Document:

Exhibit 10.2  

ASSUMPTION AND INDEMNITY REINSURANCE AGREEMENT  

        THIS ASSUMPTION AND INDEMNITY REINSURANCE AGREEMENT (this "Agreement"), dated as of April 7, 2003, is made
by and among HEALTH NET LIFE INSURANCE COMPANY, a California domiciled life and disability insurance company (the "Company"), and SAFEHEALTH LIFE
INSURANCE COMPANY, a California domiciled life and disability insurance company (the "Reinsurer"). The Company and the Reinsurer are referred to herein
collectively as the "Parties". 

        WHEREAS,
the Company desires to transfer and assign to the Reinsurer all of the Company's right, title and interest in and to the Novated Dental Policies; 

        WHEREAS,
the Reinsurer desires to assume all of the Company's duties and obligations in connection with, relating to, or arising at any time out of such Novated Dental Policies upon the
terms and conditions set forth herein; 

        WHEREAS,
the Company desires to cede, on an indemnity reinsurance basis, to the Reinsurer, the Company's Policy Liabilities in connection with, relating to and arising out of the
Non-Novated Dental Policies, upon the terms and conditions set forth herein; 

        WHEREAS,
the Reinsurer desires to reinsure on an indemnity reinsurance basis the Company's Policy Liabilities arising under or in connection with the Non-Novated Dental
Policies, upon the terms and conditions set forth herein; and 

        WHEREAS,
in connection with the foregoing, the Health Net, Inc. and SafeGuard Health Enterprises, Inc. have entered into the Purchase and Sale Agreement dated as of
April 7, 2003 (the "Purchase and Sale Agreement") which calls for the execution and delivery of this Agreement as of the Closing of the
transactions contemplated thereunder; 

        NOW,
THEREFORE, in consideration of the mutual covenants and promises, and upon the terms and conditions hereinafter set forth, the Parties hereto agree as follows. 

ARTICLE I

DEFINITIONS  

        Capitalized terms used in this Agreement and not otherwise defined shall have the meanings given such terms in the Purchase and Sale Agreement. For purposes of
this Agreement, the following terms shall have the meanings specified below. 

        "Claims" shall have the meaning set forth in Section 7.03. 

        "Dental Policies" means all policies or other agreements (including all supplements, endorsements, riders and ancillary agreements in
connection therewith) with individuals, employers or other group sponsors that obligate the Company to provide, arrange for the provision of, or indemnify for the cost of dental care services and
dental supplies as specified therein, which policies or other agreements (i) are in effect as of the Effective Time or (ii) become effective after the Effective Time, including through
(A) the reinstatement of lapsed policies pursuant to provisions therein or of applicable law, or (B) the issuance or renewal thereof by the Company after the Effective Time to honor
quotes outstanding as of the Effective Time, or to satisfy renewal rights of individuals, employers or other group sponsors under contractual provisions or applicable law, or (C) modifications
agreed to by the Reinsurer on behalf of the Company pursuant to the authority granted to the Reinsurer under Section 7.01 of this Agreement,  provided, however, Dental Policies shall not include any policy or other agreements (including all
supplements, endorsements, riders and ancillary agreements in connection therewith) with individuals, employers or other group sponsors that obligate the Company to provide, arrange for the provision
of, or indemnify for the cost of dental care services and dental supplies as a Medicare + Choice Preferred Provider Organization pursuant to Contract Number P01239 by and between the
Company and the Centers for Medicare and Medicaid Services. 

 

        "Dental Services" shall have the meaning set forth in Section 7.07. 

        "Dispute" shall have the meaning set forth in Section 11.02. 

        "Disputed Claim" shall have the meaning set forth in Section 7.03. 

        "Disputed Complaint" shall have the meaning set forth in Section 7.05. 

        "Effective Time" means 11:59 p.m. Pacific Time, on the Closing Date. 

        "Extra-Contractual Liabilities" means any and all liabilities and obligations of any nature, kind or description (i) for
consequential, extra-contractual, tort, bad faith, exemplary, punitive, special or similar damages and (ii) for statutory or regulatory damages, fines, penalties, forfeitures, and similar
charges of a penal or disciplinary nature. 

        "GAAP" means generally accepted accounting principles consistently applied throughout the specified period and in a comparable period in
the immediately preceding year. 

        "JAMS" shall have the meaning set forth in Section 11.03. 

        "Member Materials" shall have the meaning set forth in Section 3.01. 

        "Members" means the individuals (including their covered spouses and covered dependents) entitled to Dental Services pursuant to Dental
Policies. 

        "Non-Novated Dental Policies" shall have the meaning set forth in Section 2.04. 

        "Novated Dental Policies" means those Dental Policies transferred to the Reinsurer by novation as of the Novation Date and under which
Dental Policies the Reinsurer shall have become the successor to the Company under the Dental Policies as described in Section 2.03. 

        "Novation Date" shall have the meaning set forth in Section 3.02 hereof. 

        "Obligations" shall have the meaning set forth in Section 2.01 hereof. 

        "Policy Liabilities" means the Company's gross liabilities and obligations arising under or in connection with the Dental Policies to the
extent the same are unpaid or unperformed on or after the Effective Time, before deduction for all other applicable cessions, if any, under the Company's reinsurance programs. In addition, the term
"Policy Liabilities" shall include: 

        (a)   all
Extra-Contractual Liabilities that arise from any act, error or omission after the Effective Time, whether or not intentional, in bad faith or otherwise, by the
Reinsurer or any of its affiliates, or any of their respective officers, employees, agents or representatives relating to the Dental Policies, and any attorneys' fees incurred by the Reinsurer or the
Company related to such Extra-Contractual Liabilities; 

        (b)   all
liabilities and obligations for premium taxes arising on account of any premiums with respect to the Dental Policies allocable to coverage after the Effective Time; 

        (c)   all
liabilities and obligations for returns or refunds of premiums (irrespective of when due) under the Dental Policies; 

        (d)   any
assessment required by any insurance guaranty, insolvency, comprehensive health association or other similar fund maintained by any jurisdiction relating to the
Dental Policies assessed or imposed on the basis of premium for coverage after the Effective Time; 

        (e)   all
liabilities and obligations for commission payments and other compensation, if any, due and payable with respect to the Dental Policies to or for the benefit of
agents and brokers to the extent that such amount accrues after the Effective Time; 

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        (f)    all
liabilities and obligations for payment of any compensation to providers relating to Dental Services provided to Members under the Dental Policies regardless of the
"date of service"; and 

        (g)   any
obligation arising as a result of the Reinsurer "s failure to perform its obligations pursuant to Section 7.07. 

        "SAP" means statutory accounting practices prescribed or permitted by applicable insurance regulatory authorities consistently applied
throughout the specified period and in the comparable period in the immediately preceding year. 

        "Services" shall have the meaning set forth in Section 7.02. 

ARTICLE II

BUSINESS TRANSFERRED AND REINSURED  

        Section 2.01.    Assignment of Dental Policies.    As of the Effective Time (i) except as is otherwise
provided in Section 5.01 below, the Company hereby transfers and assigns to the Reinsurer all of the Company's right, title and interest in the Dental Policies identified in  Schedule 2.01
attached hereto and made a part hereof and delegates to the Reinsurer all of the Company's duties and obligations of performance
and payment under the Dental Policies arising after the Effective Time, and (ii) the Reinsurer hereby accepts, assumes and agrees to perform all of the Company's duties and obligations, whether
direct, indirect, contingent, unliquidated, unmatured or otherwise arising after the Effective Time (collectively, "Obligations"), in connection with,
relating to, or arising out of the Dental Policies. 

        Section 2.02.    Novation.    As soon as practicable after the Effective Time, the Reinsurer shall use all
commercially reasonable efforts to effect the assumption by novation by the Reinsurer of the Dental Policies (such Dental Policies are referred to herein as the "Novated Dental
Policies" and Novated Dental Policies shall include any such subsequently novated Dental Policies). If the Reinsurer does not for any reason assume by novation any Dental
Policy, then the Reinsurer shall accept and reinsure, on an indemnity reinsurance basis, 100% of the Policy Liabilities related to such Non-Novated Dental Policies in accordance with the
terms and conditions of this Agreement. 

        Section 2.03.    Direct Obligations.    To the extent that the Reinsurer assumes by novation any Dental
Policies under applicable law, as of the Novation Date (i) the Reinsurer shall be the successor to the Company under such Novated Dental Policies as if such Novated Dental Policies were direct
obligations originally issued by the Reinsurer and the Reinsurer shall be responsible for the performance of all obligations and the payment of all benefits and amounts due under the Novated Dental
Policies in accordance with their terms, (ii) the Reinsurer shall be substituted in the place and stead of the Company, and each Member under any such Novated Dental Policy shall disregard the
Company as a party thereto and treat the Reinsurer as if it had been originally obligated thereunder except as otherwise provided herein, (iii) the Company shall be released of all liability
with respect to such Novated Dental Policies, (iv) the Members under such Novated Dental Policies shall have the right to file claims arising under such Novated Dental Policies directly with
the Reinsurer and shall have a direct right of action for indemnification, benefits and services under such Novated Dental Policies against the Reinsurer, and
the Reinsurer hereby consents to be subject to any such direct action taken by any such Member, (v) the Reinsurer shall be responsible for all matters relating to administration of the Novated
Dental Policies, including but not limited to policy changes, reinstatement standards, premium rate changes, policy renewals, agent commissions and administrative methods and procedures, and
(vi) any indemnity reinsurance of such Novated Dental Policies and related liabilities thereunder by the Reinsurer shall cease and instead be replaced by such assumption by novation. 

        Section 2.04.    Indemnity Reinsurance.    Effective as of the Effective Time, the Company shall cede to the
Reinsurer, and the Reinsurer shall assume from the Company on an indemnity reinsurance basis, 

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100%
of the Policy Liabilities under all Dental Policies (including those Dental Policies that are identified in Schedule 2.01 attached hereto
and made a part hereof) which the Reinsurer has not for any reason (including the lack of any required approval or consent of a party to a Dental Policy) as of the Effective Time assumed by novation
(each such Dental Policy being referred to herein as a "Non-Novated Dental Policy"). Notwithstanding the foregoing, the term
"Non-Novated Dental Policy" shall not include any Dental Policy from and after the date of its assumption by novation at any time by the Reinsurer. 

        Section 2.05.    Policy Liabilities.    The Reinsurer accepts, reinsures, and assumes the Policy Liabilities
subject to any and all defenses, setoffs, and counterclaims to which the Company would be entitled with respect to the Policy Liabilities, it being expressly understood and agreed by the Parties
hereto that no such defenses, setoffs, or counterclaims are or shall be waived by the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, and that the
Reinsurer is and shall be fully subrogated in and to all such defenses, setoffs, and counterclaims. From and after the Effective Time, as among the Parties, the Reinsurer shall bear and shall have
responsibility for paying or performing all Policy Liabilities. The Policy Liabilities ceded under this Agreement shall be subject to any changes required by law or regulation and the same rates,
terms, conditions, waivers, interpretations, modifications and alterations as the Non-Novated Dental Policies. 

ARTICLE III

ASSUMPTION CERTIFICATES; OPTION LETTERS  

        Section 3.01.    Member Materials.    The Reinsurer shall prepare and deliver to every party to a Dental Policy
a Notice of Transfer, Certificate of Assumption, and Notice of Rejection of Assumption substantially in the appropriate forms set forth in  Exhibit A attached hereto (collectively, the "Member Materials") and otherwise acceptable to both
the Reinsurer and Company, which shall inform each party to a Dental Policy of the proposed transfer and enable such party to accept or reject the assumption and novation. 

        Section 3.02.    Mailing.    The Member Materials shall be mailed on a date agreed upon by the Reinsurer and
the Company, and, to the extent required by applicable law, shall be reviewed by and found acceptable to applicable regulatory authorities prior to mailing. The Reinsurer shall deliver only Member
Materials that are in compliance with applicable law, regulation or regulatory authority. No assumption by novation of a Dental Policy shall take effect until the earlier of the acceptance of the
assumption by the party to a Dental Policy or 90 days (or such other period, if any, as may be required by applicable law) (the "Novation Date")
after Member Materials have been mailed to the party to such Dental Policy. 

