Information Technology Services Agreement (2002)Full Document 

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                    INFORMATION TECHNOLOGY SERVICES AGREEMENT

                                     BETWEEN

                         PACIFICARE HEALTH SYSTEMS, INC.

                                       AND

                                   KEANE, INC.

                                JANUARY 11, 2002



                                TABLE OF CONTENTS



                                                                            PAGE
                                                                         
1.       DEFINITIONS AND CONSTRUCTION ...................................     1

         1.1      Definitions ...........................................     1

         1.2      Interpretation ........................................     1

         1.3      Order of Precedence ...................................     2

2.       TERM ...........................................................     2

         2.1      Initial Term ..........................................     2

         2.2      Renewal Term; Extension Period ........................     2

3.       SERVICES .......................................................     3

         3.1      Base Services .........................................     3

         3.2      Improved Technology ...................................     3

         3.3      Governmental Approvals; Changes in Laws ...............     4

         3.4      Third Party Consents ..................................     5

         3.5      Technical Architecture and Product Standards ..........     6

         3.6      Knowledge Sharing .....................................     6

         3.7      Procurement ...........................................     6

         3.8      Reports ...............................................     6

         3.9      Right to Use Third Parties ............................     8

4.       TRANSITION .....................................................     8

         4.1      Transition Services ...................................     8

         4.2      Milestones ............................................     8

5.       NEW SERVICES ...................................................     9

         5.1      New Services ..........................................     9

         5.2      Third Party Services in Connection with
                  New Services ..........................................    10

6.       PACIFICARE RESPONSIBILITIES ....................................    10

         6.1      PacifiCare Supplier Relationship Manager ..............    10

         6.2      PacifiCare Resources ..................................    10

         6.3      Use of PacifiCare Facilities ..........................    11

         6.4      Retained Staff ........................................    11

7.       THIRD PARTY AGREEMENTS .........................................    12

         7.1      Assigned Agreements ...................................    12

         7.2      Managed Agreements ....................................    12

         7.3      Performance Under Agreements ..........................    13



                                       i.


                                TABLE OF CONTENTS
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                                                                            PAGE
                                                                         
8.       SERVICE LEVELS .................................................    13

         8.1      Initial Base Service Levels ...........................    13

         8.2      Service Levels for New Services .......................    13

         8.3      Adjustment of Service Levels ..........................    13

         8.4      Root-Cause Analysis ...................................    14

         8.5      Measurement Tools .....................................    14

         8.6      Continuous Improvement and Best Practices .............    14

         8.7      Service Level Credits .................................    14

         8.8      Excused Performance ...................................    15

9.       PACIFICARE SATISFACTION AND BENCHMARKING .......................    15

         9.1      Satisfaction Survey ...................................    15

         9.2      Benchmarking ..........................................    15

10.      SERVICE LOCATIONS ..............................................    15

         10.1     Service Locations .....................................    15

         10.2     Safety and Security Procedures ........................    16

         10.3     Data Security .........................................    16

         10.4     Security Relating to Competitors ......................    16

11.      HUMAN RESOURCES ................................................    17

12.      SUPPLIER STAFF .................................................    17

         12.1     Supplier Client Relationship Manager ..................    17

         12.2     Key Personnel .........................................    17

         12.3     Project Staff .........................................    18

         12.4     Subcontractors ........................................    18

         12.5     Conduct of Supplier Personnel .........................    19

         12.6     Non-Competition .......................................    19

         12.7     Non-Solicitation ......................................    19

13.      MANAGEMENT AND CONTROL .........................................    20

         13.1     Steering Committee ....................................    20

         13.2     Oversight and Management Process; Relationship
                  with Infrastructure Supplier ..........................    20

         13.3     Policy & Procedures Manual ............................    22

         13.4     Change Control Procedures .............................    23



                                       ii.


