplier Personnel

Health Net and Supplier agree that it is in their mutual best interests to keep the turnover rate of Supplier Personnel to a reasonably low level. Accordingly, if Health Net believes that Supplier’s turnover rate is excessive, and so notifies Supplier, Supplier will provide data concerning its turnover rate and meet with Health Net to discuss the reasons for, and impact of, the turnover rate.If appropriate, Supplier will submit to Health Net its proposals for reducing the turnover rate and the

 

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Parties will mutually agree on a program to bring the turnover rate down to an acceptable level. In any event, Supplier will use Commercially Reasonable Efforts to keep the turnover rate to a reasonably low level. Notwithstanding any turnover of Supplier Personnel, Supplier remains obligated to perform the Services in compliance with the requirements of this Agreement.

 

7.7 Subcontracting

Supplier may subcontract or delegate the performance of Services only in accordance with the following:

 

  (a) Supplier may subcontract the performance of Services to any of its wholly-owned Affiliates.

 

  (b) Supplier shall enter into and maintain a subcontract with TPUSA, Inc. (TPUSA) for the performance of the Contact Center Services provided to Health Net by TPUSA as of the Effective Date. Except in cases of TPUSA’s gross negligence, willful misconduct or material breach of a material provision, or significant liability or financial risk to either Health Net or Supplier, Supplier shall not terminate or allow such subcontract to expire without Health Net’s prior written consent. If Supplier terminates the TPUSA subcontract, Supplier shall provide Health Net with written notice of such termination within forty eight (48) hours of sending such termination notice. Any replacement of TPUSA shall be subject to Health Net’s prior written consent in accordance with Section 7.7(d) and carried out pursuant to a transition plan developed by Supplier and approved by Health Net. Health Net’s consents and approvals required under this paragraph shall not be unreasonably withheld or delayed.

 

  (c) Supplier may, in the ordinary course of business, subcontract for third party services or products (which include services and products from non-wholly owned Supplier Affiliates) that satisfy each of the following conditions: (i) are not dedicated to performance of Services for Health Net, (ii) are not material to a Function constituting a part of the Services, (iii) do not result in a material change in the way Supplier conducts its business, and (iv) any such third party does not have access to Health Net’s Confidential Information (including Protected Health Information); provided (1) such subcontract does not adversely affect Health Net; and (2) in each case Supplier provides at least forty-five (45) days prior written notice of the same to Health Net. If Health Net expresses concerns to Supplier about a subcontract covered by this paragraph, Supplier will discuss such concerns with Health Net and work to resolve Health Net’s concerns on a mutually acceptable basis.

 

  (d) Except as provided in Sections 7.7(a), 7.7(b) and 7.7(c), Supplier shall not subcontract for performance of, or delegate any of its responsibilities under this Agreement without first obtaining the prior written approval of Health Net, which approval (i) may be granted or withheld in Health Net’s discretion, (ii) may be conditioned upon Health Net (or the applicable Health Net Affiliate or Health Net lines of business) providing prior notification to, and receiving approval from, applicable Regulator(s) and customers, and (iii) may be conditioned on Supplier’s obtaining the right from the proposed Subcontractor to assign the related subcontract to Health Net upon the expiration or any earlier termination of the Services being provided by such Subcontractor, and at such time and upon Health Net’s request, Supplier shall so assign the subcontract to Health Net. When seeking such approval, Supplier will (i) give Health Net forty-five (45) days prior written notice specifying the components of the Services affected, the scope of the proposed subcontract,

 

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the identity and qualifications of the proposed Subcontractor and the results of any due diligence carried out with regard to the proposed Subcontractor; and (ii) at Health Net’s request, provide Health Net a description of the scope and material terms (other than financial) of the proposed subcontract. Health Net may require Supplier to replace any previously approved Subcontractor found, in the reasonable judgment of Health Net, to be unacceptable. Any Subcontractor authorized by this Section 7.7 or approved by Health Net, in its discretion, shall be an “Approved Subcontractor” hereunder.

 

  (e) Approved Subcontractors for each SOW as of the SOW Effective Date are listed in the applicable SOW. Notwithstanding anything to the contrary in Section 25.3, after the SOW Effective Date, the Parties may add additional Approved Subcontractors, or remove previously approved Approved Subcontractors, by an amendment or by execution of a letter or other informal written document with a signed counter-signature by the receiving Party.

 

  (f) Supplier will require (i) all Subcontractors with whom Supplier enters into a subcontracting agreement after the Effective Date for performance of any Services to be bound to Supplier by all applicable terms of this Agreement and to assume toward Supplier all of the applicable obligations and responsibilities that Supplier, by this Agreement, has assumed toward Health Net, and (ii) all Subcontractors (other than those covered by subsection (i)) with whom Supplier entered into a subcontracting agreement for performance of the services provided to Health Net under the Original BPO Agreement to be bound to Supplier as required by the Original BPO Agreement.

 

  (g) Supplier may use Approved Subcontractors to perform the Services to the extent permitted by Health Net’s approval. Supplier is responsible for managing all Subcontractors. Supplier remains responsible for all Functions delegated to Subcontractors to the same extent as if such Functions were to be performed by Supplier acting through its officers, directors, employees, and agents and, for purposes of this Agreement, such Functions will be deemed Functions performed by Supplier. Supplier will be Health Net’s sole point of contact regarding the Services, including with respect to payment.

 

  (h) Supplier may disclose Health Net Confidential Information only to Approved Subcontractors who have agreed in writing to protect the confidentiality of such Confidential Information in a manner substantially equivalent to that required of Supplier under this Agreement and to permit both Supplier and Health Net, or both, to enforce such terms directly against such Subcontractor. As between the Parties, Supplier shall be responsible for all acts and omissions of (i) Supplier’s independent contractors and other Subcontractors as if they were Supplier’s employees and (ii) any third party to whom Supplier permits access to Health Net Data or Health Net Confidential Information.

 

  (i) Supplier shall not restrict or prevent (including by contract) any Subcontractor from entering into an agreement with Health Net to perform services directly for Health Net.

 

7.8 Supplier Personnel No Longer on Health Net Account

Subject to Section 7.4(e), in the event any one of the Supplier Personnel in a Key Supplier Position leaves the Health Net account for any reason (e.g., termination, voluntary departure from Supplier, etc.), Supplier will use commercially reasonable efforts to notify Health Net of such occurrence within seventy-two (72) hours.

 

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7.9 Training

 

  (a) Health Net Required Training. In addition to the training required by Schedule K (Regulatory Compliance Addendum), Supplier Personnel are required to take the then-current Health Net-provided training (administered online via Health Net’s HR link). As of the Effective Date, the required Health Net training, for which Health Net will provide the content and materials at its own cost, includes:

 

  (i) HIPAA: An Overview;

 

  (ii) Business Code of Conduct at Health Net (Ethics);

 

  (iii) The Painful Price of Healthcare Fraud;

 

  (iv) Getting the Records Straight;

 

  (v) Health Net General Compliance;

 

  (vi) Medicare Part D: Fraud, Waste and Abuse (for all associates whose job functions cover or may cover Medicare Part D); and

 

  (vii) Other training courses related to the Functions that Health Net requires its employees or contractors to take.

 

  (b) Each Supplier Personnel shall complete the above training within sixty (60) days after being assigned to the Health Net account, and annually thereafter.

 

  (c) Health Net Customer Required Training. Supplier Personnel are also required to take any training that a customer of Health Net (e.g., LAUSD) would ordinarily require Health Net personnel to take if Health Net personnel were performing the Services.

 

8. HEALTH NET RESPONSIBILITIES

 

8.1 Appointment of Health Net Program Management Office (PMO) Personnel

Health Net will designate an individual to serve as Health Net’s Program Manager, who will be Supplier’s principal point of contact for obtaining decisions, information, approvals and acceptances required from Health Net.

 

8.2 Health Net Cooperation Duties

 

  (a) In support of Supplier’s performance of the Services and subject to Section 8.3, Health Net will perform the Functions expressly identified in this Agreement, including in each SOW, as retained Health Net Functions and provide or make available to Supplier the Equipment, Software, and other resources specified in (i) for the Initial SOWs, Schedule O (Health Net Provided Resources), and (ii) each Future SOW, as applicable.

 

  (b) Health Net will cooperate with Supplier, including by making available management decisions, information, approvals and acceptances, as reasonably requested by Supplier so that Supplier may accomplish its obligations and responsibilities under this Agreement.

 

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8.3 Savings Clause

Health Net’s failure to perform its responsibilities set forth in this Agreement (or cause them to be performed) will not constitute grounds for termination by Supplier except as provided in Section16.3 (Termination by Supplier). Supplier’s nonperformance of its obligations under this Agreement will be excused if and to the extent (a) such Supplier nonperformance results from (i) the failure by Health Net (including failure by a Health Net contractor, agent or other party for which Health Net is responsible, but excluding Supplier) to perform an express obligation of Health Net under this Agreement, (ii) the failure of a Health Net Provided Resource provided that such failure shall not be an excuse if it arises out of Supplier’s failure to perform its obligations to manage and provide other Services with respect to such Health Net Provided Resource and the related third party from which Health Net procures such Health Net Provided Resource, and/or (iii) a breach by Health Net of its obligations under this Agreement that prevents Supplier from performing in accordance with this Agreement, and (b) Supplier provides Health Net with reasonable notice of such nonperformance and uses Commercially Reasonable Efforts to perform notwithstanding Health Net’s failure to perform or breach. If Supplier’s use of Commercially Reasonable Efforts to perform in such a circumstance would cause Supplier to incur Out-of-Pocket Expenses, Supplier may so notify Health Net. If it does, Supplier’s obligation to continue its efforts to work around Health Net’s failure to perform will be subject to Health Net agreeing to reimburse Supplier for its Out-of-Pocket Expenses incurred in the course of such efforts. SUPPLIER ACKNOWLEDGES THAT HEALTH NET WOULD NOT BE WILLING TO ENTER INTO THIS AGREEMENT WITHOUT ASSURANCE THAT THIS AGREEMENT MAY NOT BE TERMINATED BY SUPPLIER AND THAT SUPPLIER SHALL NOT HAVE THE RIGHT TO SUSPEND PERFORMANCE OF THE SERVICES EXCEPT, AND ONLY TO THE EXTENT, EXPLICITLY PROVIDED HEREIN.

 

8.4 Minimum Revenue Commitment.

Schedule C (Charges) sets out the terms and conditions of Health Net’s obligation to satisfy the Minimum Revenue Commitment.

 

9. CHARGES

Schedule C (Charges) sets forth all the charges payable to Supplier for performing the Services applicable to such SOW. Health Net will not be required to pay Supplier any amounts for or in connection with performing the Services and fulfilling Supplier’s obligations under this Agreement other than those amounts expressly payable to Supplier under this Agreement.

 

9.1 Pass-Through Expenses

 

  (a) Pass-Through Expenses” means third party charges that are to be both (i) paid by Health Net (either (A) directly to the third party or (B) to Supplier, which, in turn, pays the third party) on an Out-of-Pocket Expenses basis, and (ii) administered by Supplier. Any Pass-Through Expenses shall be agreed upon in accordance with Section 19.4 of Schedule C (Charges). Supplier shall arrange for delivery by third parties to Supplier of invoices for Pass-Through Expenses, and Supplier promptly shall review such invoices and provide Health Net with the original invoice together with a statement identifying which charges are proper and valid and should be paid by Health Net.

 

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  (b) Supplier shall use Commercially Reasonable Efforts to minimize the amount of Pass-Through Expenses. With respect to services or materials paid for on a Pass-Through Expenses basis, Health Net reserves the right to: (i) obtain such services or materials directly from a third party; (ii) designate the third party source for such services or materials; (iii) designate the particular services or materials (e.g., equipment make and model) Supplier shall obtain; (iv) designate the terms for obtaining such services or materials (e.g., purchase or lease and lump sum payment or payment over time); (v) require Supplier to identify and consider multiple sources for such services or materials or to conduct a competitive procurement; and (vi) review and approve the applicable Pass-Through Expenses before entering into a contract for particular services or materials.

 

9.2 Incidental Expenses

Supplier acknowledges that, except as may be otherwise provided in this Agreement, expenses that Supplier expects to incur in performing the Services (including travel and lodging, document reproduction and shipping, and long-distance telephone) are included in Supplier’s Charges and rates set forth in this Agreement. Accordingly, such Supplier expenses are not separately reimbursable by Health Net unless, on a case-by-case basis for unusual expenses, Health Net has agreed in advance and in writing to reimburse Supplier for the expense.

 

9.3 Taxes

The Parties’ respective responsibilities for taxes arising under or in connection with this Agreement shall be as follows:

 

  (a) Each Party shall be responsible for any personal property taxes on property it owns or leases, for franchise and privilege taxes on its business, and for taxes based on its net income or gross receipts.

 

  (b) Supplier shall be responsible for any sales, use, excise, value-added, services, consumption and other taxes and duties payable by Supplier on the goods or services used or consumed by Supplier in providing the Services where the tax is imposed on Supplier’s acquisition or use of such goods or services and the amount of tax is measured by Supplier’s costs in acquiring such goods or services.

 

  (c) Health Net shall be responsible for any applicable sales, use, excise, value-added, services, consumption or other tax that is assessed on the provision of the Services as a whole, or on any particular Service by any governmental or taxing authority within the United States; provided, however, that (i) Supplier invoices reflect on a current basis (and in any event before any such tax becomes due and payable) the amount of any such tax in each jurisdiction and the taxable Services to which such tax relates, (ii) if Supplier fails to reflect on its invoice any such tax on a current basis, Supplier shall be financially responsible for any penalties and interest assessed by the taxing authority with respect to such tax, and (iii) if Supplier fails to reflect any such tax on a Supplier invoice within twelve (12) months after the date that such tax is due and payable, Supplier shall be financially responsible for the full amount of such tax, including any penalties and interest.

 

  (d) Supplier shall be responsible for any sales, use, excise, value-added, services, consumption or other tax that is assessed on the provision of the Services as a whole, or on any particular Service, by any governmental or taxing authority outside the United States as of the Effective Date or during the Term, except (i) where the Parties agree in writing that a Supplier Affiliate located in a jurisdiction outside of the United States may invoice Health Net or a Health Net Affiliate directly or (ii) where the Parties agree in writing that Supplier

 

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will provide centralized billing, wherein a Health Net Affiliate located in a jurisdiction outside of the United States will receive Services from a Supplier Affiliate located in a jurisdiction outside of the United States and invoicing for such Services is between a Health Net Affiliate located in the United States and a Supplier Affiliate located in the United States.

 

  (e) Supplier shall be responsible for any payments required to compensate Supplier Personnel for compensatory tax treatment resulting from Supplier Personnel traveling to perform services, subject to the remainder of this paragraph. In the event that the assignment (or potential assignment) of particular Supplier Personnel to perform Services for Health Net has reached a point such that the continued assignment of such particular personnel is likely to trigger compensatory tax treatment of the travel related expenses reimbursed to such particular Supplier Personnel, Supplier may inform Health Net in writing that Supplier is close to becoming subject to compensatory tax treatment as a result of such assignment, and shall provide an estimate of the amount of such compensatory tax liability. If Supplier fails to so notify Health Net, Supplier shall remain responsible for any amounts resulting from compensatory tax treatment of such particular Supplier Personnel. Following such notice by Supplier, Health Net may then elect by sending written notice to Supplier to be financially responsible for any payments required to compensate Supplier with respect to such particular Supplier Personnel in an amount equal to the compensatory taxes assessed to such particular Supplier Personnel as the result of such assignment to the Health Net account. If Health Net does not so elect, Supplier shall remain responsible for any amounts resulting from compensatory tax treatment of such particular Supplier Personnel, provided, however, Supplier may then relocate such Supplier Personnel to avoid such taxes, and the Parties shall cooperate to make other arrangements so that the Services will be performed without interruption.

 

  (f) In the event that a sales, use, excise, value added, services, consumption or other tax is assessed on the provision of any of the Services, the Parties shall work together to segregate the payments under this Agreement into three (3) payment streams:

 

  (i) those for taxable Services;

 

  (ii) those for which Supplier functions merely as a payment agent for Health Net in receiving goods, supplies, or services (including leasing and licensing arrangements); and

 

  (iii) those for other nontaxable Services.

 

  (g) The Parties agree to cooperate with each other to enable each to more accurately determine its own tax liability and to minimize such liability to the extent legally permissible, provided however, where the Parties have made a joint assessment in writing as contemplated in this sentence and a taxing authority subsequently determines that a tax should have been collected and/or paid, the limitation in Section 9.3(c)(iii) will not apply. Supplier’s invoices shall separately state the amounts of any taxes Supplier is collecting from Health Net, and Supplier shall remit such taxes to the appropriate authorities. Each Party shall provide and make available to the other any resale certificates, information regarding out-of-state or out-of-country sales or use of equipment, materials or services, and other exemption certificates or information reasonably requested by the other Party.

 

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  (h) Supplier shall promptly notify Health Net of, and coordinate with Health Net the response to and settlement of, any claim for taxes asserted by applicable taxing authorities for which Health Net is responsible hereunder, it being understood that with respect to any claim arising out of a form or return signed by a Party to this Agreement, such Party shall have the right to elect to control the response to and settlement of the claim, but the other Party shall have all rights, at its sole cost and expense, to participate in the responses and settlements that are appropriate to its potential responsibilities or liabilities. If Health Net requests Supplier to challenge the imposition of any tax, Supplier shall do so in a timely manner and Health Net shall reimburse Supplier for the reasonable legal fees and expenses it incurs. Health Net shall be entitled to any tax refunds or rebates granted to the extent such refunds or rebates are of taxes that were paid by Health Net.

 

9.4 Estimating Model

Schedule J (Project Framework) sets forth the project estimation model Supplier will use for the Non-BPaaS IT Services (the “PEM”). The Parties will baseline and assess the PEM annually to address accuracy and institute improvements in Q2 of each calendar year.

 

9.5 ***

 

  (a) ***.

 

  (b) ***.

 

  (c) ***.

 

  (d) ***.

 

10. INVOICING AND PAYMENT

 

10.1 Invoicing

 

  (a) Supplier shall invoice Health Net for all amounts due under this Agreement on a monthly basis in arrears (i.e., Charges for Services delivered in August will be invoiced on the invoice delivered to Health Net in September), or as otherwise agreed by the Parties in writing. Each invoice shall provide, for each Charge, information regarding the Services to which such Charge relate which is sufficient to enable Health Net to determine the contractual basis for such Charge. Supplier shall include the calculations utilized to establish the Charges.

 

  (b) To the extent a credit may be due Health Net pursuant to this Agreement, Supplier shall provide Health Net with an appropriate credit against amounts then due and owing. If no further payments are due to Supplier, Supplier shall pay such amounts to Health Net within *** days of the date of request for such credit by Health Net.

 

  (c) Supplier shall render a single consolidated invoice for each month’s Charges showing such details as reasonably specified by Health Net, including as necessary to satisfy Health Net’s internal accounting and chargeback requirements (such as allocating Charges among Service components, locations and departments). The form of invoice shall be mutually agreed by the Parties during Transition and any changes to such form invoice during the Term must be approved by Health Net.

 

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  (d) Supplier shall use good faith efforts to submit complete invoices that include all Charges incurred in the applicable month, and may include additional Charges on a later invoice, provided that in no event shall Charges be billed more than *** days after the month during which the invoice for such Charges should have been provided to Health Net pursuant to Section 10.1(a).

 

10.2 Payment Due

Subject to the other provisions of this Section 10.2, invoices provided under Section 10.1 and properly submitted to Health Net pursuant to this Agreement shall be paid by Health Net within *** days after receipt thereof. Any amount due under this Agreement for which a time for payment is not otherwise specified shall be paid within *** days after receipt of a proper invoice for such amount.

 

10.3 Accountability

Supplier shall maintain complete and accurate records of and supporting documentation for the amounts billable to and payments made by Health Net hereunder in accordance with generally accepted accounting principles applied on a consistent basis. Supplier agrees to provide Health Net with documentation and other information with respect to each invoice as may be reasonably requested by Health Net to verify accuracy and compliance with the provisions of this Agreement.

 

10.4 Proration

Except as may be otherwise provided in this Agreement, periodic Charges under this Agreement are to be computed on a calendar month basis, and shall be prorated for any partial month.

 

10.5 Refundable Items

 

  (a) Prepaid Amounts. Where Health Net has prepaid for a service or function for which Supplier is assuming Financial Responsibility under this Agreement, Supplier shall refund to Health Net, upon either Party identifying the prepayment, that portion of such prepaid expense which is attributable to periods on and after the Effective Date.

 

  (b) Refunds and Credits. If Supplier should receive a refund, credit or other rebate for goods or services previously paid for by Health Net, Supplier shall promptly notify Health Net of such refund, credit or rebate and shall promptly pay the full amount of such refund, credit or rebate, as the case may be, to Health Net.

 

10.6 Deductions

With respect to any amount to be paid by Health Net hereunder, Health Net may deduct from such amount any amount that Supplier is obligated to pay Health Net hereunder.

 

10.7 Disputed Charges

Subject to Section10.6, Health Net shall pay undisputed Charges when such payments are due under this Section 10.7. Health Net may withhold and/or set off payment of particular Charges that Health Net disputes in good faith, and may set off amounts due and owing to Health Net as credits against Charges payable to Supplier under this Agreement. If any such disputed Charges have already been paid, Health Net may deduct such disputed Charges or amounts due from future

 

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amounts owed by Health Net to Supplier. If an invoiced amount is disputed in good faith by Health Net, then Health Net shall provide written notification to Supplier of the dispute and the basis for such dispute, and the Parties shall utilize the procedures in Section 26.1 to resolve the issue. In the event that Charges cover both disputed and undisputed items, then subject to the above in this Section 10.7, Health Net shall pay all undisputed items in accordance with this Agreement. If, after following the procedures in Section 26.1, it is determined that Health Net should have paid all or a portion of the disputed amounts, (a) Supplier shall submit to Health Net an invoice for an amount equal to the amount of disputed charges that Health Net should have paid, and (b) Health Net will endeavor to remit payment for such invoice as promptly as possible, but in no event more than *** days from receipt of such invoice.

 

11. TRANSFER OR USE OF RESOURCES

This Section 11 sets forth the processes by which certain resources used by Health Net prior to the Effective Date will be transferred or otherwise made available to Supplier for use in providing the Services. For avoidance of doubt, this Section 11 does not address Acquired Assets which are being transferred by Health Net to Supplier pursuant to the APA. RIGHTS OF USE GRANTED BY HEALTH NET TO SUPPLIER UNDER THIS SECTION 11 ARE GRANTED ON AN ‘AS-IS, WHERE-IS’ BASIS, WITHOUT WARRANTIES OF ANY KIND.

 

11.1 Transfer of Resources

Schedule E (Transitioned Employees) sets forth the terms and conditions governing the recruitment and transition of Health Net personnel to Supplier. If Supplier is obligated to make employment offers to any Health Net personnel in connection with Services to be provided by Supplier under this Agreement, such personnel shall be the Affected Employees as defined in Schedule E (Transitioned Employees), and the terms of Schedule E (Transitioned Employees) shall govern.

 

11.2 Use of Health Net Resources

 

  (a) General. Health Net’s obligation to provide the Health Net Third Party Service Contracts, the Health Net Owned Software, the Health Net Licensed Software, the Health Net Owned Equipment and the Health Net Leased Equipment pursuant to Sections 11.2(b), (c) and (d) below (collectively, “Health Net Provided Resources”) and Supplier’s right to use such Health Net Provided Resources, shall be subject to the terms of Section 11.2(e) below.

 

  (b) Health Net Third Party Service Contracts.

 

  (i) The Health Net Third Party Service Contracts that are to be made available to Supplier for use in providing the Services are listed in Schedules O-5-1, O-5-1 and O-5-3 (Health Net Provided Resources). Health Net (and each of its Affiliates) retains all of its right, title and interest in and to the referenced Health Net Third Party Service Contracts, subject to Supplier’s rights in this Agreement.

 

  (ii) As of the applicable SOW Effective Date, Health Net grants to Supplier, without assignment of any such Health Net Third Party Service Contract, but subject to the Parties obtaining any Required Consents pursuant to Section 11.3 (Required Consents), the right to use the services provided to Health Net under such Health Net Third Party Service Contracts relevant to such SOW, if any, until such time as determined in accordance with Section 11.2(e) below.

 

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  (iii) In the event Health Net or any Health Net Affiliate (e.g., Health Net of California, Inc.) enters into any third party contracts that are designated “Health Net Third Party Service Contracts” made available to Supplier under this Section 11.2(a), Health Net and/or such Health Net Affiliate will file a list of them with the applicable Regulator. The filing by Health Net and/or such Health Net Affiliate is intended to demonstrate that the availability of such contracts to Supplier will not prevent Health Net and/or such Health Net Affiliate from complying with the requirements of any applicable Law (e.g., the Knox-Keene Act of California).

 

  (c) Health Net Owned Software and Health Net Licensed Software.

 

  (i) For purposes of this Section 11, Health Net Owned Software includes Health Net proprietary configurations of third party Software other than the Configurations acquired by Supplier from Health Net pursuant to the APA.

 

  (ii) The Health Net Owned Software and Health Net Licensed Software that are to be made available to Supplier for use in providing the Services, are listed in Schedules O-1 and O-2, respectively (Health Net Provided Resources). Health Net (and each of its Affiliates) retains all of its right, title and interest in and to the referenced Health Net Owned Software and Health Net Licensed Software.

 

  (iii) As of the applicable SOW Effective Date, Health Net grants to Supplier until such time as determined in accordance with Section 11.2(e) below and except as provided in Section 5.1(a) of Schedule C (Charges):

 

  (A) a fully paid-up, nonexclusive, worldwide license to Use the referenced Health Net Owned Software relevant to such SOW, if any, in both object and Source Code versions, and

 

  (B) subject to the Parties having obtained any Required Consents pursuant to Section 11.3 (Required Consents) with respect to the referenced Health Net Licensed Software, and without assignment of the license, such rights as Health Net has (or later obtains) to use the referenced Health Net Licensed Software relevant to such SOW except as in object and, if permissible within the terms of the applicable Required Consent and if approved in writing by Health Net, the right to modify and adapt the Health Net Licensed Software and access to the Source Code,

in each case, via Citrix or other similar method of remote access.

 

  (iv) The rights granted in clause (ii) above shall be in effect until such time as determined in accordance with Section 11.2(e) below.

 

  (d) Health Net Owned Equipment and Health Net Leased Equipment.

 

  (i) The Health Net Owned Equipment and Health Net Leased Equipment that are to be made available to Supplier for use in providing the Services, are listed in Schedules O-3 and O-4 (Health Net Provided Resources). Additionally terms relating to provision of desktop computers, laptops, cell phones and similar devices are set forth in and governed by Section 11.4(b). Health Net (and each of its Affiliates) retains all of its right, title and interest in and to the referenced Health Net Owned Equipment and Health Net Leased Equipment.

 

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  (ii) As of the applicable SOW Effective Date, Health Net grants to Supplier:

 

  (A) a fully paid-up, nonexclusive, license to use the referenced Health Net Owned Equipment relevant to such SOW, and

 

  (B) subject to the Parties having obtained any Required Consents pursuant to Section 11.3 (Required Consents) with respect to the referenced Health Net Leased Equipment, and without assignment of the leases, such rights as Health Net has (or later obtains) to use the referenced Health Net Leased Equipment relevant to such SOW.

 

  (iii) The rights granted in clause (ii) above shall be in effect until such time as determined in accordance with Section 11.2(e) below. After such time, Supplier will return such Equipment to Health Net in substantially the same condition as it was when Supplier began use of it, subject to reasonable wear and tear.

 

  (e) Terms Regarding Supplier’s use of Health Net Provided Resources. The following shall apply to the Health Net Provided Resources:

 

  (i) Supplier shall utilize the Health Net Provided Resources solely to provide Services to Health Net (and other Service Recipients) under this Agreement. Supplier is not permitted to use the Health Net Provided Resources for the benefit of any entity other than Health Net (and other Service Recipients under this Agreement) without the prior written consent of Health Net, which may be withheld in Health Net’s discretion.

 

  (ii) Supplier will comply with the duties and obligations imposed on Health Net by the Health Net Third Party Service Contracts, software licenses (and related maintenance, support and service agreements), and equipment leases (and related maintenance and service agreements) related to the Health Net Provided Resources, as promptly as practicable after such Health Net Third Party Service Contracts and related agreements have been disclosed to Supplier (but in no event later than thirty (30) days after such contracts and agreements have been provided to Supplier), provided that Health Net provides to Supplier any commercially reasonable support necessary from Health Net if available for Supplier to so comply. Supplier shall not seek to revoke or modify the terms of any such agreement. Health Net may revoke or modify the terms of any such agreement, which revocation or modification may give rise to a Change, in which case the Change Control Process will apply.

 

  (iii) Health Net shall make the Health Net Provided Resources available to Supplier commencing on the BPaaS Services Commencement Date and continuing through Phase 2, provided that (i) it is permitted under the existing terms of any applicable third party agreements as of the Effective Date, and (ii) Supplier shall be responsible for providing Managed Third Party Contract Services (as defined in Schedule A (Cross Functional) with respect to the Health Net Provided Resources after the BPaaS Services Commencement Date, even though Health Net is retaining (subject to Schedule C (Charges), including the Financial Responsibility Matrix attached as Schedule C-11 to Schedule C (Charges)) Financial Responsibility through Phase 2. After Phase 2, Health Net shall have no further obligation to provide such Health Net Provided Resources, subject to clause (iv) below.

 

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  (iv) Terms for making resources available beyond Phase 2.

