Exhibit 10.4e


                          LOAN AGREEMENT


      This Loan Agreement (this  "Agreement")  is entered into as of
February 18, 1997 between  MAXICARE  HEALTH  PLANS, INC., a Delaware
corporation ("Lender"),  and  EUGENE  L.  FROELICH  ("Borrower"), in
light of the following:


                             RECITALS


      WHEREAS, Borrower has requested Lender to lend to Borrower the
sum of Two Million  Two  Hundred  Twenty  Nine Thousand Twenty Eight
Dollars  and  Thirteen  Cents  ($2,229,028.13)  in  order  to enable
Borrower to exercise  options  to  purchase  common  stock issued by
Lender;

      WHEREAS, Lender has agreed  to  make  such loan to Borrower in
accordance  with  the  terms   and   conditions  contained  in  this
Agreement;

NOW, THEREFORE, the parties agree as follows:

      1.   DEFINITIONS

      In addition to the  terms  defined  above, the following terms
shall have the following definitions:

           1.1   "Applicable Rate"  shall  mean  the annual interest
rate in effect  on  the  Loan  from  time  to  time  during the term
thereof.

           1.2   "Borrowing Rate"  shall  mean  the weighted average
annual interest rate charged to  the Company on any borrowed capital
during any calendar year during the term of the Loan.

           1.3   "Company" shall  mean  the  Lender  and  all of its
subsidiary companies and/or entities.

           1.4   "Event of Default" is defined  in Section 11 of the
Pledge Agreement.

           1.5   "LIBOR" means the one-year London Interbank Offered
Rate, as published in the  Wall  Street Journal, in effect from time
to time.

           1.6   "Loan" means the loan  described  in Section 2.1 of
this Agreement.

                           143 of 193

<PAGE>

           1.7   "Loan Documents"  means  this  Agreement, the Note,
the Pledge Agreement, and any other documents executed in connection
herewith or therewith.

           1.8   "Maturity  Date"  shall  be  April  1,  2001 unless
otherwise expressly provided for in the Loan Documents.

           1.9   "Note" means and refers  to that certain Promissory
Note, dated of even date, in the principal amount of Two Million Two
Hundred Twenty Nine Thousand Twenty Eight Dollars and Thirteen Cents
($2,229,028.13), executed by  Borrower  to  Lender, substantially in
the form of Exhibit "A"  attached  hereto and incorporated herein by
this reference,  with  appropriate  insertions,  and any amendments,
modifications and extensions thereof.

           1.9   "Pledge Agreement" means and refers to that certain
Pledge Agreement,  dated  of  even  date,  executed  by Borrower and
Lender, substantially in the form of Exhibit "B" attached hereto and
incorporated herein by this  reference, with appropriate insertions,
and any amendments, modifications and extensions thereof.

      2.   THE LOAN

           2.1   On or  after  February  18,  1997,  upon Borrower's
request, Lender shall make a  recourse loan (the "Loan") to Borrower
in the principal  amount  of  Two  Million  Two  Hundred Twenty Nine
Thousand Twenty Eight Dollars and Thirteen Cents ($2,229,028.13).

           2.2   The Loan shall be evidenced by the Note.

           2.3   The Loan shall bear interest compounding monthly at
the following rates:

                 2.3.1  during the period  commencing on the date of
the Loan and terminating on  December  31,  1997 at fifty (50) basis
points greater than the LIBOR in effect on the date of the Loan;

                 2.3.2  during the  period  commencing on January 1,
1998 through the  Maturity  Date  the  Applicable  Rate  shall be as
follows and shall be fixed for each calendar year:

                        2.3.2.1 if  the  Company  did  not  incur or
accrue  any  interest  expenses   for   borrowed  funds  during  the
immediately preceding calender  year,  the  Applicable  Rate for the
calendar year shall be    fifty  (50)  basis points greater than the
LIBOR in effect on the first business day of such new calendar year;
or


                           144 of 193

<PAGE>

                        2.3.2.2 if the  Company  did incur or accrue
interest  expenses  for   borrowed   funds  during  the  immediately
preceding calendar year, the  Applicable  Rate for the calendar year
shall be fifty (50) basis points above the greater of either:

                               2.3.2.2.1  the LIBOR in effect on the
first business day of such new calendar year; or

                               2.3.2.2.2  the Borrowing Rate for the
immediately preceding calendar year.

           2.4   Each payment on the Note shall be credited first to
interest,  if  any  then  due,   and  the  remainder  to  principal.
Principal and interest  shall  be  payable  in  lawful  money of the
United States of America.   Borrower  shall have the right to prepay
all or any portion of  the  principal  sum  of  the Note at any time
without penalty.