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                                   (CONTINUED)



                                                                            PAGE
                                                                         
14.      PROPRIETARY RIGHTS .............................................    23

         14.1     Background Technology .................................    23

         14.2     PacifiCare Software ...................................    23

         14.3     Supplier Software .....................................    24

         14.4     Supplier Tools ........................................    24

         14.5     Developed Software ....................................    24

         14.6     Web Development .......................................    25

         14.7     Upgrades to Software ..................................    25

15.      DATA ...........................................................    25

         15.1     Ownership of PacifiCare Data ..........................    25

         15.2     Use of PacifiCare Data ................................    25

         15.3     Correction and Reconstruction .........................    25

         15.4     Return of Data ........................................    26

16.      CONTINUED PROVISION OF SERVICES ................................    26

         16.1     Disaster Recovery Plan ................................    26

         16.2     Force Majeure .........................................    27

         16.3     Alternate Source ......................................    27

         16.4     No Payment for Unperformed Services ...................    27

         16.5     Allocation of Resources ...............................    27

17.      PAYMENTS AND INVOICING .........................................    27

         17.1     Base Fees .............................................    27

         17.2     Base Fees .............................................    28

         17.3     Variable Fees and Adjustment of Baselines .............    28

         17.4     Variable Fee Report ...................................    28

         17.5     Time of Payment .......................................    28

         17.6     Detailed Invoices .....................................    28

         17.7     Fee Dispute ...........................................    29

         17.8     Substantial Changes ...................................    29

         17.9     Adjustments to Fees ...................................    29

         17.10    Expenses ..............................................    29

         17.11    Rights of Set-Off .....................................    29

         17.12    Proration .............................................    29



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                                                                            PAGE
                                                                         
         17.13    Unused Credits ........................................    29

         17.14    [...***...] ...........................................    29

18.      TAXES ..........................................................    30

19.      AUDITS .........................................................    31

         19.1     Services ..............................................    31

         19.2     Fees ..................................................    31

         19.3     Omnibus Reconciliation Act ............................    32

         19.4     Record Retention ......................................    32

         19.5     Facilities ............................................    32

         19.6     Audit Software ........................................    32

         19.6     Relief ................................................    32

20.      CONFIDENTIALITY ................................................    33

         20.1     General Obligations ...................................    33

         20.2     Exceptions ............................................    33

         20.3     Attorney-Client Privilege .............................    33

         20.4     Unauthorized Acts .....................................    34

         20.5     Injunctive Relief .....................................    34

21.      REPRESENTATIONS AND WARRANTIES .................................    35

         21.1     By PacifiCare .........................................    35

         21.2     By Supplier ...........................................    35

         21.3     Disclaimer ............................................    36

22.      ADDITIONAL COVENANTS ...........................................    36

         22.1     By PacifiCare .........................................    36

         22.2     By Supplier ...........................................    36

23.      DISPUTE RESOLUTION .............................................    37

         23.1     Resolution Procedures .................................    37

         23.2     Exclusions ............................................    38

         23.3     Continuity of Services ................................    38

24.      TERMINATION ....................................................    38

         24.1     Termination for Convenience ...........................    38

         24.2     Termination for Change in Control .....................    38

         24.3     Termination for Cause .................................    38



                                       iv.
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         24.4     Termination for Failure to Provide Critical Services...    39

         24.5     Insolvency ............................................    39

         24.6     Other Terminations ....................................    39

25.      TERMINATION FEES ...............................................    39

         25.1     Early Termination Fee .................................    39

         25.2     No Other Fees .........................................    39

26.      TERMINATION ASSISTANCE .........................................    40

         26.1     Termination Assistance Services .......................    40

         26.2     Termination Services Fees .............................    41

         26.3     Exit Duties and Exit Rights ...........................    41

27.      INDEMNITIES ....................................................    43

         27.1     Indemnity by PacifiCare ...............................    43

         27.2     Indemnity by Supplier .................................    43

         27.3     Indemnification Procedures ............................    45

28.      DAMAGES ........................................................    45

         28.1     Consequential Damages .................................    45

         28.2     Direct Damages ........................................    45

         28.3     Basis of the Bargain ..................................    45

         28.4     Exclusions ............................................    46

29.      INSURANCE ......................................................    46

         29.1     Types and Amounts .....................................    46

         29.2     Supplier Agents .......................................    47

         29.3     Documentation .........................................    47

         29.4     Self Insurance ........................................    47

         29.5     Intentions ............................................    48

30.      MISCELLANEOUS PROVISIONS .......................................    48

         30.1     Amendments ............................................    48

         30.2     Assignment ............................................    48

         30.3     Bankruptcy ............................................    48

         30.4     Conflict of Interest ..................................    48

         30.5     Consents, Approvals and Requests ......................    49

         30.6     Corporate Integrity ...................................    49



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         30.7     Counterparts ..........................................    49