 

  (A) If Supplier desires Health Net to continue to provide any of the Health Net Provided Resources after Phase 2, Supplier shall give written notice of such fact to Health Net as soon as reasonably possible, but not less than ninety (90) days prior to the date by which Health Net would need to (i) notify the applicable contract counter-party in order to effect a renewal or extension of the affected contract beyond Phase 2, or (ii) in order to avoid the payment of license, maintenance, support, service or other fees extending after Phase 2 if Supplier does not intend to utilize the applicable resource during such period after Phase 2 (a “Resource Extension Notice”).

 

  (B) Provided that Health Net is permitted under the existing terms of any applicable third party agreements, Health Net shall make the Health Net Provided Resources identified in the Resource Extension Notice available after Phase 2, provided that Supplier shall be financially responsible for any and all costs incurred by Health Net relating to such Health Net Provided Resources with respect to the period after Phase 2 (“Health Net Resources Costs”), and Supplier shall reimburse Health Net for any and all such costs, such costs to include:

 

  (1) Any costs incurred by Health Net under any of the Health Net Provided Resources, including fees under the third party Software license fees and fees for maintenance, support and services agreements related to such resources;

 

  (2) Any reasonable internal costs to maintain and support any of such resources; and

 

  (3) The reasonable internal administrative and personnel costs incurred by Health Net relating to any such resources.

 

  (C) Notwithstanding the foregoing, in no event shall (i) Health Net be obligated to make available the contracts identified in Schedule O-5-1 after Phase 2, and (ii) Health Net be obligated to make any Health Net Provided Resource available to Supplier after the date that is two years after the end of Phase 2.

 

  (D) Health Net shall invoice Supplier for the Health Net Provided Resources Costs to be reimbursed by Supplier pursuant to this Section 11.2(e). Such invoices shall be paid by Supplier to Health Net within forty-five (45) days after receipt thereof.

 

  (E) Section 5.1 of Schedule C (Charges) contains additional terms relating to the Health Net Provided Resources.

 

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  (v) Supplier will return any such Health Net Provide Resource to Health Net or, at Health Net’s election, destroy it and certify the destruction of all copies in Supplier’s (or any of its Subcontractor’s) possession or control, at such time as Health Net is no longer obligated to provide such Health Net Provided Resource pursuant to this Section 11.2(e).

 

  (vi) In the event that Health Net makes any additional Health Net Provided Resources available after the Effective Date, any such additional item shall be subject to the applicable Section 11.2(b), (c) or (d) above, as well as this Section 11.2(e).

 

  (vii) Supplier shall create a list of the dates by which Supplier must provide the Resource Extension Notice with respect to each Health Net Provided Resource in order to comply with the requirements of Section 11.2(e)(iv)(A). Supplier shall provide such list to Health Net on or before the date that is forty-five (45) days after the BPaaS Services Commencement Date provided that with respect to any contract that is not provided to Supplier as of the BPaaS Services Commencement Date, Supplier shall have an additional forty-five (45) days after being provided such contract to update the list with the date for such contract in order to be in compliance with Section 11.2(e)(iv)(A). Any inaccuracies in such list shall not relieve Supplier of its obligations under this Section 11.

 

  (f) Health Net Facilities.

 

  (i) Subject to the Parties having obtained any Required Consents pursuant to Section 11.3, Health Net grants to Supplier the right, to access the Health Net Facilities, to the extent permitted by applicable lease agreements, solely to perform the Services. Such space to be made available is described on Schedule O (Health Net Provided Resources).

 

  (ii) Such facilities shall be provided from the BPaaS Services Commencement Date until the end of Phase 2. If Supplier desires to occupy the Health Net facilities after Phase 2, Supplier shall pay Health Net for such space in accordance with the following. Supplier shall provide written notice to Health Net that it desires to occupy such space after Phase 2 not less than six (6) months prior to the end of Phase 2. The Parties shall discuss and determine a fair market rent for such space.

 

  (iii) Supplier will comply with the duties imposed on Health Net (or its Affiliate) by each lease for the Health Net Facilities, commencing ten (10) Business Days after such duties have been disclosed to Supplier in writing.

 

  (g) Terms Applicable to Health Net Facilities, Generally.

 

  (i) The following provisions are applicable with respect to the Health Net Facilities: Health Net retains responsibility for management and maintenance of the building and property electrical systems, water, sewer, lights, heating, ventilation and air conditioning (HVAC) systems, physical security services and general custodial/landscape services (including monitoring and maintaining the uninterruptible power supply (UPS) system, air handlers and water chillers that are primary support for the raised-floor environment in Health Net Facilities).

 

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  (ii) Supplier is responsible for providing all other the facilities and facilities-related support it needs to provide the Services.

 

  (iii) Health Net will inform Supplier of any plans or determination to relocate the Health Net Facilities so that Supplier will have a reasonable amount of time to prepare for and implement such relocation as it affects Supplier.

 

  (iv) Supplier’s use of the Health Net Facilities shall be for the sole and exclusive purpose of providing the Services and shall be subject to the terms set forth in this Section 11.2(f). Any other uses are subject to the prior approval of Health Net in its discretion. Supplier’s use of Health Net Facilities does not constitute a leasehold or other property interest in favor of Supplier.

 

  (v) Supplier will use the Health Net Facilities in an efficient manner and in a manner that is coordinated and does not interfere with Health Net’s business operations. Supplier is responsible for any damage to Health Net Facilities resulting from the negligent or intentional misconduct of Supplier (or its Subcontractors or other guests) or other failure to comply with its obligations under this Agreement respecting the Health Net Facilities.

 

  (vi) Supplier will keep the Health Net Facilities in good order, not commit or permit waste or damage to them or use them for any unlawful purpose or act. Supplier will comply with Health Net Policies and with applicable leases made available to Supplier regarding access to and use of the Health Net Facilities, including procedures for the physical security of the Health Net Facilities.

 

  (vii) Supplier will permit Health Net and its agents and representatives to enter any portions of the Health Net Facilities occupied by Supplier Personnel.

 

  (viii) Supplier may not make improvements or changes involving structural, mechanical or electrical alterations to the Health Net Facilities without Health Net’s prior written approval. Any improvements to the Health Net Facilities will become the property of Health Net.

 

  (ix) When Health Net Facilities are no longer required for performance of the Services, or in any event upon expiration or termination of this Agreement (or the applicable lease term, if shorter), Supplier will return them to Health Net in substantially the same condition as when Supplier began use of them, subject to reasonable wear and tear.

 

11.3 Required Consents

 

  (a) Health Net, with the cooperation of Supplier, is responsible for obtaining Required Consents under any of the leases, contracts and licenses referred to in this Section 11 (Transfer or Use of Resources) (the “Used Resources”). Health Net will work diligently to obtain such Required Consents as soon as practicable after:

 

  (i) the Effective Date with respect to the Used Resources known as of the Effective Date, or

 

  (ii) such later date as agreed by the Parties with respect to new Used Resources agreed to by the Parties after the Effective Date, if any.

 

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  (b) To the extent a Required Consent under this Section 11 has not been obtained prior to the Transfer Date of the applicable Health Net Personnel who have a role in obtaining a given Required Consent, then once such Health Net Personnel are Transitioned Employees, Supplier will utilize such Transitioned Employee to obtain such Required Consents, provided that this shall not relieve Health Net from any legal obligation (including the obligations Health Net may have to the third parties from which such Required Consents are sought) to obtain their consent to the transactions contemplated by this Agreement.

 

  (c) The Parties will equally bear any fees (such as transfer or upgrade fees) required to obtain a Required Consent relating to the Used Resources. Unless and until each such Required Consent has been obtained, to the extent practical Supplier will determine and adopt, subject to Health Net’s prior written approval, such alternative approaches to provide the Services without the Required Consent. The Parties shall equally bear the costs to implement such alternative approaches.

 

  (d) If either Party is not able to obtain any such Required Consent, or if it elects not to obtain a Required Consent because of the cost or other terms required to obtain such Required Consent, Health Net reserves the right to remove from the scope of this Agreement any affected Services (or reduce the volume of any affected Services). If the failure to obtain the Required Consent has a material impact on Supplier’s ability to provide the remaining Services or its Charges, Supplier may remove from the scope of this Agreement any affected Services (or reduce the volume of any affected Services). In either such event (i) the Charges shall be reduced using the charging methodologies provided in Schedule C (Charges) and unit rates set forth in the applicable SOW, or otherwise in an equitable manner to the extent such unit rates and charging methodologies do not provide a means to determine what the reduction of Supplier’s Charges should be, and (ii) Health Net shall have the right to rehire Transitioned Employees that are performing or will perform the Services removed from the scope of this Agreement. Health Net’s right in such case to remove or reduce Services (and the corresponding adjustment to charges and right to rehire Transitioned Personnel) shall extend to other Services that relate to Services for which a Required Consent is not obtained if, in Health Net’s reasonable determination, such other Services should be grouped together for operational, maintenance or other reasons. The removal or reduction of Services pursuant to this Section 11.3(d) will be subject to the Change Control Process and Schedule G (Governance).

 

11.4 Health Net Resources Provided to Supplier Personnel Working On-site

 

  (a) On-site Health Net Resourcesmeans the reasonable office space, furniture, fixtures, telephones, office supplies, and other mutually agreed resources to be provided or made available by Health Net (or its Affiliates) to Supplier Personnel assigned by mutual agreement of the Parties to work on-site at facilities of Health Net (or its Affiliates).

 

  (b) Except as otherwise provided in this Agreement, Health Net will provide to Supplier Personnel located and authorized to work on-site at Health Net Facilities the On-site Health Net Resources reasonably necessary for the Transitioned Employees to continue to perform the Functions that they were providing prior to the Transfer Date; provided however, that:

 

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  (i) For those Transitioned Employees utilizing a Health Net-provided cell phone, Health Net will continue to provide such cell phones until the earlier of (A) the date the lease or contract for each phone expires or terminates, or (B) the end of Phase 2, after which Supplier shall provide same;

 

  (ii) With respect to laptops and desktops, Health Net will provide such PCs for the Transitioned Employees until the earlier of (A) the date the lease on such PC expires or terminates, or (B) the end of Phase 2, after which Supplier shall provide same.

 

  (iii) Health Net will not be responsible for providing any other portable computing or communications devices to Supplier Personnel.

 

  (c) Supplier shall comply and cause Supplier Personnel to comply with Health Net’s Policies regarding access to and use of the On-site Health Net Resources to Supplier, including procedures for the physical and logical security. Health Net may conduct periodic compliance inspections and audits to confirm that Supplier’s use of the On-site Health Net Resources complies with the terms of this Agreement.

 

  (d) Supplier will use the On-site Health Net Resources in an efficient manner and for the sole purpose of providing the Services. Supplier will be responsible for damage to the On-site Health Net Resources caused by the negligence or intentional misconduct of Supplier Personnel. When the On-site Health Net Resources are no longer required for performance of the Services, Supplier will return them to Health Net in substantially the same condition as they were in when Supplier began use of them, subject to reasonable wear and tear.

 

11.5 Service Description Update

 

  (a) On or before the date that is forty-five (45) days after the Effective Date, Supplier shall provide a plan to Health Net describing Supplier’s proposed approach for conducting a true-up of the Services descriptions to determine if there are any additional Functions that were being performed by the Affected Employees during the twelve (12) months prior to the Effective Date that are not described in the Initial SOWs. Such plan shall be subject to Health Net’s review and approval.

 

  (b) Promptly after the BPaaS Services Commencement Date, Supplier shall implement the approved plan described in Section 11.5(a) above. Supplier shall create a list and description of any Functions that are not covered in the Initial SOWs and provide same to Health Net on or before the date that is forty-five (45) days after the BPaaS Services Commencement Date. In assembling such list of omitted Functions, Supplier shall not exclude or delete any Function identified by a Transitioned Employee in connection with such effort. The Initial SOWs shall be updated with any additional Functions and descriptions that the Parties agree were not described in the applicable Initial SOW. There shall be no increase in the Charges as a result of the updating process described in this Section.

 

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12. RESOURCE ACQUISITIONS DURING THE TERM

 

12.1 General Responsibility and Compatibility

 

  (a) Except for (i) any resources set forth in Schedule O (Health Net Provided Resources), for which Health Net has Financial Responsibility and (ii) items which are shown as Health Net Retained Expenses in the Financial Responsibility Matrix attached as Schedule C-11 to Schedule C (Charges), Supplier is solely responsible (and has Financial Responsibility) for providing all Equipment, Software, connectivity, facilities, personnel, third party services and other resources required to perform and render the Services in accordance with this Agreement, including modifications, upgrades, enhancements, additions and replacements of Equipment, Software, and other resources as necessary or appropriate to render the Services in compliance with this Agreement.

 

  (b) Without limiting the generality of the foregoing, unless otherwise provided in Schedule O (Health Net Provided Resources), Supplier is also responsible (and has Financial Responsibility) for:

 

  (i) providing network connectivity between facilities necessary to provide the Services, including connectivity from Health Net Facilities or Health Net’s outsourcing vendor facilities to Supplier’s facilities, onshore and offshore. The Parties shall work together to determine the bandwidth, access, security and other requirements for such network connectivity;

 

  (ii) acquiring additional third party services as necessary or appropriate to render the Services in compliance with this Agreement;

 

  (iii) providing personal computers for Supplier Personnel and any additional Equipment (including modifications, upgrades, enhancements, additions and replacements of Equipment) as necessary or appropriate to render the Services in compliance with this Agreement, and the installation, operation, maintenance and refresh of such Equipment; and

 

  (iv) providing or acquiring all Software as necessary or appropriate to render the Services in compliance with this Agreement, including any office productivity Software for Supplier Personnel.

 

  (c) Supplier shall provide the Services using tools and processes that are compatible with those used by Health Net and its other service providers to provide other services within the Health Net environment. This includes implementing and maintaining interfaces with Health Net and other service provider problem management, change control, and configuration management systems to the extent required to maintain such compatibility.

 

  (d) Notwithstanding anything to the contrary in Section 25.3, the Parties agree that Schedule O (Health Net Provided Resources) may be changed through the Change Control Process without the need for a formal amendment to this Agreement.

 

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12.2 Software Used to Provide the Services

 

  (a) Upon Health Net’s request (made not more than twice per annum) Supplier will provide to Health Net a list of all Supplier Provided Software. Supplier Provided Software excludes any Health Net Software or third party Software to be provided by Health Net for Supplier’s use under this Agreement. Each list of Supplier Provided Software required under this Section 12.2(a) will separately identify:

 

  (i) Supplier Software that is Commercially Available,

 

  (ii) Supplier Software that is Non-Commercially Available,

 

  (iii) Third Party Software that is Commercially Available, and

 

  (iv) Third Party Software that is Non-Commercially Available.

 

  (b) If, after the Effective Date, Supplier intends to use any Supplier Software or Third Party Software that would constitute Supplier Provided Software, Supplier may do so without obtaining Health Net’s prior written consent (except as provided in Section 12.3(b)(ii)(B)(1)) provided that (i) Supplier’s implementation and use of such Software does not constitute a Change (and if it does, Supplier’s implementation and use of it will be subject to the Change Control Process), and (ii) Supplier has all necessary rights and agrees to provide to Health Net at the end of the Term the applicable license rights set forth in Section 12.3 with respect to such Software.

 

  (c) Notwithstanding anything else in this Section 12.2 to the contrary, if Supplier makes available to Health Net, or otherwise makes receipt of the Services dependent upon, any Software and fails to follow the process set forth in this Section 12.2, such use shall not limit Supplier’s obligations or Health Net’s rights set forth in Section 12.3 below.

 

  (d) Any Software and associated contracts acquired by Supplier for which Health Net is financially responsible shall be acquired in the name of Health Net unless Health Net otherwise agrees in writing.

 

12.3 Health Net Rights to Certain Software

The intent of this Section 12.3 is to provide the means for Health Net to have the ability to access and Use, both during the Term and Disengagement Assistance Period and thereafter as Health Net may require as contemplated herein, all Supplier Provided Software, it being the mutual intent of the Parties to provide Health Net a means to acquire licenses to whichever of the Supplier Provided Software that Health Net may desire to continue using after the Term and any Disengagement Assistance Period as outlined herein.

 

  (a) License During Term.

 

  (i) Supplier hereby grants to Health Net during the Term and any Disengagement Assistance Period, the right to use Software made available by Supplier to Health Net during the Term (including any updates and upgrades to such Software provided by Supplier), solely for Health Net (and its Affiliates and Service Recipients) to receive and use the Services.

 

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  (ii) Supplier hereby grants to Health Net, its Affiliates and the Service Recipients during the Term and any Disengagement Assistance Period, the right to access and Use—appropriate to their designated roles for Health Net and its Affiliates and consistent with Health Net’s and its Affiliates’ practices prior to the execution of this Agreement—the systems used by Supplier to provide the Services (and Health Net Data stored or processed in such systems) solely for Health Net, its Affiliates and the Service Recipients to perform their designated roles for Health Net and its Affiliates as reasonably required to receive and use the Services and otherwise reasonably required to carry on Health Net’s and its Affiliates business operations. By way of example and not limitation, Health Net’s rights include the right to access the systems used by Supplier to provide the Services in order to access Health Net Data, generate queries, run reports and perform retained Functions.

 

  (b) Additional Licenses to Use Certain Software.

This Section 12.3(b) shall apply to the Initial SOWs and any Future SOWs entered into by the Parties, provided that with respect to any Future SOW, the Parties may mutually agree in writing that this Section 12.3(b) shall not apply to such SOW, provided further that such agreement shall require the written agreement of the Health Net Legal Department.

 

  (i) Supplier Software

 

  (A) Commercially Available Supplier Software

 

  (1) With respect to Supplier Provided Software that is Commercially Available Supplier Software, Supplier (on behalf of itself and those Supplier Affiliates that own any such Software) grants to Health Net and its Affiliates (and for the sole purpose of providing services to Health Net, its Affiliates, Former Health Net Affiliates and Service Recipients, to Health Net’s and its Affiliates’ service providers), a license to Use such Software under the then-current license terms made available by Supplier to commercial customers comparable to Health Net in terms of use of the Software, during all Disengagement Assistance Periods for any Service for which such Software is used, and continuing thereafter, provided however that:

 

  a. if such then-current terms do not grant Health Net rights to Use such Software in the same manner and for the same purposes it was used under this Agreement, then such license shall be deemed to include such additional rights of Use without additional charge; and

 

  b. if Health Net and Supplier have an existing license agreement applicable to such Software, the terms of such license agreement shall apply.

The foregoing licenses shall be provided at the fees that are ordinarily charged by Supplier to licensees of such Software, for the period after the applicable Disengagement Assistance Periods; provided, however, that if the fees that are ordinarily charged are for a perpetual license and Health Net desires to use such Software for only a limited time period after the applicable Disengagement Assistance Periods, Health Net shall not be required to purchase a perpetual license for such Software (or pay the equivalent of a perpetual license fee).

 

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  (2) Supplier will offer to provide to Health Net, generally available Software Updates, maintenance, support and other services for such Supplier Software on Supplier’s then-current standard terms and conditions for such services, including pricing not in excess of that customarily charged to Supplier’s other commercial customers comparable to Health Net in terms of use of the Software. If Health Net elects to receive such services, (a) Health Net shall only be obligated to pay for such services to the extent applicable to the period after the applicable Disengagement Assistance Periods; and (b) the charges for such services will reflect that maintenance and support on such Software is current (i.e., no “catch-up” or similar payments shall be required to be made by Health Net because maintenance and support may have lapsed – if maintenance and support has lapsed, Supplier shall pay charges necessary to bring maintenance and support current).

 

  (B) Non-Commercially Available Supplier Software

 

  (1) Supplier (on behalf of itself and those Supplier Affiliates that own any Supplier Provided Software that is Non-Commercially Available Supplier Software) grants to Health Net and its Affiliates (and for the sole purpose of providing services to Health Net, its Affiliates, Former Health Net Affiliates and Service Recipients, to Health Net’s and its Affiliates’ respective service providers), a worldwide, irrevocable, fully paid-up, royalty-free, non-exclusive, non-transferable (except pursuant to a permitted assignment of the Agreement pursuant to Section 27.1) license to Use (solely to the extent such Use is reasonably necessary for use and receipt of the applicable Services being disengaged or for Health Net, its Affiliates and their respective service providers to provide and deliver to Health Net, Health Net Affiliates, Former Health Net Affiliates and Service Recipients services that are substantially similar to the Services being disengaged) Supplier Provided Software that is Non-Commercially Available Supplier Software (including technical interfaces, Documentation, artifacts, manuals and other materials useful in connection with the authorized Use of such Software), during all Disengagement Assistance Periods for any Service for which such Software is used, and continuing through the date that is two (2) years after the last day of the Disengagement Assistance Period pertaining to the applicable Services being disengaged.

 

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  (2) If Health Net requests, the Parties will mutually agree on applicable terms for Supplier’s maintenance and support of such Non-Commercially Available Supplier Software, and performance of software development requested by Health Net relating to such Software, after such termination or expiration of the Agreement (in whole or in part) or termination of Services for which such Supplier Software was used; provided that:

 

  a. Health Net shall only be obligated to pay for such maintenance and support and development services for the period after the applicable Disengagement Assistance Periods; and

 

  b. If Health Net elects, such Software maintenance and support and development services shall be performed (i) under the AO Agreement, in which event the Parties shall negotiate in good faith an appropriate amendment or work order to the AO Agreement, or (ii) on a time and materials basis, including using the professional service rates for applicable skill sets set forth in Schedule C (Charges).

 

  c. If Supplier fails to provide commercially reasonable maintenance and support and development services for such Non-Commercially Available Supplier Software at the charges described in this Section 12.3(b)(i)(B)(2) , then within ten (10) days of Health Net’s request, Supplier shall provide Health Net and its designees access to the reasonably necessary Source Code for such Software in a Supplier-provided development environment during the period of Health Net’s license to such Software described above, in order to enable Health Net and its designees to perform such maintenance and support and development work on such Software, subject to the license limitations set forth in Section 12.3(b)(ii)(B)(1). Supplier shall reasonably cooperate with Health Net and its designees in connection therewith to enable Health Net to realize the benefits of the license granted under Section 12.3(b)(i)(B)(1).

 

  d. If Supplier fails to provide the access and cooperation described in the preceding Section 12.3(b)(i)(B)(2)(c), then within ten (10) days of Health Net’s request Supplier shall provide the Source Code to such Non Commercially Available Supplier Software for Use in accordance with the license granted in Section 12.3(b)(i)(B)(1).

 

(ii) Third Party Software

 

  (A) Commercially Available Third Party Software. Supplier shall provide written notice to Health Net identifying any Supplier Provided Software that is Third Party Commercially Available Software as set forth in Section 12.2(a) above.

 

  (B) Non-Commercially Available Third Party Software.

 

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  (1) Supplier shall not utilize any Non-Commercially Available Third Party Software that would constitute Supplier Provided Software without Health Net’s prior written consent, which consent Health Net may withhold in its discretion.

 

  (2) Without limiting Health Net’s rights under this Section, no consent of Health Net shall be valid unless such consent outlines Health Net’s material rights to such Software during the Term and during any Disengagement Assistance Periods and for the two years after the applicable Disengagement Assistance Period. Unless Health Net expressly (i) consents to other specifically outlined license rights in writing in which this Section 12.3(b)(ii)(B)(2) is cross referenced as being superseded, (ii) enters into a license agreement with the applicable third party under different terms or (iii) otherwise waives in such written consent the following requirements, such Health Net material rights shall include the following:

 

  a. a world-wide, irrevocable, fully-paid up, royalty-free, non-exclusive license for Health Net and its Affiliates (and for the sole purpose of providing services to Health Net, its Affiliates, Former Health Net Affiliates and Service Recipients, to Health Net’s and its Affiliates’ respective service providers) to Use such Non-Commercially Available Third Party Software (including Source Code, programmer interfaces, Documentation, artifacts, manuals and other materials useful in connection with the Use of such Software), at no additional charge, during any Disengagement Assistance Periods for any Services for which such Software is used, and continuing through the date that is two (2) years after the last day of the Disengagement Assistance Period with the latest end date, or such other license terms as Health Net may agree in writing to accept, and

 

  b. a commercially reasonable maintenance and support agreement for such Software from the licensor of such Third Party Software, provided that:

 

  i. if Health Net elects to receive such maintenance and support, Health Net will be responsible for charges under such maintenance and support agreement only with respect to the period after the end of the Disengagement Assistance Period with the latest end date, and

 

  ii. the charges under such maintenance agreement shall reflect the fact that maintenance and support on such Software is current (i.e., no “catch-up” or similar payments shall be required to be made by Health Net because maintenance and support may have lapsed during the Term or Disengagement Assistance Period).

 

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  (C) If Supplier fails to comply with its obligations under Section 12.3(b)(ii)(B)(1) or (2), such failure shall constitute a breach of this Agreement. In such event, by way of endeavoring to mitigate Health Net’s damages resulting from the failure, Supplier shall use all Commercially Reasonable Efforts, at Supplier’s cost and expense to (i) promptly secure for Health Net a license comparable to a Deliverables License for the Non-Commercially Available Third Party Software, or (ii) if this cannot be accomplished with Commercially Reasonable Efforts, replace the Non-Commercially Available Third Party Software without degrading the functionality or performance of the Services and bear any costs of implementing the replacement Software, and secure for Health Net a license for such replacement Software as follows: (i) if such replacement Software is Non Commercially Available Third Party Software, then a license comparable to a Deliverables License, and (ii) if such replacement Software is Commercially Available, then a license on the standard terms on which such Software is licensed to customers comparable to Health Net.

 

  (c) Relationship to License in Section 15 (IP Rights). Nothing set forth in this Section 12.3 shall limit Health Net’s rights under Section 15 (Intellectual Property Rights).

 

12.4 Colocation Facilities.

 

  (a) Prior to the Effective Date, Supplier entered into agreements (each a “Colocation Agreement”) to procure certain colocation space in a data center in Centennial, Colorado and a data center in Chandler, Arizona. Supplier intends to exercise an option to procure additional colocation space under each of the Agreements for use in providing the Services to Health Net (“Health Net Colocation Space”).

 

  (b) Health Net shall have the option, at any time after it has requested Disengagement Assistance from Supplier and continuing through the date that is two (2) years after the last day of the Disengagement Assistance Period pertaining to the applicable Services, to assume Supplier’s rights and obligations under the Colocation Agreements with respect to such Health Net Colocation Space only. Supplier represents and warrants that each of the providers of such Health Net Colocation Space (“Colocation Providers”) has consented to such arrangement.

 

  (c) If Health Net elects to exercise such option, Health Net shall give written notice to Supplier. Supplier will assign the Colocation Agreement to Health Net or, if Health Net so elects, provide Health Net with reasonable cooperation and support in Health Net’s efforts to procure a replacement agreement with the Colocation Provider for use of such Health Net Colocation Space.

 

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13. TRANSITION

 

13.1 Overview

 

  (a) This Article 13 (Transition) addresses at a high level the transition of the Functions comprising the Services from Health Net to Supplier. Schedule Z (High-Level Transition Information) provides a consolidated view of Transition across all of the Initial SOWs and, in addition, each of the Initial SOWs contains an exhibit describing the Transition approach and plans for the relevant Service Tower.

 

  (b) The Transition approaches, plans and schedules set forth in Schedule Z (High-Level Transition Information) and the Initial SOWs reflect the Parties’ preliminary understanding as to how the Transition will be conducted, but they do not contain the necessary level of detail to serve as executable Transition plans. Promptly following the execution of this Agreement, Supplier will work diligently with Health Net’s team leads for each Service Tower to develop and submit executable Transition plans containing the necessary level of operational detail, as set forth in Section 13.4(b).

 

  (c) The Transition will be carried out in sequential phases and discrete ‘waves’ encompassing different Functions and work streams. Some waves are independent from other waves, and some are dependent on the progress and results of other waves. To help ensure that the Transition proceeds smoothly and with minimal disruption to Health Net’s business operations, the Parties will establish and include in the executable Transition plans appropriate ‘check-point gates’ intended to assess and validate the progress of Transition waves at logical points along the way, both to ensure that problems encountered during a Transition wave are resolved before dependent work proceeds and that lessons learned from performance of Transition waves are documented and communicated to the Transition teams working on other waves in order to minimize the recurrence of problems during Transition.

 

13.2 TransitionDefined

 

  (a) Transition” means the process (and associated time period) of migrating performance of the Services from Health Net or from Health Net’s then-current service provider to Supplier, completing any contemplated movement of services from onshore locations to alternate onshore locations, near shore locations and offshore locations (each as contemplated by the applicable Transition Documents), making any planned improvements to the process and methods and infrastructure used to perform and deliver the Services that are intended to be made during the period of Transition, and causing any required knowledge transfer from Health Net personnel to Supplier Personnel.

 

  (b) The Transitions for each of the Initial SOWs (each, an “Initial SOW Transition”) shall commence on the BPaaS Services Commencement Date, and continue through the date that Supplier has assumed all responsibility with respect to the SOW Services covered by the Initial SOWs and completed the transition to the contemplated off-shore service delivery model. The Parties expectation is that Transition will occur over an approximately two (2) year period after the BPaaS Services Commencement Date.

 

  (c) The Transition for each Future SOW (each, a “Future SOW Transition”) shall commence on the applicable SOW Effective Date, and continue through the date that Supplier has assumed all responsibility with respect to the SOW Services covered by such Future SOW and completed the transition to the contemplated off-shore service delivery model (if any).

 

  (d) The Transition for the Initial SOWs includes the closing of the transaction contemplated by the APA. Health Net and Supplier shall close on such transaction in accordance with the terms of the APA.

 

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13.3 Transition Changes

 

  (a) Given the breadth, complexity and criticality of the Functions being outsourced by Health Net to Supplier under the Initial SOWs, a well-planned, orderly, well-executed Transition is critical to preventing damage to Health Net, its Members, Providers, and employer Groups and to the continued, undisrupted operation of Health Net’s and its Affiliates businesses during the Term. Accordingly, it is agreed and understood that If Health Net determines in good faith that the Transition, or any part of the Transition, poses a meaningful risk or hazard to Health Net’s business interests (a “Transition Risk”), Health Net may request a suspension of or alteration to the Transition (each a “Transition Change”).