           2.5   All accrued interest and  unpaid principal shall be
payable on the earlier to occur of  the Maturity Date or an Event of
Default; provided, however, that  if  Borrower shall sell any shares
of stock of Lender  included  in  the  Collateral (as defined in the
Pledge Agreement), then Borrower  shall  cause proceeds of such sale
to be delivered  immediately  to  Lender  to  prepay  the Note in an
amount equal to the product  of  (x) the aggregate amount, including
accrued interest, unpaid fees and costs and unpaid principal, due on
the Note as  of  the  date  of  such  sale  and  (y) a fraction, the
numerator of which  is  the  number  of  shares  of  stock of Lender
included in the Collateral which are  to be sold by Borrower in such
sale, and the denominator of which  is the number of shares of stock
of Lender included in the Collateral immediately prior to such sale.

           2.6   Upon the occurrence  of  an  Event  of Default, the
whole principal sum shall  become  immediately  due at the option of
the holder hereof.


      3.   CONDITIONS PRECEDENT

           As conditions precedent  to  Lender's  obligation to make
the Loan, Borrower shall have  executed  and delivered to Lender, in
form and substance satisfactory to Lender, the following:

           3.1   The Note;

           3.2   The Pledge Agreement; and

           3.3   Such  other  documents  as  Lender  may  reasonably
require.

                           145 of 193

<PAGE>

      4.   REPRESENTATIONS AND WARRANTIES

           Borrower represents  and  warrants  that,  until full and
final payment of all indebtedness incurred hereunder:

           4.1   The execution,  delivery,  and  performance of this
Agreement and  of  any  instrument  or  agreement  required  by this
Agreement are  not  in  conflict  with  any  law  or  any indenture,
agreement or undertaking to which  Borrower  is  a party or by which
Borrower is bound or affected.

           4.2   All financial information  submitted by Borrower to
Lender is true and correct in  all material respects and is complete
insofar as  may  be  necessary  to  give  Lender  true  and accurate
knowledge of the subject matter thereof.

           4.3   No event has  occurred  and  is continuing or would
result from  the  making  of  the  Loan  which  constitutes or would
constitute a  breach  of  any  representation,  warranty or covenant
contained in the Loan Documents or an Event of Default.

      5.   COVENANTS

           5.1   Borrower covenants and agrees to deliver to Lender,
no later than ten (10)  days  following  the making of the Loan, the
original stock certificate  issued  by  Lender  and described in the
recitals to the Pledge Agreement,  and  a stock assignment in blank,
referencing said stock certificate.

           5.2   Borrower covenants and  agrees  that until the full
and final payment of  all  indebtedness incurred hereunder, Borrower
shall, unless Lender waives compliance in writing:

                 (a)    Promptly give written notice to Lender of:

                        (i)    Any  breach  of  any  representation,
warranty or covenant contained in the Loan Documents or any Event of
Default; and

                        (ii)   Any other  matter  which has resulted
or might result in a material adverse change in Borrower's financial
condition or operations.

                 (b)    Perform, on request of  Lender, such acts as
may be necessary  or  advisable  to  carry  out  the  intent of this
Agreement.

                 (c)    Cause   all   financial   information,  upon
submission by Borrower to  Lender,  to  be  true  and correct in all
material respects  and  complete  to  the  extent  necessary to give
Lender true and accurate knowledge of the subject matter.

                           146 of 193

<PAGE>

      6.   LENDER'S RIGHTS, POWER AND REMEDIES

           6.1   Upon the occurrence of  an Event of Default, Lender
may, at its option, exercise any and all rights, powers and remedies
provided in the Loan Documents and  pursuant to any other present or
future agreement between  Borrower  and  Lender,  by law, equity, or
otherwise.

           6.2   Lender shall have the right  to enforce one or more
remedies  partially,  successively  or  concurrently,  and  Lender's
enforcement of any  remedy  or  remedies  shall  not stop or prevent
Lender from pursuing any additional  remedy  or remedies that it may
have hereunder or by law.

           6.3   In addition to all  other  sums which are otherwise
due under the Loan  Documents,  Borrower  agrees to reimburse Lender
for collection costs, including  without limitation attorneys' fees,
incurred by Lender.


      7.   MISCELLANEOUS

           7.1   The Loan  Documents  shall  bind  and  inure to the
benefit  of  the   parties   hereto   and  their  respective  heirs,
representatives, successors  and  assigns;  provided,  however, that
Borrower shall not assign any  of  the  Loan Documents or any of the
rights, duties or obligations  of  Borrower under the Loan Documents
without the prior written consent of Lender.

           7.2   No consent or waiver under the Loan Documents shall
be effective unless in writing.  No waiver of any breach or Event of
Default shall be deemed a waiver  of  any breach or Event of Default
thereafter occurring.  No delay  by Lender shall constitute a waiver
or election or acquiescence by it.

           7.3   The various  headings  used  in  this Agreement are
inserted for convenience only  and  shall  not affect the meaning or
interpretation of this Agreement or any provision thereof.