        Section 3.03.    Expenses.    All expenses incurred by the Parties hereto pursuant to this Article shall be
shared equally by the Parties. 

ARTICLE IV

TERM  

        Section 4.01.    Term.    This Agreement shall remain in force and effect until all Policy Liabilities
reinsured and assumed by Reinsurer have been discharged in full, or all Dental Policies are transferred and assumed by the Reinsurer by novation and all obligations of the Reinsurer hereunder have
been discharged in full. 

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ARTICLE V

CONSIDERATION  

        Section 5.01.    Consideration to the Reinsurer.    The Reinsurer shall be entitled to all premium, premium
adjustments and other consideration allocable to coverage after the Effective Time (irrespective of when due) received by the Company or the Reinsurer with respect to the Dental Policies. In the event
that the Company receives any premium or other consideration with respect to a Dental Policy allocable to coverage after the Effective Time, the Company shall promptly remit such premiums and other
consideration to the Reinsurer along with all pertinent information pertaining thereto including the nature of the payment, source of funds, policy number and period to which it relates. In the event
that the Reinsurer receives any premium or other consideration with respect to a contractual liability or contractual obligation arising under a Dental Policy paid or performed by the Company prior to
the Effective Time, the Reinsurer shall promptly remit such premiums and other consideration to the Company along with all pertinent information pertaining thereto including the nature of the payment,
source of funds, policy number and period to which it relates. 

        Section 5.02.    Application of Future Consideration.    Any premium, premium adjustments and other
consideration received and retained by the Reinsurer pursuant to Section 5.01 shall be applied by the Reinsurer to the oldest unpaid obligations or outstanding invoices relating to the period
after the Effective Time. 

        Section 5.03.    Additional Consideration for Indemnity Reinsurance of Non-Novated Dental
Policies.    As additional consideration for the assumption by Reinsurer on an indemnity reinsurance basis of 100% of the Policy Liabilities under the
Non-Novated Dental Policies, the Company shall (i) transfer to Reinsurer at the Effective Time admitted assets having a net admitted asset value determined in accordance with SAP as
prescribed or permitted by the California Department of Insurance equal to the Company's net unearned premium reserve and loss and loss adjustment expense (including losses that have been incurred but
not reported) reserve, if any, attributable to claims arising under the Non-Novated Dental Policies prior to the Effective Time; and (ii) assign to Reinsurer any amounts due to
Company under any reinsurance agreements in effect on the Effective Time between the Company and any reinsurer (other than the Reinsurer) relating to the Policy Liabilities assumed by the Reinsurer
under this Agreement. 

        Section 5.04.    Additional Consideration for Assumption of Novated Dental Policies.    As additional
consideration for the assumption by novation by Reinsurer of the Novated Dental Policies, the Company shall (i) transfer to Reinsurer at the within five (5) Business Days after the end
of the calendar month following the Novation Date admitted assets having a net admitted asset value determined in accordance with SAP as prescribed or permitted by the California Department of
Insurance equal to the Company's net unearned premium reserve and loss and loss adjustment expense (including losses that have been incurred but not reported) reserve, if any, attributable to claims
arising under the Novated Dental Policies prior to the Effective Time; and (ii) assign to Reinsurer any amounts due to Company under any reinsurance agreements in effect on the Effective Time
between the Company and any reinsurer (other than the Reinsurer) relating to the Novated Dental Policies assumed by the Reinsurer under this Agreement. 

ARTICLE VI

ACCOUNTING AND SETTLEMENT  

        Section 6.01.    Accounting Reports.    On or before the last Business Day of each month, the Reinsurer shall
provide the Company with reports of activities under this Agreement with respect to the Non-Novated Dental Policies for the preceding month showing any amounts due the Company or the
Reinsurer, as the case may be, as reimbursement for paid claims, premiums or other amounts due 

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with
respect to the Non-Novated Dental Policies and any information required by the Statement of Statutory Accounting Principles, as amended, of the National Association of Insurance
Commissioners. On or before the last Business Day of January, April, July and October, the Reinsurer shall provide the Company with quarterly reports or an annual report of such activities as
appropriate. 

        Section 6.02.    Financial Statement Information.    The Reinsurer and the Company shall each provide the other
with the financial, accounting and actuarial information necessary to prepare SAP regulatory, tax and GAAP monthly, quarterly and annual financial statements and returns and satisfy other requirements
including reserve and related calculations regarding the Non-Novated Dental Policies in the form reasonably required by the Reinsurer and the Company. The Company and the Reinsurer shall
agree to mutually acceptable procedures and time schedules for the transmission and receipt of such information. 

        Section 6.03.    Settlements.    Within ten (10) Business Days after delivery of each monthly report,
the Reinsurer and the Company shall settle on an estimated basis, all amounts then due under this Agreement for that month. The Reinsurer and the Company shall make a final settlement of all amounts
due for each calendar year within twenty (20) Business Days after the delivery of the annual report referred to in Section 6.01 hereof. 

        Section 6.04.    Net Payment Basis.    Amounts payable under this Agreement by the Parties hereto shall be
settled against each other, dollar for dollar, and only a net payment shall be due; provided, however,
that no balance or amount due by the Parties under any other agreement shall be offset against any obligation arising under this Agreement. 

        Section 6.05.    Late Payments.    Should any payment due any party be received by such party more than sixty
(60) days after the due date for such payment under this Agreement, interest shall accrue from the date on which such payment was due (taking into account the provisions of 6.06 hereof) until
payment is received by the party entitled thereto, at an annual rate equal to the Bank of America Reference Rate quoted for six month periods as reported in The Wall Street Journal on the first
Business Day of the month in which such payment first becomes due. 

        Section 6.06.    Federal Funds.    All settlements in accordance with this Agreement shall be made by wire
transfer of immediately available funds on the due date, or if such day is not a Business Day, on the
next day which is a Business Day. Payment may be made by check payable in immediately available funds in the event the party entitled to receive payment has failed to provide wire transfer
instructions. 

        Section 6.07.    Reports to Regulatory Authorities.    During the term of this Agreement, the Reinsurer and the
Company shall promptly furnish the other copies of any and all filings with, and reports or communications received from, any regulatory authority which relates directly and materially to the
Non-Novated Dental Policies, including, without limitation, each annual statement, each quarterly financial report to the regulatory authority of the party's domicile having principal
jurisdiction over the party and each report on periodic examination issued by such regulatory authority to the extent it relates to the Non-Novated Dental Policies. 

ARTICLE VII

DENTAL POLICY ADMINISTRATION; REPORTING  

        Section 7.01.    Administration of Non-Novated Dental Policies.    The Company hereby grants the
Reinsurer authority in all matters relating to administration of the Non-Novated Dental Policies to the fullest extent such authority may be granted pursuant to applicable law. In
furtherance of the foregoing, the Company hereby nominates, constitutes and appoints the Reinsurer as its attorney-in-fact with respect to the rights, duties, privileges and
obligations of the Company in and to the Non-Novated Dental Policies, with full power and authority to act in the name, place and stead of the Company with respect to the
Non-Novated Dental Policies. 

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        Section 7.02.    Administration.    The Reinsurer shall, at its expense, provide the technical and
administrative service, assistance and support functions described in Schedule 7.02 attached hereto (the
"Services") reasonably necessary or appropriate for the proper management and administration of the Non-Novated Dental Policies, which shall
include, but not be limited to, Services required for the proper administration of the Non-Novated Dental Policies prior to the Effective Time and not performed as of the Effective Time.
The Services at all times shall be consistent with the Company's prevailing practices and procedures as of the Effective Time with respect to similar types of policies actually communicated by the
Company to Reinsurer and all applicable laws, regulations, and regulatory actions and pronouncements. (As used elsewhere in this Agreement, the terms "prevailing practices and procedures" will refer
to the Company's prevailing practices and procedures as of the Effective Time communicated by the Company to the Reinsurer). 

        Section 7.03.    Claims Payment Instructions.    The Reinsurer at its own cost shall administer and process all
payments to reimburse providers and Members for covered Dental Services under the Non-Novated Dental Policies (the "Claims") in conformance
with the Company's prevailing practices and procedures with respect to similar types of policies, including review, investigation, adjustment, settlement, defense and payment of Claims, special
investigation and anti-fraud compliance, and preparation of any report required concerning the foregoing Dental Services and will, in connection with such Claims administration, retain, at
its sole discretion and cost, any outside investigation firms, adjusters, attorneys or other professionals that the Reinsurer deems necessary in the adjustment of such Claims. If a Claim arising prior
to the Effective Time under a Non-Novated Dental Policy is presented that the Reinsurer in good faith disputes, the Reinsurer shall consult with the Company. If, after such consultation,
the Reinsurer and the Company disagree as to how to resolve a Claim, the Company shall be entitled to assume, at its own expense, the control of the handling or the defense of such a disputed Claim (a
"Disputed Claim"), including employment of counsel. The Company shall apprise the Reinsurer of and consult with the Reinsurer with respect to the
progress of a Disputed Claim. In exercising such control, the Company shall act in good faith in accordance with generally accepted claims practices of similar insurance companies under similar
circumstances. Any payment of any portion of a Disputed Claim made by the Company shall be added to the Policy Liabilities and shall be unconditionally binding on the Reinsurer;  provided, however, that if the Company receives an offer of settlement or compromise from the other
parties to a Disputed Claim for a particular amount or obtains a commitment from such other parties that they would accept a compromise or settlement requiring only the payment of a specific amount,
the granting of an appropriate release or similar accommodation, and the Company, after mandatory consultation with and over the objection of the Reinsurer, refuses to consent thereto and elects to
continue to dispute or otherwise pursue such Disputed Claim, then the liability of the Reinsurer with respect of such Disputed Claim shall be deemed limited to that amount including expenses which the
Company would have been liable if such compromise or settlement had been accepted by the Company. 

        Section 7.04.    Communications Relating to Non-Novated Dental Policies.    On and after the
Effective Time, the Company shall forward promptly to the Reinsurer all notices and other written communications it receives relating to the Non-Novated Dental Policies (including all
inquiries or complaints from state insurance regulators, agents, brokers and Members and all notices of claims, suits and actions for which it receives service of process). The Company shall be
entitled to retain copies of all such materials. 

        Section 7.05.    Complaint Handling Procedure.    The Parties shall cooperate with each other in providing
information necessary to respond to any inquiries and complaints concerning the Non-Novated Dental Policies. All inquiries and complaints concerning the Non-Novated Dental
Policies received by the Company shall be forwarded immediately by facsimile or overnight mail to a contact person designated by the Reinsurer for reply. After consultation with the Company, except as
provided below, the Reinsurer shall answer all inquiries and complaints received by it concerning the 

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Non-Novated
Dental Policies. If the Reinsurer and the Company disagree as to the appropriate response to an inquiry or complaint, the Company shall be entitled to assume, at its own
expense, the control of the handling of the response to such inquiry or complaint (a "Disputed Complaint"), including employment of counsel. The Company
shall apprise the Reinsurer of and consult with the Reinsurer with respect to the progress of a Disputed Complaint. In exercising such control, the Company shall act in good faith consistent with the
Company's prevailing practices and procedures as of the Effective Time with respect to similar inquiries or complaints. Any payment arising out of a Disputed Complaint controlled by the Company, to
the extent such payment constitutes an Extra Contractual Liability, shall be added to the Policy Liabilities and shall be unconditionally binding on the Reinsurer;  provided, however, that if the Company receives an offer of settlement or compromise from the other
parties to a Disputed Complaint for a particular amount or obtains a commitment from such other parties that they would accept a compromise or settlement requiring only the payment of a specific
amount, the granting of an appropriate release or similar accommodation, and the Company, after mandatory consultation with and over the objection of the Reinsurer, refuses to consent thereto and
elects to continue to dispute or otherwise pursue such Disputed Complaint, then the liability of the Reinsurer with respect of such Disputed Complaint shall be deemed limited to that amount including
expenses for which the Company would have been liable if such compromise and settlement had been accepted by the Company. Upon answering such inquiries or complaints, the Reinsurer shall furnish the
Company with a copy of the complaint file. The Reinsurer shall be solely responsible for maintaining any complaint files, complaint registers or other reports of any kind, which are required to be
maintained under applicable law. 