 

  (b) Upon Supplier receiving a Transition Change request from Health Net:

 

  (i) Notwithstanding anything else to the contrary in this Section 13.3, Supplier shall immediately suspend the Transition or those aspects of the Transition that Health Net requests be suspended; and

 

  (ii) the Parties’ respective Transition Management Offices shall immediately begin conferring to determine how to implement the Transition Change going forward (i.e., after any suspension) so as to eliminate the Transition Risk in the least disruptive and least costly way, taking into account the risk to Health Net’s business and the financial impact on Supplier, but giving priority to minimizing the risk to Health Net’s business.

 

  (c) If the Parties have not reached agreement as to the nature of the Transition Change to be made going forward or the manner in which it is to be made within a reasonable amount of time after Health Net’s sending the notice of Transition Change to Supplier, the dispute shall immediately be escalated to the Executive Council.

 

  (d) If the Executive Council has not resolved the disagreement within a reasonable amount of time after referral of the disagreement to the Executive Council, Health Net’s Chief Executive Officer shall have the final say on the nature and manner of the Transition Change, taking into account the risk to Health Net’s business and the financial impact on both Parties, but giving priority to minimizing the risk to Health Net’s business. In all events, Health Net’s Chief Executive Officer must act reasonably and in good faith and shall choose a manner of Transition Change that, all else being equal, seeks to address the Transition Risk in a satisfactory way to Health Net while minimizing the incremental financial burden on Supplier.

 

  (e) Supplier will bear financial responsibility for its cost impacts from the Transition Change if the Transition Risk giving rise to the Transition Change met the threshold of posing a meaningful risk or hazard to Health Net’s routine business operations (an “Operational Transition Risk”), except to the extent that such Operational Transition Risk has resulted from the failure by Health Net (including failure by a Health Net contractor, agent or other party for which Health Net is responsible, but excluding Supplier) to perform an express obligation of Health Net under this Agreement. The foregoing allocation of cost, if any, will be subject to Supplier following the procedures outlined in Section 8.3 (Savings Clause). If not, Health Net will bear financial responsibility for Supplier’s cost impacts from the Transition Change.

 

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  (f) If the Executive Council cannot agree on whether (i) the risk threshold stated in Section 13.3(a) has been met, or (ii) Health Net was partially at fault in creating the Transition Risk and, if so, what portion of Supplier’s cost impact is therefore equitably allocable to Health Net, then either Party may refer the disagreement for resolution to a third party subject matter expert (“Mediator”) for non-binding resolution. In order to avoid conflicts of interests, the fees for such Mediator shall be paid for by both Parties equally. The selection of the Mediator shall be approved by at least three (3) members of the Executive Council. Both Parties shall cooperate fully with the Mediator and provide any reasonably requested information as promptly as practicable. The Mediations shall be completed in not more than thirty (30) days. If either Party disagrees with the non-binding resolution(s) proposed by the Mediator, , then such Party may refer the disagreement for resolution via litigation in accordance with Section 26.2 (Litigation); provided, however, that the existence of such disagreement (at any stage) and the mediation process shall not constitute grounds for delaying or altering the Transition Change while the dispute is being resolved if so directed by Health Net.

 

  (g) Where possible, all Transition Changes shall be processed via the Change Control Process on an expedited basis, including as an Emergency Change when necessary under the circumstances.

 

13.4 Transition Documents

 

  (a) Each Transition shall be conducted in accordance with a written plan and documents (the Transition Documents) which shall include: (i) a description of the operations being transitioned; (ii) a general description of the methods and procedures, personnel and organization Supplier will use to perform the Transition; (iii) a schedule of the Transition activities; (iv) a detailed description of the respective roles and responsibilities of Health Net and Supplier; (v) such other information and planning as are necessary to conduct the Transition in accordance with the other terms in this Agreement.

 

  (i) A draft of the Transition Documents for the Initial SOWs Transition is attached to the Transition Manual for each SOW as Exhibit A-2 (Transition Description), Exhibit A-2-1 (Transition Project Plan) and Exhibit A-2-2 (Transition Staffing Plan) and Schedule Z (High-Level Transition Information); and

 

  (ii) A draft of the Transition Documents for any Future SOW Transition shall be included as part of the applicable Future SOWs as contemplated by Schedule R (SOW Template).

 

  (b) Following the Effective Date with respect to the Initial SOW Transitions or the applicable SOW Effective Date for any Future SOW Transition, Supplier shall be responsible for revising and finalizing the applicable Transition Documents, provided that: (i) Supplier shall cooperate and work closely with Health Net in finalizing such Transition Documents (including incorporating Health Net’s reasonable comments); and (B) all changes to such Transition Documents shall be subject to the prior written approval by Health Net.

 

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13.5 Conduct of the Transition

Supplier will carry out and complete the Initial SOW Transitions and any Future SOW Transition in accordance with the applicable Transition Documents, including its time schedule. Except as otherwise expressly provided in the applicable Transition Documents, Supplier’s responsibilities with respect to each Transition include:

 

  (a) performing and managing the Transition and In-Flight Projects and activities;

 

  (b) establishing communications lines and network connections, and providing Equipment, Software, tapes, records and supplies, as made necessary by the Transition;

 

  (c) performing the Transition without interruption, and without disrupting Health Net’s business operations;

 

  (d) paying Supplier’s costs associated with the Transition, including communications circuit costs (both installation/de-installation and ongoing) except as otherwise expressly provided in this Agreement; and

 

  (e) otherwise performing such migration tasks as are necessary to enable Supplier to complete the Transition and provide the Services.

 

13.6 Health Net Cooperation and Support

Health Net will cooperate with Supplier in the conduct of each Transition and provide support as described in the applicable Transition Documents.

 

13.7 In Flight Projects

As part of the Transition, Supplier will also assume responsibility for completing the projects listed or described in Schedule X (In-Flight and Accelerated Projects), which are in progress as of the SOW Effective Date or expected to commence promptly following the Effective Date (the In-Flight and Accelerated Projects).

 

13.8 Completion of Transition Projects

 

  (a) Health Net reserves the right to monitor, test and otherwise observe and participate in each Transition. Supplier will notify Health Net without delay if any Health Net monitoring, testing or participation has caused (or Supplier expects it to cause) a problem or delay in a particular Transition and work with Health Net to prevent or circumvent the problem or delay.

 

  (b) Health Net’s as-is operations will not be disabled until Supplier demonstrates to Health Net’s reasonable satisfaction that the affected processes and operations have been successfully migrated to Supplier and are functioning properly.

 

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  (c) If any of the Transition activities are not completed on schedule and the delay is not due to the fault of Health Net (or its Affiliates, customers or other suppliers), Force Majeure, or a failure to secure required Regulatory Consents, then for the period of delay:

 

  (i) if Supplier’s charges to Health Net are greater than they would have been if the delayed Transition activity had been completed on schedule, Health Net will receive a credit against Supplier’s monthly charges in an amount equal to the difference between Supplier’s actual charges and what Supplier’s charges would have been if the delayed Transition activity had been completed on schedule; and

 

  (ii) Supplier will give Health Net an additional credit against Supplier’s monthly charges in an amount sufficient to reimburse Health Net for any excess or continuing costs incurred for personnel, third-party equipment, Software and/or services that would not have been incurred if the delayed Transition activity had been completed on schedule.

 

  (d) Provided that a Transition is on schedule and that there are no problems with such Transition, Supplier may request the approval of Health Net to accelerate a wave of such Transition, provided that granting of such approval shall be in Health Net’s reasonable discretion.

 

14. DATA SECURITY AND PROTECTION

 

14.1 [Reserved.]

 

14.2 Health Net Data, Generally

 

  (a) As between the Parties, Health Net Data will be and remain the property of Health Net. Supplier may not use Health Net Data for any purpose other than to render the Services. No Health Net Data will be sold, assigned, leased or otherwise disposed of to third parties or commercially exploited by or on behalf of Supplier (or any of its Subcontractors). Neither Supplier nor any of its Subcontractors may possess or assert any lien or other right against or to Health Net Data. Without limiting the generality of the foregoing, (a) Supplier may only use Health Net Data as strictly necessary to render the Services and must restrict access to such information to Supplier Personnel on a strict need-to-know basis, and (b) Supplier shall not download, copy, transmit or make available any Health Net Data to any third party (other than an Approved Subcontractor) except as expressly permitted by this Agreement.

 

  (b) At Health Net’s request at any time during the Term, Suppler shall provide Health Net with access to and/or copies of (in format reasonably requested by Health Net) any Health Net Data stored on Supplier systems or otherwise under the control of Supplier.

 

14.3 Data Security

 

  (a) When present at Health Net Facilities or accessing Health Net systems or Health Net Data (whether such data is in Health Net’s systems of Supplier’s systems), Supplier will observe and comply with Health Net’s Policies regarding data security procedures that have been communicated to Supplier. Prior to performing Services from any new service location (i.e., any service location other than those set forth in Schedule F (Supplier Facilities)), Supplier shall complete a security questionnaire, which Health Net requires before Services are permitted to be provided from a new service location. If Health Net requests, Supplier shall provide Health Net with access to any new service location for due diligence purposes.

 

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  (b) Supplier will establish and maintain reasonable safeguards designed to protect against the occurrence of any Security Breach, including by establishing and maintaining appropriate network and internet security procedures, protocols, security gateways and firewalls with respect to Health Net Data.

 

  (c) Supplier shall comply with the security requirements and standards set forth in Schedule Q (Security Addendum), which represent the minimum security requirements and standards with which Supplier must comply. Supplier shall also comply with:

 

  (i) All applicable Laws relating to privacy and information security, as they may evolve during the Term, including those establishing federal services requirements (such as the Federal Information Processing Requirements and FIPS 140-2), the National Institute of Standards and Technology (NIST) and as may be required for Health Net to qualify for the safe harbor exemption for de-identified health information under the HIPAA Privacy Rule (45 CFR 164.502 (d));

 

  (i) the Payment Card Industry Data Security Standards (promulgated by the PCI Data Security Standards Council) (“PCI DSS”);

 

  (ii) the applicable legal or regulatory requirements of the Exchange Agreement, to the extent provided to Supplier reasonably in advance of the need to implement any such requirements; and

 

  (iii) the legal or regulatory requirements, obligations or other terms with which Health Net must comply under any Regulatory Contract that are provided to Supplier reasonably in advance of the need to implement any such requirements.

 

  (d) Supplier shall be responsible for implementing additional security measures as may be necessary to protect Health Net Data from any unauthorized access or use and to prevent any Security Breach in accordance with this Agreement.

 

  (e) Supplier shall meet with Health Net not less frequently than once every six (6) months to review the continually evolving security threat environment and potential changes to the applicable security standards to address the same.

 

  (f) No Health Net Data may be stored outside of the United States. No Health Net Data may be accessed from outside of the United States without Health Net’s prior written consent, which may be granted or withheld in Health Net’s discretion. Supplier may access Health Net Data from those Supplier Facilities shown on Schedule F (Supplier Facilities), and Supplier may store Health Net Data at those on-shore Supplier Facilities shown on Schedule F (Supplier Facilities), that are denoted as facilities from which Supplier may access and store (as applicable) Health Net Data.

 

  (g) Health Net will be provided with backup copies of Health Net Data from the Supplier upon written request. Supplier must store and transmit backup Health Net Data in accordance with Schedule Q (Security Addendum). Supplier will document such safeguards in the Procedures Manual.

 

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  (h) Without limiting the generality of the foregoing:

 

  (i) Supplier’s information security policies shall provide for (A) regular assessment and re-assessment of the risks and vulnerabilities to the confidentiality, integrity, and availability of Health Net Data, including electronic data, and systems acquired or maintained by Supplier and its agents and contractors, including (1) identification of internal and external threats that could result in a Security Breach, (2) assessment of the likelihood and potential damage of such threats, taking into account the sensitivity of such data and systems, and (3) assessment of the sufficiency of policies, procedures, and information systems of Supplier and its agents and subcontractors, and other arrangements in place, to control risks; (B) protection against such risks; and (C) establishment and monitoring of key risk indicators (KRIs). Supplier shall provide such policies, and conduct and report on the results of such assessments to Health Net.

 

  (ii) Supplier shall (A) require all users to enter a user identification and password prior to gaining access to the information systems; (B) control and track the addition and deletion of users; (C) control and track user access to areas and features of Supplier’s information systems, and (D) encrypt Health Net Data in accordance with Schedule Q (Security Addendum).

 

  (iii) Supplier Personnel will not attempt to access, or allow access to, any Health Net Data that they are not permitted to access under this Agreement. Without limiting any of Supplier’s other obligations in respect of a Security Breach, including those set forth in Section 14.7, as soon as Supplier first becomes aware that unauthorized access to Health Net Data has been attained, (i) Supplier will report such unauthorized access to Health Net, describing to the best of Supplier’s knowledge the Health Net Data that was accessed, and (ii) Supplier shall take all necessary measures to stop the access, prevent recurrences, and return to Health Net any copied or removed Health Net Data.

 

  (iv) Except as provided in Section 21 (Confidentiality), Supplier shall (A) remove all Health Net Data from any media within the scope of the Services that is taken out of service; (B) destroy or securely erase such media in accordance with Health Net Policies and otherwise in a manner designed to protect against Security Breaches; and (C) provide to Health Net, within five (5) business days after a receipt of a request from Health Net, a notification of destruction, which may be provided via an automated solution that creates an auditable record.

 

14.4 Intrusion Detection/Interception

Supplier will provide Health Net and its representatives with:

 

  (a) reasonable access to the alerts, logs and data feeds from Supplier’s and its Subcontractors’ network intrusion detection systems, host intrusion detection systems and anti-virus tools on assets at Health Net Facilities or in data center(s) being used for the Services each to the extent used exclusively to provide Services to Health Net in order to enable Health Net to have adequate and timely access to system data regarding security incidents that have a nexus to Health Net, including Security Breaches;

 

  (b) access to Supplier’s information security policies and Supplier’s procedures relating to intrusion detection and interception with respect to the Supplier systems used to provide the Services for the purpose of examining and assessing those policies and procedures in accordance with Section 18 (Audits and Records); and

 

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(c)

 

  (d) the other requirements set forth in Schedule A (Services) or an SOW.

 

14.5 Litigation and Investigation Requests

 

  (a) Supplier recognizes that (i) Health Net may, from time to time, sue third parties, be sued by third parties, or have grounds to believe that one or more lawsuits will be filed for or against Health Net, (ii) Health Net may be the subject of governmental, regulatory or similar investigations and requests or demands for information from third parties, and (iii) Health Net may conduct internal investigations at its own prerogative (including investigations conducted by or on behalf of its Organization Effectiveness, Legal and/or Special Investigations business units). Upon any of the foregoing events occurring (for avoidance of doubt, these events do not include any legal proceeding directly between Health Net and Supplier, or their respective Affiliates), Supplier hereby agrees to fully cooperate with Health Net and its legal counsel, and to create and implement a process sufficient to comply, in a timely manner, with any requests from Health Net or its legal counsel to categorize, identify, view, preserve, extract, produce, filter, convert and and/or provide to Health Net or its designee (in the format reasonably requested by Health Net), any hard copy documents or electronically stored information or data of any type that is associated with the Services, that results from or reflects the Services, or that evidences or memorializes Supplier’s efforts on behalf of Health Net pursuant to this Agreement (hereinafter, the “Requested Information”). Requested Information may include: claims data, email data, home drive data, server data, common drive data, data stored in cloud repositories, data on smartphones or peripheral devices, and data stored with any third-parties on Supplier’s behalf. Requested Information may include any type of reports or other information received, created or collected as part of the Services, all information created by or for Health Net or Health Net’s employees, or at their request, and any information or “metadata,” associated with other types of Requested Information. Requested Information may include any type of information relating to the foregoing within Supplier’s possession, custody or control, including information entrusted to its employees or third parties, or housed in any type of repository or media whatsoever, such as servers, systems, applications, discs, equipment, tapes, or other locations. Supplier shall use best efforts to provide requested information in a timely manner to enable Health Net to meet regulatory and internal deadlines.

 

  (b) Supplier acknowledges and agrees that Supplier may, in some instances, be required to utilize or required to involve outside professionals to utilize forensic extraction methods and techniques to obtain Requested Information without alteration, to set-up a new or use an existing non-production environment to retrieve and provide Requested Information, and if requested by Health Net, Supplier shall provide access to such environment or Requested Information so that Health Net and/or its designee may access, view, download and extract the Requested Information, including reasonable access to third-party litigation support providers selected by Health Net to facilitate requests for Requested Information. Supplier shall maintain and support an access method for allowing such access and extractions, as determined by Health Net (e.g., SFTP connections, remote access, on-site access). Supplier will use its best efforts to provide all Requested Information within the time period specified by Health Net or its legal counsel, and, if such deadlines cannot be met, Supplier shall promptly notify Health Net of the reason and extent of any delay.

 

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  (c) Health Net shall direct any request under this Section 14.5 (Litigation and Investigation Requests) to the Supplier Account Executive. Upon Health Net’s request, Supplier shall promptly designate a Supplier attorney to work with Health Net and who can facilitate any Health Net request under this Section. In the event that Health Net is the target of a governmental inquiry or investigation, Health Net shall retain all responsibility for directly interacting with such governmental entity regarding such inquiry or investigation. Supplier shall comply with and follow all restrictions and requirements reasonably imposed by Health Net or its legal counsel to maintain the protections of the attorney-client privilege and attorney work-product doctrine for all efforts and communications connected with requests and efforts made under this section 14.5.

If requests for Requested Information do not comprise Services under this Agreement, and require additional time or resources to meet the specifications of Health Net or its legal counsel, then such requests shall be responded to through the Change Control Process, but Health Net shall have the right to direct that any such request constitutes an Emergency Change under such process requiring expedited handling and fulfillment.

 

14.6 Compliance with Data Privacy and Data Protection Laws, Regulations and Policies

 

  (a) In carrying out its activities under this Agreement, and without limiting Section 27.7 (Compliance with Laws), each Party will observe and comply with all applicable data privacy and data protection Laws. In addition, when accessing or handling any Health Net Data that contains personal identifying information, Supplier will comply with Health Net Policies that have been disclosed to Supplier relating to the use and disclosure of such information.

 

  (b) The Parties hereby reaffirm their agreement to the terms of the Business Associate Agreement between the Parties which is being executed on or about the Effective Date (“Business Associate Agreement”). The Business Associate Agreement is hereby incorporated into this Agreement by reference and made a part of this Agreement. In the event of any conflict between the terms of this Section 14 (Data Security and Protection), Section 21 (Confidentiality) and the terms and conditions of the Business Associate Agreement, the terms and conditions that are more protective of the Protected Health Information (as such term is defined in HIPAA) shall govern to the extent of that conflict.

 

14.7 Security Breach.

 

  (a) If Supplier becomes aware of (or if Health Net notifies Supplier of) any Security Breach (even if such Security Breach arises out of events or items that are not in the possession of or operated by (or for) or under the control of Supplier or a third party which receives Health Net Data (directly or indirectly) through Supplier, notwithstanding the limitations in the definition of Security Breach), Supplier shall:

 

  (i) notify Health Net’s Chief Information Security Officer (or his or her identified delegate) of such Security Breach in accordance with Section 14.3(f)(iii) and, thereafter, perform a root cause analysis thereon, the results of which shall be provided to Health Net;

 

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  (ii) investigate such Security Breach and report its findings to Health Net, including providing updates of such investigation as they occur and promptly responding to requests for information from Health Net;

 

  (iii) unless such investigation shows that a suspected or threatened Security Breach was unsuccessful, provide Health Net with a remediation plan, acceptable to Health Net in Health Net’s reasonable discretion, to address the Security Breach and which is designed to prevent any further similar incidents;

 

  (iv) remediate such Security Breach in accordance with such approved plan;

 

  (v) after consulting with Health Net’s Chief Privacy Officer, conduct a forensic investigation to determine what systems, data and information have been affected by such event, and provide Health Net with daily updates of the results of such investigation;

 

  (vi) cooperate with Health Net’s investigation of the Security Breach, including promptly providing any information that Supplier (or a Subcontractor) has with respect to the Security Breach; and

 

  (vii) at Health Net’s request, cooperate with any law enforcement or regulatory officials, credit reporting companies, and credit card associations investigating such Security Breach.

 

  (b) Where permitted by Law, Health Net shall, acting reasonably, make the final decision on notifying Health Net’s members, employees, suppliers and/or the general public of such Security Breach, and the implementation of the remediation plan.

 

  (c) With respect to such Security Breach:

 

  (i) Except to the extent that Supplier is able to demonstrate that the Security Breach was caused by Health Net’s negligence, willful misconduct or breach of this Agreement, Supplier shall be responsible at its own expense for performing the activities described in Section 14.7(a) and for all other costs and expenses incurred by Supplier (and its Subcontractors) in relation to the Security Breach;

 

  (ii) Supplier shall have Financial Responsibility for all costs and expenses incurred by Health Net (and Health Net’s Affiliates) in relation to the Security Breach, including Identity-Related Costs, except as provided in Section 14.7(c)(iii) ; and

 

  (iii) To the extent the Security Breach arises out of Health Net Data that was compromised (“Compromised Data”) due to any Health Net-provided technologies, Software, or other assets prior to the time that such Compromised Data was scheduled to be relocated to a Supplier-furnished data center as set forth in the Transition Documents for SOW#4 attached to the Transition Manual as Exhibit A-2 (Transition Description), Exhibit A-2-1( Transition Project Plan), and Exhibit A-2-3 (Transition ITO Plan (Phase 2 Implementation)) (as such documents are updated by the Parties pursuant to Section 13.3 (Transition Documents) and Section 1 of Schedule Z (Transition)), and provided the Security Breach was not attributable to (A) Supplier’s failure to adhere to the information, data and physical security practices and standards observed by Health Net and at

 

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the affected data center as of the BPaaS Services Commencement Date, or (B) Supplier’s acts, omissions, negligence, willful misconduct, breach of this Agreement or failure to take reasonable actions or employ industry best practices to protect the Health Net Data, Health Net Software or systems in question, then (x) Supplier shall not have Financial Responsibility for such Security Breach other than as provided in Section 14.7(c)(i), and (y) Supplier shall not have Financial Responsibility for remediating the Security Breach under Section 14.7(a)(iv).

 

  (d) Supplier shall reimburse Health Net on demand for all costs and expenses described in Sections 24.2(f)(x) and 24.2(f)(xi) relating to any Security Breach.

 

14.8 Import/Export Controls

 

  (a) The Parties acknowledge that certain software and technical data exchanged pursuant to this Agreement may be subject to import/export controls under the Laws of the United States and other countries. Neither Party will import, export or re-export any such items, any direct product of those items, or any technical data in violation of applicable import/export control Laws.

 

  (b) Each Party will be responsible for compliance with import/export control Laws with respect to any items it is deemed under such Laws to have imported or exported, including responsibility for preparing and filing all required documentation and obtaining all licenses, permits and authorizations required for compliance. Each Party will cooperate with the other Party in that Party’s efforts to comply with applicable import/export control Laws.

 

  (c) Supplier will include with copies of all Software provided to Supplier by Health Net’s U.S.-based personnel that Supplier will use outside of the United States documentation stating that “These commodities, technology or software were exported from the United States in accordance with Export Administration Regulations. Diversion or re-export contrary to U.S. law is prohibited.”

 

14.9 Compliance with Gramm-Leach-Bliley

 

  (a) GLB Act” means the Gramm-Leach-Bliley Act, 15 USC §6801 et. seq., and the implementing regulations and regulatory interpretations thereto, as amended from time to time. Supplier acknowledges that Health Net is subject to Title V of the GLB Act, pursuant to which Health Net is required to obtain certain undertakings from Supplier with regard to the privacy, use and protection of nonpublic personal financial information of Health Net’s (or of any Health Net Affiliate’s or Service Recipient’s) customers or prospective customers (“Health Net Non-public Data”). Therefore, notwithstanding anything to the contrary contained in this Agreement and in addition to (and not in substitution for) Supplier’s other obligations hereunder, Supplier agrees that:

 

  (b) it will not disclose or use any Health Net Non-public Data except to the extent necessary to carry out its obligations under this Agreement and for no other purpose;

 

  (i) it will not disclose Health Net Non-public Data to any third party, including, without limitation, its third party service providers without the prior consent of Health Net and an agreement in writing from the third party to use or disclose such Health Net Non-public Data only to the extent necessary to carry out Supplier obligations under this Agreement and for no other purposes; and

 

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  (ii) it will maintain, and will require all third parties approved under Section 7.7 (Subcontracting) to maintain, effective information security measures to protect Health Net Non-public Data from unauthorized disclosure or use; and it will provide Health Net with information regarding such security measures upon the reasonable request of Health Net and promptly provide Health Net with information regarding any failure of such security measures or any security breach related to Health Net Non-public Data.

 

  (c) The obligations set forth in this Section 14.9 (Compliance with Gramm-Leach-Bliley) will survive termination or expiration of this Agreement. For purposes of this Agreement, Health Net Non-public Data includes the nonpublic personal information (as defined in 15 USC §6809(4)) received by Supplier in connection with the performance of its obligations hereunder, including (i) an individual’s name, address, e-mail address, IP address, telephone number and/or social security number; (ii) the fact that an individual has a relationship with Health Net; and (iii) an individual’s account information. For the avoidance of doubt, Health Net Non-public Data does not include (A) information collected from Health Net employees (in their capacity as employees, and not as Health Net’s customers) by Supplier for the purpose of administering and providing the Services, and (B) nonpublic information collected from a source other than Health Net that has been obtained on a non-confidential basis and which is not subject to the GLB Act.

 

15. INTELLECTUAL PROPERTY RIGHTS

This Article 15 sets forth the Parties’ respective rights in Work Product and other materials provided or created pursuant to this Agreement. As between the Parties, the rights apply as set forth in this Article 15 whether the work in question is performed solely by Supplier Personnel or by Supplier Personnel working jointly with others.

 

15.1 Certain IP-related Definitions

 

  (a) Derivative Work” means a work of authorship or expressive creation (i) that includes more than a de-minimis amount of copyright-protected elements of a pre-existing work, or (ii) such work is incapable of being used without the pre-existing work or in conjunction with the pre-existing work, including a work in which a pre-existing work has been modified, enhanced, recast, transformed, or adapted.

 

  (b) Independent IP” of a party (including a third party) means any materials, methods, processes, and other forms of intellectual property that either (i) were created or acquired by or for the party on or prior to the Effective Date, or (ii) are subsequently created or acquired by or for the party outside the scope of and independent from this Agreement, and (iii) any Derivative Works of either of the foregoing. Supplier Independent IP includes the Acquired Seller Intellectual Property Rights as defined in the APA.

 

  (c) New Work” means any Material produced by Supplier Personnel specifically for Health Net in the course of performing the Services that is not a Derivative Work.

 

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15.2 Independent IP, Generally

 

  (a) The Parties agree that:

 

  (i) As between the Parties, each Party will have and retain all ownership of all right, title and interest, including Intellectual Property Rights, in and to its Independent IP, and will be entitled to seek Intellectual Property Rights protection for its Independent IP as it deems appropriate;

 

  (ii) a Party will not submit patent applications or otherwise seek to file for or obtain Intellectual Property Rights protection with respect to or based upon the other Party’s Independent IP without the other Party’s prior written consent, which may be withheld at the other Party’s sole discretion;

 

  (iii) a Party will not be permitted to use the other Party’s Independent IP except as otherwise expressly provided in this Agreement or in any other written agreement between the Parties;

 

  (iv) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN ANY OTHER WRITTEN AGREEMENT BETWEEN THE PARTIES, ANY RIGHTS OF USE OF A PARTY’S INDEPENDENT IP GRANTED IN THIS AGREEMENT ARE GRANTED ON AN ‘AS-IS, WHERE-IS’ BASIS WITHOUT EXPRESS OR IMPLIED WARRANTIES OF ANY KIND; and

 

  (v) If Health Net provides any of its Independent IP to Supplier for use in rendering the Services, Health Net hereby grants to Supplier a nonexclusive, non-transferable, worldwide, fully paid-up right and license during the Term and any Disengagement Period to Use such Independent IP solely to perform the Services, with the right to sublicense Approved Subcontractors to do the same on Supplier’s behalf, subject to any limitations or restrictions set forth in agreements between Health Net (or its Affiliate) and third party licensors of the Health Independent IP that are disclosed in writing, in advance by Health Net to Supplier. Supplier may not Use Health Net’s Independent IP for the benefit of any entities other than Health Net and Health Net’s Affiliates (and their respective Service Recipients under this Agreement) without the prior written consent of Health Net, which may be granted or withheld in Health Net’s discretion.

 

15.3 Rights in Deliverables

 

  (a) Deliverable” means any material that is produced by Supplier Personnel specifically for Health Net (or another Service Recipient) in the course of performing Services and is either (i) listed or described in an SOW (or Work Order, Project plan or any other document signed or agreed to in writing by the Parties) as a Deliverable, or (ii) actually delivered or otherwise required to be delivered to Health Net (or another Service Recipient) as an intended output of the Services. A Deliverable may be a one-off material resulting from performance of Project Services (e.g., a Software application) or, alternatively, a recurring form of material resulting from performance of BPaaS Services (e.g., a document containing processed Health Net Data or a periodic operational or management report).

 

  (b) Software Deliverable” means any Deliverable that is (or contains) Software.