           7.4   Neither the Loan  Documents  nor any uncertainty or
ambiguity therein shall be  construed  or resolved against Lender or
Borrower.  The Loan Documents have  been reviewed by all parties and
shall be construed and interpreted according to the ordinary meaning
of the words  used  so  as  to  fairly  accomplish  the purposes and
intentions of all parties hereto.

           7.5   If any provision  in  the  Loan  Documents shall be
invalid, illegal or unenforceable, such provision shall be severable
from the remainder of such  contract  and the validity, legality and
enforceability of the remaining provisions  shall  not in any way be
affected or impaired thereby.


                           147 of 193

<PAGE>

           7.6   This Agreement,  the  Note  and  any  instrument or
agreement required under  this  Agreement  shall  be governed by and
construed under the laws of the State of California.

           7.7   If either party  files  a  legal proceeding against
the other predicated on a  breach  of this Agreement, the prevailing
party in such action  shall  be  entitled  to recover its attorneys'
fees, litigation expenses and proceeding costs.

           7.8   This  Agreement  and  any  agreement,  document  or
instrument attached hereto or  referred  to herein integrate all the
terms and  conditions  mentioned  herein  or  incidental hereto, and
supersede all oral negotiations and prior writings in respect to the
subject matter hereof.

           7.9   Time  is  of  the   essence   in  the  payment  and
performance of the obligations of  the Borrower under this Agreement
and all other documents executed in connection herewith.


      IN WITNESS  WHEREOF,  the  parties  hereto  have executed this
Agreement as of the day and year first above written.


                                LENDER:


                                MAXICARE HEALTH PLANS, INC., a
                                Delaware corporation


                                /s/ ROBERT J. LANDIS
                                --------------------
                                      TREASURER


                                BORROWER:

                                /s/ EUGENE L. FROELICH
                                ----------------------
                                    EUGENE L. FROELICH


                           148 of 193

<PAGE>

                                                       EXHIBIT A


                      SECURED PROMISSORY NOTE


$2,229,028.13                                 February 18, 1997



      FOR  VALUE  RECEIVED,  EUGENE  L.  FROELICH  (the "Borrower")
promises to pay to  the  order  of  MAXICARE  HEALTH PLANS, INC., a
Delaware corporation (the  "Lender"),  the  sum  of Two Million Two
Hundred Twenty  Nine  Thousand  Twenty  Eight  Dollars and Thirteen
Cents ($2,229,028.13), together with interest thereon from the date
of the Loan at the Applicable Rate, compounded monthly.

      Except as  otherwise  provided  in  the  Loan  Agreement, all
accrued interest and unpaid principal of this Note shall be due and
payable on the Maturity Date.

      This Note is fully recourse to the Borrower.

      All payments in respect of this  Note shall be made in lawful
money of the United  States  of  America  in  same day funds to the
office of the Lender located  at  1149 South Broadway Street, Suite
910, Los Angeles, California 90015 or  at such other place as shall
be designated in writing  by  the  Lender  to  the Borrower.  Until
notified in writing  of  the  transfer  of  this Note, the Borrower
shall be entitled to deem the  Lender,  or such person who has been
so identified by the transferor  in  writing to the Borrower as the
holder of this Note, as the owner  and holder of this Note. Each of
the Lender and  any  subsequent  holder  of  this  Note agrees that
before disposing of this Note  or  any  part  hereof it will make a
notation  hereon  of   all   payments  previously  made  hereunder;
provided, however, that the failure to make notation of any payment
made  on  this  Note  shall  not  limit  or  otherwise  affect  the
obligation of the  Borrower  hereunder  with  respect to payment on
this Note.

      This Note is the Note referred  to in, and is entitled to all
of the rights, benefits  and  privileges  provided  for in the Loan
Agreement, dated as of February  18, 1997 (as amended, supplemented
or modified from time to  time,  the "Loan Agreement" ) between the
Borrower and the Lender.  For the purposes hereof, unless otherwise
defined herein, all capitalized terms  contained in this Note shall
have the meanings ascribed to them  in the Loan Agreement. The Loan
Agreement, among other things, (a)  provides  for the making of the
Loan (the "Loan") by the  Lender  to  the Borrower in the principal
amount of Two Million Two Hundred Twenty Nine Thousand Twenty Eight
Dollars and Thirteen Cents ($2,229,028.13), the indebtedness of the
Borrower resulting from such Loan being evidenced by this Note, and
(b) contains  provisions  for  acceleration  of  the  Maturity Date
hereof upon the happening of certain stated events.

                           149 of 193

<PAGE>

      This Note is secured  by  that  certain Pledge Agreement (the
"Pledge Agreement") of even  date  by  and between the Borrower and
the Lender.

      No reference  herein  to  the  Loan  Agreement  or the Pledge
Agreement and no provision of this  Note, the Loan Agreement or the
Pledge Agreement  shall  alter  or  impair  the  obligation  of the
Borrower, which is absolute and  unconditional, to pay this Note at
the place and at the time herein prescribed.