        Section 7.06.    Filings.    The Reinsurer shall handle all compliance and regulatory matters relating to the
administration of the Non-Novated Dental Policies, including monitoring changes in applicable law, filing and refiling forms and rates, and preparing and filing all reports and other
filings required by applicable law. The Reinsurer shall provide to the Company copies of all reports and filings with respect to the Non-Novated Dental Policies required to be made with
any Governmental Authority. 

        Section 7.07.    Provider Services.    In fulfilling its Obligations pursuant to Section 2.01, the
Reinsurer shall provide, arrange for the provision of, or indemnify for the cost of dental care services and supplies ("Dental Services") required to
satisfy all obligations with respect to the provision of Dental Services to Members and their dependents under the Non-Novated Dental Policies. The Reinsurer shall be responsible for the
recruitment, credentialing and management of, and for contracting with, or gaining access to dental care and service providers adequate for the delivery of all Dental Services to Members required by
or incidental to the Non-Novated Dental Policies. 

        Section 7.08.    Administration of Novated Dental Policies.    Except for those services to be provided to the
Reinsurer by the Company pursuant to the Transition Services Agreement, administration and servicing of the Novated Dental Policies shall be the sole responsibility of the Reinsurer. 

        Section 7.09.    Communications Relating to Novated Dental Policies.    On and after the Effective Time, the
Company shall forward promptly to the Reinsurer all notices and other written communications received by it relating to the Novated Dental Policies (including all inquiries or complaints from state
insurance regulators, agents, brokers and insureds and all notices of claims, suits and actions for which it receives service of process). The Company shall be entitled to retain copies of all such
materials. 

        Section 7.10.    Novation Reports.    Within ten (10) Business Days after the end of each month after
the Effective Time, beginning with the month in which the first novation of an Dental Policy occurs, the Reinsurer shall provide to the Company a report indicating all Dental Policies that have been
the subject of a novation by the Reinsurer during the prior month. 

        Section 7.11.    Inspection.    Each party hereto and its respective authorized representatives shall have the
right, upon prior written notice, at reasonable times during normal business hours, to inspect 

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and
review all books, records, accounts, reports, tax returns, files and information of the other party hereto reasonably relating to this Agreement. The Parties shall keep all non-public
information received from the other party strictly confidential, and unless otherwise required by applicable Law or Governmental Authority, shall not disclose any of the same without obtaining the
prior approval of the party providing the information. The rights of the Parties under this Section 7.11 shall survive termination of this Agreement. 

ARTICLE VIII

REGULATORY APPROVALS; STATEMENT CREDIT  

        Section 8.01.    Regulatory Approvals.    The consummation of this Agreement and the transactions contemplated
hereby are expressly contingent upon and subject to obtaining any and all such approvals and consents as may be required by applicable law, regulation, or Governmental Authority. No provision in this
Agreement shall be deemed to require any party hereto to take any action prohibited by applicable law, regulation, or regulatory authority. The form of any application for any such approvals or
consents as may be required by applicable law, regulation, or Governmental Authority shall be approved by the Company and the Reinsurer prior to the filing of any such application. 

        Section 8.02.    Statement Credit.    The Reinsurer shall at its own expense take all actions reasonably
necessary to permit the Company to obtain full financial statement credit in all applicable jurisdictions for the reinsurance provided to it by the Reinsurer and the assumptions by novation pursuant
to this Agreement, including, if necessary, posting acceptable security. 

ARTICLE IX

INDEMNIFICATION  

        Section 9.01.    Indemnification by the Reinsurer.    The Reinsurer shall indemnify, defend and hold the
Company harmless from and against all Policy Liabilities and all losses, liabilities, claims, damages and expenses (including reasonable attorneys' fees and expenses) that are based upon or arise out
of the breach of any obligation of the Reinsurer provided for in this Agreement. 

        Section 9.02.    Indemnification by the Company.    The Company shall indemnify the Reinsurer against, and hold
them harmless from, all losses, liabilities, claims, damages and expenses (including reasonable attorneys' fees and expenses) that are based upon or arise out of the breach of any obligation of the
Company provided for in this Agreement. 

ARTICLE X

INSOLVENCY  

        Section 10.01.    Payments by the Reinsurer.    With respect to any Non-Novated Dental Policy, the
Reinsurer hereby agrees that all amounts due under this Agreement with respect to the Non-Novated Dental Policies shall be payable by the Reinsurer to any conservator, liquidator, or
statutory successor of the Company on the basis of the claims allowed against the Company by any court of competent jurisdiction or by any conservator, liquidator, or statutory successor of the
Company having authority to allow such claims, without diminution because of that insolvency, or because the conservator, liquidator, or statutory successor has failed to pay all or a portion of any
claims. Payments by the Reinsurer as set forth in this Section 10.01 shall be made directly to the Company or to its conservator, liquidator, or statutory successor, except where the
Non-Novated Dental Policy specifically provides another payee of such reinsurance in the event of the insolvency of the Company. 

        Section 10.02.    Claims.    It is agreed that in the event of the insolvency of the Company, the liquidator,
receiver or other statutory successor of the Company shall give prompt written notice to the 

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Reinsurer
of the pendency or submission of a Claim under the Non-Novated Dental Policies reinsured hereunder. During the pendency of such claim, the Reinsurer may investigate such Claim
and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense available to the Company or its receiver. The expense thus incurred by the Reinsurer is
chargeable against the Company, subject to any court approval, as a part of the expense of insolvency, liquidation, or rehabilitation to the extent of a proportionate share of the benefit which
accrues to the Company solely as a result of the defense undertaken by the Reinsurer. 

        Section 10.03.    Novated Dental Policies.    All amounts due a Member under the Novated Dental Policies shall
be payable by the Reinsurer on the basis of the liability of the Reinsurer under the Novated Dental Policies, without diminution because of the insolvency of the Company. Any benefits or amounts due
to Members with respect to a Novated Dental Policy shall be paid or performed by the Reinsurer in accordance with the Novated Dental Policy. 

ARTICLE XI

ARBITRATION  

        Section 11.01.    Conciliation.    If a dispute between any of the Parties relating to this Agreement is not
resolved within ten (10) Business Days from the date that any party has notified another party that such dispute exists, then such dispute shall be submitted on the next Business Day for
conciliation to a senior executive officer or his or her designee of each party. If such senior executive officers are unable to resolve the dispute within fifteen (15) Business Days from the
date that it is first presented to them, then such dispute shall be referred to binding arbitration. 

        Section 11.02.    Arbitration.    In the event of any dispute between the Parties hereto relating to, arising
out of, or in connection with any provision of this Agreement (hereinafter a "Dispute"), the Parties to this Agreement and their representatives, designees, successors and assigns agree that any such
Dispute shall be settled by binding arbitration to take place in Orange County, California. 

        Section 11.03.    Appointment of Arbitrator.    Any arbitration hereunder shall be conducted by a single
arbitrator chosen from the panel of arbitrators of the Judicial Arbitration & Mediation Services ("JAMS") with experience and expertise in the dental HMO or dental indemnity insurance business.
If
a JAMS arbitrator with specific experience in the dental HMO or dental indemnity insurance business is not available, the arbitrator must have general experience in the health insurance industry.
Within ten (10) days of notice of a Dispute from Company to Reinsurer or notice from Reinsurer to Company, the Company and Reinsurer shall use their best efforts to choose a mutually agreeable
arbitrator. If the Company and the Reinsurer cannot agree on an arbitrator, the arbitrator shall promptly be selected by JAMS. 

        Section 11.04.    Procedures.    The party submitting a Dispute to arbitration hereunder shall present its case
to the arbitrator and the other party hereto in written form within twenty (20) days after the appointment of the arbitrator. The other party hereto shall then have twenty (20) days to
submit a written response to the arbitrator and the original party who submitted the Dispute to arbitration. After timely receipt of each party's case, the arbitrator shall have twenty
(20) days to render his or her decision. 

        Section 11.05.    Applicable Law.    The arbitrator is relieved from judicial formalities and, in addition to
considering the rules of law, the limitations contained in this Agreement and the customs and practices of the health care industry, shall make his or her award with a view to effectuating the intent
of this Agreement. 

        Section 11.06.    Decisions Final.    The decision of the arbitrator shall be final and binding upon the
Parties, and judgment may be entered thereon in a court of competent jurisdiction. 

10

 

        Section 11.07.    Costs.    Each party shall bear its own cost of arbitration, and the costs of the arbitrator
shall be shared equally by the Parties. 

        Section 11.08.    Equitable Relief.    Sections 11.01 and 11.02 shall not apply to any claim for equitable
relief, including, without limitation, claims for specific performance, a preliminary injunction, or a temporary restraining order. Such claims shall be submitted to a court of competent jurisdiction,
and neither party shall be required to post any bond or other security. If a party chooses to pursue equitable relief, such conduct shall not constitute a waiver of, or be deemed inconsistent with,
the arbitration provisions set forth in this Article XI. Once the claims for equitable relief are finally decided, any and all remaining claims shall be submitted to arbitration pursuant to
Section 11.02 and the arbitrator shall be bound by the findings and rulings of the court on the claims for equitable relief. 

        Section 11.09.    Survival of Article.    This Article XI shall survive termination of this Agreement. 

ARTICLE XII

MISCELLANEOUS  

        Section 12.01.    Notices.    Any notice or other communication required or permitted hereunder shall be in
writing and shall be delivered by hand by certified process server, certified or registered mail (postage prepaid and return receipt requested), by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or by facsimile (with request for immediate confirmation of receipt in a manner customary for communications of such respective type). Notices shall be
effective upon receipt and shall be addressed as follows: 

        If
to the Reinsurer: 

SafeGuard
Health Enterprises, Inc.

95 Enterprise, Suite 100

Aliso Viejo, California 92656

Attn.: James E. Buncher

President and Chief Executive Officer

Tel: (949) 425-4100

Fax: (949) 425-4101 

with
a copy to: 

Ronald
I. Brendzel

Senior Vice President and General Counsel

SafeGuard Health Enterprises, Inc.

95 Enterprise, Suite 100

Aliso Viejo, California 92656

Tel: (949) 425-4110

Fax: (949) 425-4586 

and

David
K. Meyercord

Strasburger and Price, LLP

901 Main Street, Ste. 4300

Dallas, Texas 75202-3794

Tel: (214) 651-4525

Fax: (214) 659-4023 

If
to the Company: 

Health
Net, Inc.

21650 Oxnard Street

Woodland Hills, California 91367

Attention: General Counsel

Facsimile: (818) 676-7503 

11

 

with
a copy to: 

Sonnenschein
Nath & Rosenthal

685 Market Street, 6th Floor

San Francisco, California 94105

Attention: Kenneth B. Schnoll

Facsimile: (415) 543-5472 

        All
notices and other communications required or permitted under the terms of this Agreement that are addressed as provided in this Section shall (i) if delivered personally or by
overnight express, be deemed given upon delivery; (ii) if delivered by facsimile transmission, be deemed given when electronically confirmed; and (iii) if sent by registered or certified
mail, be deemed given when received. Any party from time to time may change its address for notice purposes by giving a similar notice specifying a new address, but no such notice shall be deemed to
have been given until it is actually received by the party sought to be charged with the contents thereof. 

        Section 12.02.    Entire Agreement.    This Agreement (including the Exhibits and Schedules hereto) and the
Transaction Agreements contain the entire agreement and understanding among the Parties with respect to the transactions contemplated hereby, and supersedes all prior agreements and understandings,
written or oral, with respect thereto. 

        Section 12.03.    Expenses.    Except as otherwise expressly provided in this Agreement, whether or not the
transactions contemplated hereby are consummated, each of the Parties hereto shall pay its own costs and expenses incident to preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby. 

        Section 12.04.    Counterparts.    This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same instrument and shall become effective when one or more counterparts have been signed by each of the Parties and
delivered to the other Parties. 