 

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  (c) Except as otherwise expressly provided in a subsequent written agreement between the Parties, the Parties’ respective Intellectual Property Rights in Deliverables shall be as follows:

 

  (i) If the Deliverable is developed as part of an Accelerated Project, a BPaaS Roadmap Project a BPaaS Non-Discretionary Project, or any other type of Project under this Agreement that is not a BPaaS Discretionary Project, Supplier will be the owner of the Deliverable, and Supplier hereby grants to Health Net, during the Term and any Disengagement Period, a nonexclusive, world-wide, fully paid-up, non-transferable (except as part of a permitted assignment pursuant to Section 27.1 (Binding Nature and Assignment)) right and license for Health Net (or its Affiliate or another Service Recipient) to Use (or have Used on its behalf) the Deliverable solely in connection with Health Net’s (or its Affiliate’s or such other Service Recipient’s) receipt and use of the BPaaS Services, subject to any additional limitations that may be set forth in a written agreement between the Parties. Health Net license rights with respect to Software Deliverables owned by Supplier (including those developed as part of an Accelerated Project, a BPaaS Roadmap Project or a BPaaS Non-Discretionary Project) following the Term and any Disengagement Period shall be pursuant to the terms of Section 12.3 (Health Net Rights to Use Certain Software) of this Agreement and Section 4 of the BPaaS Supplemental Terms and Conditions for BPaaS Services.

 

  (ii) If the Deliverable is developed as part of a BPaaS Discretionary Project and consists solely of New Work (or does not contain any Independent IP of Supplier or a third party who has licensed Independent IP to Supplier), the Deliverable and all Intellectual Property Rights in and to the Deliverable will be owned by Health Net from the moment it is created, and the Deliverable will be deemed to be a ‘work made for hire’ for Health Net under applicable copyright Laws. To the extent that title and ownership rights in the Deliverable may not originally vest in Health Net as contemplated herein, Supplier hereby irrevocably assigns, transfers and conveys to Health Net all such right, title and interest without further consideration. Supplier agrees to execute such other documents or take such other actions as Health Net may reasonably request to file, record, perfect, and enforce Health Net’s Intellectual Property Rights in and to the Deliverable, as set forth herein, including obtaining any necessary assignments, consents, or waivers from individual authors, creators, or inventors.

 

  (iii)

If the Deliverable is developed as part of a BPaaS Discretionary Project and does contain some Independent IP of Supplier, Supplier will be the owner of the Deliverable (including any New Work incorporated into the Deliverable), and Supplier hereby grants to Health Net a nonexclusive, perpetual, irrevocable, fully paid-up, world-wide, transferable and sub-licensable (through multiple levels of sub-licensees) right and license to Use (or have Used on its behalf) such Deliverable, including the Supplier Independent IP incorporated in such Deliverable, including for the creation and use of Derivative Works, without any further consideration or duty of accounting to Supplier or any third party (a “Deliverables License”) provided, however, that if such Supplier Independent IP comprises Software, in no event shall such Supplier Independent IP be unbundled or separated from the applicable Deliverable or used as a stand-alone product or development tool. In addition, unless and except as expressly provided in the proviso contained in the following sentence or as Health Net otherwise expressly

 

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  agrees in a written agreement with Supplier, Supplier shall be restricted to using such Deliverable solely to provide the Services under this Agreement (each such Deliverable, a “Restricted Use Deliverable”). Health Net shall be obligated to compensate Supplier separately for providing ongoing maintenance and support services for any Restricted Use Deliverable, in a per annum amount equal to fifteen percent (15%) of Supplier’s charges to Health Net for developing the Restricted Use Deliverable, or such other amount as may be agreed in writing between the Parties; provided, however, that Health Net shall have the right to provide written notice to Supplier at any time that Health Net no longer requires that such Deliverable be a Restricted Use Deliverable, in which event Supplier shall thereafter provide maintenance and support for such Restricted Use Deliverable at no additional charge to Health Net for the remainder of the Term and any Disengagement Period.

 

  (d) Any representations and warranties of Supplier that are applicable to a Deliverable shall apply equally to any Independent IP of Supplier or a third party incorporated into such Deliverable.

 

  (e) If the Deliverable is owned by Health Net or is a Restricted Use Deliverable, Supplier will mark the Deliverable with such proprietary rights and confidentiality legend(s) as Supplier may be reasonably instructed by Health Net to use.

 

  (f) If Supplier desires to use any Deliverable that is owned by Health Net or is a Restricted Use Deliverable, or a Derivative Work of thereof, in connection with providing services to another customer, Supplier shall notify Health Net of its proposal. If Health Net consents to Supplier’s proposed use of such Deliverable, Supplier may use such Deliverable to perform services for other customers in the manner and on the terms and conditions set forth in Health Net’s written consent.

 

15.4 Incorporation of Third-Party Independent IP in a Deliverable

 

  (a) Supplier Personnel shall not incorporate any Independent IP of a third party into a Deliverable without first notifying Health Net of its nature and obtaining Health Net’s written consent to do so unless Supplier has all necessary rights to grant Health Net a Deliverables License in and to such third party Independent IP as set forth herein. If Supplier does not have all such rights (or if Supplier is unwilling to grant Health Net a Deliverables License in and to such Supplier Independent IP), then prior to incorporating the third party Independent IP into the Deliverable, Supplier shall enter into with Health Net, or procure for Health Net or assist Health Net in procuring, a license to Use the incorporated third party Independent IP on terms that are acceptable to Health Net.

 

  (b) If Supplier incorporates any Independent IP of a third party into a Deliverable without first notifying Health Net of its nature and obtaining for Health Net, or confirming that Health Net has obtained, the necessary rights of use as provided in Section 15.4(a), such failure shall constitute a breach of this Agreement. In such event, by way of endeavoring to mitigate Health Net’s damages resulting from the failure, Supplier shall, at Supplier’s cost and expense: (i) use all Commercially Reasonable Efforts to promptly secure for Health Net a license comparable to a Deliverables License for the incorporated third party Independent IP, or (ii) if this cannot be accomplished on commercially reasonable terms with Commercially Reasonable Efforts, replace or modify the Deliverable to remove the incorporated third party Independent IP without degrading the functionality or performance of the Deliverable and without adversely affecting Supplier’s performance of the Services, and Supplier shall bear any costs of implementing the replaced or modified Deliverable.

 

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15.5 Work Products

 

  (a) Work Product” means any material produced by Supplier Personnel in the course of performing the Services that is not a Deliverable.

 

  (b) Supplier will own all Intellectual Property Rights in and to all Work Products; provided, however, that if a Work Product contains any Health Net Data or other Health Net material, Health Net will retain all of its Intellectual Property Rights in and to such Health Net material (and Derivative Works thereof) contained in the Work Product. Health Net hereby grants to Supplier a nonexclusive, non-transferable, worldwide, fully paid-up right and license during the Term and any Disengagement Period to Use the subject Health Net materials solely to perform the Services, with the right to sublicense Approved Subcontractors to do the same on Supplier’s behalf.

 

  (c) If a Work Product is (or incorporates) Software, Health Net’s rights with respect to such Software shall be as set forth in Section 12.3 (Health Net Rights to Certain Software).

 

  (d) If a non-Software Work Product is necessary or useful for Health Net’s (or another Service Recipient’s) use of a Deliverable for its intended purpose or receipt and use of the Services, then, unless Health Net agrees to enter and does enter into another form of license with Supplier with respect to the Work Product, Supplier hereby grants to Health Net, during the Term and any Disengagement Period, a nonexclusive, world-wide, fully paid-up, non-transferable (except as part of a permitted assignment pursuant to Section 27.1 (Binding Nature and Assignment)) right and license for Health Net or another Service Recipient to Use (or have Used on its behalf) the Work Product as necessary or useful for Health Net’s (or such other Service Recipient’s) use of the Deliverable or receipt and use of the Services.

 

15.6 Delivery of Deliverables and Other Materials

Upon expiration or termination of this Agreement or any SOW or Services, to the extent Supplier has not already done so, Supplier will turn over to Health Net all Deliverables and other materials owned by Health Net or to which Health Net has been granted (or is to be granted) license rights pursuant to this Agreement.

 

15.7 Use of Material Subject to Open Source Licenses

Without Health Net’s prior written approval, which Health Net may grant or withhold in its sole discretion, no Deliverable will incorporate, link to or call upon any components subject to an Open Source License (including the GNU General Public License). The provisions of this Section 15.7 (Use of Material Subject to Open Source Licenses) shall not apply to any Deliverable that forms part of the ABS Platform.

 

15.8 Intellectual Property Rights Agreements with Supplier Personnel

Supplier is responsible for having in place with all Supplier Personnel (either directly or indirectly through their respective employers) such agreements respecting Intellectual Property Rights as are necessary for Supplier to fulfill its obligations under this Section 15 (Intellectual Property Rights).

 

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15.9 Bankruptcy

All licenses and rights of Use granted under or pursuant to this Agreement shall be deemed to be, for the purposes of Section 365(n) of the United States Bankruptcy Code (the “Bankruptcy Code”), licenses to rights in “intellectual property” as defined under the Bankruptcy Code. Accordingly, the licensee of such rights shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code. Upon the commencement of bankruptcy proceedings by or against either Party under the Bankruptcy Code, the other Party shall be entitled to retain all of its license rights and Use rights granted under this Agreement.

15.10 Mental Impressions

 

  (a) Mental Impressions” means general ideas, concepts, know-how and techniques relating to data processing and computer programming that are learned and retained in the unaided memory of a Party’s and or any of its Affiliates’ personnel involved in performance of this Agreement who have had access to Confidential Information or materials of the other Party and its Affiliates without deliberately memorizing them for purposes of reuse.

 

  (b) Each Party and its Affiliates may use the Mental Impressions of their personnel in their business activities provided that in doing so they do not disclose Confidential Information of the other Party in violation of Section 21 (Confidentiality) or misappropriate or infringe the Intellectual Property Rights of the other Party, its Affiliates, or third parties who have licensed or provided materials to the other Party or its Affiliates.

 

16. TERMINATION

 

16.1 Termination By Health Net

 

  (a) Termination for Cause. If Supplier (i) commits a material breach of this Agreement or any SOW and fails to cure such breach within thirty (30) days after receiving notice of the breach from Health Net, or (ii) commits multiple breaches of this Agreement or any SOW, whether material or non-material, that collectively constitute a material breach of a material provision of this Agreement or any Related SOW(s), (iii) fails to close on the transaction contemplated by the APA in breach thereof, or (iv) commits a material breach of its obligations under Section 3.6 of Schedule E (Transitioned Employees), then Health Net may, by giving written notice to Supplier, terminate this Agreement (in whole or in part) or any Related SOW(s) (in whole or in part) for cause as of a date specified in the notice of termination. Any termination by Health Net shall not constitute an election of remedies and shall be without prejudice as to Health Net’s other rights and remedies under this Agreement or at law or in equity.

 

  (b) Termination for Convenience. Health Net may terminate this Agreement (in whole or in part) or any SOW (in whole or in part) at any time for convenience (i.e., for any reason or no reason) by giving Supplier at least three (3) months’ prior written notice specifying the terminated Services and designating the termination date.

 

  (c) Termination for Certain Service Level Failures. If (i) the amount of Service Level Credits (excluding those associated with Non-BPaaS IT Services) that Supplier is obligated to credit to Health Net equals the entire BPaaS Amount at Risk for *** or more months in any rolling *** continuous month period, or (ii) the amount of Service Level Credits relating to the Non-BPaaS IT Services that Supplier is obligated to credit to Health Net equals the

 

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entire Non-BPaaS Amount at Risk for *** or more months in any rolling *** continuous month period, then Health Net may, by giving notice to Supplier, terminate this Agreement (in whole or in part) or any Related SOW(s) (in whole or in part), as of a date specified in the notice of termination. The foregoing rights to terminate shall not be construed as precluding Health Net from claiming that any other Service Level Failure (or combination thereof) is a material breach of this Agreement and to exercise any available remedies in connection with such material breach.

 

  (d) Termination Following a Change of Control of Health Net. “Change of Control of Health Net” means an announcement by Health Net (i) that any other entity, person or “group” (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended) will acquire Control, of all or substantially all of the assets or customers, of Health Net (or any parent company of Health Net), whether directly or indirectly, in a single transaction or series of related transactions, or (ii) that Health Net (or any parent company of Health Net) will consolidate with, or be merged with or into, another entity, or will sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its assets or customers to another person(s) or entity(ies). At any time within one year after the effective date of the consummation of the transaction described in (i) or (ii) above, Health Net may terminate this Agreement (in whole or in part) or any Related SOW(s) (in whole or in part) by giving Supplier at least ninety (90) days prior written notice specifying the terminated Services and designating the termination date.

 

  (e) Termination Following a Change of Control of Supplier. A “Change of Control of Supplier” means an announcement by Supplier (A) that any other entity, person or “group” (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended) that is a health plan, or offers a health plan to its customers, will acquire Control, of all or substantially all of the assets, of Supplier (or any parent company of Supplier), whether directly or indirectly, in a single transaction or series of related transactions, or (B) that Supplier (or any parent company of Supplier) will consolidate with, or be merged with or into, another such entity, or will sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its assets to another such person(s) or entity(ies). At any time within *** after the effective date of the consummation of the transaction described in subsections (i) or (ii) above, Health Net may terminate this Agreement (in whole) or in part (provided that such in part termination is limited to termination of all BPaaS Services or all Non-BPaaS IT Services) by giving Supplier at least ninety (90) days’ prior written notice specifying the terminated Services and designating the termination date.

 

  (f) Termination in the Event of a Force Majeure. Health Net may terminate this Agreement (in whole or in part) or any Related SOW(s) (in whole or in part) as provided in Section 24.3 (Force Majeure).

 

  (g) Termination Due to Change in Law. Health Net may terminate this Agreement (in whole or in part) or any Related SOW(s) (in whole or in part) by giving Supplier at least ninety (90) days’ prior written notice specifying the terminated Services and designating the termination date if a Law enacted after the Effective Date (i) precludes or substantially restricts Health Net from using or receiving Services or (ii) substantially increases Health Net’s cost of using or receiving Services.

 

  (h) [Reserved.]

 

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  (i) Termination Due To Adverse Changes in Supplier’s Financial Circumstances. If an Adverse Change in Supplier’s Financial Circumstances occurs then Health Net may terminate this Agreement by giving written notice to Supplier designating the termination date. Supplier shall notify Health Net as soon as possible after becoming aware of an actual or likely Adverse Change in Supplier’s Financial Circumstances. Supplier shall (i) endeavor to certify to Health Net at least annually, and (ii) otherwise certify within ten (10) days of a request by Health Net, that an Adverse Change in Supplier’s Financial Circumstances has not occurred as of the date of certification or, to the best of Supplier’s knowledge, is not likely to occur within twenty (24) months after the date of certification.

 

  (j) Termination Relating to Customer Consents or Regulatory Approval. Health Net may terminate this Agreement (in whole or in part) or any SOW (in whole or in part), as provided in Section 4.3 (Regulatory and Customer Approvals).

 

  (k) Termination if Supplier Becomes a Competitor of Health Net. If Supplier develops or acquires a business line or service offering that is a health plan or offers health plans to its customers and is competitive with Health Net’s business, Health Net may terminate this Agreement (in whole or in part) or any SOW(s) (in whole or in part) by giving Supplier at least ninety (90) days’ prior written notice specifying the terminated Services and designating the termination date; provided however, that this Section 16.1(k) shall not be considered to apply to Supplier’s provision of Services to a third party that competes with Health Net’s business.

 

  (l) Termination Relating to Supplier’s Liability Cap. If Supplier owes or has paid to Health Net damages in an amount greater than *** of the Liability Cap evidenced by one or more of the following:

 

  (i) an agreement by Supplier that it owes Health Net such damages,

 

  (ii) a settlement agreed to by the Parties, or

 

  (iii) an order from a court of competent jurisdiction or an arbitration award, and Supplier does not agree to refresh the Liability Cap to its original amount (i.e., meaning that none of such damages incurred prior to the date of Health Net’s request for Supplier to refresh the Liability Cap shall, after such refresh, be considered to apply against the refreshed Liability Cap) within thirty (30) days after a Health Net written request to Supplier to refresh the Liability Cap, then Health Net may terminate this Agreement (in whole or in part) or any Related SOW(s) (in whole or in part) upon not less than thirty (30) days’ prior written notice to Supplier.

 

  (m) Termination Relating to Business Associate Agreement. Health Net may terminate this Agreement as provided in the Business Associate Agreement.

 

  (n) Pre-BPaaS Services Commencement Date Termination. Health Net shall have the right to terminate this Agreement prior to the BPaaS Services Commencement Date by sending written notice to Supplier and paying to Supplier the Breakup Fee.

 

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16.2 Termination Related Payments.

 

  (a) Health Net and/or Supplier, as applicable, may exercise its rights to terminate under this Article 16 or Section 4.3(d)(iii) without charge, except that, subject to Section 16.2(a)(iii), on the effective date of any termination under this Article 16 or Section 4.3, Health Net shall pay to Supplier:

 

  (i) the Break-Up Fee (and no other amounts) if the termination of the entire Agreement is prior to the BPaaS Services Commencement Date; or

 

  (ii) the following if the termination is on or after the BPaaS Services Commencement Date:

 

  (A) outstanding charges (if any) for all terminated Services completed in accordance with the Agreement through to the effective date of termination (including for work in progress);

 

  (B) the applicable termination fee calculated pursuant to Section 18 of Schedule C (Charges); and

 

  (C) any due and unpaid payments relating to the applicable Minimum Revenue Commitment fee through to the effective date of termination, calculated pursuant to Section 17 of Schedule C (Charges);

provided that nothing set forth herein shall limit Health Net’s right to dispute Charges under Section 10.7.

 

  (iii) For any termination under Sections 16.1(a), 16.1(c), 16.1(l) or 16.1(m),

 

  (A) Health Net shall have the right to offset against the amounts owed under Section 16.2(a)(ii)(A), any damages that can be reasonably quantified as having been incurred by Health Net and arising directly out of the event(s) giving rise to the termination; and

 

  (B) Health Net shall pay any remaining amounts owed to Supplier (if any) under Section 16.2(a) concurrently with the final resolution of Health Net’s underlying damage(s) claims, rather than on the effective date of termination.

 

  (b) Nothing set forth in this Section 16.2 shall limit Health Net’s right to make a claim for damages or to exercise any other remedies available under this Agreement, at law or at in equity.

 

  (c) Termination Not Supported By Competent Authority. If a purported termination by Health Net under any of Sections 16.1(a) or 16.1(c) – 16.1(n) is found by a competent authority not to be a proper termination under such section, then such termination will be deemed to be a termination for convenience by Health Net under Section 16.1(b).

 

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16.3 Termination By Supplier

If Health Net fails to pay Supplier when due material undisputed charges totaling at least *** *** Charges under this Agreement, and fails to make such payment within sixty (60) days after the date Health Net receives notice of non-payment from Supplier, then Supplier may terminate this Agreement by sending written notice to Health Net, in which event this Agreement shall terminate as of the date specified in the notice of termination. Following Supplier’s termination pursuant to this Section 16.3 (Termination By Supplier), Health Net shall pay to Supplier all fees and charges set forth in Section 16.2(a)(ii).

 

16.4 Extension of Termination/Expiration Date

Health Net may extend the effective date of any termination/expiration of this Agreement or a SOW one or more times as it elects in its discretion. However, the total of all such extensions for any single termination/expiration may not exceed one hundred eighty (180) days following the effective date of termination/expiration in place immediately prior to the initial extension under this Section 16.4. If any extension notice provided to Supplier within thirty (30) days of the then-scheduled date of termination/expiration would cause Supplier to incur Out-of-Pocket Expenses, Supplier may so notify Health Net. In that case, the extension will be subject to Health Net agreeing to reimburse Supplier for its Out-of-Pocket Expenses incurred as a result of the extension notice being provided within thirty (30) days of the then-scheduled date of termination/expiration. If Supplier terminated pursuant to Section 16.3 (Termination By Supplier), then Health Net will pay for any such extension Services thirty (30) days in advance based on projected usage, with the following month’s invoice showing a true up or true down to account for actuals.

 

16.5 Partial Termination

 

  (a) Partial Terminations by Health Net. With respect to any partial terminations described herein, included those set forth in this Article 16 or Section 4.3, Health Net may only terminate by Line of Business or by Service Tower. All other purported partial terminations hereunder will be considered a reduction in Services unless otherwise agreed to by the Parties.

 

  (b) If this Agreement or any SOW is terminated in part:

 

  (i) the portions of this Agreement (or the applicable SOW) not terminated will continue in force according to the terms of this Agreement and the applicable SOW;

 

  (ii) if this Agreement (or the applicable SOW) does not otherwise specify the basis for determining Supplier’s charges for the continuing Services that are not terminated, the charges payable under this Agreement (or the applicable SOW) will be equitably adjusted to reflect the Services that have been terminated, taking into account any increased per-unit charges for remaining Services;

 

  (iii) the amounts (if any) payable by Health Net pursuant to Section 16.2 in respect of such termination will be, where applicable, equitably adjusted to reflect the portion of the Services being terminated and any changes in Supplier’s costs; and

 

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  (iv) the Agreement documents specifying the termination-related payments for which Health Net is responsible will be revised to reflect the amounts paid by Health Net pursuant to Section 16.2.

 

  (c) For clarity, Health Net’s reduction in volume of a particular Service (e.g., a reduction in the number of Claims or Members) shall not constitute a termination in part pursuant to Section 16.1 unless Health Net provides written notice to Supplier terminating this Agreement in part or an SOW in part pursuant to Section 16.1.

 

16.6 Disengagement Assistance

 

  (a) General.

 

  (i) During each Disengagement Assistance Period, Supplier shall provide Disengagement Assistance to Health Net, or at Health Net’s request to Health Net’s designee. For the avoidance of doubt, there may be more than one Disengagement Assistance Period for any Affected Services.

 

  (ii) The Parties further agree that:

 

  (A) Health Net’s request for (and Supplier’s provision of) Disengagement Assistance may be in the context of any reduction or removal of a portion of the Services (or volumes of Services) or Functions that is in accordance with this Agreement or any SOW, although this Agreement or the applicable SOW is not itself expiring or being terminated; and

 

  (B) Disengagement Services provided by Supplier shall be subject to the other applicable provisions of this Agreement.

 

  (b) Except as may be permitted by Section 16.6(c), the quality of Services (including the Affected Services) provided by Supplier, and Supplier’s performance of the Services, will not be materially degraded during the period Supplier is providing Disengagement Assistance. Supplier shall not (i) make any changes to the number of the Supplier Personnel providing the Services during the applicable Disengagement Assistance Period, or (ii) reassign any Supplier Personnel away from performing Services under this Agreement during the applicable Disengagement Assistance Period, in each case except as otherwise permitted by this Agreement or set forth in any disengagement plan mutually agreed to by the Parties.

 

  (c) Except to the extent permitted by this Section 16.6(c), Supplier shall provide Disengagement Assistance utilizing Supplier Personnel then being regularly utilized to provide the Services (“Existing Supplier Personnel”).

 

  (i) If Supplier believes in good faith that providing Disengagement Assistance utilizing Existing Supplier Personnel will prevent Supplier from meeting the Service Levels or otherwise complying with other obligations under this Agreement, Supplier shall provide written notice to such effect to Health Net, describing the circumstances in which the provision of such Disengagement Assistance by some or all Existing Supplier Personnel would prevent Supplier from meeting Service Levels or comply with its obligations under this Agreement.

 

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  (ii) Upon receipt of such notice, Health Net may (in its sole discretion), elect to either:

 

  (A) Permit Supplier to utilize personnel in addition to the Existing Supplier Personnel to provide the Disengagement Assistance, or

 

  (B) Waive the Service Level Credits and any other remedy for failure to meet the applicable Service Levels and other affected obligations of Supplier, in which case Supplier shall only utilize the Existing Supplier Personnel to provide the Disengagement Assistance, and shall nonetheless use good faith efforts to continue to meet the Service Levels and perform in accordance with its obligations under this Agreement.

 

  (d) Charges for Disengagement Assistance. Charges for Disengagement Services shall be as follows:

 

  (i) For Disengagement Assistance for which there is a predetermined charge in Schedule C (Charges) (e.g., a charge to maintain and support a server), such pre-determined charge in the applicable SOW shall apply.

 

  (ii) For Disengagement Assistance for which (1) there are no predetermined charges in Schedule C (Charges) (i.e., for assistance that is not part of the routine Services) and (2) Supplier is permitted under Section 16.6(c) to utilize (and does in fact utilize) personnel in addition to the Existing Supplier Personnel to provide such Disengagement Assistance, then the Services performed by such additional Supplier Personnel will be chargeable on a time and material basis pursuant to Section 16.1(b) of Schedule C (Charges).

 

  (iii) If Supplier terminates for non-payment by Health Net under Section 16.3, Supplier shall have the right to request payment of the charges for the Disengagement Assistance monthly, in advance.

 

16.7 Survival

Any provision of this Agreement that contemplates or governs performance or observance subsequent to termination or expiration of this Agreement will survive the expiration or termination of this Agreement for any reason, including the following Sections:

 

  (a) Article 2 (Definitions);

 

  (b) Article 10 (Invoicing and Payment);

 

  (c) Section 12.3 (Health Net Rights to Certain Software);

 

  (d) Article 15 (Intellectual Property Rights);

 

  (e) Section 16.6 (Disengagement Assistance);

 

  (f) Section 18.6 (Records Retention);

 

  (g) Section 19.4 (Deliverable);

 

  (h) Section 19.7 (Non-Infringement);

 

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  (i) Section 19.9 (Disabling Code);

 

  (j) Article 21 (Confidentiality);

 

  (k) Article 23 (Indemnification);

 

  (l) Article 24 (Liability);

 

  (m) Article 25 (Rules of Construction);

 

  (n) Section Sections 4 and 5 of Annex 1 (Supplemental Terms and Conditions for BPaaS Services); and

 

  (o) Software Escrow Agreement.

 

16.8 Bid Assistance

 

  (a) In the process of deciding whether to undertake or allow any cessation of Services, or any termination, expiration or renewal of this Agreement (or a SOW), in whole or in part, Health Net may consider or seek offers for performance of services similar to the Services. As and when reasonably requested by Health Net for use in any such process, Supplier will provide to Health Net such information and other cooperation regarding performance of the Services as would be reasonably necessary to enable Health Net to prepare a request for proposal relating to some or all of such services, and for a third party to conduct due diligence and prepare an informed, non-qualified offer for such services.

 

  (b) Without limiting the generality of Section 16.8(a), the types of information and level of cooperation to be provided by Supplier pursuant to this Section 16.8 will be no less than those initially provided by Health Net to Supplier prior to the Effective Date, and shall include the following information which Health Net may distribute to third-party bidders in a request for proposal(s), request for information, specification, or any other solicitation relating to the Services and as necessary to support any related due diligence activities:

 

  (i) General organization charts showing the overall structure of Supplier’s organization supporting Health Net, and a description of the roles and responsibilities of the various functions described in such organization charts;

 

  (ii) General organization charts showing the overall structure of the organization supporting the Services and a description of the roles and responsibilities of the various Functions described in such organization charts;

 

  (iii) The number of personnel at each location used to provide Services classified by job title, skill level, and experience;

 

  (iv) Generic descriptions of the functions and classifications of the personnel used to provide the Services;

 

  (v) New training materials, policies and procedures, work instructions, and other written Deliverables created as a result of the Services;

 

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  (vi) First order descriptions of Health Net’s IT infrastructure environment, including a listing of major infrastructure components and locations;

 

  (vii) Up-to-date Service Level performance histories, asset inventories (including Equipment and Software) with current book values, third party contracts, and (where possible) then-current work volumes and general information relating to projects underway; and

 

  (viii) Detailed network topographies.

 

17. GOVERNANCE AND MANAGEMENT

 

17.1 Contract Governance Structure and Processes

 

  (a) Supplier acknowledges that it is a key business requirement of Health Net that Supplier provide the Services in a consistent, integrated manner. Schedule G (Governance) describes the Contract Governance (as defined therein) and the related framework and processes to manage the relationship between the Parties and Supplier’s performance under this Agreement.

 

  (b) Notwithstanding anything set forth in this Agreement to the contrary, any term in this Agreement that states that a matter shall be referred to or resolved in accordance with Schedule G (Governance) shall not affect either Party’s right to escalate such matter to the dispute resolution provisions in Article 26.

 

17.2 Procedures Manual

 

  (a) The “Procedures Manual” is a document (or set of documents) to be prepared by Supplier describing how Supplier will perform and deliver the Services under this Agreement, the Equipment and Software used, and the documentation (e.g., operations manuals, user guides, specifications) that provide further details of the activities. The Procedures Manual will:

 

  (i) describe the activities Supplier shall undertake in order to provide the Services, including those direction, supervision, monitoring, staffing, reporting, planning and oversight activities normally undertaken to provide services of the type Supplier is to provide under this Agreement;

 

  (ii) include Supplier’s escalation procedures and the other standards and procedures of Supplier pertinent to Health Net’s interactions with Supplier in obtaining the Services; and

 

  (iii) include such other information as would be reasonably necessary to an Auditor when performing audits as permitted by this Agreement.

The Procedures Manual shall describe the aforementioned information in sufficient detail so as to permit a reader to understand how the Services are being provided. The table of contents for the Procedures Manual is set forth in Schedule S (Procedures Manual TOC) .

 

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  (b) Working in consultation with Health Net, Supplier will deliver to Health Net a detailed outline of the Procedures Manual describing the Services to be transitioned from Health Net to Supplier within ninety (90) days after the Effective Date. Health Net may review the draft Procedures Manual to confirm that it is sufficiently comprehensive to enable Health Net to understand how the Services are being provided. In the event Health Net identifies any deficiencies, Supplier will address such deficiencies and will finalize the Procedures Manual with respect to each wave, within one hundred eighty (180) days after the occurrence of such wave. The final Procedures Manual will be subject to the approval of Health Net for the limited purposes described above.

 

  (c) The Procedures Manual will be considered an operational document, which Supplier shall revise and periodically update to reflect changes in the operations or procedures described in it. Updates of the Procedures Manual will be provided to Health Net for review, comment and approval, which approval shall be for the limited purposes described in Section 17.2(b).