      The Borrower promises to  pay  all costs, expenses, including
reasonable  attorneys'  fees,   incurred   in  the  collection  and
enforcement of this Note.  The  Borrower and endorsers of this Note
hereby consent to renewals and  extensions  of time at or after the
maturity  hereof,  without  notice,  and  hereby  waive  diligence,
presentment, protest, demand and notice of every kind.

      IN WITNESS WHEREOF, the  Borrower  has executed and delivered
this Note as of the day and year and place first above written.



                                     ---------------------------
                                     EUGENE L. FROELICH

                           150 of 193

<PAGE>

                                                       EXHIBIT B


                         PLEDGE AGREEMENT



      THIS PLEDGE AGREEMENT (this "Agreement") is entered into as of
February 18, 1997 by and between EUGENE L. FROELICH ("Pledgor"), and
MAXICARE HEALTH PLANS, INC., a Delaware corporation (the "Lender").

      WHEREAS, pursuant to  that  certain  Loan Agreement (the "Loan
Agreement") of even date between  the Lender and Pledgor, the Lender
has agreed to make a loan (the  "Loan") to Pledgor in the sum of Two
Million Two Hundred Twenty  Nine  Thousand  Twenty Eight Dollars and
Thirteen Cents ($2,229,028.13);  capitalized  terms,  which are used
herein but not defined herein,  shall  have the meanings ascribed to
them in the Loan Agreement;

      WHEREAS, Pledgor has agreed to repay the Loan pursuant to that
certain Promissory Note (the "Note") of even date;

      WHEREAS, Pledgor is the legal  and beneficial owner of 150,000
of the issued  and  outstanding  shares  of  common  stock of Lender
evidenced by the  certificates  set  forth  on  Exhibit "A" attached
hereto and made  part hereof (the "Pledged Shares");

      WHEREAS, it is a  condition  to  the  Lender's making the Loan
that Pledgor shall  have  granted  the  pledge and security interest
contemplated by this Agreement; and

      NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration,  the  receipt and adequacy of which
are hereby acknowledged, and in  order  to induce the Lender to make
the Loan, the parties hereto agree as follows:

      SECTION 1.    Grants  of  Security.    Pledgor hereby assigns,
pledges and grants to the  Lender a first priority security interest
in all of such Pledgor's  right,  title  and  interest in and to the
following (the "Collateral") to  secure  the Secured Obligations (as
defined in Section 2):

           (i)    the   Pledged   Shares    and   the   certificates
representing the Pledged Shares and  any interest of such Pledgor in
the entries on the books of any financial intermediary pertaining to
the Pledged  Shares,  and  all  dividends,  cash,  warrants, rights,
instruments  and  other  property  or  proceeds  from  time  to time
received, receivable or otherwise  distributed  in  respect of or in
exchange for any or all of the Pledged Shares; and

           (ii) all proceeds of the foregoing items described in the
preceding clause (i).

                           151 of 193

<PAGE>

      SECTION 2.  Secured Obligations.   This Agreement secures, and
the Collateral is  collateral  security  for,  the prompt payment or
performance  in  full  when  due,  whether  upon  demand,  at stated
maturity, by acceleration or  otherwise,  of: (a) all obligations of
Pledgor in respect  of  the  Note,  whether  for principal, interest
(including, without limitation, interest that, but for the filing of
a petition in bankruptcy  with  respect  to Pledgor, would accrue on
such  obligations),  fees,  expenses   or  otherwise;  and  (b)  all
obligations  of  Pledgor  now   or  hereafter  existing  under  this
Agreement and the Loan Agreement and  any and all damages and claims
(including any third  party  claims)  suffered  by  Lender which may
result from  any  breach  by  Pledgor  of,  or any misrepresentation
contained in this Agreement,  the  Loan  Agreement  or the Note (all
such obligations of Pledgor are  referred  to herein as the "Secured
Obligations").

      SECTION 3.  Delivery of  Pledged  Shares.  All certificates or
instruments representing or evidencing  the  Pledged Shares shall be
delivered to and held by or  on behalf of the Lender pursuant hereto
and shall be in suitable form  for transfer by delivery, or shall be
accompanied by duly executed  instruments  of transfer or assignment
in blank, all in form and substance satisfactory to the Lender.  The
Lender shall have  the  right,  at  any  time  in its discretion and
without  notice  to  Pledgor,  whether  prior  to  or  following the
occurrence of an Event of  Default  (as defined herein), to transfer
to or to register in the name  of  the Lender or any of its nominees
any or all of the  Pledged  Shares.    In addition, the Lender shall
have the  right,  subject  to  the  reasonable  approval of Lender's
transfer agent, at any time  to exchange certificates or instruments
representing  or  evidencing  Pledged  Shares  for  certificates  or
instruments of smaller or larger denominations.