         30.8     Covenant of Further Assurances ........................    49

         30.9     Entire Agreement ......................................    49

         30.10    Export ................................................    49

         30.11    Good Faith and Fair Dealing ...........................    49

         30.12    Governing Law and Venue ...............................    50

         30.13    Notices ...............................................    50

         30.14    Publicity .............................................    51

         30.15    Relationship ..........................................    51

         30.16    Severability ..........................................    51

         30.17    Survival ..............................................    51

         30.18    Third Party Beneficiaries .............................    52

         30.19    Timing and Cumulative Remedies ........................    52

         30.20    Waivers ...............................................    52



                                       vi.
                                               *CONFIDENTIAL TREATMENT REQUESTED


                    INFORMATION TECHNOLOGY SERVICES AGREEMENT

      THIS INFORMATION TECHNOLOGY SERVICES AGREEMENT (the "AGREEMENT"), dated as
of January 11, 2002 (the "EFFECTIVE DATE"), is between PACIFICARE HEALTH
SYSTEMS, INC., a Delaware corporation with its principal place of business at
3120 W. Lake Center Drive, Santa Ana, California, 92704 ("PACIFICARE"), and
KEANE, INC., a Massachusetts corporation with its principal place of business at
Ten City Square, Boston, Massachusetts 02129 ("SUPPLIER").

                                    RECITALS

      WHEREAS, the PacifiCare Entities (as defined below) currently receive
information technology ("IT"), data processing and related services from
internal staff and certain third party providers;

      WHEREAS, the PacifiCare Entities desire to centralize the delivery of IT
services to maximize efficiency, improve the speed of delivering IT solutions
for new business opportunities and improve IT service levels;

      WHEREAS, PacifiCare desires for the PacifiCare Entities to obtain from
Supplier and International Business Machines Corporation, a New York corporation
(the "INFRASTRUCTURE SUPPLIER"), and Supplier desires to provide to the
PacifiCare Entities, in cooperation with the Infrastructure Supplier, certain
IT, data processing and related services whereby the PacifiCare Entities shall
be provided with a stable and robust operating environment with sufficient
capacity and scalability to meet business objectives on a proactive, rather than
reactive, basis, in accordance with the terms and conditions of this Agreement;
and

      WHEREAS, PacifiCare and Supplier have engaged in extensive negotiations
and discussions that have culminated in the formation of the relationship
described in this Agreement whereby Supplier shall provide to PacifiCare
Entities certain IT, data processing and related services, in accordance with
the terms and conditions of this Agreement.

      NOW, THEREFORE, for and in consideration of the agreements set forth
below, PacifiCare and Supplier agree as follows:

                                    AGREEMENT

1.    DEFINITIONS AND CONSTRUCTION.

      1.1 DEFINITIONS. Capitalized terms used in this Agreement shall have the
meanings set forth in EXHIBIT A.

      1.2 INTERPRETATION.

            (a) The schedules and exhibits attached to this Agreement are hereby
incorporated into and deemed part of this Agreement and all references to
"Agreement" include the schedules and exhibits to this Agreement.



            (b) The headings preceding the text of sections, the headings to
schedules and exhibits, the table of contents and the table of schedules
included in or attached to this Agreement are used for convenience only and are
not to be considered in construing or interpreting this Agreement.

            (c) The use of the terms "including," "include" or "includes" shall
in all cases herein mean "including without limitation," "include without
limitation" or "includes without limitation," respectively.

            (d) Words importing the singular include the plural and words
importing the masculine include the feminine and vice versa where the context so
requires.

            (e) References to any Law shall mean references to the Law as it
exists on the Effective Date as well as in changed or supplemented form or to a
newly adopted Law.