 

  (d) Supplier will perform the Services in accordance with the most recent Procedures Manual. In the event of a conflict between the provisions of this Agreement and the Procedures Manual, the provisions of this Agreement will control.

 

  (e) Notwithstanding anything to the contrary in Article 15 (Intellectual Property Rights), Health Net and its Affiliates may retain and Use the Procedures Manual in their businesses and for their benefit both during the Term and following the expiration or termination of this Agreement for any reason. Subject to appropriate non-disclosure agreements for the limited purpose of protecting any Independent IP of Supplier incorporated into the Procedures Manual, Health Net and its Affiliates may permit any of their other service providers to use the Procedures Manual during and after the Term, but solely in connection with their provision of services for Health Net and its Affiliates.

 

17.3 Technology Plans

Supplier will update Health Net’s annual technology plan in accordance with the provisions of this Section 17.3 (Technology Plan) (the Technology Plan). Each Technology Plan updated by Supplier will include a review and assessment of the immediately preceding Technology Plan. The Technology Plan will consist of a three-year plan and an annual implementation plan as described below.

 

  (a) Contents of the Technology Plan.

 

  (i) The Technology Plan will include a comprehensive assessment and strategic analysis of Health Net’s then-current technology environments that are in-scope hereunder for the next three (3) years, including an assessment of the appropriate direction for Health Net’s systems and services in light of Health Net’s business priorities and strategies and competitive market forces (to the extent such business information is available or provided to Supplier). The Technology Plan will include a specific identification of proposed Software and Equipment strategies and direction, a cost projection, a costs-vs.-benefits analysis of any proposed Changes, a description of the types of personnel skills and abilities needed to respond to any recommended Changes or upgrades in technology, a general plan and a projected time schedule for developing and achieving the recommendations made, and references to appropriate operating platforms that support Service Level requirements, exploit industry trends in production capabilities and provide potential price-performance improvement opportunities.

 

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  (ii) As necessary to support the overall objectives and directions of the three (3)-year plan, the annual implementation plan will provide specific guidance as to the information services requirements, projects and plans for the upcoming year, including details on operations, maintenance backlog and development activities. The annual implementation plan will include a summary review of Supplier’s performance of the Services in the year then concluding, and will provide updates and revisions of the long-term plan as appropriate. Supplier will prepare an annual implementation plan for each year of the Term.

 

  (b) Process for Developing the Technology Plan.

 

  (i) As part of the process of preparing the annual implementation plan, (A) Health Net will inform Supplier of its strategic direction, (B) the Parties will mutually agree on the content of the Technology Plan, and (C) the Parties will review the overall operation of this Agreement to ensure that the Services continue to be aligned with Health Net’s strategic business and IT requirements.

 

  (ii) Supplier will submit for Health Net’s review and approval a draft Technology Plan that reflects the content agreed to pursuant to Section 17.3(b)(i). Supplier will submit the final Technology Plan to Health Net within fifteen (15) days after receiving Health Net’s comments on the draft. Supplier will submit the draft of the Technology Plan within nine (9) months after the Effective Date.

The schedule for developing and delivering each Technology Plan will be coordinated to support Health Net’s annual business planning cycle. Supplier will update the Technology Plan during the year as necessary to reflect changes to Health Net’s and its Affiliates’ businesses that materially affect the validity of the then-current Technology Plan. Supplier will recommend modifications to the Technology Plan as it deems appropriate, and will revise the Technology Plan as requested or approved by Health Net.

 

17.4 Action Plans and Step In Rights

 

  (a) Triggers for an Action Plan. If Supplier fails to perform any material or critically important Function or material portion thereof for which it is responsible in accordance with the requirements of this Agreement or the applicable SOW, Supplier shall perform a root cause analysis to determine the underlying cause of such failure to perform, and Health Net may request an action plan from Supplier (the “Action Plan”). If Health Net requests an Action Plan, Supplier will prepare and deliver, at Supplier’s expense an Action Plan for Health Net’s review and approval within five (5) business days after receiving the request, unless a communication from a Regulator requires an earlier date, in which case Supplier will use its best efforts to accelerate the production of the plan.

 

  (b) Contents of Action Plan. Each Action Plan must be submitted using a Health Net-provided corrective action plan template (or other Health Net-approved format). Each Action Plan must specify in detail reasonably satisfactory to Health Net:

 

  (i) a description of the problem or problems (each, an “Underlying Problem”) or the process for identifying the Underlying Problem(s) that caused the failure that lead to Health Net’s request for an Action Plan;

 

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  (ii) where remedy of the Underlying Problem is possible, the actions that will be implemented by Supplier to effect that remedy;

 

  (iii) the actions that will be implemented by Supplier to prevent the same or a substantially similar Underlying Problem from occurring in the future;

 

  (iv) a timeline for the implementation of the Action Plan; and

 

  (v) any other content that may reasonably be requested by Health Net.

 

  (c) Health Net’s Response to Draft Action Plan.

 

  (i) After receiving the draft Action Plan, Health Net may give Supplier notice that it approves the draft Action Plan or comment on the draft Action Plan, in which case Supplier must (i) at the reasonable request of Health Net, meet at Supplier’s sole expense to discuss Health Net’s comments; and (ii) within two (2) Business Days (or such longer period as Health Net may set in writing) after the meeting, or receipt of Health Net’s comments where no meeting is required by Health Net (unless as otherwise agreed by the Parties), prepare at Supplier’s sole expense a revised Action Plan addressing Health Net’s comments and submit it to Health Net for its approval.

 

  (ii) This Section 17.4(c) applies to any proposed Action Plan until it has been approved by Health Net.

 

  (d) Implementation of Action Plan. Supplier will only implement an Action Plan if Health Net has approved it and in the form approved by Health Net.

 

  (e) Exercise of Step In Rights.

 

  (i) In the event:

 

  (A) Supplier fails to comply in a timely manner with Supplier’s obligations regarding the creation or implementation of an Action Plan, or

 

  (B) the implementation of the Action Plan does not and will not (within a reasonable period of time) result in the resolution of the Underlying Problem and the prevention of the same or a substantially similar Underlying Problem from occurring in the future; or

 

  (C) an event (or multiple events) has occurred that Health Net reasonably believes could lead to the right for Health Net to terminate the Agreement (in whole or in part) or any SOW (in whole or in part), then

Health Net may by giving written notice to Supplier have Health Net personnel and/or contractors retained by Health Network along-side Supplier personnel to assist Supplier in resolving the Underlying Problem and preventing its recurrence (a “Step In”). Health Net’s Step In rights shall include the right to access the Health Net Colocation Space and Supplier shall facilitate such access with the Colocation Providers.

 

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  (ii) If Health Net Steps In, Supplier must cooperate fully with Health Net and its personnel and will provide, at no additional charge to Health Net, all assistance reasonably required by Health Net as soon as possible, including providing all reasonable access to Supplier Personnel and all relevant Equipment, premises and Software under Supplier’s control to facilitate the purpose of the Step In.

 

  (iii) Health Net’s right to Step In will end when Supplier demonstrates to Health Net’s reasonable satisfaction that Supplier has resolved the Underlying Problem and Supplier is capable of providing the affected Service in accordance with the requirements of this Agreement and the affected SOW.

 

  (iv) Supplier must reimburse Health Net for its out-of-pocket expenses incurred by Health Net in the event Health Net exercises its right to Step In for up to *** months.

 

  (v) For the avoidance of doubt, Health Net’s election to Step In:

 

  (A) does not act to relieve Supplier of its obligations under this Agreement; and

 

  (B) shall not be construed as limiting any rights and remedies Health Net may have under this Agreement, or at law or equity, in connection with any Underlying Problem, the resulting failure(s) by Supplier to perform in accordance with the Agreement.

 

17.5 Change Control

 

  (a) Change” means any addition to, modification or removal of any aspect of the Services “Change Control Process” means the written procedure set forth in Schedule H (Change Control Process) for considering, analyzing, approving and carrying out Changes, which is designed to ensure that only desirable Changes are made and that Changes made by or on behalf of Supplier are carried out in a controlled manner with minimal disruption to the Services and Service Recipients’ business operations.

 

  (b) Except as otherwise expressly provided in Schedule A (Services) or in an SOW, Health Net has retained responsibility for establishing the standards (including security standards) and strategic direction of Health Net (and its Affiliates) with respect to outsourcing.

 

  (c) The Parties agree that a Change might not require changes to the Charges. Supplier shall not be entitled to request an additional charge for a Change unless, and then only to the extent that, (i) such Change (A) is either (1) not within the scope of the Services and is not otherwise Supplier’s financial responsibility under this Agreement or (2) even if it is within such scope or financial responsibility and except as otherwise provided in Section 17.5(e), is a non-de minimus change requested by Health Net in the required manner or location of performance of the Services, and (B) would demonstrably increase Supplier’s costs to implement the Change or to deliver the Services in accordance with such Change; and (ii) the additional charge requested by Supplier for such Change must be directly and reasonably related to the net additional costs incurred by Supplier arising out of the Change (after taking into account any reductions to Supplier’s costs arising out of the Change). Supplier shall include in the applicable Change Order a proposal on how Charges for the affected Services will change.

 

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  (d) Supplier will not make any Changes, except in accordance with the Change Control Process and with Health Net’s prior written approval; provided, however, that Supplier operational changes that do not fall within clauses (i), (ii) or (iii) and are not subject to other agreed restrictions shall not be subject to such approval. Health Net’s approval of any Change may be withheld in its discretion for any Change that may reasonably be expected to do or result in any of the following in any non- de minimis way: (i) adversely affect the specifications, functionality, performance or resource efficiency of any Services; (ii) increase Health Net’s internal costs, Supplier’s charges to Health Net under this Agreement or charges by other Health Net suppliers to Health Net; (iii) disrupt or adversely affect any of Health Net’s or its Affiliates’ business or operations; or (iv) discontinuing the use of the ABS platform or claim edit system (ihealth) to provide the Services. If Supplier implements any Change without securing Health Net’s prior written approval via the Change Control Process, the Change will be deemed to be provided as part of the Services at no additional charge.

 

  (e) With respect to any change in a Law or Health Net Policy (or any new Law or Health Net Policy) that either Party determines may require a potential Change to the Services:

 

  (i) The Parties will mutually discuss the potential Change to the Services, and based on such discussions, Supplier shall provide a proposed Change Order addressing such Change, to reflect how the Services would be modified to be in compliance with such changed or new Law or Health Net Policy (as applicable).

 

  (ii) With respect to any Change resulting from (x) a change in or a new Law, or (y) a change in or a new Health Net Policy (but only to the extent such change in or new Health Net Policy was required in order to comply with an existing Law or caused by a change in or a new Law):

 

  (A) Supplier shall use Commercially Reasonable Efforts to implement the Change sufficiently in advance of the effective date of compliance with such changed or new Law such that Health Net has a reasonable amount of time to perform testing of any of Health Net’s equipment, systems, processes or other items that may be impacted by such Change; and

 

  (B) Supplier shall have financial responsibility for any such Change, except to the extent that Health Net is financially responsible as expressly set forth in Section 13 of Schedule C (Charges).

 

  (f) If an approved Change would result in:

 

  (i) New Services or a change to an existing SOW, then (unless otherwise agreed by Health Net to be documented in a Change Notice) the Change must be authorized via, as applicable, a Future SOW pursuant to Section 3.7 or an amendment or modification to an existing SOW made pursuant to Section 25.3 (Contract Amendments and Modifications) or documentation resulting from agreeing to such Change pursuant to the Change Control Procedure; or

 

  (ii) A change to any other terms of this Agreement, the Change must be authorized via a contract amendment or modification made pursuant to Section 25.3 (Contract Amendments and Modifications).

 

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18. AUDITS AND RECORDS

 

18.1 Audit Rights

 

  (a) Health Net and its agents, auditors (internal and external), Regulators, Health Net customers, provider groups and hospitals (and their respective auditors), and other representatives as Health Net may designate (collectively, “Auditors”) will have the right to reasonably inspect, examine and audit those portions of the systems, records (including financial records), facilities, data, practices and procedures of Supplier and its Subcontractors that are used in rendering the Services or pertain to the Services (collectively, “Audits”) for any of the following purposes:

 

  (i) to verify the accuracy of Supplier’s invoices;

 

  (ii) to verify the integrity of those elements of Health Net’s corporate control processes that are performed by Supplier, in order to permit Health Net’s management and independent auditors to make certifications required by the securities or other Laws of any country;

 

  (iii) to verify the integrity of Health Net Data and Supplier’s compliance with the data privacy, data protection, confidentiality and security requirements of this Agreement;

 

  (iv) to examine Supplier’s performance of the Services and to verify Supplier’s compliance with this Agreement, including (to the extent applicable to the Services and to the charges therefore), performing audits of:

 

  (A) practices and procedures;

 

  (B) systems, equipment, and Software;

 

  (C) general controls and security practices and procedures;

 

  (D) disaster recovery and back-up procedures;

 

  (E) the validity of Supplier’s charges, but Auditors shall not be given access to information concerning Supplier’s costs except in relation to the following: (1) charges billed on a time and materials basis or using another form of ‘price x quantity’ charging model, (2) Supplier’s proposed charges for Changes, and (3) invoiced charges for reimbursement of Out-of-Pocket Expenses;

 

  (F) as necessary to enable Health Net to meet, or to confirm that Supplier is meeting, applicable regulatory and other legal requirements; and

 

  (G) Supplier’s methodology and approach for estimating the charges for Projects;

 

  (v) to satisfy the requirements of the Health Net audit committee and the requirements of Regulators (including with respect to the requirements of any corrective action plan);

 

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  (vi) to verify Health Net’s compliance with applicable Laws and Health Net’s agreements with customers and employer groups;

 

  (vii) to verify Supplier’s compliance with Section 9.5 (Most Favored Customer); and

 

  (viii) to perform mock Audits.

 

  (b) Health Net shall also have the right to retain a third party to perform Audits of Supplier’s Service Level measurements, calculations and reporting, and to confirm statistically valid random sampling.

 

  (c) All Audits shall be subject to the following limitations:

 

  (i) Audits will be conducted during Business Hours and upon reasonable advance notice to Supplier except in the case of Audits by Regulators, emergency or security Audits and Audits investigating claims of illegal behavior;

 

  (ii) Health Net and its Auditors will comply with Supplier’s reasonable security and confidentiality requirements, guidelines and other policies of Supplier when accessing facilities or other resources owned or controlled by Supplier with respect to the Audit;

 

  (iii) Use of any third party auditor that is a Supplier Competitor, shall be subject to Supplier’s prior written approval, such approval not to be unreasonably withheld or delayed;

 

  (iv) Heath Net and its Auditor(s) must obtain Supplier’s written approval prior to utilizing tools or utilities within Supplier’s computer systems and network, and Supplier shall have the opportunity to thoroughly test such tools prior to granting such approval, such approval not to be unreasonably withheld or delayed.

 

  (d) Supplier will cooperate with Health Net, its Regulators and its and their Auditors conducting Audits and provide such assistance as they reasonably require to carry out the Audits, including providing audit support as contemplated in any SOWs and providing knowledgeable staff to assist them in conducting Audits. Furthermore, Supplier will comply with Health Net’s internal audit methodology, as it is provided to Supplier by Health Net. Subject to the foregoing, Auditors will be provided reasonable access to systems or Supplier facilities used in the performance of the Services, provided that the Auditors will not have access to any data of any customer of Supplier other than Health Net.

 

18.2 Supplier Audits

 

  (a) Supplier will conduct its own audits pertaining to the Services consistent with the audit practices of well-managed companies that perform services similar to the Services. Without limiting the generality of the foregoing, Supplier will conduct the following audits upon Health Net’s request (provided that Health Net shall not request any audit more frequently than annually) at each Supplier Facility and obtain the appropriate compliance certification:

 

  (i) a security (including physical security) audit;

 

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  (ii) an audit of privacy practices as related to the Services;

 

  (iii) a Statement on Standards for Attestation Engagements No. 16, Service Organization Control 2, Type 2 (“SSAE 16”) audit as defined by the American Institute of Certified Public Accountants (or an equivalent ISAE 3402 Type 2 audit or an audit made pursuant to any other guidance that supersedes or replaces SSAE 16 SOC 1 and 2, Type 2). Supplier will provide copies of SSAE 16 or International Standard on Assurance Engagements 3402 (“ISAE 3402”) audit reports for the Services. Supplier will provide such audit reports for the Term of this Agreement. The Audits will be conducted in accordance with third party auditor’s control requirements and industry standards or guidelines. Such audits will be performed on a service or facility basis and not on a customer specific basis;

 

  (iv) ISO 20000-1 audits (or similar audits based upon industry-recognized successor standards) to be performed by a reputable, independent third party auditor;

 

  (v) a corporate-wide ISO 9001:2008 audit (or similar audit based upon an industry-recognized successor standard); and

 

  (vi) an ISO 27001 audit; and

 

  (vii) such other audits in order to verify compliance with the provisions of the Sarbanes-Oxley Act of 2002, as such Act may be amended from time to time.

(such audits referenced in this Section 18.2 collectively the “Required Supplier Audits”). Supplier’s SSAE 16/ISAE 3402 audits will cover the time period on an overlapping six (6) month basis of each calendar year. Each calendar year, one of Supplier’s SSAE 16/ISAE 3402 audits will cover a six (6) month period ending no later than two (2) months prior to the end of such calendar year, and no earlier than three (3) months prior to the end of such calendar year, with the related SSAE 16/ISAE 3402 report provided to Health Net within three (3) months after the end date of the period under audit.

 

  (b) If Supplier receives a qualified opinion resulting from a Supplier Audit, Supplier will promptly remediate the audited services and provide Health Net with a supplemental audit report removing the qualification.

 

  (c) As requested by Health Net for a Required Supplier Audit as of a date that is specified by Health Net in such request and that is within the period in which such Required Supplier Audit remains valid, Supplier shall provide Health Net with a “bring down” certification letter, signed by an appropriate Supplier employee, which certifies that such Required Supplier Audit remain materially accurate.

 

  (d) Supplier shall make available promptly to Health Net (i) the results of any review or audit conducted by or for Supplier or its Affiliates relating to Supplier’s operating practices or procedures, to the extent relevant to the Services or Health Net, and (ii) summaries of business continuity test results to the extent relevant to the Services or Health Net, which shall include frequency of the testing, that which was tested, and a summary of the outcome of those tests; and which shall be no less detailed than similar information that which Supplier provides to government or other customers similar to Health Net. In addition, Supplier will cause its account management team to maintain an awareness of any material issues that relate to Health Net and that are discovered by Supplier or its auditors (including

 

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as part of any internal review or audit). If any such resulting review or audit report is relevant to Health Net, its Affiliates or other Service Recipients, Supplier will provide a copy of the audit report to Health Net and its independent auditors for review and comment as soon as reasonably possible, and in any event within thirty (30) days after completion of the audit report. Supplier will also provide information regarding its plans to correct, and will correct, any material errors or problems identified in the audit report.

 

18.3 Supplier’s Internal Controls

 

  (a) Supplier will develop and maintain internal control processes and controls that are designed to prevent and detect a material misstatement in financial information processed or generated by Supplier, as required to achieve and maintain compliance with the provisions of the Sarbanes-Oxley Act of 2002, as such Act may be amended from time to time.

 

  (b) Supplier will permit Health Net access to Supplier’s processes and controls relevant to the Services and provide such documentation as reasonably requested by Health Net to the extent reasonably necessary for Health Net to complete its internal control testing to satisfy the Sarbanes-Oxley Act of 2002.

 

18.4 Audit Follow-up

 

  (a) Following an Audit or examination, Health Net may conduct, or request its external Auditors or examiners to conduct, an exit conference with Supplier to obtain factual concurrence with issues identified in the review. Supplier will make available promptly to Health Net the results of any review or audit conducted by Supplier and Supplier’s Affiliates (including by internal audit staff or external auditors), or by inspectors, Regulators or other representatives, relating to Supplier’s operating practices and procedures to the extent relevant to the Services or Health Net. Supplier shall comply with Health Net’s internal audit methodology as Health Net makes it known to Supplier in order resolve any issues that arise from the audit.

 

  (b) At Health Net’s request, Supplier will meet with Health Net to review each audit report promptly after the issuance thereof and to mutually agree upon the appropriate manner, if any, in which to respond to the changes suggested by the audit report. Supplier and Health Net agree to develop operating procedures for the sharing of audit and regulatory findings and reports related to Supplier’s operating practices and procedures produced by auditors or regulators of either Party. Supplier shall comply with Health Net’s internal audit methodology as Health Net makes it known to Supplier.

 

18.5 Confidentiality of Audits

All Audit results and disclosed records of Supplier’s performance of the Services will be treated as Supplier Confidential Information (except to the extent they contain Health Net Confidential Information or fall within an exception in Section 21.1(b)) and shall not be used for any purpose except to verify Supplier’s compliance with its obligations under this Agreement and except that such results and records may be disclosed to Regulators in accordance with Section 21.2(d).

 

18.6 Records Retention

 

  (a) In support of Health Net’s Audit rights, Supplier will keep and maintain (i) financial records relating to this Agreement in accordance with generally accepted accounting principles applied on a consistent basis, (ii) records substantiating Supplier’s invoices, (iii) records pertaining to Supplier’s compliance with the Service Levels, including root cause analyses, and (iv) such other operational records pertaining to performance of the Services as Supplier keeps in the ordinary course of its business.

 

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  (b) Supplier will retain such records and provide access to them upon request for Audits until the last to occur of the following: (i) ten (10) years after expiration or termination of this Agreement; (ii) all pending matters relating to this Agreement (including disputes) are closed; and (iii) the information is no longer required to meet the Health Net Policy on records retention. Before destroying or otherwise disposing of such records, Supplier will provide Health Net with sixty (60) days prior notice and offer Health Net the opportunity to recover the records or to request Supplier to deliver the records to Health Net, with Health Net paying Supplier’s Out-of-Pocket Expenses.

 

  (c) Supplier will cause any Subcontractor of Supplier under this Agreement to make such Subcontractor’s books and records with respect to the Services available for inspection, examination and copying by the applicable Regulator and to retain such books and records in accordance with applicable Laws (e.g., the California Knox-Keene Act requirements), which requirements shall be provided by Health Net to Supplier. In the event that Health Net or its Affiliates receives any notice that a Regulator requires such access to a Subcontractor’s books and records, it will notify Supplier promptly to allow Supplier to notify the applicable Subcontractor, if not prohibited by Law. If Supplier or Subcontractor requests that any information disclosed to Regulators be given confidential treatment by the Regulator, Health Net or the applicable Affiliate will make such request, will cooperate reasonably with Supplier in communicating with the Regulator and will take all reasonable actions to obtain confidential treatment.

 

18.7 Financial Reports

At Health Net’s request, Supplier will provide to Health Net copies of all publicly-available audited and unaudited financial statements of Supplier and its Controlling Affiliates.

 

18.8 Overcharges

 

  (a) If as a result of an audit or otherwise it is determined that Supplier has overcharged Health Net, Supplier shall credit Health Net’s account (or, at Health Net’s option, pay Health Net directly) an amount equal to the overcharge plus interest at *** above the prime rate (as shown in The Wall Street Journal) calculated from the date the overcharge was paid by Health Net.

 

  (b) If an audit of the charges discloses that Supplier’s overcharges exceeded *** percent of the audited charges during the period audited, Supplier shall also reimburse Health Net for the reasonable cost of such audit.

 

19. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUPPLIER

 

19.1 Work Standards

Supplier covenants that the Services will be rendered with promptness and diligence and be executed in a professional and workmanlike manner in accordance with the practices and standards observed by the leading companies in Supplier’s industry when performing similar services. Supplier covenants that it will use adequate numbers of qualified Supplier Personnel with suitable training, education, experience and skill to perform the Services in accordance with timing and other requirements of this Agreement.

 

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19.2 Maintenance

Supplier represents, warrants and covenants that it will maintain the Equipment and Software for which it has operational responsibility or Financial Responsibility so they operate in accordance with their specifications, including (i) maintaining Equipment in good operating condition, subject to normal wear and tear; (ii) undertaking repairs and preventive maintenance on Equipment in accordance with the applicable Equipment manufacturer’s recommendations; and (iii) performing Software maintenance in accordance with the applicable Software vendor’s documentation and recommendations.

 

19.3 Efficiency and Cost-Effectiveness

Supplier covenants that it will use Commercially Reasonable Efforts to use efficiently the resources or services necessary to provide the Services. Supplier covenants that it will use Commercially Reasonable Efforts to perform the Services in a cost-effective manner consistent with the required level of quality and performance.

 

19.4 Deliverable

Supplier represents, warrants and covenants that each Deliverable produced by Supplier under this Agreement will not, during the Warranty Period, deviate in any material respect from the specifications and requirements for such Deliverable set forth or referred to in this Agreement (or a SOW, work order, service request, project plan or similar document developed pursuant to this Agreement). If Health Net notifies Supplier of a breach of the foregoing warranty within the Warranty Period, Supplier will promptly correct and redeliver the affected Deliverable at no additional charge to Health Net without delay. “Warranty Period” shall mean the period of time commencing on the date of delivery of the Deliverable to Health Net and continuing for ninety (90) days ; provided that with respect to Deliverables that are modifications or enhancements or additions to the Technology Platform, the Warranty Period shall be the period of time commencing on the earlier to occur of (i) the date of delivery of such Deliverable to Health Net, and (ii) use of such Deliverable to provide the Services, and continuing for the duration of the Term and all Disengagement Assistance Periods.

 

19.5 Documentation

Supplier represents, warrants and covenants that any Documentation developed for Health Net by or on behalf of Supplier under this Agreement, except portions of the Documentation provided by Health Net, will (a) accurately and with reasonable comprehensiveness describe the operation, functionality and use of the item described in such Documentation, and (b) for Application Software, accurately describe in terms understandable to a typical End User the functions and features of such item and the procedures for exercising such functions and features.

 

19.6 Compatibility

Supplier represents, warrants and covenants that, during the Warranty Period, Deliverables that are developed and that are intended to interact or otherwise work together as part of a functioning system, including with other technology components that exist at the time such Deliverables are created, will be compatible and will properly inter-operate and work together as components of an integrated system.

 

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19.7 Non-Infringement

 

  (a) Subject to Section19.7(b), Supplier represents, warrants and covenants that:

 

  (i) Supplier will perform their responsibilities under this Agreement in a manner that does not infringe or constitute an infringement or misappropriation of any Intellectual Property Rights of any third party;

 

  (ii) Supplier has all rights and licenses necessary to convey to Health Net (and to its Affiliates, where applicable) the ownership of or license rights to, as applicable, all Software, Work Product, Independent IP, and other items provided to Health Net by or on behalf of Supplier; and

 

  (iii) no Software, Work Product, Independent IP, or other item used to provide the Services or otherwise provided to Health Net by or on behalf of Supplier, nor their use by Health Net or other Service Recipients in accordance with the applicable Documentation (if any), will infringe or constitute an infringement or misappropriation of any Intellectual Property Right of any third party.

 

  (b) Supplier will not be considered in breach of the representations, warranties and covenants set forth in Section 19.7(a) to the extent (but only to the extent) that any claimed breach, infringement or misappropriation (if true) would be attributable to any of the following:

 

  (i) Health Net’s modification of an item provided by or on behalf of Supplier unless the modification was expressly authorized, approved or made by Supplier; or

 

  (ii) Health Net’s combination, operation or use of an item provided by or on behalf of Supplier with other specific items not furnished by, through or at the specification of Supplier or its Subcontractors; provided, however, that this exception will not be deemed to apply to the combination, operation or use of an item with other commercially available products that could reasonably have been anticipated by Supplier that Health Net would likely use in combination with the item provided by or on behalf of Supplier (e.g., the combination, operation or use of application Software provided by Supplier with a commercially available computer and operating systems Software not provided by Supplier); or

 

  (iii) Any aspect of Health Net’s Software, Documentation or data which existed prior to Supplier’s performance of Services provided the claimed breach, infringement or misappropriation (if true) would not be attributable to any work performed by (or on behalf of) Supplier for Health Net or a Health Net Affiliate; or

 

  (iv) Claims relating to the ABS Platform in respect of which Health Net is obligated to indemnify Supplier under the APA; or

 

  (v) Any instruction, information, design or other materials furnished to Supplier hereunder by or on behalf of Health Net; or

 

  (vi) Health Net’s continuing the allegedly infringing activity after (A) being notified thereof, and (B) being provided with modifications that would have avoided the alleged infringement without adversely affecting Health Net’s use of or the functionality of the applicable item or Health Net’s receipt of the Services.

 

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19.8 Viruses

Virus” means (i) program code or programming instruction(s) or set(s) of instructions intentionally designed to disrupt, disable, harm, interfere with or otherwise adversely affect computer programs, data files or operations; or (ii) other code typically described as a virus, Trojan horse, worm, back door or other type of harmful code. Supplier covenants that Supplier Personnel will not knowingly introduce a Virus or allow a Virus to be introduced into Health Net’s or any other Service Recipient’s system or any system used to provide the Services. In addition, Supplier will use Commercially Reasonable Efforts to prevent Supplier Personnel from unknowingly introducing a Virus or allowing a Virus to be introduced into Health Net’s or any other Service Recipient’s system or any system used to provide the Services. If a Virus is found to have been introduced into Health Net’s or other Service Recipients’ systems or the systems used to provide the Services as a result of a breach of the foregoing representation, warranty and covenant, Supplier will use Commercially Reasonable Efforts at no additional charge to assist Health Net in eradicating the Virus and reversing its effects and, if the Virus causes a loss of data or operational efficiency, to assist Health Net in mitigating and reversing such losses.