      SECTION  4.     Representations   and   Warranties.    Pledgor
represents and warrants to the  Lender that the following statements
are true, correct and complete:

      (a)  Pledgor  is  the  legal   and  beneficial  owner  of  the
Collateral, free and clear of  any  lien or security interest except
for the security interest created  by this Agreement.  Pledgor shall
defend the Collateral against all  claims and demands of all persons
at any time claiming any interest therein adverse to the Lender;

      (b)  Pledgor has full  power,  authority,  and  legal right to
pledge the Collateral pursuant to this Agreement;

      (c)  All of the Pledged  Shares  have been duly authorized and
validly issued and are fully paid and non-assessable;

      (d)  The pledge and delivery  of  the Collateral to the Lender
pursuant to  this  Agreement  creates  a  valid  and perfected first
priority security interest in  the  Collateral, securing the payment
and performance of the Secured Obligations;

                           152 of 193

<PAGE>

      (e)  Except as have already been  made or obtained, no consent
of any  other  party  (including,  without  limitation, creditors of
Pledgor) and no  consent,  authorization,  approval, or other action
by, and no notice to  or  filing  with any governmental authority or
regulatory body is required either (i)  for the pledge by Pledgor of
the Collateral pursuant  to  this  Agreement  or  for the execution,
delivery or performance of this Agreement by Pledgor or (ii) for the
perfection of or exercise by  the  Lender of the rights provided for
in this Agreement  or  the  remedies  in  respect  of the Collateral
pursuant to this Agreement;

      (f)  The  pledge  of  the  Pledged  Shares  does  not  violate
Regulations G, T, U or X  of  the  Board of Governors of the Federal
Reserve System;

      (g)  Except as permitted under  this Agreement, the Pledgor at
all times will be the  sole  beneficial owner of the Pledged Shares;
and

      (h)  The  proceeds  of  the  Loan  shall  be  used  for lawful
business purposes.

      SECTION 5.  Further  Assurances.    Pledgor agrees that at any
time and from time  to  time,  at  the  expense  of Pledgor, he will
promptly execute and deliver  all further instruments and documents,
and take all further action, that  may be necessary or desirable, or
that the Lender may  request,  in  order  to perfect and protect any
security interest granted hereby or to enable the Lender to exercise
and enforce its rights  and  remedies  hereunder with respect to any
Collateral.

      SECTION 6.  Voting Rights, Dividends, Etc.

      (a)  So long as no Event of Default shall have occurred and be
continuing:

           (i)    Pledgor shall be entitled  to exercise any and all
voting and other consensual  rights  pertaining to the Collateral or
any part thereof for any purpose  not inconsistent with the terms of
this Agreement;  provided,  however,  that  Pledgor  shall  give the
Lender at least five days' written  notice of the manner in which he
intends to exercise, or the  reasons for refraining from exercising,
any such right;

           (ii)   Pledgor shall be  entitled  to  receive and retain
any and all dividends and other distributions paid in respect of the
Collateral; provided, however, that any and all

                  (A)   dividends and  other  distributions  paid or
payable other than in cash in  respect of, and instruments and other
property received, receivable  or  otherwise  distributed in respect
of, or in exchange for, any Collateral,

                           153 of 193

<PAGE>

                  (B)   dividends and  other  distributions  paid or
payable in cash in respect  of  any  Collateral in connection with a
partial or total liquidation or  dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus, and

                  (C)   cash paid, payable  or otherwise distributed
in redemption of, or in exchange  for, any Collateral, shall be, and
shall be forthwith delivered  to  the  Lender to hold as, Collateral
and shall, if received  by  Pledgor,  be  received  in trust for the
benefit of the  Lender,  be  segregated  from  the other property or
funds of  Pledgor,  and  be  forthwith  delivered  to  the Lender as
Collateral in the  same  form  as  so  received  (with any necessary
indorsement); and

           (iii)  the Lender shall execute  and deliver (or cause to
be executed and delivered)  to  Pledgor  all  such proxies and other
instruments as Pledgor  may  reasonably  request  for the purpose of
enabling Pledgor to exercise the voting and other rights which he is
entitled to exercise pursuant  to  subsection 6(a)(i) and to receive
the dividends and  other  distributions  which  he  is authorized to
receive and retain pursuant to subsection 6(a)(ii).

      (b)  Upon the  occurrence  and  during  the  continuance of an
Event of Default:

           (i)    Upon written notice  from  the  Lender to Pledgor,
all rights of Pledgor  to  exercise  the voting and other consensual
rights which he would otherwise  be entitled to exercise pursuant to
subsection 6(a)(i) shall cease, and  all such rights shall thereupon
become vested in  the  Lender  which  shall  thereupon have the sole
right to exercise such voting and other consensual rights.