        Section 12.05.    No Third Party Beneficiary.    Except as otherwise specifically provided in this Agreement,
nothing in this Agreement is intended or shall be construed to give any person, other than the Parties hereto, their successors and permitted assigns, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provisions contained herein, and Reinsurer shall not be directly liable hereunder to any Member under any Non-Novated Dental Policy. 

        Section 12.06.    Amendment.    This Agreement may only be amended or modified by a written instrument executed
on behalf of the Parties hereto and any such amendment shall be subject to receipt of any and all consents, approvals, permits and authorizations required to be obtained from Governmental Authorities. 

        Section 12.07.    Assignment; Binding Effect.    Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by either of the Parties hereto without the prior written consent of the other party, and any such assignment that is attempted
without such consent shall be null and void. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the Parties and their respective
successors and permitted assigns. 

        Section 12.08.    Invalid Provisions.    If any provision of this Agreement is held to be illegal, invalid, or
unenforceable under any present or future law, and if the rights or obligations of the Parties under this Agreement will not be materially and adversely affected thereby, (a) such provision
shall be fully severable; (b) this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and (c) the
remaining provisions of this 

12

 

Agreement
shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. 

        Section 12.09.    Duty of Cooperation.    Each party hereto shall cooperate fully with the other party hereto
in all reasonable respects in order to accomplish the objectives of this Agreement. 

        Section 12.10.    Governing Law.    This Agreement shall be governed by and construed in accordance with the
laws of the State of California. 

        Section 12.11.    Waiver.    Any term or condition of this Agreement may be waived in writing at any time by
the party that is entitled to the benefit thereof. A waiver on one occasion shall not be deemed to be a waiver of the same or any other breach or nonfulfillment on a future occasion. All remedies,
either under the terms of this Agreement, or by law or otherwise afforded, shall be cumulative and not alternative, except as otherwise provided by law. 

        Section 12.12.    Errors and Omissions.    Inadvertent delays, errors or omissions that occur or are made in
connection with the transactions contemplated by this Agreement shall not relieve any party from any liability that would have attached had such delay, error or omission not occurred, provided that
such error or omission is rectified by the party making such error or omission as soon as possible after discovery thereof and such error or omission does not prejudice any other party. 

        Section 12.13.    Interpretation.    For purposes of this Agreement, the terms
"hereof", "herein", "hereto",
"hereunder", and derivative or similar words refer to this Agreement (including the exhibits hereto) as a whole unless otherwise indicated. Whenever the
words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without limitation". Whenever the singular is used herein, the same shall include the
plural, and whenever the plural is used herein, the same shall include the singular, where appropriate. The headings used in this Agreement have been inserted for convenience and do not constitute
matter to be construed or interpreted in connection with this Agreement. 

        Section 12.14.    Business Associate.    In performing functions, activities, or services for, or on behalf of,
the Company involving the use or disclosure of Protected Health Information, as that term is defined in 45 CFR 164.501, the Reinsurer shall comply with the Business Associate Addendum set forth in  Schedule 12.14 hereto. 

13

 

        IN
WITNESS WHEREOF, the Company and the Reinsurer have each executed this Agreement as of the date first written above. 

	 	 	SAFEHEALTH LIFE INSURANCE COMPANY
	

 	
 	

By:	

/s/  JAMES E. BUNCHER      
 James E. Buncher

President and Chief Executive Officer
	

 	
 	

By:	

/s/  RONALD I. BRENDZEL      
 Ronald I. Brendzel

Senior Vice President and Secretary
	

 	
 	

HEALTH NET LIFE INSURANCE COMPANY
	

 	
 	

By:	

/s/  DAVID W. ANDERSON      
 David W. Anderson

President

14

   SCHEDULE 2.01 

HEALTH NET LIFE INSURANCE COMPANY

DENTAL POLICIES  

        The Dental Policies identified by group and individual contract number and name: 

        To
be determined as of the Effective Time 

15

 
SCHEDULE 7.02 

SERVICES  

        The Reinsurer agrees to perform, consistent with the Company's prevailing practices and procedures and the terms of the Non-Novated Dental Policies,
all services reasonably necessary for, and incident to the proper management and administration of, the Non-Novated Dental Policies, including but not limited to the following services: 

	A.
	All
Member services relating to the Non-Novated Dental Policies including the following:

	1.
	Billing
and collection of premiums;

	2.
	Process
and payment of claims;

	3.
	Handle
Member service requests (including adding new Members to group Dental Policies, deleting Members from group Dental Policies), administration of COBRA responsibilities, inquiries
and complaints relating to the Non-Novated Dental Policies;

	4.
	Preparation
and mailing of premium notices on a timely basis to Members and parties to the Non-Novated Dental Policies; transmission of additional premium notices, lapse
notices, reinstatement offers and other notices to Members and parties to Dental Policies;

	5.
	Underwriting
and processing of any and all policy changes and reinstatements;

	6.
	Member
mailings of any necessary endorsements or other contract documents;

	7.
	Preparation
of quarterly financial statement data (within ten Business Days after the end of a calendar quarter) and annual financial statement data (within 35 calendar days after the
end of the calendar year), for inclusion in the Company's applicable financial statements;

	8.
	Administration
of any agreement providing for the payment of commissions relating to any Non-Novated Dental Policy;

	9.
	Development,
as necessary, and maintenance of computer systems required to provide the Services.

	10.
	Recruitment,
credentialing and management of, and contracting with sufficient dental providers adequate for the delivery of all Dental Services to Members required by or incidental to
the Non-Novated Dental Policies as determined by applicable law.

	B.
	All
services performed by the Reinsurer's employees providing legal, compliance, actuarial, accounting, treasury, human resources and data processing, including the preparation of
financial and other relevant reports. 

16

 
SCHEDULE 12.14 

BUSINESS ASSOCIATE ADDENDUM  

        This Business Associate Addendum (the "Addendum") supplements and is made a part of the Assumption and Indemnity Reinsurance Agreement (the "Agreement") by and
between Health Net Life Insurance Company (the "Company") and SafeHealth Life Insurance Company (the "Reinsurer"), and is effective as of the effective date of the Agreement. 

Recitals 

	A.
	The
Company may disclose certain information to the Reinsurer pursuant to the terms of the Agreement, some of which may constitute Protected Health Information, as defined below.

	B.
	The
parties intend to protect the privacy and provide for the security of Protected Health Information in compliance with the Health Insurance Portability and Accountability Act of
1996, Public law No. 104-191 ("HIPAA") and the regulations promulgated thereunder by the U.S. Department of Health and Human Services (the "HIPAA Regulations") and other applicable
laws.

	C.
	The
purpose of this Addendum is to satisfy certain standards and requirements of HIPAA and the HIPAA Regulations, including, but not limited to, 45 CFR 164.502(e) and 45 CFR
164.504(e). 

        In
consideration of the mutual promises below and the exchange of information pursuant to the Agreement and this Addendum, the parties agree as follows: 

	1.
	Definitions

        (a)   Business
Associate means the Reinsurer to the extent it performs functions, activities, or services for, or on behalf of, the Company pursuant to the Agreement involving
the use or disclosure of Protected Health Information. 

        (b)   Covered
Entity means the Company. 

        (c)   "Privacy
Rule" means the Standards for Privacy of Individually Identifiable Health Information at 45 CFR part 160 and part 164, subparts A and E. 

        (d)   "Protected
Health Information" has the same meaning as the term "protected health information" in 45 CFR 164.501, limited to the information created or received by
Business Associate from or on behalf of Covered Entity. 

        (e)   Capitalized
terms used but not otherwise defined in this Addendum have the same meaning as those terms in the Privacy Rule. 

	2.
	Obligations
and Activities of Business Associate 

        (a)   Business
Associate shall not use or disclose Protected Health Information other than as permitted or required by this Addendum or as Required By Law. 

        (b)   Business
Associate shall use appropriate safeguards to prevent use or disclosure of the Protected Health Information other than as provided for by the Agreement and this
Addendum. 

        (c)   Business
Associate agrees to mitigate, to the extent practicable, any harmful effect that is known to Business Associate of a use or disclosure of Protected Health
Information by Business Associate in violation of the requirements of this Addendum. 

        (d)   Business
Associate shall report to Covered Entity any use or disclosure of the Protected Health Information not provided for by this Addendum of which it becomes aware. 

17

 

        (e)   Business
Associate shall ensure that any agent, including a subcontractor, to whom it provides Protected Health Information received from, or created or received by
Business Associate on behalf of, Covered Entity agrees to the same restrictions and conditions that apply through this Addendum to Business Associate with respect to such information. 

        (f)    Business
Associate shall provide access, at the request of Covered Entity, and in the time and manner designated by Covered Entity, to Protected Health Information in a
Designated Record Set, to Covered Entity or, as directed by Covered Entity, to an Individual in order to meet the requirements under 45 CFR 164.524 

        (g)   Business
Associate agrees to make any amendment(s) to Protected Health Information in a Designated Record Set that the Covered Entity directs or agrees to pursuant to 45
CFR 164.526 at the request of Covered Entity or an Individual, and in the time and manner designated by Covered Entity. 

        (h)   Business
Associate agrees to make its internal practices, books, and records, including policies and procedures, relating to the use and disclosure of Protected Health
Information received from, or created or received by Business Associate on behalf of, Covered Entity available to the Secretary, in a time and manner designated by the Secretary, for purposes of the
Secretary determining Covered Entity's compliance with the Privacy Rule. 

        (i)    Business
Associate agrees to document such disclosures of Protected Health Information and information related to such disclosures as would be required for Covered
Entity to respond to a request by an Individual for an accounting of disclosures of Protected Health Information in accordance with 45 CFR 164.528. 

        (j)    Business
Associate agrees to provide to Covered Entity, in the time and manner designated by Covered Entity, information collected in accordance with
Section (2)(i) of this Addendum, to permit Covered Entity to respond to a request by an Individual for an accounting of disclosures of Protected Health Information in accordance with 45
CFR 164.528. 

	3.
	Permitted
Uses and Disclosures by Business Associate General Use and Disclosure Provisions 

        Except
as otherwise limited in this Addendum, Business Associate may use or disclose Protected Health Information to perform functions, activities, or services for, or on behalf of,
Covered Entity as specified in the Agreement, provided that such use or disclosure would not violate the Privacy Rule if done by Covered Entity. 

	4.
	Specific
Use and Disclosure Provisions 

        (a)   Except
as otherwise limited in this Addendum, Business Associate may use Protected Health Information for the proper management and administration of Business Associate
or to carry out the legal responsibilities of Business Associate. 

        (b)   Except
as otherwise limited in this Addendum, Business Associate may disclose Protected Health Information for the proper management and administration of Business
Associate, provided that disclosures are Required By Law, or Business Associate obtains reasonable assurances from the person to whom the information is disclosed that it will remain confidential and
used or further disclosed only as Required By Law or for the purpose for which it was disclosed to the person (which purpose shall be consistent with the limitations imposed by this Addendum) and the
person notifies the Business Associate of any instances of which it is aware in which the confidentiality of the information has been breached. 

        (c)   Except
as otherwise limited in this Addendum, Business Associate may use Protected Health Information to provide Data Aggregation services to Covered Entity as permitted
by 42 CFR 164.504(e)(2)(i)(B). 

18

 

        (d)   Business
Associate may use Protected Health Information to report violations of law to appropriate Federal and State authorities, consistent with 45 CFR 164.502(j)(1). 

	5.
	Obligations
of Covered Entity Provisions for Covered Entity To Inform Business Associate of Privacy Practices and Restrictions 

        (a)   Covered
Entity shall notify Business Associate of any limitation in its notice of privacy practices in accordance with 45 CFR 164.520, to the extent that such limitation
may affect Business Associate's use or disclosure of Protected Health Information. 

        (b)   Covered
Entity shall notify Business Associate of any changes in, or revocation of, permission by an Individual to use or disclose Protected Health Information, to the
extent that such changes may affect Business Associate's use or disclosure of Protected Health Information. 