 

19.9 Disabling Code

Supplier covenants that in the course of providing the Services it will not intentionally insert into Software or any systems used to provide the Services any code that would have the effect of disabling or otherwise shutting down all or any portion of the Services. With respect to any disabling code that was already part of Software or systems used to provide the Services, Supplier covenants that it will not intentionally invoke such disabling code or knowingly permit it to be invoked at any time without Health Net’s prior written consent. For purposes of this covenant, programming errors will not be deemed disabling code to the extent Supplier can demonstrate that such errors were not made with the intention of disabling or otherwise shutting down all or any portion of Health Net’s or any other Service Recipient’s systems or any system used to provide the Services.

 

19.10 Date and Currency Compliance

Supplier represents, warrants and covenants to Health Net that the Services and any Deliverable provided by Supplier do and will, operate in a manner which prevents ambiguous or erroneous output with respect to all (a) date-related data and functions and (b) currency-related data and functions.

 

19.11 Corporate Social Responsibility

Supplier represents, warrants and covenants to Health Net that Supplier and Supplier Facilities comply, and during the Term will comply, with the following:

 

  (a) Supplier will not use forced or compulsory labor in any form, including prison, indentured, political, bonded or otherwise.

 

  (b) Supplier will not follow policies promoting or resulting in unacceptable worker treatment such as the exploitation of children, physical punishment, female abuse, involuntary servitude, or other forms of abuse.

 

  (c) Supplier will not discriminate based on race, creed, gender, marital or maternity status, class or caste status, religious or political beliefs, age or sexual orientation. Supplier’s decisions related to hiring, salary, benefits, advancement, termination or retirement will be based solely on the ability of an individual to do the job, Supplier’s business and technical requirements, and those of Supplier’s customers.

 

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  (d) Supplier’s management practices will recognize the dignity of the individual employee and the right to a work place free of harassment, abuse or corporal punishment, and will respect Supplier’s employees’ voluntary freedom of association.

 

  (e) Supplier will comply with all applicable Laws concerning the conditions of employment of its employees, including those relating to pay, benefits, and working conditions.

 

  (f) Supplier will maintain on file all documentation needed to demonstrate compliance with these standards and shall make these documents available for Health Net and its auditors with or without prior notice. Supplier will publicize to its employees and enforce a non-retaliation policy that permits Supplier’s employees to speak with Health Net and Health Net’s auditors without fear of retaliation by Supplier or Supplier’s management.

 

19.12 Subcontractor Confidentiality and Data Protection

Supplier will ensure that each of Supplier’s Subcontractors performing the Services will, prior to performing any Services, have executed an agreement satisfying the confidentiality and data protection obligations provided in this Agreement.

 

19.13 No Improper Inducements

Supplier represents, warrants and covenants to Health Net that it has not violated any applicable Laws or any Health Net Policy regarding the offering of unlawful or improper inducements in connection with this Agreement. If at any time during the Term, Health Net determines that the foregoing representation, warranty and covenant is inaccurate, then, in addition to any other rights Health Net may have at law or in equity, Health Net may terminate this Agreement for cause without affording Supplier an opportunity to cure.

 

19.14 Foreign Corrupt Practices Act

 

  (a) Supplier represents, warrants and covenants that it has not and will not offer, pay, promise to pay, or authorize the payment of any money, or offer, give, promise to give, or authorize the giving of anything of value to a foreign official (as defined in the Foreign Corrupt Practices Act (P.L. 95-213), as amended), to any foreign political party or official thereof or any candidate for foreign political office, or to any person, while knowing or being aware of a high probability that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office, for the purposes of:

 

  (i) influencing any act or decision of such foreign official, political party, party official, or candidate in his or its official capacity, including a decision to fail to perform his or its official functions; or

 

  (ii) inducing such foreign official, political party, party official, or candidate to use his or its influence with the foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist Health Net or Supplier in obtaining or retaining business for or with, or directing business to Health Net or Supplier.

 

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  (b) Supplier further represents, warrants and covenants that it will not violate the Foreign Corrupt Practices Act or any other applicable anti-corruption laws or regulations. Supplier agrees that if subsequent developments after the Effective Date cause the representations, warranties, covenants and information reported herein to be no longer accurate or complete, Supplier will promptly furnish Health Net with a supplementary report detailing such change in circumstances.

 

19.15 Claims Procedures, Appeals and External Review

Supplier shall ensure that its decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to Supplier Personnel (such as a claims adjudicator, appeals processor, or medical expert) shall not be made based upon the likelihood or perceived likelihood that the individual will support or tend to support the denial of benefits for Health Net members and/or customers.

 

19.16 ABS Platform

The representations, warranties, covenants and other provisions contained in Sections 19.1-19.12 shall not apply to any part of the ABS Platform developed by or for Health Net (other than by Supplier) prior to the BPaaS Services Commencement Date.

 

20. MUTUAL REPRESENTATIONS AND WARRANTIES; DISCLAIMER

 

20.1 Mutual Representations and Warranties

Each Party represents, warrants and covenants to the other that:

 

  (a) It has the requisite corporate power and authority to enter into this Agreement and to carry out the transactions and activities contemplated by this Agreement;

 

  (b) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly authorized by the requisite corporate action on the part of such Party, are a valid and binding obligation of such Party, and do not constitute a violation of any existing judgment, order or decree;

 

  (c) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement do not constitute a material default under any existing material contract by which it or any of its material assets is bound, or an event that would, with notice or lapse of time or both, constitute such a default; and

 

  (d) There is no proceeding pending or, to the knowledge of the Party, threatened that challenges or could reasonably be expected to have a material adverse effect on this Agreement or the ability of the Party to perform and fulfill its obligations under this Agreement.

 

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20.2 Disclaimer

OTHER THAN AS PROVIDED IN THIS AGREEMENT, THERE ARE NO EXPRESS WARRANTIES AND THERE ARE NO IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE EXPRESSLY DISCLAIMED EXCEPT WHERE REQUIRED BY LAW.

 

21. CONFIDENTIALITY

 

21.1 “Confidential Information” Defined

 

  (a) Confidential Information” of a Party means any non-public, commercially sensitive information (or materials) belonging to, concerning or in the possession or control of the Party or any of its Affiliates (and, in the case of Health Net, any of the Service Recipients) (the “Furnishing Party”) that is furnished, disclosed or otherwise made available (directly or indirectly) to the other Party (the “Receiving Party”) (or entities or persons acting on the other Party’s behalf) in connection with this Agreement and which is either marked or identified in writing as confidential, proprietary, secret or with another designation sufficient to give notice of its sensitive nature, or is of a type that a reasonable person would recognize it to be confidential. In the case of Health Net, “Confidential Information” includes any (i) information to which Supplier has access in Health Net Facilities or Health Net systems (or those of any Health Net Affiliates or Service Recipients) (ii) information belonging to or concerning Health Net, any Health Net Affiliates or any of the Service Recipients in Supplier Facilities or systems used to provide the Services; (iii) Deliverables and information pertaining to them, (iv) Health Net Data, Health Net Owned Software, Health Net Licensed Software, and systems access codes, (v) information concerning Health Net’s and/or its Affiliates’ and/or Service Recipients’ products, marketing strategies, financial affairs, employees, customers or suppliers, (vi) personal information and Personally Identifiable Information of Health Net’s employees and members and any information protected under the Business Associate Agreement (including Protected Health Information), (vii) Proprietary Business Rules and (viii) all data and information in any form derived from any of the foregoing, in each case regardless of whether or how any of the foregoing is marked. In the case of Supplier, “Confidential Information” includes any (a) information regarding Supplier’s systems, marketing plans, Software, processes and controls, products and services, (b) Work Product (other than Deliverables) and Supplier’s Independent IP, and (c) any part of the Required Information that is not Health Net Data, in each case regardless of whether or how any of the foregoing is marked. Any notes, memoranda, compilations, derivative works, data files or other materials prepared by or on behalf of the Receiving Party that contain or otherwise reflect or refer to Confidential Information of the Furnishing Party will also be considered Confidential Information of the Furnishing Party.

 

  (b)

Confidential Information” does not include any particular information (other than personal information, -Personally Identifiable Information and Protected Health Information) that the Receiving Party can demonstrate: (i) was rightfully in the possession of, or was rightfully known by, the Receiving Party without an obligation to maintain its confidentiality prior to receipt from the Furnishing Party; (ii) was or has become generally known to the public other than as a result of breach of this Agreement or a wrongful disclosure by the Receiving Party or any of its agents; (iii) after disclosure to the Receiving Party, was received from a third party who, to the Receiving Party’s knowledge, had a

 

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  lawful right to disclose such information to the Receiving Party without any obligation to restrict its further use or disclosure; or (iv) was independently developed by the Receiving Party without use of or reference to any Confidential Information of the Furnishing Party.

 

21.2 Obligations of Confidentiality

 

  (a) Each Party acknowledges that it may be furnished, receive or otherwise have access to Confidential Information of the other Party in connection with this Agreement.

 

  (b) The Receiving Party will not use, disclose or reproduce Confidential Information of the Furnishing Party except as reasonably required to accomplish the purposes and objectives of this Agreement. The Receiving Party will not disclose the Confidential Information of the Furnishing Party to any person or appropriate it for the Receiving Party’s own use, or for any other person’s use or benefit, except as specifically permitted by this Agreement or approved in writing by the Furnishing Party.

 

  (c) The Receiving Party will keep the Confidential Information of the Furnishing Party confidential and secure and will protect it from unauthorized use or disclosure by using at least the same degree of care as the Receiving Party employs to avoid unauthorized use or disclosure of its own Confidential Information, but in no event less than reasonable care.

 

  (d)

As necessary to accomplish the purposes and objectives of this Agreement, the Receiving Party may disclose Confidential Information of the Furnishing Party to any employee, officer, director, contractor, Service Recipient, agent or representative of the Receiving Party who is bound to the Receiving Party to protect the confidentiality of the information in a manner substantially equivalent to that required of the Receiving Party under this Agreement. As necessary to accomplish the purposes and objectives of this Agreement, Health Net may also provide Confidential Information of Supplier to contractors (including outsourcing suppliers that may replace Supplier under this Agreement) who provide services to Health Net, provided any such contractor and outsourcing supplier (but not their employees) (i) is bound to Health Net to use such Confidential Information for the sole purpose of providing services to Health Net, and (ii) shall, prior to receipt of any Confidential Information, execute a non-disclosure agreement for Supplier substantially in the form set forth in Schedule N (the “Non-Disclosure Agreement”), provided further that (A) Supplier has the right to make reasonable modifications to the form of Non-Disclosure Agreement, and (B) Supplier shall consider in good faith any changes to the form Non-Disclosure Agreement reasonably requested by a contractor or outsourcing supplier and shall not unreasonably withhold agreement to any such changes. The Receiving Party may also disclose Confidential Information of the Furnishing Party to the Receiving Party’s Auditors provided they are made aware of the Receiving Party’s obligations of confidentiality with respect to the Furnishing Party’s Confidential Information and such Auditors are obligated to maintain the confidentiality of such Confidential Information on terms that are substantially equivalent to the terms of this Section 21 (Confidentiality). Health Net and its Affiliates may also disclose Supplier Confidential Information, including this Agreement and the transactions contemplated by this Agreement, in any reports furnished, filed or required to be filed with the Securities and Exchange Commission (“SEC”) pursuant to the rules and regulations promulgated by the SEC, as well as to the New York Stock Exchange and any other Regulator charged with the administration, oversight or enforcement of regulations applicable to any business conducted by Health Net or any of its Affiliates (collectively, the “SEC and Regulatory Filing Requirements”). In the event that Health Net or its Affiliates intend to disclose

 

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  Supplier Confidential Information as permitted by the immediately preceding sentence it will, to the extent commercially practicable, notify Supplier prior to disclosing the information and provide copies of the intended disclosure to allow Supplier to comment on such disclosures. If Supplier requests that Health Net or its Affiliates request confidential treatment of the Confidential Information by the SEC or other Regulator, Health Net or the applicable Affiliate will make such request and will take all commercially reasonable actions to obtain confidential treatment. Notwithstanding the foregoing, Health Net shall maintain sole discretion regarding compliance with SEC and Regulatory Filing Requirements.

 

  (e) If any unauthorized use, disclosure, loss of, or inability to account for any Confidential Information of the Furnishing Party occurs, the Receiving Party will promptly so notify the Furnishing Party and will cooperate with the Furnishing Party and take such actions as may be necessary or reasonably requested by the Furnishing Party to minimize the violation and any damage resulting from it.

 

21.3 No Implied Rights

Each Party’s Confidential Information will remain the property of that Party. Nothing contained in this Section 21 (Confidentiality) will be construed as obligating a Party to disclose its Confidential Information to the other Party, or as granting to or conferring on a Party, expressly or by implication, any rights or license to the Confidential Information of the other Party. Any such obligation or grant will only be as provided by other provisions of this Agreement.

 

21.4 Compelled Disclosure

If the Receiving Party becomes legally compelled to disclose any Confidential Information of the Furnishing Party in a manner not otherwise permitted by this Agreement, the Receiving Party will provide the Furnishing Party with prompt notice of the request so that the Furnishing Party may seek a protective order or other appropriate remedy. If a protective order or similar order is not obtained by the date by which the Receiving Party must comply with the request, the Receiving Party may furnish that portion of the Confidential Information that, after consulting with legal counsel, it determines it is legally required to furnish. The Receiving Party will exercise reasonable efforts to obtain assurances that confidential treatment will be accorded to the Confidential Information so disclosed.

 

21.5 Confidential Treatment of this Agreement

Each Party may disclose the existence and general nature of this Agreement as permitted by Section 27.9 (Public Disclosures), but otherwise the terms and conditions of this Agreement will be considered the Confidential Information of each Party; provided however, that this Agreement may be disclosed by either Party in connection with an actual or good-faith proposed merger, acquisition, divestiture or similar transaction, so long as such receiving entity first agrees in writing to obligations substantially similar to those described in this Section 21 (Confidentiality).

 

21.6 Disclosure of Information Concerning Tax Treatment

Notwithstanding anything to the contrary in this Section 21 (Confidentiality), each Party (and its Affiliates), and any person acting on their behalf, may disclose to any person or entity the “tax structure” and “tax treatment” (as such terms are defined in the U.S. Internal Revenue Code and regulations under it) of the transactions effected by this Agreement and any materials provided to

 

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that Party (or its Affiliates) describing or relating to such tax structure and tax treatment; provided, however, that this disclosure authorization will not be interpreted to permit disclosure of (i) any materials or portions of materials that are not related to the transaction’s tax structure or tax treatment, or (ii) any materials or information that the Party (or its Affiliate(s)) must refrain from disclosing to comply with applicable securities Laws.

 

21.7 Return or Destruction

 

  (a) As requested by the Furnishing Party during the Term, the Receiving Party will return or provide the Furnishing Party a copy of any designated Confidential Information of the Furnishing Party. When Confidential Information of the Furnishing Party is no longer required for the Receiving Party’s performance under this Agreement, or in any event upon expiration or termination of this Agreement, the Receiving Party will return all materials that contain, refer to, or relate to Confidential Information of the Furnishing Party or, at the Furnishing Party’s election, destroy them. In addition, Supplier shall, within sixty (60) days of the expiration or termination of this Agreement, delete all of Health Net’s Confidential Information from its databases, servers, personal computers, web site and other electronic media that exist now or in the future.

 

  (b) The Receiving Party may, however, keep (i) any Confidential Information of the Furnishing Party that the Receiving Party has a license to continue using, (ii) in the files of its legal department or outside counsel, for record purposes only, one copy of any material requested to be returned or destroyed, (iii) archival copies as may be necessary to comply with document retention laws and regulations applicable to such Party’s business operations, and (iv) data that is necessary to be retained by Supplier in order to comply with Supplier’s back-up policies and procedures; provided that any electronic Confidential Information that is stored on routine back-up media for the purpose of disaster recovery will be subject to destruction in due course. Additionally, the Receiving Party shall have no obligation to destroy any Confidential Information that is subject to a claim, dispute, lawsuit, or subpoena or in any other circumstances in which such Party reasonably believes that destruction of such Confidential Information would be unethical or unlawful. Any Confidential Information of the Furnishing Party that is retained by the Receiving Party pursuant to the foregoing shall continue to be subject to the confidentiality obligations of this Agreement.

 

  (c) At the Furnishing Party’s request, the Receiving Party will certify in writing to the Furnishing Party that it has returned or destroyed all copies of the Furnishing Party’s Confidential Information in the possession or control of the Receiving Party’s or any of its Affiliates or contractors that are required to be returned or destroyed pursuant to this Section 21.7 (Return or Destruction).

 

21.8 Duration of Confidentiality Obligations

The Receiving Party’s obligations under this Section 21 (Confidentiality) apply to Confidential Information of the Furnishing Party disclosed to the Receiving Party before or after the Effective Date and will continue during the Term and survive the expiration or termination of this Agreement as follows:

 

  (a) The Receiving Party’s obligations under Section 21.7 (Return or Destruction) will continue in effect until fully performed;

 

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  (b) As to any portion of the Furnishing Party’s Confidential Information that constitutes a trade secret under applicable Law, the obligations will continue for as long as the information continues to constitute a trade secret;

 

  (c) As to all other Confidential Information of the Furnishing Party, the obligations will survive for four (4) years after the Receiving Party’s fulfillment of its obligations under Section 21.7 (Return or Destruction) with respect to the Confidential Information in question; and

 

  (d) With respect to personal information, Personally Identifiable Information and Protected Health Information, the obligations shall survive indefinitely.

 

22. INSURANCE

Supplier represents that it has, as of the Effective Date, and agrees to maintain in force throughout the Term at least the types and amounts of insurance coverage specified in Schedule I (Supplier Insurance).

 

23. INDEMNIFICATION

 

23.1 Indemnification By Supplier

Supplier will at its expense indemnify, defend and hold harmless Health Net and its Affiliates, and their respective officers, directors, customers, employees, agents, representatives, successors and assigns (collectively, Health Net Indemnitees) from and against any and all Losses suffered or incurred by any of them arising from, in connection with, or based on any of the following, whenever made, except to the extent caused by Health Net or an Health Net Affiliate:

 

  (a) Any Indemnity Claim by, on behalf of or relating to any of the Affected Employees relating to Supplier’s employee selection, communications, recruitment or hiring process or a breach by Supplier of Schedule E (Employee Transfer);

 

  (b) Any Indemnity Claim by, on behalf of or relating to any of the Transitioned Employees with respect to matters arising out of acts or omissions of Supplier occurring on or after the Transfer Date, excluding Indemnity Claims for which Health Net is required to indemnify under Section 23.3(b);

 

  (c) Any Indemnity Claim (i) by a Subcontractor or by other Supplier Personnel, including claims by such personnel that Health Net is liable to such personnel for employee benefits or as the employer or joint employer of such personnel, except to the extent, if any, that Health Net is required by this Agreement to indemnify Supplier in respect of the Indemnity Claim, or (ii) based upon the acts or omissions of any Subcontractor in performance of or relating to the Services to the same extent as if Supplier had committed the act or omission;

 

  (d) Any Indemnity Claim arising out of Supplier’s breach of its obligations under Section 14 (Data Security and Protection) or Section 21 (Confidentiality) or the Business Associate Agreement;

 

  (e) Any Indemnity Claim arising out of a Security Breach, except to the extent that such Security Breach was caused by Health Net’s negligence, willful misconduct or breach of this Agreement;

 

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  (f) Any Indemnity Claim arising out of Supplier’s breach of Section 19.7(a) (Non-Infringement);

 

  (g) Any Indemnity Claim arising out of Supplier’s breach of its obligations under Section 27.7 (Compliance with Laws)

 

  (h) Any Indemnity Claim for death or bodily injury, or the damage, loss or destruction of real or tangible personal property of any third party (including employees of Health Net or Supplier or their respective subcontractors) brought against a Health Net Indemnitee alleged to have been caused by the tortious acts or omissions of Supplier, Supplier Personnel or anyone else for whose acts Supplier is responsible. However, Supplier will have a right of contribution from Health Net with respect to the Indemnity Claim to the extent Health Net’s comparative negligence is responsible for causing the alleged injury or damage, loss or destruction;

 

  (i) Any Indemnity Claim with respect to Supplier’s use of any Health Net Provided Resources made available by Health Net to Supplier or Subcontractors pursuant to Section 11 to the extent the loss results from a breach by Supplier or any Subcontractor of, or an act or omission of Supplier which creates liability for Health Net pursuant to (A) a Health Net Provided Resource or an agreement between Health Net and a third party relating to such Health Net Provided Resources, or certain provisions thereof, which have been provided to Supplier in writing, including obligations to comply with requirements regarding numbers and types of licenses under any such agreements; (B) the terms of this Agreement, including Supplier’s obligations with respect to Managed Third Party Contracts set forth in this Agreement, or (C) any other reasonable restrictions required by Health Net relating to the Health Net Provided Resources, which restrictions are provided to Supplier in writing;

 

  (j) Any amounts, including taxes, interest, and penalties, assessed against Health Net which arise as a result of Supplier’s failure to comply with and perform its obligations under Section 9.3 (Taxes);

 

  (k) Supplier’s (i) improper or wrongful termination of this Agreement or part thereof, or (ii) except to the extent any cessation of Services is expressly permitted under this Agreement, abandonment of any work under this Agreement;

 

  (l) Any breach of any of Supplier’s representations or warranties set forth in Section 20 (Mutual Representations and Warranties), Section 19.8 (Disabling Code), or the second sentence of Section 19.7 (Viruses);

 

  (m) Any intentional misconduct or criminal misconduct by Supplier; and

 

  (n) Any Indemnity Claim arising out of occurrences Supplier is required to insure against under this Agreement, but only to the extent Supplier has failed to procure the insurance that Supplier is obligated to procure under this Agreement.

Any act or omission of a Subcontractor shall be deemed to be an act or omission of Supplier for purposes of determining Supplier’s indemnification obligations pursuant to this Section 23.1.

 

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23.2 Infringement Indemnity Claims

If any item used by Supplier to provide the Services or provided by Supplier to Health Net or any Deliverable becomes, or in Supplier’s reasonable opinion is likely to become, the subject of an infringement or misappropriation Indemnity Claim, Supplier will, in addition to indemnifying Health Net Indemnitees as provided in this Section 23 (Indemnification) and to the other rights Health Net may have under this Agreement, and at law or equity, at its expense: (i) promptly at Supplier’s expense secure the right to continue using the item or Deliverable, or (ii) if this cannot be accomplished with Commercially Reasonable Efforts, then at Supplier’s expense, replace or modify the item or Deliverable to make it non-infringing or without misappropriation, while not degrading performance, functionality, or quality, increasing Health Net costs, or disrupting Health Net’s business operations, or (iii) if neither of the foregoing can be accomplished by Supplier with Commercially Reasonable Efforts, and only in such event, then upon at least one hundred eighty (180) days’ prior written notice to Health Net, (A) with respect to non-Deliverable items, Supplier may remove the item from use in performing the Services, in which case Supplier’s Charges will be equitably adjusted to reflect such removal, and (B) in the case of Deliverable, Supplier may recall the Deliverables and shall refund to Health Net all Charges and fees paid by Health Net relating to such Deliverable. If removal of the item from use in performing Services or recall of a Deliverable causes the loss or degradation of the Services or any portion of the Services that is material to Health Net or has a material impact on Health Net, such loss, degradation or material impact will constitute a material breach of this Agreement by Supplier in respect of which Health Net may exercise its termination and other rights and remedies under this Agreement. This Section 23.2 (Infringement Indemnity Claims) will not apply to any Indemnity Claim relating to the ABS Platform in respect of which Health Net is obligated to indemnify Supplier under the APA.

 

23.3 Indemnification By Health Net

Health Net will at its expense indemnify, defend and hold harmless Supplier and its Affiliates and their respective officers, directors, employees, agents, representatives, successors and assigns (collectively, “Supplier Indemnitees”) from and against any and all Losses suffered or incurred by any of them arising from, in connection with or based on any of the following, whenever made, except to the extent caused by Supplier or a Supplier Affiliate: Any Indemnity Claim by, on behalf of or relating to any of the Transitioned Employees with respect to matters arising out of the acts or omissions of Health Net occurring prior to the Transfer Date, excluding Indemnity Claims for which Supplier is required to indemnify under Section 23.1(a);

Any Indemnity Claim by, on behalf of or relating to any Supplier Personnel who is a Transitioned Employee and which arises out of Health Net’s employee selection, communications, recruitment or hiring process relating to Health Net’s rehiring of such Transitioned Employees pursuant to the terms of this Agreement;

Any Indemnity Claim arising out of Health Net’s breach of its obligations under Schedule E (Employee Transfer);

Any Indemnity Claim arising out of (i) Health Net’s failure to observe or perform any duties or obligations to be observed or performed prior to the Effective Date by Health Net under any of the Health Net Third Party Service Contracts or licenses for Health Net Licensed Software that are being made available for use by Supplier pursuant to Section 11.2(a);

Any Indemnity Claim arising out of Health Net’s breach of its obligations under Section 21 (Confidentiality) or the Business Associate Agreement;

 

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Any Indemnity Claim arising out of Health Net’s breach of its obligations under Section 27.7 (Compliance with Laws), including a failure to comply with Law by (1) any of the Transitioned Employees prior to their respective Transfer Date, or (2) any third party under any of the Health Net Third Party Service Contracts that are being made available for use by Supplier pursuant to Section 11.2(a) (provided the Indemnity Claim did not arise due to the failure of Supplier to perform its management obligations under this Agreement with respect to such contracts);

Any Indemnity Claim to the extent such claim alleges that (1) any Health Net Owned Software or Health Net Licensed Software that is being made available for use by Supplier pursuant to Section 11.2(c), or (2) systems or other items made available to Supplier by Health Net under this Agreement, infringes or misappropriates any Intellectual Property Right of any third party, provided however that this Section 23.3(g) does not apply to any such Indemnity Claim (x) that relates to any part of the ABS Platform or Configurations developed by or for Supplier, or (y) in which the alleged infringement or misappropriation is attributable to the following:

Supplier’s modification of such Health Net Owned Software, Health Net Licensed Software, or any such system or other item, unless the Indemnity Claim (if true) would be attributable to Health Net’s instructions, specifications or requirements; or

Supplier’s combination, operation or use of such Health Net Owned Software, Health Net Licensed Software, or any such system or other item with other Software, systems or items not provided by Health Net for use with such Health Net Developed Software, Health Net Provided Resource, or system or other item; or

Supplier’s continuing the allegedly infringing activity after (A) being notified thereof, and (B) being provided with modifications that would have avoided the alleged infringement without adversely affecting Supplier’s ability to provide the Services and a reasonable time to implement them for use.

Any Indemnity Claim for death or bodily injury, or the damage, loss or destruction of real or tangible personal property of any third party (including employees of Health Net or Supplier or their respective subcontractors) brought against a Supplier Indemnitee alleged to have been caused by the tortious acts or omissions of Health Net, Health Net personnel or anyone else for whose acts Health Net is responsible. However, Health Net will have a right of contribution from Supplier with respect to the Indemnity Claim to the extent Supplier’s comparative negligence is responsible for causing the alleged injury or damage, loss or destruction;

Any Indemnity Claim caused by Supplier’s proper compliance with any Health Net Policy or other requirement mandated by Health Net; an Any Indemnity Claim based upon the gross negligence or willful misconduct of Health Net or any Health Net third party contractor (excluding Supplier, Supplier’s Affiliates and its subcontractors).

 

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23.4 Indemnification Procedures

The following procedures will apply to Indemnity Claims for which a Party seeks to be indemnified pursuant to this Agreement:

 

  (a) Notice.

 

  (i) Promptly after an indemnitee receives notice of any Indemnity Claim for which it will seek indemnification pursuant to this Agreement, the indemnitee will notify the indemnitor of the Indemnity Claim in writing (an “Indemnity Notice”). No failure to so notify the indemnitor will abrogate or diminish the indemnitor’s obligations under this Section 23 (Indemnification) if the indemnitor has or receives knowledge of the Indemnity Claim by other means, or if the failure to notify does not materially prejudice its ability to defend the Indemnity Claim, or if the indemnitor does not have the right to defend the Indemnity Claim pursuant to Section 23.4(b)(ii). Within fifteen (15) days after receiving an indemnitee’s Indemnity Notice of an Indemnity Claim, or otherwise obtaining knowledge of the Indemnity Claim, but no later than ten (10) days before the date on which any formal response to the Indemnity Claim is due, the indemnitor will notify the indemnitee in writing (a “Notice of Election”) as to whether:

 

  (A) the indemnitor acknowledges its obligation to indemnify and hold the indemnitee harmless with respect to such Indemnity Claim, and

 

  (B) with respect to any such Indemnity Claim that is not an Identified Health Net Indemnity Claim (as defined below), the indemnitor elects to assume control of the defense and settlement of the Indemnity Claim.

 

  (ii) Each Notice of Election shall be delivered to the indemnitee at the address set forth in Section 27.5 (Notices), as such address may be modified pursuant to such Section.

 

  (b) Procedure Following Indemnity Notice.

 

  (i) Procedure for Indemnity Claims that are not Identified Health Net Indemnity Claims.

With respect to any Indemnity Claim that is not an Identified Health Net Indemnity Claim, if the indemnitor timely (i.e., in accordance with Section 23.4(a)) delivers a Notice of Election that both (1) acknowledges indemnitor’s obligation to indemnify and hold the indemnitee harmless with respect to such Indemnity Claim, and (2) includes an express election to assume control of the defense and settlement of such Indemnity Claim, then:

 

  (A) the indemnitor will be entitled to have sole control over the defense and settlement of such Indemnity Claim; provided that the indemnitee shall have the right to approve:

 

  (1) the legal counsel selected by the indemnitor, and

 

  (2) in the indemnitee’s sole discretion, any settlement (or portion thereof) that is not a monetary settlement, including settlements involving injunctive relief; and

 

  (B) the indemnitor will not be required to reimburse the indemnitee for (1) any legal expenses incurred by the indemnitee in defending or settling such Indemnity Claim after the indemnitee’s receipt of such Notice of Election unless reasonable and necessary (e.g., costs incurred prior to receipt of the Indemnitor’s Notice of Election), or (2) any amounts paid or payable by the indemnitee in settlement of such Indemnity Claim after the indemnitee’s receipt of such Notice of Election if the settlement was agreed to without the written consent of the indemnitor.