           (ii)   All rights of Pledgor to receive the dividends and
other  distributions  which  he  would  otherwise  be  authorized to
receive and retain pursuant  to  subsection 6(a)(ii) shall cease and
all such rights shall  thereupon  become  vested in the Lender which
shall thereupon have the  sole  right  to receive such dividends and
other distributions and the right  to  hold such dividends and other
distributions as Collateral during the  continuance of such Event of
Default.  All dividends  and  other distributions which are received
by Pledgor contrary to  the  provisions  of this subsection 6(b)(ii)
shall be received in trust for  the  benefit of the Lender, shall be
segregated from other funds of  Pledgor  and shall be forthwith paid
over to the Lender as  Collateral  in  the  same form as so received
(with any necessary indorsement).

           (iii)  Pledgor shall execute and  deliver (or cause to be
executed and delivered) to  the  Lender  all  such proxies and other
instruments as the Lender may  reasonably request for the purpose of
enabling the Lender to exercise the voting and other rights which it
is entitled  to  exercise  pursuant  to  subsection  6(b)(i)  and to
receive the dividends and other distributions which it is authorized
to receive and retain pursuant to subsection 6(b)(ii).

                           154 of 193

<PAGE>

      SECTION 7.  Transfers and Other Liens; Additional Shares.

      (a)  Pledgor agrees that  he  will  not  (i) sell or otherwise
dispose of, or grant any option  with respect to, any Collateral, or
(ii)  create or permit to  exist  any lien or security interest upon
or with respect to any  Collateral, except for the security interest
under this Agreement.

      (b)  Pledgor agrees that he will  vote to cause the Lender not
to issue any additional stock or other securities or in substitution
for the Pledged Shares.

      SECTION 8.  Lender Appointed Attorney-in-Fact.  Pledgor hereby
appoints  the  Lender  as   Pledgor's  attorney-in-fact,  with  full
authority in the place  and  stead  of  Pledgor  and  in the name of
Pledgor or otherwise,  from  time  to  time  upon the occurrence and
continuation of an Event of  Default,  in the Lender's discretion to
take any action and to  execute  any instrument which the Lender may
deem necessary  or  advisable  to  accomplish  the  purposes of this
Agreement, including, without limitation:

           (i)     to  receive,  indorse and collect all instruments
made  payable  to  Pledgor   representing   any  dividend  or  other
distribution in respect of the Collateral or any part thereof and to
give full discharge for the same;

           (ii)      to  ask,  demand,  collect,  sue  for, recover,
compound, receive and give  acquittance  and  receipts for money due
and to become due under or in respect of any of the Collateral;

           (iii)  to file any claims or take any action or institute
any proceedings which the Lender may deem necessary or desirable for
the collection of any of the  Collateral or otherwise to enforce the
rights of the Lender with respect to any of the Collateral; and

           (iv)    generally  to  sell,  transfer,  pledge, make any
agreement  with  respect  to  or  otherwise  deal  with  any  of the
Collateral as fully and  completely  as  though  the Lender were the
absolute owner thereof for all purposes,  and to do, at the Lender's
option and Pledgor's expense, at  any  time,  and from time to time,
all acts that the  Lender  deems  necessary  to protect, preserve or
realize upon  the  Collateral  and  the  Lender's  security interest
therein, in order to  effect  the  intent  of this Agreement, all as
full and effectively as Pledgor might do.

This appointment as attorney-in-fact is coupled with an interest and
is irrevocable.  In performing  its  functions and duties under this
Agreement, the Lender has  not  assumed  and  shall not be deemed to
have assumed any  obligation  toward  or  relationship  of agency or
trust with or for Pledgor.

                           155 of 193

<PAGE>

      SECTION 9.  Lender May  Perform.   If Pledgor fails to perform
any agreement contained herein,  the  Lender  may itself perform, or
cause performance of, such agreement, and the expenses of the Lender
incurred in connection therewith  shall  be payable by Pledgor under
Section 14(b).

      SECTION 10.  The Lender's Duties and Liabilities.

      (a)  The powers conferred on  the  Lender hereunder are solely
to protect its interest in  the  Collateral and shall not impose any
duty upon it to  exercise  any  such  powers.    The Lender shall be
deemed  to  have  exercised  reasonable  care  in  the  custody  and
preservation of the Collateral  in  its possession if the Collateral
is accorded treatment substantially  equal  to that which the Lender
accords its own property, it  being understood that the Lender shall
have no responsibility for  (i)  ascertaining  or taking action with
respect to  calls,  conversions,  exchanges,  maturities, tenders or
other matters relative to any  Collateral, whether or not the Lender
has or is deemed to have  knowledge  of such matters, or (ii) taking
any necessary  steps  to  assert  rights  against  any  parties with
respect to any Collateral.

      (b)  The Lender shall not  be  liable  to  Pledgor (i) for any
loss or damage sustained by  Pledgor  or  (ii) for any loss, damage,
depreciation  or  other  diminution  in  the  value  of  any  of the
Collateral that may occur as a result of, in connection with or that
is in any way related to (x) any exercise by the Lender of any right
or remedy under this Agreement  or  (y)  any other act or failure to
act of the Lender,  except  to  the  extent  that  the same shall be
determined by a judgment of  a court of competent jurisdiction, that
is final and not subject to  review  on  appeal, to be the result of
acts or omissions  on  the  part  of  the  Lender constituting gross
negligence or willful misconduct.