        (c)   Covered
Entity shall notify Business Associate of any restriction on the use or disclosure of Protected Health Information that Covered Entity has agreed to in
accordance with 45 CFR 164.522, to the extent that such restriction may affect Business Associate's use or disclosure of Protected Health Information. 

        (d)   Covered
Entity shall not request Business Associate to use or disclose Protected Health Information in any manner that would not be permissible under the Privacy Rule if
done by Covered Entity, except as permitted by Sections 4(b) and 4(c) of this Addendum. 

	6.
	Term
and Termination 

        (a)   This
Addendum shall be effective as of the effective date of the Agreement, and shall terminate when all of the Protected Health Information provided by Covered Entity
to Business Associate, or created or received by Business Associate on behalf of Covered Entity, is destroyed or returned to Covered Entity, or, if it is infeasible to return or destroy Protected
Health Information, protections are extended to such information, in accordance with the termination provisions in this Section. 

        (b)   Upon
Covered Entity's knowledge of a material breach of this Addendum by Business Associate, Covered Entity shall either: (i) provide an opportunity for Business
Associate to cure the breach or end the violation and terminate this Addendum, and the provision for performance of functions, activities, or services for, or on behalf of Covered Entity under the
Agreement, if Business Associate does not cure the breach or end the violation within the time specified by Covered Entity; (ii) immediately terminate this Addendum, and the provision for
performance of functions, activities, or services for, or on behalf of Covered Entity under the Agreement, if Business Associate has breached a material term of this Addendum and cure is not possible;
or (iii) if neither termination nor cure is feasible, report the violation to the Secretary. 

        (c)   Effect
of Termination. 

        (i)    Except
as provided in paragraph (ii) of this section, upon termination of this Addendum, for any reason, Business Associate shall return or destroy all Protected
Health Information received from Covered Entity, or created or received by Business Associate on behalf of Covered Entity, and shall retain no copies of the Protected Health Information. This
provision shall apply to Protected Health Information that is in the possession of subcontractors or agents of Business Associate. 

        (ii)   In
the event that Business Associate determines that returning or destroying the Protected Health Information is infeasible, Business Associate shall provide to Covered
Entity notification of the conditions that make return or destruction infeasible. Upon mutual agreement that return or destruction of Protected Health Information is infeasible, Business Associate
shall extend the protections of this Addendum to such Protected Health Information and limit further 

19

 

uses
and disclosures of such Protected Health Information to those purposes that make the return or destruction infeasible, for so long as Business Associate maintains such Protected Health
Information. 

	7.
	Miscellaneous

        (a)   Regulatory References. A reference in this Addendum to a section in the Privacy Rule means the section as in effect or as
amended. 

        (b)   Amendment. The Parties agree to take such action as is necessary to amend this Addendum from time to time as is necessary
for Covered Entity to comply with the requirements of the Privacy Rule and the HIPAA. 

        (c)   Survival. The respective rights and obligations of Business Associate under Section 6(c) of this Addendum shall
survive the termination of this Addendum. 

        (d)   Interpretation. The provisions of this Addendum shall prevail over any provisions in the Agreement that may conflict with
or appear inconsistent with any provision of this Addendum. Any ambiguity in this Addendum shall be resolved to permit Covered Entity to comply with the Privacy Rule. 

20

 

EXHIBIT A

TO ASSUMPTION AND

INDEMNITY

REINSURANCE

AGREEMENT 

MEMBER MATERIALS  

NOTICE OF TRANSFER (Arizona and California) 

Dear
Policyholder: 

        This
notifies you of an agreement reached between Health Net Life Insurance Company ("Health Net") and SafeHealth Life Insurance Company ("SafeHealth") for the transfer of your dental
policy by SafeHealth. This assumption will be effective as of 12:01 a.m. Pacific Time, on                        , 2003.

        SafeHealth
Life Insurance Company is licensed to provide dental insurance products in [STATE]. To introduce you to SafeHealth, attached is a summary of essential
information about SafeHealth. 

        Your
rights as a policyholder and the terms of your policy will not change as a result of the transfer. Your benefits will not change as a result of the transfer [although
Health Net's provider network will be replaced with the provider network of SafeHealth and certain providers in the Health Net provider network may not be available in the SafeHealth provider
network]. If you accept the transfer, SafeHealth will provide your coverage. It will have direct responsibility for the payment of all claims and benefits and for all other policy
obligations. Health Net will no longer have any obligations to you. 

        You
have the following options with regard to the assumption of your policy: 

	 
	 	 
	 	 

	 	 	Option 1.	 	Accept the transfer of your policy from Health Net to SafeHealth.
	

 	
 	

Option 2.	
 	

Reject the proposed transfer of your policy from Health Net to SafeHealth. If you choose this option, Health Net will remain your insurer and you will have no rights to claim any payments from SafeHealth[, although SafeHealth will be administering
your Health Net dental policy until your insurance terminates, as indicated below].

        Health
Net and SafeHealth recommend that you choose Option 1. 

        If
you wish to choose Option 1, simply do not return the Rejection Form and you will automatically be deemed to have accepted this option upon
                        [date]. You should then attach the [enclosed] Certificate of Assumption [that you will be receiving under
separate
cover] to your policy. 

        If
you wish to choose Option 2, you must complete the enclosed Rejection Form, sign it and return it within            days of this Notice. If you do not return the Rejection Form
within that time, you will be deemed to have accepted the transfer of your policy. [You should also return the [enclosed] Certificate of Assumption.] 

        In
considering whether to accept the assumption, please note that Health Net intends to cease offering dental insurance as promptly as practicable after the transfer and assumption of
its dental business to SafeHealth. Rejection of the assumption may ultimately result in termination of your coverage. [Please also note that Health Net has contracted with SafeHealth to
administer its dental insurance policies until Health Net is able to withdraw completely from the market. As a result, if you reject the assumption although Health Net would remain legally responsible
for its policy obligations to you, SafeHealth will be administering your Health Net dental policy until your insurance terminates.] 

21

 

        The
enclosed Certificate of Assumption should be attached to your policy unless you choose to reject the assumption of your policy. 

        Your
current and future premiums should be paid as indicated by your premium notices. 

        If
you have any questions about the assumption of your policy or about SafeHealth, please feel fee to call SafeHealth at (      )
            -            . Written
inquiries may be mailed to: SafeHealth at                        [address]. 

	 
	 	 

	 	 	Sincerely,
	

 SAFEHEALTH LIFE INSURANCE COMPANY	
 	

 HEALTH NET LIFE INSURANCE COMPANY

22

 
NOTICE OF TRANSFER [Oregon] 

Dear
Policyholder: 

Important:
Please read this notice carefully. This notice affects your rights under your insurance policy. 

TRANSFER
OF POLICY 

SafeHealth
Life Insurance Company ("SafeHealth") has agreed to replace Health Net Life Insurance Company ("Health Net") as your insurer under [insert policy or certificate name and
number], effective as of 12:01 a.m. Pacific Time on                        , 2003. SafeHealth's principal place of business
is                        . 

At
your request, Health Net Life will furnish to you financial information concerning both companies. This information will include the following: 

        (1)   Ratings
for the previous year, if available, from two nationally recognized insurance rating services. If a rating of either insurance company changed during the
previous year, the ratings for the year preceding will be furnished as well. 

        (2)   Balance
sheets for the previous year, if available, and as of the date of the most recent quarterly statement. 

        (3)   A
copy of the Management's Discussion and Analysis that was filed as a supplement to the previous year's annual statement. 

        (4)   An
explanation of the reason for the transfer. 

You
may obtain additional information concerning SafeHealth from reference materials in your local library or by contacting the Oregon Insurance Division at 350 Winter St. NE, Room 440-1
Salem, Oregon 97301-0220. 

SafeHealth
is authorized to write this coverage in Oregon. [The Insurance Commissioner of Oregon has reviewed the potential effect of the proposed transaction, and has approved the
transaction.] 

YOUR
RIGHTS 

You
may choose to consent to or reject the transfer of your policy to SafeHealth. If you want your policy transferred, you may notify us in writing by signing and returning the enclosed
pre- addressed, postage-paid card or by writing to us at: 

[Insert
name, address and facsimile number of contact person] 

Payment
of your premium to the assuming company will also constitute acceptance of the transaction. [If premium notices are used: The first
premium notice you receive from SafeHealth, however, will provide you with a method that will allow you to pay the premium while reserving the right to reject the transfer.]
[If premium notices are NOT used: SafeHealth will provide you with a method by which you may pay the premium while reserving the right to
reject the transfer.] 

If
you reject the transfer, you may keep your policy with Health Net or exercise any option under your policy. If we do not receive a written rejection you will, as a matter of law, have consented to
the transfer. Before this consent is final, however, you will be provided a second notice of the transfer twelve months from now. After the second notice is provided you will have one month to reply.
If you have paid your premium to SafeHealth without reserving your right to reject the transfer, you will not receive a second notice. 

23

 

EFFECT
OF TRANSFER 

If
you accept this transfer, SafeHealth will be your insurer. It will have direct responsibility to you for the payment of all claims, benefits and for all other policy obligations. Health Net will no
longer have any obligations to you. 

If
you accept this transfer, you should make all premium payments and claims submissions to SafeHealth and direct all questions to SafeHealth. 

In
considering whether to accept the assumption, please note that Health Net intends to cease offering dental insurance as promptly as practicable after the transfer and assumption of its dental
business to SafeHealth. Rejection of the assumption may ultimately result in termination of your coverage. [Please also note that Health Net has contracted with SafeHealth to administer
its dental insurance policies until Health Net is able to withdraw completely from the market. As a result, if you reject the assumption although Health Net would remain legally responsible for its
policy obligations to you, SafeHealth will be administering your Health Net dental policy until your insurance terminates.] 

	 

	Sincerely.
	

 Health Net Life Insurance Company

[Address]

[Telephone Number]

For
your convenience, we have enclosed a pre-addressed postage- paid response card. Please take time now to read the enclosed notice and complete and return the response card to us. 

24

 

NOTICE
TO GROUP MEMBERS 

        Health
Net Life Insurance Company ("Health Net") is presently implementing a plan that is intended to ensure uninterrupted coverage for our customers. As part of the plan, we have
entered into an agreement with SafeHealth Life Insurance Company ("SafeHealth"), that will assume Health Net's dental insurance business. SafeHealth will replace Health Net under your dental insurance
coverage with Health Net effective                        , 2003. 

        Your
rights as an insured and the terms of your certificate of coverage will not change as a result of the transfer, except as set forth in the enclosed Certificate of Assumption. Your
benefits will not change as a result of the transfer. 

        The
enclosed Certificate of Assumption should be attached to your certificate of coverage. 

        Assumption
of your dental insurance coverage will be effective as of                        , 2003, at 12:01 a.m. Pacific Time. If you
have any questions about the assumption of your
contract or about SafeHealth, please feel fee to
call SafeHealth at (      )            -            . Written inquiries may be mailed to: SafeHealth
at [                        ]. 

	 
	 	 

	Sincerely,	 	 
	

 SAFEHEALTH LIFE INSURANCE COMPANY	
 	

 HEALTH NET LIFE INSURANCE COMPANY

25

 
CERTIFICATE OF ASSUMPTION 

        [Individual]

        You
are hereby notified that SafeHealth Life Insurance Company has, effective as of                        , 2003 (the "Effective
Time"), assumed all rights, liabilities, and obligations of
Health Net Life Insurance Company under your dental insurance policy with Health Net Life Insurance Company. 

        From
and after the Effective Time, all references in your policy or certificate to "Health Net Life Insurance Company" are hereby changed to "SafeHealth Life Insurance Company." Except
for the substitution of SafeHealth for Health Net as your insurer, your rights as a insured will not be affected by the change in companies, and the terms and conditions of your policy or certificate
will not be changed by reason of the assumption. 

        All
correspondence and inquiries concerning your policy or certificate, including premium payments, policy or certificate changes, and notices of claims, should be submitted to: 

SafeHealth
Life Insurance Company

[address] 

        This
Certificate of Assumption, as of the Effective Time, forms a part of and should be attached to the policy or certificate issued to you by Health Net Life Insurance Company. 

        IN
WITNESS WHEREOF, SafeHealth Life Insurance Company has caused this Certificate of Assumption to be duly signed and issued. 