 

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  (ii) Procedure for Identified Health Net Indemnity Claims.

 

  (A) An “Identified Health Net Indemnity Claim” means any of the following Indemnity Claims brought against Health Net with respect to which Health Net expressly elects to retain control of the defense and settlement in its written Indemnity Notice to Supplier pursuant to Section 23.4(a) (or as soon as reasonably practicable thereafter so long as such notice is given by Health Net prior to receipt of Supplier’s Notice of Election pursuant to Section 23.4(a)), and for which Health Net indicates in such Indemnity Notice that Health Net will seek indemnification from Supplier pursuant to this Agreement:

 

  (1) any Indemnity Claim brought by a governmental or regulatory entity (a “Public Indemnity Claim”); and

 

  (2) any Indemnity Claim brought by a private party that is based on the same events that also resulted in a Public Indemnity Claim being brought against Health Net, and where adjudication of the private party Indemnity Claim or some part of it may result in collateral estoppel with respect to a material issue of the Public Indemnity Claim.

 

  (B) With respect to any Identified Health Net Indemnity Claim, if Supplier timely (i.e., in accordance with Section 23.4(a)) delivers a Notice of Election acknowledging its obligation to indemnify and hold Health Net harmless with respect to such Identified Health Net Indemnity Claim, then:

 

  (1) Health Net will be entitled to have sole control over the defense and settlement of such Identified Health Net Indemnity Claim at the cost and expense of Supplier, including payment of any settlement, judgment or award and the reasonable costs of defending or settling such Identified Health Net Indemnity Claim; provided that in the event of a settlement by Health Net, Supplier shall only be obligated to reimburse Health Net for reasonable amounts paid or payable by Health Net in settlement of such Identified Health Net Indemnity Claim (the reasonableness of such amount determined by taking into consideration all of the facts and circumstances relating to such Identified Health Net Indemnity Claim, including reputational risks to Health Net, the potential for the Identified Health Net Indemnity Claim to cause adverse impacts to Health Net’s business or operations, and costs incurred by Health Net as a result of or in connection with such Identified Health Net Indemnity Claim); and

 

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  (2) Health Net shall keep Supplier informed regarding the status of and developments in any such Identified Health Net Indemnity Claim (subject to execution where appropriate of a mutually acceptable joint defense or common interest agreement), shall invite and allow Supplier to be present at relevant discussions, negotiations and proceedings to the greatest extent practicable, and shall, in advance of settling any such Identified Health Net Indemnity Claim, meet and confer with Supplier regarding the terms and conditions of such settlement with respect to which it intends to seek indemnification so as to give Supplier an opportunity to provide its input regarding such terms and conditions; and

 

  (3) in the event that Health Net rejects any settlement offer with respect to an Identified Health Net Indemnity Claim (over Supplier’s written objection, assuming Health Net has complied with its obligations under Section 23.4(b)(ii)(B)(2) above) and later settles such Identified Health Net Indemnity Claim for an amount exceeding any rejected settlement offer, or has a judgment entered against it with respect to such Identified Health Net Indemnity Claim for an amount exceeding any rejected settlement offer, then Supplier will be responsible only for reimbursing Health Net for the lesser of (a) the lowest rejected settlement offer with respect to such Identified Health Net Indemnity Claim; or (b) the reasonable amounts paid or payable by Health Net in settlement of such Identified Health Net Indemnity Claim, considering the factors described in Section 23.4(b)(ii)(B)(1) above; and

 

  (4) subject to the limitations described in Sections 23.4(b)(ii)(B)(1) and 23.4(b)(ii)(B)(3) above, Supplier will promptly reimburse Health Net upon demand for all Losses suffered or incurred by Health Net as a result of or in connection with such Identified Health Net Indemnity Claim; and

 

  (5) in the event of a dispute between the Parties as to the reasonableness of the amount of a settlement that Health Net approves or the reasonableness of costs, including but not limited to attorneys’ fees, of defending the Identified Health Net Indemnity Claim, (i) Supplier shall reimburse Health Net for that portion of the settlement or defense costs that it believes in good faith to be a reasonable amount, and (ii) the Parties agree to use the arbitration process described in Section 23.4(e) below to resolve any dispute relating to the reasonableness of the difference between the actual amount of the settlement that Health Net approves or the defense costs that Health Net incurs and the amount that Supplier reimbursed Health Net pursuant to item (i).

 

  (c) Procedure Where No Proper Notice of Election Is Delivered (Applicable to all Indemnity Claims including, for clarity, Identified Health Net Indemnity Claims).

If the indemnitor does not deliver a timely (i.e., in accordance with Section 23.4(a)) Notice of Election that both (i) acknowledges its obligation to indemnify and hold the indemnitee harmless with respect to the Indemnity Claim, and (ii) in the case of any Indemnity Claim

 

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that is not an Identified Health Net Indemnity Claim, includes an express election by the indemnitor to assume control of the defense and settlement of the Indemnity Claim, then the indemnitee may defend and/or settle the Indemnity Claim in such manner as it may deem appropriate at the cost and expense of the indemnitor, including payment of any settlement, judgment or award and the costs of defending or settling the Indemnity Claim. The indemnitor will promptly reimburse the indemnitee upon demand for all Losses suffered or incurred by the indemnitee as a result of or in connection with the Indemnity Claim.

 

  (d) Cooperation regarding Indemnity Claims. The indemnitor and the indemnitee shall provide reasonable cooperation with one another in connection with the defense and resolution of any Indemnity Claim, provided that any costs incurred by the indemnitee in connection with such cooperation shall be borne by the indemnitor, and shall be promptly reimbursed by the indemnitor upon demand from the indemnitee.

 

  (e) Arbitration of Disputed Settlement Amounts.

 

  (i) A dispute between the Parties as described in Section 23.4(b)(ii)(B)(5) above shall be finally settled by mandatory and binding arbitration administered by the American Arbitration Association (“AAA”) in accordance with its then-effective Commercial Arbitration Rules (the “Rules”). One (1) arbitrator shall be appointed in accordance with the Rules. Either Party may initiate arbitration by submitting a written request for arbitration to the AAA and the other Party, setting forth in reasonable detail the subject of the dispute and the relief requested.

 

  (ii) The arbitration shall be conducted in accordance with the Rules, provided that to the extent this Section 23.4(e) modifies, supplements or is inconsistent with the Rules, this Section 23.4(e) will govern. The arbitrator shall have no power or authority to amend or disregard any provision of this Section 23.4(e) or any other provision of this Agreement. The arbitration hearing shall be commenced promptly and conducted expeditiously, with each Party being allocated one-half of the time for the presentation of its case.

 

  (iii) Unless otherwise agreed by the Parties, arbitration hearings hereunder shall be held in Los Angeles, California. The language of the arbitration shall be English. Unless otherwise agreed by the Parties, an arbitration hearing shall be conducted on consecutive days. The Parties will participate in the arbitration in good faith, and will share equally in the administrative costs of the arbitration; provided however, that each Party will pay its own attorneys’ fees (subject to the next sentence). The arbitrator may, in his or her discretion, award the prevailing Party its attorneys’ fees and out-of-pocket expenses, including its share of the arbitration fees.

 

  (iv) Recognizing the express desire of the Parties for an expeditious means of dispute resolution, (A) each Party will, upon the written request of the other Party, promptly provide the other with copies of documents relevant to the issues raised by the dispute, and (B) there will be no depositions.

 

  (v) The award shall be made within thirty (30) days of the filing of the notice of intention to arbitrate (demand), and the arbitrator shall agree to comply with this schedule before accepting appointment. However, this time limit may be extended by agreement of the Parties or by the arbitrator if necessary.

 

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  (vi) The arbitration shall be conducted as follows:

 

  (A) Each Party shall submit to the arbitrator and exchange with each other not less than seven (7) days prior to the scheduled hearing date their last, best offers, along with a brief and documentation in support of their offer. The arbitrator shall have the authority to limit the length of such submissions.

 

  (B) The arbitration hearing shall not exceed eight (8) hours and may be less if the arbitrator decides that less time is required.

 

  (C) The arbitrator shall be limited to awarding only one or the other of the two figures submitted. The arbitrator shall not have the option of deciding upon a resolution that reflects a compromise between (or is outside of) the Parties’ respective proposed resolutions. For example, if the amount that Health Net demands from Supplier (above any amounts already reimbursed by Supplier pursuant to Section 23.4(b)(ii)(B)(5)(i) above) as its last, best offer is $250,000, and Supplier has proposed to reimburse Health Net an additional $150,000 as its last, best offer, the arbitrator shall determine which of the two proposals (i.e., $250,000 or $150,000) is more appropriate and may not select an amount somewhere between (or outside of) the two proposals.

 

  (vii) The arbitrator’s decision shall be final and binding on the Parties, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

 

  (viii) The arbitrator is instructed that time is of the essence in the arbitration proceeding.

 

24. LIABILITY

 

24.1 General Intent

Subject to the specific provisions of this Section 23.1 (Liability), it is the intent of the Parties that if a Party fails to perform its obligations in the manner required by this Agreement, that Party will be liable to the other Party for any damages suffered or incurred by the other Party as a result.

 

24.2 Limitations of Liability

 

  (a) Consequential Damage Exclusion. Except as otherwise expressly provided below in this Section 24, in no event, whether in contract or in tort (including breach of warranty, negligence and strict liability in tort or otherwise), will a Party be liable to the other Party under this Agreement for (1) indirect, incidental, consequential, exemplary, punitive or special damages of any kind or nature whatsoever, or (2) lost revenues, profits, savings or business, even if such Party has been advised in advance of the possibility of such damages or such damages could have been reasonably foreseen by such Party.

 

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  (b) General Liability Cap. Except as otherwise expressly provided below in this Section 24, each Party’s total liability to the other under this Agreement, whether in contract or in tort (including breach of warranty, negligence and strict liability in tort) will be limited, in the aggregate, to an amount equal to the greater of:

 

  (i) ***; and

 

  (ii) the total charges paid or payable by Health Net to Supplier pursuant to this Agreement for proper performance of the Services for the twelve (12) months prior to the month in which the most recent event giving rise to liability occurred, provided that if the event giving rise to liability occurs during the first twelve (12) months after the BPaaS Services Commencement Date, the liability cap under this clause (ii) will be an amount equal to twelve (12) times the result obtained by dividing the total charges paid or payable under this Agreement from the BPaaS Services Commencement Date through the date on which such event occurred, by the number of months from the BPaaS Services Commencement Date through such date***.

Service Level Credits and Deliverable Credits do not count against and do not reduce the amounts available under the foregoing limitations. The limitations specified in this Section will survive and apply even if any limited remedy specified in this Agreement is found to have failed of its essential purpose. For purposes of this Section, fees shall be deemed payable when accrued to the benefit of and legally collectable by Supplier.

 

  (c) Items to which the Liability Caps and Consequential Damages Exclusion do not apply. Sections 24.2(a) and 24.2(b) will not apply to any of the following:

 

  (i) damages arising out of the intentional or reckless misconduct or gross negligence of a Party;

 

  (ii) damages arising out of (A) the improper or wrongful termination of this Agreement by Supplier, or (B) abandonment of the Services by Supplier (except to the extent any such cessation of Services is expressly permitted under this Agreement), or (C) Supplier’s refusal or failure to provide Disengagement Assistance as required by this Agreement;

 

  (iii) damages arising out of a Party’s breach of its obligations in Article 21 (Confidentiality), except with respect to Protected Health Information and Personally Identifiable Information (which are governed by Section 24.2(d)(iii) below);

 

  (iv) damages arising out of a Party’s breach of its obligations to comply with applicable Laws as set forth in Section 27.7;

 

  (v) Claims and Losses that are the subject of indemnification pursuant to Sections 23.1 (Indemnification by Supplier) and 23.3 (Indemnification by Health Net), but not those indemnities described in Section 24.2(d)(iv).

 

  (d) Liability Cap relating to PHI, PII and certain other items. Notwithstanding Sections 24.2(a), 24.2(b), and 24.2(e), each Party’s total liability to the other, including under this Agreement, whether in contract or in tort (including breach of warranty, negligence and strict liability in tort) for all claims, liabilities and damages relating to or arising from the following, will be limited in the aggregate, to ***:

 

  (i) A Party’s breach of the Business Associate Agreement, including breaches related to Protected Health Information;

 

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  (ii) A Party’s breach of its obligations in Article 14 (Data Security And Protection) or damages attributable to Supplier’s breach of its obligations with respect to Health Net Data;

 

  (iii) a Party’s breach of its obligations in Article 21 (Confidentiality) relating to Protected Health Information or Personally Identifiable Information;

 

  (iv) Claims and Losses that are the subject of indemnification pursuant to Section 23.1(d) and 23.1(e) (Indemnification by Supplier) and 23.3(e) (Indemnification by Health Net);

 

  (v) a Party’s misappropriation or infringement of the other Party’s Intellectual Property Rights; and

 

  (vi) any other damages relating to Health Net Data or Personally Identifiable Information, or a Security Breach.

For clarity, the exclusions of liability set forth in Section 24.2(a) will not apply to any of the damages described in this Section 24.2(d).

 

  (e) Damages Subcap relating to TPUSA. Notwithstanding Section 24.2(b), Supplier’s total liability to Health Net arising out of the acts or omissions of TPUSA in its role as an Approved Subcontractor providing Contact Center Services under this Agreement, whether in contract or in tort (including breach of warranty, negligence and strict liability in tort) will be limited, in the aggregate, to the greater of:

 

  (i) *** of the total charges paid or payable by Health Net to Supplier pursuant to this Agreement for proper performance of the Services for the twelve (12) months prior to the month in which the most recent event based on TPUSA’s acts or omissions giving rise to liability occurred, provided that if the event giving rise to liability occurs during the first twelve (12) months after the BPaaS Services Commencement Date, the liability cap amount for this clause (i) will be an amount equal to (A) *** of (B) twelve (12) times the result obtained by dividing (1) the total charges paid or payable under this Agreement from the BPaaS Services Commencement Date through the date on which such event occurred, by (2) the number of months from the BPaaS Services Commencement Date through such date; and

 

  (ii) *** with respect to the following items: (a) damages arising out of the intentional or reckless misconduct or gross negligence of TPUSA, (b) damages arising out of TPUSA’s improper or wrongful termination of Supplier’s subcontract agreement with TPUSA for the Contact Center Services, wrongful abandonment of the Services by TPUSA or TPUSA’s refusal or failure to provide disengagement assistance as required by Supplier’s subcontract agreement with TPUSA, (c) TPUSA’s obligations under Sections 6.5 (Compliance with Law), Section 7 (Intellectual Property and Confidentiality) or Section 9 (Indemnity) of Supplier’s subcontract agreement with TPUSA for the Contact Center Services.

 

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Notwithstanding the foregoing, the cap set forth in this Section 24.2(e) shall not apply to the extent that the TPUSA-caused event giving rise to liability is the result of Supplier’s failure to properly manage (i) TPUSA or (ii) the Services performed by TPUSA. For clarity, the exclusions set forth in Section 24.2(a) will not apply to any of the damages governed by this Section 24.2(e) to the extent that they are also covered under Sections 24.2(c), 24.2(d) or 24.2(f).

 

  (f) Stipulated Direct Damages. Without limiting (1) each Party’s responsibility for direct damages under this Agreement, and (2) each Party’s right to claim other direct damages, the following items shall be considered direct damages under this Agreement and are not prohibited by Section 24.2(a), to the extent they are reasonable:

 

  (i) Costs incurred by Health Net to correct or have corrected any errors or other deficiencies in the Services rendered by Supplier;

 

  (ii) Any portion of overpayments paid by Health Net to members due to errors of Supplier that remain unrecovered by Health Net ***;

 

  (iii) Amounts paid by Health Net for interest arising out of Supplier’s performance of the Services relating to examiner error ***;

 

  (iv) Amounts paid by Health Net for fines arising out of Supplier’s performance of the Services during each calendar year ***

 

  (v) Performance Guarantee Group Payment Amounts owed by Supplier to Health Net pursuant to Schedule B (Service Levels);

 

  (vi) Costs of recreating, restoring or reloading any of Health Net’s information lost or damaged as a result of a failure by Supplier to perform the Services at all or in accordance with this Agreement. Such recreation, restoration and reloading costs shall include all activities and efforts that an IT group of a health insurance company may reasonably undertake to recreate, restore or reload such lost or damaged information, using efforts that are proportionate to the importance to Health Net of the information to be recreated, restored or reloaded and the volume of such lost or damaged information;

 

  (vii) Costs of implementing a workaround in respect to a failure to perform the Services at all or in accordance with this Agreement;

 

  (viii) Costs and expenses incurred by Health Net to acquire and have performed substitute services conforming to this Agreement in place of any Services Supplier fails to provide at all or in accordance with this Agreement;

 

  (ix) Straight time, overtime, or related expenses incurred by Health Net or its Affiliates, including wages and salaries of additional personnel, travel, expenses, telecommunication and similar charges, arising out of the failure of Supplier to perform at all or in compliance with this Agreement;

 

  (x) Amounts required to be paid by Health Net under any Law or by any court or governmental or regulatory authority, or incurred by Health Net to create and implement any corrective actions plan, and to satisfy an order or directive of a court or governmental or regulatory authority arising out of Supplier’s acts or omissions, and costs arising from settlements with such authorities, provided that interest and fines shall be governed by Sections 24.2(f)(iii) and (iv) above;

 

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  (xi) Identity-Related Costs incurred by Health Net, except to the extent that Supplier is able to demonstrate that a Security Breach was caused by Health Net’s negligence, willful misconduct or breach of this Agreement, and

 

  (xii) Damages arising out of a breach by Supplier of its obligations under Section 3.6 Schedule E (Transitioned Employees) with respect to the retention of Personnel Groups of Transitioned Personnel,

provided, however, that nothing in this Section 24.2(f) shall limit Supplier’s obligations or liability under Section 23.1 (Indemnification by Supplier) above.

Each Party shall pay to the other Party upon request of such other Party any amount for which it is responsible under Sections 24.2(f)(ii). 24.2(f)(iii), 24.2(f)(iv), 24.2(f)(v) and 24.2(f)(xi) .

 

  (g) For clarity, the amounts spent by an indemnitor in defense of a Claim for which it is responsible under this Agreement shall not be counted for purposes of computing the amount of total damages that have been incurred relative to the liability cap set forth in Section 24.2.

 

  (h) Each Party has a duty to mitigate the damages suffered by it for which the other Party is or may be liable.

 

24.3 Force Majeure

 

  (a) No Party will be liable for any default or delay in the performance of its obligations under this Agreement (i) if and to the extent such default or delay is caused, directly or indirectly, by fire, flood, pestilence, earthquake, elements of nature or acts of God, riots, or civil disorders, (ii) provided the non-performing Party is without fault in causing such default or delay, and such default or delay could not have been prevented by reasonable precautions and could not reasonably be circumvented by the non-performing Party through the use of alternate sources, workaround plans or other means (including with respect to Supplier by Supplier meeting its obligations for performing disaster recovery and business continuity services as described in this Agreement) (each such event a “Force Majeure Event”).

 

  (b) In such event the non-performing Party will be excused from further performance or observance of the obligations so affected for as long as such circumstances prevail and such Party continues to use Commercially Reasonable Efforts to recommence performance or observance without delay. Any Party so delayed in its performance will immediately notify the Party to whom performance is due by telephone (to be confirmed in writing within twenty-four (24) hours of the inception of such delay) and describe at a reasonable level of detail the circumstances causing such delay. To the extent the provision of the Services or any part thereof is prevented or materially affected by a Force Majeure Event, Health Net’s obligation to pay Charges hereunder shall accordingly be reduced by an equitable amount (which in the case of total suspension of the Services would be an amount equal to the total charges hereunder for the period of suspension).

 

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  (c) If any event under Section 24.3(a) substantially prevents, hinders or delays performance of the Services, then Supplier shall use Commercially Reasonable Efforts to identify another Supplier location from which it might provide the Services without interference from such event, and if Health Net requests, Supplier shall assist Health Net in identifying an alternate source that may be able to provide the Services to Health Net during the time of such Force Majeure Event. If any event under Section 24.3(a) substantially prevents, hinders or delays performance of the Services necessary for the performance of functions reasonably identified by Health Net as critical for more than five (5) consecutive business days, then at Health Net’s option: (i) Health Net may procure such Services from an alternate source, and in such event Supplier will reimburse Health Net for one-half of the difference between (A) the amount Health Net is obligated to pay the alternate source for such services, and (B) the amount that Health Net would have paid Supplier for such Services under this Agreement, for a period not to exceed one hundred eighty (180) days; (ii) Health Net may terminate any portion of this Agreement (including a SOW or a portion of a SOW) so affected without charge to Health Net or liability to Supplier and the Charges payable under this Agreement will be equitably adjusted to reflect those terminated Services; or (iii) Health Net may terminate this Agreement, without charge to Health Net or liability to Supplier, as of a date specified by Health Net in a written notice of termination to Supplier. Supplier will not have the right to any additional payments from Health Net for costs or expenses incurred by Supplier as a result of any Force Majeure Event.

 

  (d) A Force Majeure Event will not relieve Supplier of its obligations to implement successfully all of the Services relating to disaster recovery services that are included in this Agreement within the time period described in this Agreement.

 

25. RULES OF CONSTRUCTION

 

25.1 Entire Agreement

This Agreement – consisting of the signature page, these Terms and Conditions and the attached Schedules and all SOWs and their attached Exhibits – constitutes the entire agreement between the Parties with respect to its subject matter and merges, integrates and supersedes all prior and contemporaneous agreements and understandings between the Parties (including as described in Section 3.1(c), the Original BPO Agreement), whether written or oral, concerning its subject matter. For clarity, at such time as the Original BPO Agreement is terminated as provided in Section 3.1(c), Health Net will not owe any penalties, termination fees, wind-down charges, or similar fees or charges in connection with such termination.

 

25.2 Contracting Parties; No Third Party Beneficiaries

This Agreement is entered into solely between, and may be enforced only by, Health Net and Supplier. This Agreement does not create any legally enforceable rights in third parties, including suppliers, subcontractors and customers of a Party, except as provided in this paragraph and Section 23 (Indemnification).

 

25.3 Contract Amendments and Modifications

Any terms and conditions varying from this Agreement on any order or written notification from either Party will not be effective or binding on the other Party. This Agreement may be amended or modified solely in a writing signed by an authorized representative of each Party.

 

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25.4 Governing Law

This Agreement and performance under it shall be governed by and construed in accordance with the laws of the state of California without regard to its choice of law principles.

 

25.5 Relationship of the Parties

Supplier, in furnishing the Services, is acting as an independent contractor. Supplier has the sole right and obligation to supervise, manage, contract, direct, procure, perform or cause to be performed, all work to be performed by Supplier under this Agreement. Supplier is not an agent or partner of Health Net and has no authority to represent or bind Health Net as to any matters, except as expressly authorized in this Agreement. This Agreement establishes a nonexclusive relationship between the Parties.

 

25.6 Consents and Approvals

Where approval, acceptance, consent or similar action by either Party is required under this Agreement, such action will not be unreasonably delayed, conditioned or withheld unless this Agreement expressly provides that it is in the discretion of the Party. No approval or consent given by a Party under this Agreement will relieve the other Party from responsibility for complying with the requirements of this Agreement, nor will it be construed as a waiver of any rights under this Agreement (except to the extent, if any, expressly provided in such approval or consent). Each Party will, at the request of the other Party, perform those actions, including executing additional documents and instruments, reasonably necessary to give full effect to this Agreement.

 

25.7 Waiver

No failure or delay by a Party in exercising any right, power or remedy will operate as a waiver of that right, power or remedy, and no waiver will be effective unless it is in writing and signed by an authorized representative of the waiving Party. If a Party waives any right, power or remedy, the waiver will not waive any successive or other right, power or remedy that Party may have.

 

25.8 Remedies Cumulative

Except as otherwise expressly provided in this Agreement, all remedies provided in this Agreement are cumulative and in addition to and not in lieu of any other remedies available to a Party under this Agreement, at law, or in equity.

 

25.9 References

 

  (a) The section headings and the table of contents used in this Agreement are for convenience of reference only and will not enter into the interpretation of this Agreement.

 

  (b) Unless otherwise indicated, section references are to sections of the document in which the reference is contained. For example, section references in these Terms and Conditions are to sections of the Terms and Conditions and, likewise, section references in a Schedule to this Agreement are to sections of that Schedule.

 

  (c) References to numbered (or lettered) sections of this Agreement also refer to and include all subsections of the referenced section.

 

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  (d) Unless otherwise indicated, references to Schedules to this Agreement also refer to and include all sub-Schedules to the referenced Schedule.

 

25.10 Rules of Interpretation

 

  (a) Unless the context requires otherwise, (i) “including” (and any of its derivative forms) means including but not limited to, (ii) “may” means has the right, but not the obligation to do something and “may not” means does not have the right to do something, (iii) “will” and “shall” are expressions of command, not merely expressions of future intent or expectation, (iv) “written” or “in writing” is used for emphasis in certain circumstances, but that will not derogate from the general application of the notice requirements set forth in Section 27.5 (Notices) in those and other circumstances, (v) use of the singular imports the plural and vice versa, and (vi) use of a specific gender imports the other gender(s).

 

  (b) References in this Agreement to “hours”, days, or yearsthat do not specifically refer to Business Hours, Business Days or Contract Years are references to clock hours, calendar days, or calendar years, respectively, unless otherwise provided.

 

25.11 Order of Precedence

 

  (a) If there is any conflict between this Agreement and any document incorporated by reference into this Agreement, the Parties shall attempt to read any such conflicting provisions consistently, however, in the event such a consistent reading cannot be accomplished, the order of precedence will be as follows: (i) the Terms and Conditions and any amendments thereto, (ii) the Schedules, (iii) the Initial SOWs and the Transition Manual (it being the intent of the Parties that such documents shall be give equal priority), (iv) other attachments to this Agreement, and (v) other documents incorporated by reference.

 

  (b) If there is any conflict between any Future SOW and the other terms of this Agreement, the Parties shall attempt to read any such conflicting provisions consistently, however, in the event such a consistent reading cannot be accomplished, such Future SOW will take precedence over such other terms of this Agreement with respect to such Future SOW only if and to the extent the requirements of Section 3.7(a)(ii)(A) are satisfied. If such requirements are not satisfied, then the other terms of this Agreement shall govern.

 

25.12 Severability

If any provision of this Agreement conflicts with the Law under which this Agreement is to be construed or if any provision of this Agreement is held invalid, illegal, or otherwise unenforceable by a competent authority, such provision will, if possible, be deemed to be restated to reflect as nearly as possible the original intentions of the Parties in accordance with applicable Law. In any event, the remainder of this Agreement will remain in full force and effect.

 

25.13 Counterparts

This Agreement may be executed in several counterparts and by facsimile or PDF signature, all of which taken together constitute a single agreement between the Parties. Each signed counter-part, including a signed counterpart reproduced by reliable means (including facsimile and PDF), will be considered as legally effective as an original signature.

 

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25.14 Reading Down

If a provision of this Agreement is reasonably capable of an interpretation which would make that provision valid, lawful and enforceable and an alternative interpretation that would make it unenforceable, illegal, invalid or void then, so far as is possible, that provision will be interpreted or construed to be limited and read down to the extent necessary to make it valid and enforceable.

 

26. DISPUTE RESOLUTION

Any dispute between the Parties arising out of or relating to this Agreement, including with respect to the interpretation of any provision of this Agreement or with respect to performance by Supplier or Health Net, will be resolved as provided in this Section 26 (Dispute Resolution).

 

26.1 Informal Dispute Resolution

 

  (a) Subject to Section 26.1(b), the Parties initially will attempt to resolve any dispute arising out of or relating to this Agreement informally in accordance with the following:

 

  (i) Within ten (10) days after a Party receives notice of a dispute from the other Party (“Dispute Date”), it will designate a senior representative (i.e., a person whose rank within the company is superior to, in the case of Supplier, the Client Partner, and in the case of Health Net, the Health Net Program Manager) who does not devote substantially all of his time to performance under this Agreement, who will offer to meet with the designated senior representative of the other Party for the purpose of attempting to resolve the dispute amicably.

 

  (ii) The appointed representatives will meet promptly to discuss the dispute and attempt to resolve it without the necessity of any formal proceeding. They will meet as often as the Parties deem necessary in order that each Party may be fully advised of the other’s position. During the course of discussion, all reasonable requests made by one Party to the other for non-privileged information reasonably related to the matters in dispute will be honored promptly.

 

  (iii) The specific format for the discussions will be left to the discretion of the appointed representatives.

 

  (b) Formal dispute resolution may be commenced by a Party upon the first to occur of any of the following:

 

  (i) the appointed representatives conclude in good faith that amicable resolution of the dispute through continued negotiation does not appear likely;

 

  (ii) thirty-five (35) days have passed from the Dispute Date (this period will be deemed to run notwithstanding any claim that the process described in this Section 26.1 (Informal Dispute Resolution) was not followed or completed); or

 

  (iii) commencement of formal dispute resolution is deemed appropriate by a Party to avoid the expiration of an applicable limitations period or to preserve a superior position with respect to other creditors, or a Party makes a good faith determination, including as provided in Section 26.4 (Equitable Remedies), that a breach of this Agreement by the other Party is such that a temporary restraining order or other injunctive or conservatory relief is necessary.

 

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  (c) All timeframes specified in this Section 26.1 are not-to-exceed durations. In the event of disputes related to compliance with Laws, Health Net may request (and Supplier shall use all best efforts to comply with) shorter timeframes as needed in order for Health Net to respond to any Regulator or regulatory deadlines.