      SECTION  11.    Events  of  Default;  Remedies  Upon  Default;
Decisions Relating to Exercise of Remedies.

      11.1 Any one or more of  the following events shall constitute
an Event of Default by Pledgor under this Agreement:

           (a)    Failure to Pay Obligations.    If Pledgor fails to
pay, no later than  fifteen  (15)  calendar  days following the date
when due and payable or  when  declared  due and payable, all or any
portion of the  Secured  Obligations  owing  to  Lender (whether for
principal,   interest,   taxes,   reimbursement   of   expenses,  or
otherwise);

           (b)    Failure to Perform.   If Pledgor fails to perform,
keep or  observe  any  other  term,  provision, condition, covenant,
agreement, warranty or  representation  contained in this Agreement,
the Loan  Agreement,  the  Note,  or  any  other  present  or future
agreement between Pledgor and Lender, and such failure continues for
thirty  (30)  days  following  written  notice  from  the  Lender to
Pledgor;

                           156 of 193

<PAGE>

           (c)    Voluntary  Insolvency  Proceeding.     If  Pledgor
commences any Insolvency Proceeding (as defined below); and

           (d)    Involuntary  Insolvency   Proceeding.      If  any
Insolvency Proceeding is commenced against  Pledgor and which is not
dismissed within sixty (60) days of the date of filing.

      11.2  As used herein  the  term "Insolvency Proceeding" means
and includes any proceeding commenced  by  or against any person or
entity under  any  provision  of  the  federal  Bankruptcy Code, as
amended,  or  under  any   other   bankruptcy  or  insolvency  law,
including, but  not  limited  to,  assignments  for  the benefit of
creditors,  formal   or   informal   moratoriums,  compositions  or
extensions generally with his creditors.

      11.3  If an  Event  of  Default  shall  have  occurred and be
continuing:

            (a)   the  Lender  may  exercise   in  respect  of  the
Collateral, in addition to  other  rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of
a secured party on default  under  the Uniform Commercial Code (the
"UCC") in effect in the State of California at that time;

            (b)   the Lender may transfer  all  or  any part of the
Collateral into the Lender's  name  or  the  name of its nominee or
nominees;

            (c)   the Lender  may  give  all  consents, waivers and
ratifications in respect of  the  Collateral and otherwise act with
respect thereto as though it were a party thereto or outright owner
thereof;

            (d)   the Lender  may  settle,  adjust,  compromise and
arrange all accounts, controversies,  questions, claims and demands
whatsoever in relation to all or any part of the Collateral;

            (e)   the Lender  may,  in  respect  of the Collateral,
execute  all  such  contracts,  agreements,  deeds,  documents  and
instruments; bring, defend and abandon  all such actions, suits and
proceedings; and take all actions in relation to all or any part of
the  Collateral  as  the  Lender  in  its  absolute  discretion may
determine;

            (f)   (i)   The Lender  may  without  notice (except as
specified below), sell the Collateral or any part thereof in one or
more parcels at public or  private  sale, at any exchange, broker's
board or at any of the  Lender's offices or elsewhere, for cash, on
credit or for future delivery,  at  such  time or times and at such
price or prices and upon  such  other  terms as the Lender may deem
commercially reasonable, irrespective  of  the  impact  of any such
sales on  the  market  price  of  the  Collateral.    To the extent
permitted by law, the Lender may be  the purchaser of any or all of
the Collateral at any such public or private sale.  Pledgor agrees

                           157 of 193

<PAGE>

that, to the extent notice  of  sale  shall  be required by law, at
least five days' notice to  Pledgor  of  the  time and place of any
public sale or the time after  which  a  private sale is to be made
shall constitute reasonable notification.   The Lender shall not be
obligated to make any sale  of  the Collateral regardless of notice
of sale having been given.    The  Lender may adjourn any public or
private sale from time  to  time  by  announcement  at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned;

                  (ii)  Pledgor  recognizes  that,   by  reason  of
certain prohibitions contained in  the  Securities  Act of 1933, as
from time to time  amended  (the  "Securities Act"), and applicable
state securities laws, the Lender may be compelled, with respect to
any sale of all  or  any  part  of the Collateral conducted without
prior registration or  qualification  of  such Collateral under the
Securities  Act  and/or  such   state  securities  laws,  to  limit
purchasers to those who will  agree, among other things, to acquire
the Collateral for their own account, for investment and not with a
view to the distribution or resale thereof, and such purchasers may
have to be limited  in  number  to  possibly  one purchaser and any
purchaser  must  be  a  sophisticated  investor  able  to  fend for
himself.  Pledgor acknowledges that  any  such private sales may be
at prices and on  terms  less  favorable  to  the Lender than those
obtainable  through  a   public   sale  without  such  restrictions
(including, without limitation, a  public offering made pursuant to
a  registration   statement   under   the   Securities   Act)  and,
notwithstanding such circumstances,  Pledgor  agrees  that any such
private sale shall be deemed  to  have  been made in a commercially
reasonable manner and that the  Lender  shall have no obligation to
engage in public sales and no  obligation  to delay the sale of any
Collateral for the period of time necessary to permit the Lender to
register it for a form  of public sale requiring registration under
the Securities Act or under  applicable state securities laws.  The
Pledged  Shares  constitute  or  upon  foreclosure  may  constitute
"restricted securities" as defined  in  Rule 144 promulgated by the
Securities and Exchange Commission under the Securities Act and may
be subject to transfer restrictions under the Securities Act;