	 
	 	 

	 	 	
 SafeHealth Life Insurance Company

26

 
NOTICE OF REJECTION OF ASSUMPTION 

[Arizona and California] 

To:
HEALTH NET LIFE INSURANCE COMPANY 

 REJECTION  

        I have reviewed the Certificate of Assumption whereby SafeHealth Life Insurance Company would assume all of the rights, liabilities, and obligations of Health Net
Life Insurance Company under my dental insurance policy or certificate previously issued by Health Net Life Insurance Company. I have also reviewed the Notice of Transfer describing the transaction. 

        I
hereby notify you that I REJECT the proposed assumption of my policy or certificate and substitution of SafeHealth Life Insurance
Company thereunder, and I wish to retain my policy or certificate with Health Net Life Insurance Company. I understand that Health Net Life Insurance Company intends to
discontinue its dental insurance business and that rejection of the assumption may ultimately result in termination of my coverage.

	 
	 	 

	DATE:	 	 
	

 Policyholder Signature	
 	

 
	

 Print or Type Name	
 	

 
	

 ID # from the Health Net Life Insurance Company

Identification Card Issued to Policy Holder	
 	

 

27

 
RESPONSE CARD 

[Oregon] 

            Yes,
I accept the transfer of my policy from Health Net Life Insurance Company to SafeHealth Life Insurance Company. 

            No,
I reject the proposed transfer of my policy Health Net Life Insurance Company to SafeHealth Life Insurance Company and wish to retain my
policy Health Net Life Insurance Company 

	 
	 	 

	DATE:	 	 
	

 Policy Holder Signature	
 	

 
	

 Print or Type Name	
 	

 
	

 Street Address	
 	

 
	

 City, State, Zip	
 	

 
	

 ID # from the Health Net Life Insurance Company

Identification Card Issued to Policy Holder	
 	

 

28

 
CERTIFICATE OF ASSUMPTION 

        [Group]

        You
are hereby notified that SafeHealth Life Insurance Company has, effective as of                        , 2003 (the "Effective
Time"), assumed all rights, liabilities, and obligations of
Health Net Life Insurance Company under your dental insurance policy with Health Net Life Insurance Company. 

        From
and after the Effective Time, all references in your policy to "Health Net Life Insurance Company" are hereby changed to "SafeHealth Life Insurance Company." 

        All
correspondence and inquiries concerning your policy, including premium payments, policy changes, and notices of claims, should be submitted to: 

SafeHealth
Life Insurance Company

[address] 

        Except
as described in this Certificate of Assumption, your rights as a policy holder will not be affected by the change in companies, and the terms and conditions of your policy will
not be changed by reason of the assumption. This Certificate of Assumption, as of the Effective Time, forms a part of and should be attached to the dental insurance policy issued to you by Health Net
Life Insurance Company. Copies of this Certificate of Assumption must be distributed to covered group members under the policy for attachment to their certificates of coverage. 

        IN
WITNESS WHEREOF, Health Net Life Insurance Company and SafeHealth Life Insurance Company have caused this Certificate of Assumption to be duly signed and issued. 

	 
	 	 
	 	 

	

 	
 	

 Health Net Life Insurance Company	
 	

 SafeHealth Life Insurance Company

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Exhibit 10.3  

NETWORK ACCESS AGREEMENT  

        This
NETWORK ACCESS AGREEMENT (the "Agreement") is made and entered into this 7th day of April, 2003 by and between Health Net Life Insurance Company, a California domiciled life and
disability insurance company ("HNL"), and SafeHealth Life Insurance Company, a California domiciled life and disability insurance company ("SafeHealth"). 

 
 

RECITALS

        WHEREAS,
HNL has developed and maintains a network of providers of dental care and dental services to provide quality dental health care services in a timely and efficient manner
consistent with good dental practices at contracted rates; 

        WHEREAS,
pursuant to the Purchase and Sale Agreement by and between Health Net, Inc. and SafeGuard Health Enterprises, Inc. dated April 7, 2003 ("Purchase and Sale
Agreement"), SafeGuard Health Enterprises, Inc. agreed, among other things, to purchase and Health Net, Inc. agreed, among other things, to transfer and assign to SafeGuard Health
Enterprises, Inc. or its Designee, all of HNL's right, title and interest in the agreements between the Dental Providers (as defined herein) under contract with HNL to provide
dental services or dental supplies to HNL Subscribers (as defined herein) in California, Arizona and Oregon capable of being assigned or transferred by HNL to SafeGuard Health Enterprises, Inc.
or its Designee; 

        WHEREAS,
as a condition to the obligation of the parties to consummate the Purchase and Sale Agreement, the parties agreed to enter into an agreement at the Closing to use commercially
reasonable efforts to provide SafeHealth as the Designee of SafeGuard Health Enterprises, Inc. continued access after the Closing to those Dental Providers with dental provider agreements which
HNL is not able to assign to SafeHealth; 

        WHEREAS,
HNL and SafeHealth desire to enter into this Agreement under which HNL will use its commercially reasonable efforts to provide SafeHealth with access to the Dental Providers. 

        NOW,
THEREFORE, in consideration of the mutual covenants, terms and conditions herein contained and other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereby agree as follows: 

ARTICLE I

DEFINITIONS  

        Capitalized terms used in this Agreement and not otherwise defined shall have the meanings given such terms in the Purchase and Sale Agreement. For purposes of
this Agreement, the following terms shall have the meanings specified below. 

        "Assumption and Indemnity Reinsurance Agreement" means the Assumption and Indemnity Reinsurance Agreement by and between Health Net Life
Insurance Company and SafeHealth Life Insurance Company dated April 7, 2003. 

        "Change of Control" means the acquisition, in a single transaction or in a series of related transactions, by a person, an entity or a
group of persons acting in concert of fifty-one percent (51%) or more of the voting securities of a party, or fifty-one percent (51%) or more of the aggregate value of the
assets of a party. 

        "Contract" mean a contract between HNL and a Dental Provider for the provision of Covered Services to HNL Subscribers in force as of the
Effective Date. 

1

 

        "Covered Services" means those dental services and dental supplies that are described in a Subscriber Agreement. 

        "Dispute" shall have the meaning set forth in Section 7.01. 

        "Dental Provider" means a dentist, dental health service provider, or a dental supply provider who or which as of the Effective Date is
party to a Contract with HNL to provide dental services or dental supplies to HNL Subscribers who reside in California, Arizona or Oregon. 

        "Effective Date" means the Closing Date of the Purchase and Sale Agreement by and between Health Net, Inc. and SafeGuard Health
Enterprises, Inc. dated April 7, 2003. 

        "HNL Subscriber" means the person who has entered into an individual or group Subscriber Agreement with HNL or any of its Affiliates and
who is eligible to receive Covered Services from HNL or any of its Affiliates. For purposes of this Agreement, Subscribers under Non-Novated Dental Policies (as defined in the Assumption
and Indemnity Reinsurance Agreement) shall be considered HNL Subscribers and Non-Novated Dental Policies shall be considered HNL Subscriber Agreements. 

        "JAMS" shall have the meaning set forth in Section 7.02. 

        "Losses" shall have the meaning set forth in Section 8.02. 

        "Network List" shall have the meaning set forth in Section 2.04. 

        "Non-Novated Dental Policies" shall have the meaning set forth in the Assumption and Indemnity Reinsurance Agreement. 

        "Notice of Transfer" shall have the meaning set forth in Section 2.02. 

        "Novated Dental Policies" shall have the meaning set forth in the Assumption and Indemnity Reinsurance Agreement. 

        "Participating Dental Provider" means any Dental Provider who or which has not consented to the assignment by HNL of their Contract to
SafeHealth, but who or which has otherwise consented to provide dental services or dental supplies to SafeHealth Subscribers in California, Arizona or Oregon on the same terms and conditions as
contained in the Contract with such Dental Provider and who or which SafeHealth determines meets the credentialing and contracting criteria established by SafeHealth. 

        "SafeHealth Subscriber" means the person who has entered into an individual or group Subscriber Agreement with SafeHealth or any of its
Affiliates and who is eligible to receive Covered Services from SafeHealth or any of its Affiliates. For purposes of this Agreement, Subscribers under Novated Dental Policies (as defined in the
Assumption and Indemnity Reinsurance Agreement) shall be considered SafeHealth Subscribers and Novated Dental Policies shall be considered SafeHealth Subscriber Agreements. 

        "Subscriber Agreement" means an agreement with a Subscriber that describes the Covered Services and which sets forth the terms and
conditions of coverage and enrollment. 

ARTICLE II

HNL SERVICES  

        Section 2.01.    Access to Network.    Subject to and consistent with the terms and conditions of this
Agreement, HNL shall provide to SafeHealth access to the Dental Providers who or which allow such access under their Contracts for the purpose of providing dental services or dental supplies to
SafeHealth Subscribers. SafeHealth shall cooperate with HNL to arrange access by SafeHealth Subscribers to any Dental Provider whose Contract does not expressly permit such access and who or 

2

 

which
SafeHealth determines meets the credentialing and contracting criteria established by SafeHealth. 

        Section 2.02.    Notice to Dental Providers.    HNL and SafeHealth shall jointly prepare and deliver to each
Dental Provider a notice informing each Dental Provider of the agreement reached between HNL and SafeHealth for the transfer of the Dental Policies from HNL to SafeHealth pursuant to the Assumption
and Indemnity Reinsurance Agreement and requesting each Dental Provider to consent to the assignment by HNL of such Dental Provider's Contract to SafeHealth (the "Notice of Transfer"). The
expense of preparing and delivering the Notice of Transfer to each Dental Provider shall be shared equally by the parties. The parties shall use commercially reasonable efforts to take such actions or
cause to be done such things necessary, proper or appropriate to obtain the consent of the Dental Providers to the assignment by HNL of their Contracts to SafeHealth. Upon receipt of a consent by a
Dental Provider to the assignment by HNL of his, her or its Contract to SafeHealth, HNL shall take such actions necessary or appropriate to effect the assignment of such Dental Provider Contracts to
SafeHealth. 

        Section 2.03.    Access to Dental Providers.    SafeHealth understands and acknowledges that certain Dental
Providers may elect not to consent to the assignment of their Contract by HNL to SafeHealth. When HNL has information that a Dental Provider has indicated that he, she or it will not consent to the
assignment by HNL of such Dental Provider's Contract to SafeHealth, HNL shall use its commercially reasonable efforts to cause each such Dental Provider selected by SafeHealth to provide dental
services or dental supplies to SafeHealth Subscribers on the same basis, terms and conditions as such Dental Provider has agreed to provide Covered Services to HNL Subscribers,  provided, however, that HNL shall not be required to take any action with respect to any Contract that
would constitute a breach thereof, a violation of Law, or that would result in a failure by HNL to provide access to HNL Subscribers to an adequate network of Dental Providers. 

        Section 2.04.    Network List.    Thirty (30) days prior to the Effective Date, HNL shall deliver to
SafeHealth a list of Dental Providers (the "Network List") in a mutually acceptable electronic format that is accurate as of the end of the calendar month preceding delivery of the Network List. The
Network List shall contain information regarding each Dental Provider including name, billing address, facility office address, telephone number, tax identification number, the Contract fee schedule,
Contract effective date, Contract termination date, and any specialty. On a monthly basis thereafter, HNL shall deliver to SafeHealth (i) updates of all information contained in the Network
List and any additional information in HNL's possession reasonably necessary for SafeHealth to monitor and maintain an accurate database of Dental Providers and to maintain the
sufficiency and accuracy of SafeHealth's claim processing and payment systems, (ii) a list of all Dental Providers who or which have consented to the assignment of their Contract from HNL to
SafeHealth, and (iii) a list of all Dental Providers who or which have agreed to be Participating Dental Providers. 

        Section 2.05.    Maintenance of Network.    HNL shall use commercially reasonable efforts to maintain and
enforce all provisions of the Contracts with Participating Dental Providers, provided, however, HNL
shall not be required to recruit or enter into a contract with any person or entity who or which is not a Dental Provider as of the Effective Date. 