            (f) The Parties acknowledge and agree that they have mutually
negotiated the terms and conditions of this Agreement and that any provision
contained herein with respect to which an issue of interpretation or
construction arises shall not be construed to the detriment of the drafter on
the basis that such Party or its professional advisor was the drafter, but shall
be construed according to the intent of the Parties as evidenced by the entire
Agreement.

      1.3 ORDER OF PRECEDENCE. Except as otherwise expressly set forth in the
body of this Agreement or in any schedules or exhibits, in the event of a
conflict, ambiguity or inconsistency between the provisions in the body of this
Agreement and any schedule or exhibit, the provisions in the body of this
Agreement shall prevail.

2.    TERM.

      2.1 INITIAL TERM. The initial term of this Agreement (the "INITIAL TERM")
shall commence on the Effective Date and continue until 23:59 (Pacific Time) on
March 9, 2012 (the "INITIAL TERM EXPIRATION DATE"), or such earlier date upon
which this Agreement may be terminated in accordance with the provisions hereof.

      2.2 RENEWAL TERM; EXTENSION PERIOD.

            (a) Unless this Agreement is terminated in accordance with the
provisions hereof, PacifiCare shall notify Supplier at least one hundred eighty
(180) days prior to the Initial Term Expiration Date as to whether or not
PacifiCare desires to renew this Agreement. If PacifiCare provides Supplier with
notice that PacifiCare desires to renew this Agreement for a specified period
(the "RENEWAL TERM") and the Parties agree on the terms and conditions
applicable to the Renewal Term at least sixty (60) days prior to the Initial
Term Expiration Date, then this Agreement shall continue in effect beyond the
Initial Term Expiration Date in accordance with the terms and conditions agreed
upon by the Parties for the Renewal Term. If PacifiCare provides Supplier with
notice that PacifiCare does not desire to renew this Agreement, this Agreement
shall expire on the Initial Term Expiration Date, subject to Supplier's
obligation to provide Termination Assistance Services as set forth in this
Agreement.


                                       2.


            (b) If PacifiCare provides Supplier with notice that PacifiCare
desires to renew this Agreement and the Parties have not agreed on the terms and
conditions applicable to a Renewal Term at least sixty (60) days prior to the
Initial Term Expiration Date, then the term of this Agreement shall extend for a
period determined by PacifiCare of up to twelve (12) months beyond the Initial
Term Expiration Date (the "EXTENSION PERIOD"), at the charges, terms and
conditions in effect as of the Initial Term Expiration Date subject to a cost of
living adjustment as set forth in Schedule 17. If, during the Extension Period,
the Parties are able to reach agreement on the terms and conditions applicable
to a Renewal Term, then this Agreement shall continue in effect beyond the end
of the Extension Period in accordance with the terms and conditions agreed upon
by the Parties for the Renewal Term, and agreed upon pricing for the Renewal
Term will be applied retroactively to the Extension Period. If, during the
Extension Period, the Parties are unable to reach agreement on the terms and
conditions applicable to a Renewal Term, this Agreement shall expire at the end
of the Extension Period, subject to Supplier's obligation to provide Termination
Assistance Services as set forth in this Agreement.

3.    SERVICES.

      3.1 BASE SERVICES. Commencing on the Cutover Date and continuing
throughout the Term, Supplier shall be responsible for providing to PacifiCare
Entities (with respect to each PacifiCare Entity, as requested by PacifiCare)
the following services (collectively, the "BASE SERVICES"):

            (a) the services, functions and responsibilities described in this
Agreement (including the services, functions, responsibilities and projects
described in EXHIBIT B);

            (b) the application systems maintenance and enhancement services,
functions and responsibilities being performed during the twelve (12) month
period prior to the Cutover Date by the Affected Contractors set forth in
Schedule 3.1(b)(i) and the Affected Employees set forth in Schedule 3.1(b)(ii),
even if the service, function or responsibility is not specifically described in
this Agreement;

            (c) any application systems maintenance and enhancement services,
functions or responsibilities that are not specifically described in this
Agreement, but that are required for the proper performance and delivery of the
Services; and

            (d) those services otherwise identified in this Agreement as part of
the Base Services.

      Subject to Section 17.3 and Section 17.8, Supplier shall increase or

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