 

26.2 Litigation

For all litigation which may arise with respect this Agreement, the Parties irrevocably and unconditionally submit (a) to the exclusive jurisdiction and venue (and waive any claim of forum non conveniens and any objections as to laying of venue) of the United States District Court for the Central District of California, or (b) if such court does not have subject matter jurisdiction, to the Superior Court of the State of California, Los Angeles County in connection with any action, suit or proceeding arising out of or relating to this Agreement. The Parties further consent to the jurisdiction of any state court located within a district that encompasses assets of a Party against which a judgment has been rendered for the enforcement of such judgment or award against the assets of such Party.

 

26.3 Continued Performance

Each Party agrees (a) to continue performing its obligations under this Agreement while a dispute is being resolved except (and then only) to the extent performance is prevented by the other Party or the issue in dispute precludes performance, and (b) not to take any action that intentionally obstructs, delays, or reduces in any way the performance of such obligations. For the avoidance of doubt, a good faith dispute regarding invoiced charges and Health Net’s withholding payment of disputed charges as permitted under this Agreement will not be considered to prevent Supplier from performing the Services or preclude performance by Supplier, nor will this Section 26.3 be interpreted to limit either Party’s right to terminate this Agreement (in whole or in part) or any SOW (in whole or in part) as provided in Section 16 (Termination).

 

26.4 Equitable Remedies

Each Party acknowledges that a breach of any of its obligations under the Sections of this Agreement listed below, or its infringement or misappropriation of any Intellectual Property Rights of the other Party, may irreparably harm the other Party in a way that could not be adequately compensated by money damages. In such a circumstance, the aggrieved Party may (in addition to all other remedies and rights) proceed directly to court notwithstanding the other provisions of this Section 26 (Dispute Resolution). If a court of competent jurisdiction should find that a Party has breached (or attempted or threatened to breach) any such obligations, such Party agrees that without posting bond or proving damages and without any additional findings of irreparable injury or other conditions to injunctive relief, it will not oppose the entry of an appropriate order compelling its performance of such obligations and restraining it from any further breaches (or attempted or threatened breaches) of such obligations. The following Sections are subject to this paragraph:

 

  (a) Section 14 (Data Security and Protection);

 

  (b) Section 15 (Intellectual Property Rights);

 

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  (c) Section 16 (Termination);

 

  (d) Section 21 (Confidentiality);

 

  (e) Section 23 (Indemnification);

 

  (f) Section 27.7; and

 

  (g) Schedule E (Transitioned Employees).

 

26.5 Waiver of Jury Trial

THE PARTIES HEREBY UNCONDITIONALLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING DIRECTLY OR INDIRECTLY OUT OF, RELATED TO, OR IN ANY WAY CONNECTED WITH, THE PERFORMANCE OR BREACH OF THIS AGREEMENT, OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN THEM. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT OR OTHER TRIBUNAL (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, AND RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A CONSENT TO A TRIAL BY THE COURT.

 

26.6 Disclaimer of Uniform Computer Information Transactions Act

TO THE MAXIMUM EXTENT PERMITTED UNDER APPLICABLE LAW, THE PARTIES DISCLAIM AND NONE OF THIS AGREEMENT SHALL BE SUBJECT TO THE UNIFORM COMPUTER INFORMATION TRANSACTIONS ACT (“UCITA”) (PREPARED BY THE NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS) AS CURRENTLY ENACTED OR AS MAY BE ENACTED, CODIFIED OR AMENDED FROM TIME TO TIME BY ANY JURISDICTION. TO THE EXTANT THAT ANY ASPECT OF THIS AGREEMENT OR ANY LICENSE GRANTED UNDER THIS AGREEMENT IS UNCLEAR OR DISPUTED BY THE PARTIES AND UCITA, IF APPLIED, WOULD CLARIFY SUCH LICENSE OR RESOLVE SUCH DISPUTE, THE PARTIES AGREE TO CLARIFY SUCH LICENSE OR RESOLVE SUCH DISPUTE INDEPENDENTLY OF UCITA BY APPLYING THE INTENT OF THE PARTIES AT THE TIME THAT THEY ENTERED THIS AGREEMENT.

 

27. GENERAL

 

27.1 Binding Nature and Assignment

This Agreement is binding on the Parties and their respective successors and permitted assigns. Supplier acknowledges that the Services are personal in nature and that, as a result, Supplier may not assign this Agreement or delegate (except to Subcontractors as permitted in Section 7.7 its rights or obligations under this Agreement, whether by operation of law or otherwise, without the

 

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prior written consent of Health Net (which may be conditioned upon Health Net (or the applicable Health Net Affiliate or Health Net lines of business) providing prior notification to, and receiving approval from, applicable Regulator(s) and customers). Health Net may not assign this Agreement or delegate its rights or obligations under this Agreement without the prior written consent of Supplier except to a Health Net Affiliate or to the successor in a merger or reorganization of Health Net or an entity that acquires Control of Health Net or acquires all or substantially all of Health Net’s business or assets. Any attempted assignment in violation of this Section 27.1 will be void and will constitute a material breach of this Agreement by the Party attempting the assignment. A Party assigning this Agreement or delegating its rights or obligations under this Agreement must provide prompt notice of the assignment or delegation to the other Party after its effective date, subject to the prior regulatory approval set out above.

 

27.2 Ethics Hotline

Supplier agrees to report any violation of Law (including HIPAA and the FCPA) committed by Supplier, its employees or subcontractors in the performance of the Services to Health Net’s Ethics Hotline at (888) 866-1366 or Health Net’s Ethics Officer at Health Net’s address for Notices.

 

27.3 Nondiscrimination

 

  (a) Neither Party shall discriminate against any Beneficiary in the provision of Services hereunder, whether on the basis of the Beneficiary’s coverage under a Benefit Program, age, sex, marital status, sexual orientation, race, color, religion, ancestry, national origin, disability, handicap, health status, source of payment, utilization of medical or mental health services or supplies, or other unlawful basis including, without limitation, the filing by such Beneficiary of any complaint, grievance or legal action against Supplier, Health Net, or a Health Net Affiliate. Supplier agrees to make reasonable accommodations for Beneficiaries with disabilities or handicaps, including but not limited to, providing auxiliary aids and services to Beneficiaries at Supplier’s expense, as required by law.

 

  (b) This Agreement is subject to the affirmative action and nondiscrimination requirements of Executive Order 11246 as amended, Section 503 of the Rehabilitation Act of 1973, and Section 402 of the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, and with all rules, regulations, pertaining thereto, which are incorporated herein by specific reference.

 

  (c) Supplier and its subcontractors shall abide by the requirements of 41 CFR 60-300.5(a) and 60-741.5(a). These regulations prohibit discrimination against qualified individuals on the basis of protected veteran status or disability, and require affirmative action by covered prime contractors and subcontractors to employ and advance in employment qualified protected veterans and individuals with disabilities.

 

27.4 Beneficiary Hold Harmless

Supplier will (a) not hold any Beneficiary liable for fees that are the responsibility of Health Net or a Health Net Affiliate; and (b) ensure that Supplier’s subcontractors will not hold any Beneficiary liable for fees that are the responsibility of Health Net or a Health Net Affiliate.

 

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27.5 Notices

 

  (a) All notices, requests, demands and determinations under this Agreement (other than routine operational communications), shall be in writing and shall be deemed duly given (i) when delivered by hand, (ii) on the designated day of delivery after being timely given to an express overnight courier with a reliable system for tracking delivery, (iii) six (6) days after the day of mailing, when mailed by United States mail, registered or certified mail, return receipt requested and postage prepaid, and addressed as follows:

 

  (i) In the case of Health Net:

Health Net, Inc.

21650 Oxnard Street

Woodland Hills, CA 91367

Attn: Vendor Management Officer

With a copy to:

Health Net, Inc.

21650 Oxnard Street

Woodland Hills, CA 91367

Attn: General Counsel

 

  (ii) In the case of Supplier:

Cognizant Technology Solutions US Corporation

500 Frank W. Burr Blvd.

Teaneck, New Jersey 07666

Attn: General Counsel

 

  (b) A Party may from time to time change its address or designee for notification purposes by giving the other prior written notice of the new address or designee and the date upon which it will become effective.

 

27.6 Non-solicitation of Employees

 

  (a) Except as provided in Schedule E (Employee Transfer), Supplier will not solicit or seek to procure the employment of any Health Net personnel, either directly or indirectly (other than by general advertising not specifically targeted at Health Net’s employees) until after the date on which any such Health Net personnel is terminated by Health Net, or three (3) months after any such Health Net Personnel voluntarily ceases to be employed by Health Net, without the prior written consent of Health Net (which consent is deemed given as of the Effective Date for the Affected Employees).

 

  (b) Except as provided in Schedule L (Disengagement Assistance), Health Net will not solicit or seek to procure the employment of any Supplier Personnel, either directly or indirectly (other than by general advertising not specifically targeted at Supplier’s employees) until after the date on which any such Supplier Personnel is terminated by Supplier, or three (3) months after any such Supplier personnel voluntarily ceases to be employed by Supplier, without the prior written consent of Supplier.

 

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27.7 Compliance with Laws

 

  (a) Supplier’s Obligations.

 

  (i) Supplier agrees at its cost and expense (x) to comply with its obligations under the Regulatory Compliance Addendum attached hereto as Schedule K (Regulatory Compliance Addendum), and (y) obtain all necessary approvals, licenses, and permits required by Law, and to comply with all Laws, in each case as applicable to:

 

  (A) its business (or that of any of its Affiliates);

 

  (B) the performance of any of its obligations under this Agreement;

 

  (C) the Services that Supplier is obligated to provide under this Agreement, including as such obligations may evolve pursuant to this Agreement, including Services provided with respect to any jurisdiction in which Health Net does business; or

 

  (D) its obligations under Sections 14.3, 14.6, 14.8, and 14.9.

 

  (ii) If Supplier is charged with failing to comply with any such Laws, it shall promptly notify Health Net of the charges in writing.

 

  (iii) Supplier shall identify, track and report any failure by Supplier to comply with Laws or failure (or suspected failure) to comply with the Compliance Services set forth in Section 3.5 of Schedule A (Cross Functional Services). Such report shall be made to Health Net with five (5) days of Supplier’s learning of same.

 

  (iv) Health Net, not Supplier, shall be responsible (as provided in Section 27.7(b)(iii)(ii) below) for discovering, identifying, and notifying Supplier of new Laws and changes in Laws applicable to Health Net’s own business and operations that are applicable to the Services but would not otherwise be applicable to Supplier. Upon receiving notification of a new Law or change in Law applicable to the Services, Supplier shall prepare for Health Net’s approval draft policies concerning compliance with the new Law or change in Law. Health Net shall review and the following portions of policies submitted by Supplier: policy statement, policy purpose, scope/limitations, references and definitions (“Reviewed Policy Provisions”), but Supplier shall be responsible for any other portions of such policies. Supplier shall comply with all such Reviewed Policy Provisions approved by Health Net. Supplier shall alone be responsible for the development and implementation of operational procedures to facilitate Supplier’s compliance with such policies.

 

  (b) Health Net’s Obligations.

 

  (i) Health Net agrees at its cost and expense (x) to comply with its obligations under the Regulatory Compliance Addendum attached hereto as Schedule K (Regulatory Compliance Addendum), and (y) obtain all necessary approvals, licenses and permits required by Law, and to comply with all Laws, in each case as applicable to:

 

  (A) its business (or that of any of its Affiliates);

 

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  (B) the performance of any of its obligations under this Agreement; or

 

  (C) its obligations under Sections 14.6 and 14.8.

 

  (ii) If Health Net is charged with failing to comply with any such Laws it shall promptly notify Supplier of the charges in writing.

 

  (iii) As between Health Net and Supplier, Health Net shall be responsible for discovering, identifying, and notifying Supplier of new Laws and changes in Laws applicable to Health Net’s own business and operations that are applicable to the Services but would not otherwise be applicable to Supplier.

 

  (c) If there is a Law with which Supplier is obligated to comply pursuant to Section 27.7(a) and Health Net is obligated to comply pursuant to Section 27.7(b), each Party shall have the financial responsibility for its own compliance with such Law.

 

  (d) When either Party receives notice of a change in Law applicable to the Services or the other Party’s activities pursuant to this Agreement, such Party will promptly provide notice to the other Party.

 

  (e) For the avoidance of doubt, nothing contained in this Agreement shall require either Party to act in any illegal manner.

 

27.8 Covenant of Good Faith

Each Party, in its respective dealings with the other Party under or in connection with this Agreement, will act reasonably and in good faith.

 

27.9 Public Disclosures

Neither Party shall make any media releases, public announcements or public disclosures relating to this Agreement or the subject matter of this Agreement, including promotional or marketing material, but not including disclosures to the extent required to meet legal or regulatory requirements beyond the reasonable control of the disclosing Party without the prior written consent of the other Party.

 

27.10 Service Marks

Supplier will not, without Health Net’s consent, use the name, service marks or trademarks of Health Net in any advertising or promotional materials prepared by or on behalf of Supplier.

 

27.11 Guaranty

Supplier shall cause the Guaranty Agreement, attached as Schedule V (Guaranty), to be executed by Cognizant Technology Solutions Corporation and delivered to Health Net concurrently with the execution of this Agreement. Failure to do so will constitute a material breach of this Agreement by Supplier.

 

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27.12 Mutually Negotiated

No rule of construction will apply in the interpretation of this Agreement to the disadvantage of one Party on the basis that such Party put forward or drafted this Agreement or any provision of this Agreement.

 

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IN WITNESS WHEREOF, Health Net and Supplier have each caused this Agreement to be signed and delivered by its duly authorized officer, all as of the date first set forth above.

 

Health Net, Inc. Cognizant Healthcare Services, LLC
By: /s/ James E. Woys By: /s/ Steven Schwartz
Print Name: James E. Woys Print Name: Steven Schwartz
Title: EVP, COO & CFO Title: Executive Vice President Chief Legal and
Date:   Corporate Affairs Officer
Date:  

 

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SCHEDULE A

CROSS FUNCTIONAL SERVICES

 

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SCHEDULE A

CROSS FUNCIONAL SERVICES

Table of Contents

 

1

INTRODUCTION   1   
1.1 General   1   
1.2 Solution   1   
1.3 Hours of Coverage   i   
1.4 Definitions   2   
1.5 Changes   3   

2

RESPONSIBLE PARTY   4   

3

CROSS-FUNCTIONAL SERVICES   4   
3.1 Business Continuity & Disaster Recovery Services   5   
3.2 Training Services   8   
3.3 Documentation   9   
3.4 ERM Services   10   
3.5 Regulatory Compliance Adherence Services   10   
3.6 Innovation Services   11   
3.7 Root Cause Analysis Services   13   
3.8 Managed Third Party Contract Services   13   
3.9 Reporting and Analytics Services   16   
3.10 User Acceptance Testing Services   17   
3.11 Return Mail Processing Services   18   
3.12 Inventory Management Services   18   
3.13 Collection of Funds Services   19   
3.14 Issue and Error Resolution Services   19   
3.15 Integration Services   19   
3.16 Translation Services   20   

4

EMBEDDED PROCESSES   20   
4.1 General   20   
4.2 Embedded Processes   20   

 

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SCHEDULE A

CROSS FUNCTIONAL SERVICES

 

1 INTRODUCTION

 

1.1 General

 

  (a) This Schedule A (Cross Functional Services) describes, among other things, those Cross Functional Services and Embedded Processes to be performed and delivered by Supplier, which are applicable to all of the Services performed by Supplier under this Agreement.

 

  (b) The Services are required for Health Net’s business operations in the United States, including its territories.

 

  (c) References to specific resources (e.g., tools, systems) in this Schedule A (Cross Functional Services), any SOW, or elsewhere in the Agreement that are used by Supplier in performing the Services shall be deemed to include successor or replacement resources.

 

  (d) Supplier shall manage and perform the Services in a tightly integrated manner (with appropriate consideration given at all times to the impact of change to all Services).

 

  (e) Supplier shall provide such information as may be reasonably requested by Health Net from time to time to support Health Net’s investigation into potential violations of Health Net’s policies and procedures.

 

  (f) All communications and documentation will be in English unless otherwise specified in the Agreement.

 

  (g) Supplier shall generate and provide to Health Net (i) each operational report generated prior to the BPaaS Services Commencement Date, unless and until Health Net confirms in writing that such operational report is no longer required, (ii) such other operational reports as Health Net may reasonably request from time to time, and (iii) such modifications to or replacements for the foregoing reports as may be necessary to reflect changes to and evolutions of the Cross Functional Services during the term of the Agreement.

 

1.2 Solution

Schedule A-1 (Cross Functional Solution) describes how Supplier will perform and deliver the Services in a manner that meets the requirements of the Agreement (the “Cross Functional Solution”). Except where explicitly noted otherwise, Schedule A-1 (Cross Functional Solution) is intended to describe the future “To-Be” service delivery environment and processes and tools to be implemented and used by Supplier in performing the Services. Supplier’s performance of the Services will be in accordance with the Solution. The Solution may not modify or change the scope of Services to be provided under, or any other terms or conditions of, this Agreement.

 

1.3 Hours of Coverage

The hours of coverage for each of the Services are set forth in Schedule A-1 (Cross Functional Solution). Supplier will at minimum mirror the regular operating hours adhered to by the Health

 

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Net personnel performing the Cross Functional Services as of the Effective Date. Supplier acknowledges and agrees that performance of the Cross Functional Services will regularly require Supplier Personnel to perform additional/overtime work outside regular operating hours, and that such additional/overtime work is within the scope of the Cross Functional Services.

Supplier will extend its hours of operations (for example, through overtime, weekend and holiday work) from time to time as needed to meet regulatory requirements, Compliance and Service Level metrics and other requirements of the Agreement. Supplier’s work during such extended hours of operations is within the scope of the Cross Functional Services.

Within the regular hours of operations set forth in Schedule A-1 (Cross Functional Solution), Supplier will have staff work according to defined shift schedules. However, Supplier will make reasonable efforts to permit Supplier staff to work flexible shift times when that can be done without jeopardizing Supplier’s ability to meet regulatory requirements, Compliance and Service Level metrics and other requirements of the Agreement.

 

1.4 Definitions

Capitalized terms not defined in this Schedule A (Cross Functional Services) shall have the meanings given them in Schedule W (Glossary) or elsewhere in this Agreement.

 

  (a) Channels” means various forms of communication including phone, chat, email, text, and SMS.

 

  (b) Health Net Departments” means Claims, Membership, Configuration, Correspondence, Customer Contact Center, and Appeals & Grievances.

 

  (c) Health Net Investigations” means any effort that Health Net (including the Health Net Compliance Department, Vendor Oversight, or any other department) undertakes to obtain information necessary to perform an internal audit or monitoring process, obtain information necessary to respond to regulators or other external entities, or otherwise ensure compliance with business and regulatory requirements.

 

  (d) Member” means a person who is properly enrolled in and eligible to receive covered services under a Health Net benefit program at the time covered services are rendered.

 

  (e) Plan” means a health insurance plan offered by Health Net.

 

  (f) Provider” means a facility, physician, physician organization, independent practice association, health care provider, supplier, or other organization that may provide covered services.

 

  (g) Ramp Up” means the period of time from when an associate completes process training to the time when the agent starts meeting the required quality SLAs and 100% productivity standards.

 

  (h) Regions” means (i) Arizona, (ii) California, and (iii) Oregon/Washington.

 

  (i) RTO” means recovery time objective.

 

  (j) Supplier Facilities” means those locations set forth in Schedule F (Supplier Facilities).

 

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  (k) Tower(s)” means the set of Services described in each Statement of Work.

 

  (l) Transition Management Office” or “TMO” means the Supplier resources dedicated to managing the Transition as further described in the Transition Manual.

 

1.5 Changes

Material additions to, deletions from, or other changes in the Services described in this Schedule A (Cross Functional Services) are subject to the Change Control Process.

 

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2 RESPONSIBLE PARTY

 

Process /

Function ID

  

Process/Function Name / Description

   Line of
Business
   Region    Resp. Party
            Supplier    HN

CF1

   Business Continuity & Disaster Recovery Services    All    All    X   

CF2

   Training Services    All    All    X   

CF3

   Documentation    All    All    X   

CF4

   ERM Services    All    All    X   

CF5

   Regulatory Compliance Adherence    All    All    X   

CF6

   Innovation    All    All    X   

CF7

   Root Cause Analysis    All    All    X   

CF8

   Managed Third Party Contract Service    All    All    X   

CF9

   Reporting and Analytics    All    All    X   

CF10

   User Acceptance Testing    All    All    X   

CF11

   Return Mail Processing    All    All    X   

CF12

   Inventory Management    All    All    X   

CF13

   Collection of Funds    All    All    X   

CF14

   Issue/Error Resolution    All    All    X   

CF15

   Integration Services    All    All    X   

CF16

   Translation Services    All    All    X   

 

3 CROSS-FUNCTIONAL SERVICES

Supplier shall provide the following cross-functional services (the “Cross Functional Services”) as part of the Services and any other Services the Parties may agree to add to the scope of this Agreement. In the event that Health Net terminates the provision of any part of the Services pursuant to this Agreement, Supplier shall continue to provide the Cross Functional Services set forth in this Section 3 as such Cross Functional Services relate to the remaining Services.

 

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3.1 Business Continuity & Disaster Recovery Services

 

  (a) Business Continuity and Disaster Recovery Services” are (i) the Functions associated with planning, documenting, implementing, maintaining and periodically testing a mutually agreed-upon business continuity plan that ensures that the Services are sustained at a suitable and appropriate level during any business disruption, disaster or Force Majeure event (the “Business Continuity Plan”), and (ii) the IT Continuity and Business Recovery Services set forth in Schedule A-3 (IT Continuity and Business Recovery Services).

 

  (b) Supplier will assume responsibility for performing Business Continuity and Disaster Recovery Services for each Service as of the BPaaS Services Commencement Date. Supplier will adopt Health Net’s then existing business continuity plan for all operations that remain at Health Net Facilities following the BPaaS Services Commencement Date. Supplier will develop a Business Continuity Plan and Disaster Recovery Plan for all Services to be performed at Supplier Facilities (i) prior to the BPaaS Service Commencement Date or (ii) for Services transitioned after the BPaaS Services Commencement Date, prior to the date that such Service is transitioned from a Health Net Facility to a Supplier Facility. No later than eighteen (18) months following the BPaaS Services Commencement Date, Supplier will fully implement a tested Business Continuity Plan for the Services in compliance with all enhanced requirements set forth in this Agreement.

 

  (c) Supplier will ensure during the Transition and during steady state that at all times the Services comply with Health Net’s disaster recovery policies and business requirements (and changes thereto), including any applicable regulatory requirements, to the extent such plans, policies, requirements and regulations apply to the Services. Supplier will store the Business Continuity Plans in readily accessible locations for access in the event of a disaster.

 

  (d) Among other things, the Business Continuity Plan shall:

 

  (i) Contain a brief description of processes and procedures used to recover the Services, and associated time frames for the recovery of such Services, including a prioritized listing of Services, subject to Health Net’s input, review and approval;

 

  (ii) Contain notification procedures to alert Health Net of Service disruptions including off-hour and weekend coverage; and

 

  (iii) Describe Supplier’s and Health Net respective recovery responsibilities.

 

  (e) The Parties will alert each other of any deficiencies discovered in the Business Continuity Plan that would adversely affect Health Net or the provision of Services.

 

  (f) With cooperation and approval from Health Net, Supplier shall review and update, the Business Continuity Plan at a minimum on an annual basis or as otherwise warranted by (i) business or technical changes (or both), (ii) requirements of applicable Laws, and (iii) otherwise as necessary to maintain compatibility with Health Net’s overall business continuity plan. Supplier will receive business direction and requirements from Health Net and must receive authorization from Health Net to make significant changes to the strategic and/or tactical direction of Health Net’s overall business continuity plan.

 

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  (g) As part of the Business Continuity and Disaster Recovery Services, Supplier will:

 

  (i) assess and define functional, performance, availability, maintainability and disaster recovery needs and the security requirements to meet user, regulatory, client and company policy requirements; and

 

  (ii) propose functional, performance, availability, maintainability and disaster recovery requirements and establish standards (e.g., support processes and procedures).

 

  (h) As part of the Business Continuity and Disaster Recovery Services, Supplier will:

 

  (i) provide training and support to Health Net technical and business unit employees for the necessary technical and non-technical (process oriented) changes that would become necessary and executed during emergencies and business disruption events affecting the Services; and

 

  (ii) perform education and awareness training related to the Business Continuity Plan for all Supplier Personnel.

 

  (i) As part of the Business Continuity and Disaster Recovery Services Supplier will, at a minimum:

 

  (i) Perform the Business Continuity and Disaster Recovery Services in accordance with ISO 22301 (or any replacement standard during the Term that is mutually agreed upon by Supplier and Health Net) and any additional standards and procedures mutually agreed upon by Supplier and Health Net;

 

  (ii) Include the capabilities to transition back from the disaster recovery site to Supplier Facilities of the affected services and restoration of Services at the affected site upon cessation of the disaster;

 

  (iii) Include the capabilities to allow the same Supplier Personnel assigned to perform the Services to continue providing the Services in the event of a disaster;

 

  (iv) Upon cessation of the disaster, implement the activities necessary to restore the affected Services at the affected locations with the capabilities to meet the RTO and other turnaround times set forth in the Business Continuity Plan;

 

  (j) Test Supplier’s disaster recovery and business continuity plans (including the Business Continuity Plan), as warranted by (i) business or technical changes (or both), (ii) Health Net requirements as defined in this Schedule A (Cross Functional Services) or requirements of applicable Laws, and (iii) otherwise as necessary to maintain compatibility with Health Net’s overall business continuity plan. Supplier will receive business direction and requirements from Health Net and must receive authorization from Health Net to make significant changes to the strategic and/or tactical direction of Health Net’s overall business continuity plan, procedures and capabilities with respect to each Supplier Facility and those related to or affecting the Services.

 

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  (k) Interface Supplier’s disaster recovery and business continuity plans, procedures and capabilities with, and provide support and assistance to Health Net in connection with Health Net’s annual testing of, Health Net’s disaster recovery and business continuity plans, processes and procedures. Supplier will permit Health Net and its auditors to audit the Business Continuity Plans on an annual basis.

 

  (l) In the event of a disaster, Supplier shall provide the Services and other business continuity Functions in accordance with the Business Continuity Plan. Supplier’s Functions shall include the following:

 

  (i) Providing a single 24 hour per day, 365 day per year (24/365) point-of-contact with at least two (2) alternative back-up points-of-contact with 24/365 availability for business continuity related communications and activities;

 

  (ii) Paying all travel and living expenses incurred by Supplier Personnel in the performance of Supplier’s responsibilities described in this Section 3.1 for Supplier’s facilities offshore; and

 

  (iii) Meet service levels established in the approved BCP/DR Plan related to mission critical processes required during the disaster event, with relief during the phase of Transition from any penalties (financial or otherwise) that occur as a result of documented deficiencies in the existing Health Net business continuity and disaster recovery testing reports related to services and supporting technology that are adopted by Supplier prior to development, approval, and testing of the Supplier’s Business Continuity Plan, and with relief from consequences (financial impact or otherwise) outside of Supplier control and within scope of services provided by third parties contracted directly to Health Net.

 

  (m) In the event of a disaster, Supplier shall not give priority to the recovery of other Supplier clients’ processes with recovery time objectives that exceed Health Net’s recovery time objectives for recovery of affected Equipment, Software, Services and data related to the Services deemed mission critical in the Business Continuity and Disaster Recovery Plan.

 

  (n) In addition to the Functions described in Section 3.1(b) through 3.1(m) above, the Business Continuity & Disaster Recovery Services include the following activities:

 

  (i) Develop, subject to Health Net’s approval, the Business Continuity Plan in accordance with the requirements of this Section 3.1;

 

  (ii) Conduct gap analyses of potential faults in meeting the RTO, in applications or processes used to perform the Services;

 

  (iii) Propose to Health Net updates to Health Net’s overall disaster recovery and business continuity plans and to the Business Continuity Plan, as needed to reflect changes in the Services, the technical environment, or requirements of applicable Laws;

 

  (iv) Conduct tests of the Business Continuity Plan related to the Services;

 

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  (v) Participate, as requested by Health Net, in Health Net’s disaster recovery and business continuity tests that will enable Health Net to test compatibility of their applications and processes with the recovery center environment;

 

  (vi) Participate, as requested by Health Net, in Health Net’s disaster recovery and business continuity testing (or, in the event of a disaster, disaster recovery and business continuity execution) for Health Net customers and business partners, including by coordinating with third parties as such third parties relate to the Services;

 

  (vii) Integrate Supplier’s disaster recovery and business continuity plans, procedures and capabilities with Health Net’s disaster recovery and business continuity plans, processes and procedures;

 

  (viii) Review and approval by Health Net of Supplier’s disaster recovery and business continuity plans, test plans and testing results;

 

  (ix) Participate with Health Net in the Joint Steering Committee and test team meetings for disaster recovery and business continuity;

 

  (x) Communicate to Health Net proposed disaster recovery and business continuity plan changes, including changes in the Business Continuity Plan, due to any technical or business changes;

 

  (xi) Identify and inform Health Net of opportunities (if any) for improvement of effectiveness and efficiencies in disaster recovery and business continuity functions;

 

  (xii) Review and recommend opportunities for improvement of effectiveness and efficiencies in disaster recovery and business continuity functions;

 

  (xiii) Communicate to Health Net disaster recovery and business continuity goals and initiatives, related to Supplier Services for the following year; and

 

  (xiv) Report to Health Net, quarterly, all business continuity and disaster recovery activities as outlined in ISO 22301.

 

3.2 Training Services

Training Services” are those Functions associated with the curriculum development, planning, scheduling and delivery of trainings in compliance with Laws for all Supplier Personnel performing the Services in the Claims, Membership, Appeals & Grievances, and Contact Center, including the following activities:

 

  (a) Develop training curriculum needed