        Section 2.06.    Termination of Contracts.    HNL shall notify SafeHealth as soon as reasonably practicable of
the receipt by HNL of a notice of a Participating Dental Provider's intention to terminate his, her or its Contract. Nothing herein shall preclude HNL from terminating any Participating Dental
Provider either for cause or at the direction of SafeHealth in a manner consistent with the provisions of the Contract of each Participating Dental Provider. If the Contract of a Participating Dental
Provider terminates, the obligation of HNL to use its commercially reasonable efforts to cause such Participating Dental Provider to provide dental services or dental supplies to SafeHealth
Subscribers shall cease effective on the date such termination becomes effective. 

3

 

        Section 2.07.    Communications.    HNL shall notify SafeHealth in writing promptly after receiving any actual
or constructive notice of any investigation, complaint, grievance or adverse action against any Participating Dental Provider, including without limitation (i) any action against a
Participating Dental Provider's state license, accreditation, or certification, or (ii) any event or circumstance which reasonably could be expected to interfere materially with, modify, or
alter the performance of any Participating Dental Provider's duties or obligations under its Contract. 

        Section 2.08.    Grievance Procedure.    HNL and SafeHealth shall cooperate to resolve any questions or
complaints involving a Participating Dental Provider related to dental services or dental supplies provided to SafeHealth Subscribers. 

ARTICLE III

OBLIGATIONS OF SAFEGUARD  

        Section 3.01.    Direct Contracting.    As soon as reasonably practicable after the Effective Date, SafeHealth
shall use commercially reasonable efforts to contract directly with the those Dental Providers who or which (i) do not consent to the assignment of their Contract from HNL to SafeHealth,
(ii) who or which SafeHealth determines meet the SafeHealth credentialing requirements as of the Effective Date, and (iii) who or which SafeHealth determines are necessary or desirable
to provide dental services or dental supplies to SafeHealth Subscribers. If any Dental Provider enters into a direct contractual relationship with SafeHealth, HNL's obligations to
SafeHealth with respect to such Dental Provider pursuant to this Agreement shall cease, provided,  however, HNL shall maintain its Contract with any Dental
Provider who or which contracts directly with SafeHealth if necessary to provide HNL
Subscribers under Non-Novated Dental Policies with access to an adequate network of Dental Providers. 

        Section 3.02.    Agreements with Contracting Providers.    SafeHealth hereby accepts and agrees to comply with
all provisions of the Contracts with Participating Dental Providers, including but not limited to, the responsibility to make payment to any Participating Dental Provider for dental services or dental
supplies provided by the Participating Dental Providers to SafeHealth Subscribers according to the fee schedule applicable to each Contract. Any fee schedule maintained by HNL with a Participating
Dental Provider shall be provided by HNL upon request to the SafeHealth. Upon receipt of the written consent of SafeHealth, HNL may amend the fee schedule applicable to any Participating Dental
Provider in a manner consistent with the terms of the Contract with such Participating Dental Provider. Notwithstanding the foregoing, SafeHealth shall not modify in any way any obligation of the
parties set forth in the applicable Contracts executed between HNL and the Participating Dental Providers. 

        Section 3.03.    Payment of Dental Provider Fees.    

        (a)   SafeHealth
shall retain full responsibility for the payment of all fees related to dental services and dental supplies provided to SafeHealth Subscribers by
Participating Dental Providers, excluding applicable copayment, coinsurance and deductible amounts. SafeHealth shall at all times retain full responsibility for determining compensability and for
payment or non-payment of claims for fees from Participating Dental Providers pertaining to SafeHealth Subscribers. 

        (b)   HNL
shall promptly forward to SafeHealth any claims for fees received by HNL from Participating Dental Providers pertaining to SafeHealth Subscribers and payable by
SafeHealth, unless SafeHealth has made alternate arrangements in advance with a Participating Dental Provider to submit claims directly to SafeHealth for payment. SafeHealth shall pay the claims for
fees of Participating Dental Providers for dental services or dental supplies provided to SafeHealth Subscribers as soon as practical, but subject to the following minimum standard: 95% of the monthly
volume of clean claims shall be paid or denied within thirty (30) days of receipt by SafeHealth. For purposes of this 

4

 

Section 3.03,
"clean claim" means a claim that has no defect or impropriety, including any lack of any required substantiating documentation, or particular circumstances requiring special
treatment that prevents timely payments from being made on the claim. SafeHealth shall promptly notify HNL if they determine that the minimum reimbursement standards are not met regularly. 

        Section 3.04.    Credentialing.    SafeHealth shall annually re-credential the Participating Dental
Providers utilizing SafeHealth's credentialing criteria as of the Effective Date. If a Participating Dental Provider fails to meet the SafeHealth credentialing criteria, upon the request of
SafeHealth, HNL shall terminate the Contract of such Participating Dental Provider in accordance with its terms. SafeHealth shall require the Participating Dental Providers to maintain all
professional liability and general liability insurance coverage required by Law or their Contract. Subject to any applicable confidentiality requirements, HNL and its authorized representatives shall
have the right, upon prior written notice, at all reasonable times during normal business hours, to inspect, review and make copies of all books and records of SafeHealth reasonably related to the
credentialing of Participating Dental Providers. 

        Section 3.05.    Quality of Service.    SafeHealth shall monitor the quality of Covered Services provided by
the Participating Dental Providers to HNL Subscribers and SafeHealth Subscribers through a quality management program consistent with the prevailing practices and procedures of SafeHealth as of the
Effective Date. In the event the standard or quality of care or service furnished by a Participating Dental Provider is found to be unacceptable under such program, SafeHealth shall promptly notify
HNL and either (i) use commercially reasonable efforts to ensure that such Participating Dental Provider corrects the specified deficiency, or (ii) direct HNL to terminate the Contract
of such Participating Dental Provider in accordance with its Terms. HNL shall cooperate with SafeHealth and use reasonable efforts to obtain the cooperation of Participating Dental Providers with
SafeHealth's provider profiling and performance measurement programs and processes. 

        Section 3.06.    Use of Information.    SafeHealth may provide the names of Participating Dental Providers to
SafeHealth Subscribers in provider directories or otherwise and may use such information as otherwise necessary to carry out the terms of this Agreement, including but not limited to, attempting to
contract directly with Dental Providers pursuant to Section 3.01. SafeHealth shall not otherwise use the names, symbols, trademarks or service marks of Participating Dental Providers without
the prior written consent of HNL and the Participating Dental Providers. 

        Section 3.07.    Subscriber Services.    SafeHealth shall perform all duties relating to SafeHealth Subscriber
services, grievances, appeals and coordination of care under the SafeHealth Subscriber Agreements. 

        Section 3.08.    Covered Services.    Communications as to the scope of Covered Services under the SafeHealth
Subscriber Agreements and the availability of same to SafeHealth Subscribers shall be the sole responsibility of the SafeHealth. 

ARTICLE IV

TERM AND TERMINATION  

        Section 4.01.    Term.    The term of this Agreement shall be for a period of one (1) year, commencing
on the Effective Date. 

        Section 4.02.    Termination on Mutual Consent.    This Agreement may be terminated at any time by mutual
agreement of the parties hereto in writing. 

5

 

        Section 4.03.    Termination for Cause.    Either party may terminate this Agreement for cause by providing the
other party thirty (30) days written notice of its intention to terminate upon the occurrence of any of the following: 

        (a)   If
a party fails to remit any amounts due under this Agreement within ninety (90) days of the date such amount is due and payable. 

        (b)   If
a party breaches a material term, covenant or condition of this Agreement and fails to cure such breach within thirty (30) days of receiving written notice of
such breach from the non-breaching party. The written notice of such breach shall make specific reference to the action causing breach. If the breaching party fails to cure its breach to
the reasonable satisfaction of the non-breaching party during the thirty (30) day cure period, this Agreement shall terminate at the option of the non-breaching party.
In the event such cure cannot reasonably be completed within such thirty (30) day period, then commencement of such cure within such thirty (30) days and its diligent prosecution shall,
subject to the party's other rights to terminate the Agreement, extend the period to cure the breach for an additional period reasonably necessary to complete the cure. 

        (c)   If
a party engages in fraudulent, illegal or grossly negligent conduct with respect to its duties and obligations under this Agreement, the other party shall have the
right to terminate this Agreement, upon delivery of written notice of such termination to the defaulting party, which shall be effective upon receipt, without prejudice to any other rights or remedies
available to the non-defaulting party by reason of the defaulting party's conduct. 

        (d)   If
a party becomes unable to perform its obligations under the Contracts or this Agreement because of financial impairment or loss of authority to act under Law, or by
action of any Governmental Authority, the other party shall have the right to terminate this Agreement immediately. 

        (e)   In
the event of a Change of Control of one party, the other party shall have the right to terminate this Agreement effective as of the effective date of the Change of
Control. 

        Section 4.04.    Post-Termination Rights and Responsibilities.    Termination of this Agreement
shall not terminate rights and obligations of the parties which by their nature extend beyond the term. Upon the expiration or earlier termination of this Agreement, upon the written request of
SafeHealth, SafeHealth and HNL shall coordinate the transfer of SafeHealth Subscribers to dental providers other than the Dental Providers in a manner consistent with the SafeHealth Subscribers' need
for continuity of dental services and dental supplies. 

ARTICLE V

RELATIONSHIP OF THE PARTIES  

        Section 5.01.    Relationship of Parties.    The parties to this Agreement are and shall remain independent
contractors. Neither party is the employee or agent of the other party, except as set forth herein, and neither party has an express or implied right to bind the other party. The parties do not intend
to form a joint venture, partnership, or to be governed by Law relating to any relationship other than that of independent contractors. Neither party is authorized to modify, alter or waive the
terms of any product issued by the other party. 

        Section 5.02.    Dental Providers.    SafeHealth acknowledges that all Participating Dental Providers are
independent contractors and are not employees of HNL, or any HNL Affiliate. None of the parties hereto shall attempt, directly or indirectly, to control, direct or interfere with the practice of
medicine or dentistry by any Participating Dental Provider. 

6

 

ARTICLE VI

PROTECTION OF CONFIDENTIAL INFORMATION  

        Section 6.01.    License to Use HNL Materials.    HNL may from time to time provide to SafeHealth certain
materials, brochures, reporting forms, and other related material, whether in a printed or electronic format, pertaining to the Participating Dental Providers. HNL grants to SafeHealth a
non-exclusive license to use during the term of this Agreement any such nonconfidential or nonproprietary materials in a manner consistent with this Agreement and the Contracts of each
Participating Dental Provider. 

        Section 6.02.    Confidentiality of Information.    During the term of this Agreement and at all times
thereafter, SafeHealth shall refrain from disclosing to any person any confidential or trade secret information of HNL. Upon termination of this Agreement, SafeHealth shall immediately surrender and
return to HNL all documents relating to HNL's confidential or trade secret information, including but not limited to, utilization review and quality assurance plans, utilization review
data bases, fee schedules and schedules of charges, billing systems, any and all operating manuals or similar materials, including without limitation the policies, procedures, methods of doing
business developed by HNL, other property belonging to HNL, or other matters that are trade secrets of HNL. SafeHealth agrees that all such documents and materials are the sole property of HNL and
that SafeHealth shall not make any copies thereof. Upon the termination of this Agreement, neither party shall use or permit the use for any purpose any of the other party's proprietary or
confidential information or trade secrets. 

        Section 6.03.    Subscriber Confidential Information.    

        (a)   The
parties shall maintain the confidentiality of any personal information, including health information, pertaining to Subscribers and dependents of Subscribers
including, without limitation, files, records, reports, and other information prepared and maintained in connection with this Agreement, in accordance with all applicable Law. 

        (b)   Each
party shall obtain any necessary consent or authorization from Subscribers and the dependents of Subscribers with respect to the release to the other party of any
non-public personal information, including health information, relating to such Subscribers or dependents of Subscribers, by means of a general or specific release, as appropriate. Each
party shall notify the other if it becomes aware that proper authorizations have not been obtained with respect to the release of non-public personal or health information of a Subscriber
or a dependent of a Subscriber. 

ARTICLE VII

DISPUTE RESOLUTION  

        Section 7.01.    Arbitration.    In the event of any dispute between the parties hereto relating to, arising
out of, or in connection with any provision of this Agreement (hereinafter a "Dispute"), the parties to this Agreement and their representatives, designees, successors and assigns agree that any such
Dispute shall be settled by binding arbitration to take place in Orange County, California; provided,  however, that nothing herein shall preclude the
parties from seeking equitable judicial relief pending arbitration, including but not limited to
injunctive or other provisional relief. 

        Section 7.02.    Selection of Arbitrator.    Any arbitration hereunder shall be conducted by a single
arbitrator chosen from the panel of arbitrators of the Judicial Arbitration & Mediation Services ("JAMS") with experience and expertise in the dental HMO or dental indemnity insurance business.
If a JAMS arbitrator with specific experience in the dental HMO or dental indemnity insurance business is not available, the arbitrator must have general experience in the health insurance industry.
Within ten (10) days of notice of a Dispute from HNL to SafeHealth or notice from SafeHealth to HNL, HNL 

7

 

and
SafeHealth shall use their best efforts to choose a mutually agreeable arbitrator. If HNL and SafeHealth cannot agree on an arbitrator, the arbitrator shall promptly be selected by JAMS. 

        Section 7.03.    Procedures.    The party submitting a Dispute to arbitration hereunder shall present its case
to the arbitrator and the other party hereto in written form within twenty (20) days after the appointment of the arbitrator. The other party hereto shall then have twenty (20) days to
submit a written response to the arbitrator and the original party who submitted the Dispute to arbitration. After timely receipt of each party's case, the arbitrator shall have twenty
(20) days to render his or her decision. 

        Section 7.04.    Applicable Law.    The arbitrator is relieved from judicial formalities and, in addition to
considering the rules of law, the limitations contained in this Agreement and the customs and practices of the health care industry, shall make his or her award with a view to effectuating the intent
of this Agreement. The decision of the arbitrator shall be final and binding upon the parties, and judgment may be entered thereon in a court of competent jurisdiction. 

        Section 7.05.    Expenses.    Each party shall bear its own cost of arbitration, and the costs of the
arbitrator shall be shared equally among each party to a Dispute. 

        Section 7.06.    Survival of Article.    This Article VII shall survive termination of this Agreement. 

ARTICLE VIII

ALLOCATION OF LIABILITY & INDEMNIFICATION  

        Section 8.01.    Limitation of Liability.    

        (a)   HNL
shall not be responsible for any claims, liabilities, expenses or other obligations arising out of or in connection with any of the benefits, coverages, or other
terms and conditions of SafeHealth Subscriber Agreements, policies, agreements, or other arrangements issued or entered into by SafeHealth or any of its Affiliates providing Covered Services to
SafeHealth Subscribers or the performance or non-performance of any of SafeHealth's obligations under this Agreement. HNL shall not be liable for any breach of any agreement with a Dental
Provider arising from or in connection with any act, error or omission by SafeHealth. SafeHealth acknowledges that HNL shall have no responsibility to pay any compensation to any Participating Dental
Provider or any other person for any dental services or dental supplies provided to a SafeHealth Subscriber. 

        (b)   Except
as provided in the Assumption and Indemnity Reinsurance Agreement, SafeHealth shall not be responsible for any claims, liabilities, expenses or other obligations
arising out of or in connection with any of the benefits, coverages, or other terms and conditions of the HNL Subscriber Agreements, policies, agreements, or other arrangements issued or entered into
by HNL or any of its Affiliates providing Covered Services to HNL Subscribers or the performance or non-performance of any of HNL "s or any of HNL's Affiliate's obligations
under this Agreement. SafeHealth shall not be liable for any breach of any agreement with a Dental Providers arising from or in connection with any act, error or omission by HNL or any HNL Affiliate. 

        Section 8.02.    Indemnification.    Each party shall indemnify and hold harmless the other party and their
respective directors, officers, employees, representatives, and agents against any and all losses, liabilities, damages, demands, claims, actions judgments, causes of action, assessments, costs or
expenses, including without limitation, interest, penalties and reasonable attorneys' fees (collectively, "Losses") incurred by a party by reason of or arising out of the performance or
non-performance of obligations of the other party under this Agreement or any other act, error or omission. The obligation of SafeHealth to indemnify HNL shall include, without limitation,
Losses arising out of SafeGuard's performance or non-performance of the obligations under the Contracts with Participating Dental Providers in accordance with Section 3.02 of this
Agreement. 

8

 

ARTICLE IX

GENERAL PROVISIONS  

        Section 9.01.    Compliance with Laws.    Each party shall, in the performance of their obligations set forth
in this Agreement, comply with all applicable Law and the rules and regulations of all Governmental Authorities with jurisdiction over the parties and each party shall maintain all licenses or
certificates
necessary or appropriate for the performance of the functions set forth in this Agreement. Each party shall conform its actions under this Agreement to any orders concerning the activities covered by
this Agreement by Governmental Authorities having jurisdiction over the parties' business affairs and operations. Each party shall take all actions and make all filing, applications and provide all
notices required by applicable Law. Each party shall promptly notify the other party of any complaint, inquiry or lawsuit by any Governmental Authority relating to this Agreement. 

        Section 9.02.    Notices.    Any notice or other communication required or permitted hereunder shall be in
writing and shall be delivered by certified process server, certified or registered mail (postage prepaid and return receipt requested), by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or by facsimile (with request for immediate confirmation of receipt in a manner customary for communications of such respective type). Notices shall be
effective upon receipt and shall be addressed as follows: 

        (a)   if
to SafeHealth to: 

SafeGuard
Health Enterprises, Inc.

95 Enterprise, Suite 100

Aliso Viejo, California 92656

Attn.: James E. Buncher

President and Chief Executive Officer

Tel: (949) 425-4100

Fax: (949) 425-4101 

with
a copy to: 

Ronald
I. Brendzel

Senior Vice President and General Counsel

SafeGuard Health Enterprises, Inc.

95 Enterprise, Suite 100

Aliso Viejo, California 92656

Tel: (949) 425-4110

Fax: (949) 425-4586 

and 

David
K. Meyercord

Strasburger and Price, LLP

901 Main Street, Ste 4300

Dallas, Texas 75202-3794

Tel: (214) 651-4525

Fax: (214) 659-4023 

        (b)   if
to HNL to: 

Health
Net, Inc.

Att: General Counsel

21650 Oxnard Street

Woodland Hills, California 91367

9

 

Tel:
(818) 676-7601

Fax: (818) 676-7503 

with
a copy to: 

Kenneth
B. Schnoll

Sonnenschein Nath & Rosenthal

685 Market Street

San Francisco, CA 94105

Tel: (415) 882-0210

Fax: (415) 543-5472 

        Section 9.03.    Headings.    The headings of the sections of this Agreement are included for the purposes of
convenience only and shall not affect the interpretation of any provision hereof. 

        Section 9.04.    Governing Law.    This Agreement shall be governed by and construed in accordance with the Law
of the State of California, without giving effect to the principles of conflicts of laws thereof. 

        Section 9.05.    Severability.    In the event any section or provision of this Agreement or related documents
is found to be void and unenforceable by a court of competent jurisdiction, the remaining sections and provisions of this Agreement or related documents shall nevertheless be binding upon the parties
with the same force and effect as though the void or unenforceable part had not been severed or deleted. 

        Section 9.06.    Assignability.    Except as otherwise expressly provided in this Agreement, neither party may
assign any of its rights or obligations under this Agreement without the prior written consent of the other party. Except as specifically provided in this Agreement, any attempted assignment or
delegation of a party's rights, claims, privileges, duties or obligations hereunder shall be null and void. 

        Section 9.07.    Successors and Assigns.    This Agreement and the rights, privileges, duties and obligations
of the parties hereunder, to the extent assignable or delegable, shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assignees. 

        Section 9.08.    Waiver.    No waiver of or failure by any party to enforce any of the provisions, terms,
conditions, or obligations herein shall be construed as a waiver of any subsequent breach of such provision, term, condition, or obligation, or of any other provision, term, condition, or obligation
hereunder, whether the same or different in nature. No extension of time for performance of any obligations or acts shall be deemed an extension of the time for performance of any other obligations or
acts. 

        Section 9.09.    Expenses.    Except as may be specifically provided for in this Agreement, all parties shall
bear their own expenses incurred in connection with this Agreement and the transactions contemplated herein, including, but not limited to, legal and accounting fees. 

        Section 9.10.    Further Assurances.    Each party agrees, at its own cost, to do such further acts and things
and to execute and deliver such additional agreements and instruments as the other may reasonably require to consummate, evidence or confirm the agreements contained herein in the manner contemplated
hereby. 

        Section 9.11.    Relationship of Parties.    The parties to this Agreement are and shall remain independent
contractors. Neither party is the employee or agent of the other party, except as set forth herein, and neither party has an express or implied right to bind the other party. The parties do not intend
to form a joint venture, partnership, or to be governed by Law relating to any relationship other than that of independent contractors. 

10

 

        Section 9.12.    No Third Party Rights.    This Agreement has been made for the benefit of the parties hereto
and respective successors and permitted assigns and nothing in this Agreement is intended to confer any rights or remedies under or by reason of this Agreement on any other person other than the
parties to it and their respective successors and permitted assigns. Nothing in this Agreement is intended to relieve or discharge the obligations or liability of any third person to any party to this
Agreement. 

        Section 9.13.    Exhibits and Schedules.    All exhibits and Schedules referred to in this Agreement are
incorporated herein by this reference. 

        Section 9.14.    Force Majeure.    Neither party- hereto shall be liable for any delay or failure
in the performance of any obligation under this Agreement or for any loss or damage (including indirect or consequential damage) to the extent that such nonperformance, delay, loss or damage results
from any contingency which is beyond the control of such party, provided such contingency is not caused by the fault or negligence of such party. A contingency for the purposes of this Agreement shall
be acts of God, fires, floods, earthquakes, explosions, storms, wars, hostilities, blockades, public disorders, quarantine restrictions, embargoes, strikes or other labor disturbances, and compliance
with any law, order or control of, or insistence by any governmental or military authority. 

        Section 9.15.    Plurals/Pronouns/Gender.    All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as appropriate. 

        Section 9.16.    Locative Adverbs.    Whenever in this Agreement the locative adverbs "herein," "hereof," or
"hereunder" are used, the same shall be understood to refer to this Agreement in its entirety and not to any specific article, section, subsection, subpart, paragraph or subparagraph. 

        Section 9.17.    Integration.    This Agreement and all Exhibits and Schedules attached hereto constitute the
entire agreement between the parties with regard to the subject matter hereof and thereof. This Agreement supersedes all previous agreements between or among the parties. There are no agreements,
representations, or warranties between or among the parties with respect to the subject matter hereof other than those set forth in this Agreement or the documents and agreements referred to in this
Agreement. 

        Section 9.18.    Amendments.    No amendment, modification, or supplement to this Agreement shall be binding on
any of the parties unless it is reduced to writing and signed by each of the parties. SafeHealth acknowledges that Contracts permit the implementation of certain amendments unilaterally by HNL without
the consent by the Dental Providers who or which are parties to such Contracts. SafeHealth shall cooperate with HNL in effecting such amendments to Contracts as may be required in order to carry out
the terms of this Agreement. 

        Section 9.19.    Counterparts.    This Agreement may be executed simultaneously in any number of counterparts,
each of which will be deemed an original, but all of which will constitute one and the same agreement. 

11

 

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

	 
	 	 

	 	 	HEALTH NET LIFE INSURANCE COMPANY
	

 	
 	

/s/  DAVID W. ANDERSON      
 Name: David W. Anderson

Title: President
	

 	
 	

SAFEHEALTH LIFE INSURANCE COMPANY
	

 	
 	

/s/  JAMES E. BUNCHER      
 Name: James E. Buncher

Title: President and Chief Executive Officer
	

 	
 	

/s/  RONALD I. BRENDZEL      
 Name: Ronald I. Brendzel

Title: Senior Vice President and Secretary

12

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RECITALS

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