            (g)   The  Lender  may  appoint  managers,  sub-agents,
officers and servants  for  any  of  the  purposes mentioned in the
foregoing provisions of this  Section  11  and to dismiss the same,
all as the Lender in its absolute discretion may determine; and

            (h)   The Lender  may  generally  take  all  such other
action as the Lender in its absolute discretion may determine to be
incidental or conducive to any  of  the matters or powers mentioned
in the foregoing provisions of this Section 11 and which the Lender
may or can do lawfully.

      SECTION 12.   Remedies  Cumulative.    Each  and every right,
power and remedy hereby specifically  given  to the Lender shall be
in addition to  every  other  right,  power and remedy specifically
given under this Agreement, the Loan Agreement or the Note or now

                           158 of 193

<PAGE>

or hereafter existing at law or  in equity, or by statute, and each
and every right, power and remedy whether specifically herein given
or otherwise  existing  may  be  exercised  from  time  to  time or
simultaneously and as often  and  in  such  order  as may be deemed
expedient by the  Lender.    All  such  rights, powers and remedies
shall be cumulative, and the  exercise or the beginning of exercise
of one shall not be deemed a waiver of the right to exercise of any
other or others.    No  delay  or  omission  of  the  Lender in the
exercise of any  such  right,  power  or  remedy  and no renewal or
extension of any of the  Secured  Obligations shall impair any such
right, power or remedy or shall be  construed to be a waiver of any
default or Event of Default or an acquiescence therein.

      SECTION 13.  Application of  Proceeds.   After and during the
continuance of an Event of Default,  any cash held by the Lender as
Collateral and all cash proceeds  received  by the Lender (all such
cash being "Proceeds") in respect  of any sale of, collection from,
or other  realization  upon  all  or  any  part  of  the Collateral
pursuant to the exercise by the Lender of its remedies as a secured
creditor as provided in Section 11 of this Agreement shall promptly
be applied by the Lender from time to time as follows:

            FIRST: To the payment of the costs and expenses of such
sale,  collection   or   other   realization,   and  all  expenses,
liabilities  and  advances  made  or  incurred  by  the  Lender  in
connection therewith, in accordance with Section 14(b);

            SECOND: After payment in  full of the amounts specified
in the  preceding  subparagraph,  to  the  payment  of  the Secured
Obligations to the Lender; and

            THIRD: After payment in  full  of the amounts specified
in the preceding subparagraphs,  and  any  other amount required by
any provision of law,  to  Pledgor,  or his heirs, representatives,
successors or assigns, or to  whomever  may be lawfully entitled to
receive the  same  or  as  a  court  of  competent jurisdiction may
direct, of any surplus then remaining from such Proceeds.
All applications of Proceeds  to  the  Secured Obligations shall be
applied to  the  payment  of  interest  before  application  to the
payment of principal.   If  any  portion of the Secured Obligations
shall remain unpaid following  application of the Proceeds, Pledgor
shall remain liable therefor.

      SECTION 14.  Indemnity and Expenses.

      (a)   Pledgor agrees to indemnify the Lender from and against
any and  all  claims,  losses  and  liabilities  growing  out of or
resulting  from  Pledgor's  breach  of   any  term  hereof  or  any
misrepresentation  made  hereunder  or   in  connection  with  this
Agreement  (including,  without  limitation,  enforcement  of  this
Agreement), except claims, losses or liabilities resulting from the
Lender's gross negligence  or  willful  misconduct.  This provision
shall  remain  in   effect   following   payment   of  the  Secured
Obligations.

                           159 of 193

<PAGE>

      (b)   Pledgor will upon demand  pay  to the Lender the amount
of any and all  of  the Lender's reasonable out-of-pocket expenses,
including fees and disbursements  of  its  counsel, that the Lender
may  incur  in  connection  with  (i)  the  administration  of this
Agreement, (ii) the custody, preservation,  use or operation of, or
the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or  enforcement of any of the rights
of the Lender hereunder or  (iv)  the failure by Pledgor to perform
or observe any of the provisions hereof.

      SECTION 15.   Amendments,  Etc.   No amendment, modification,
termination or waiver of any provision of this Agreement or consent
to  any  departure  by  Pledgor  herefrom  shall  in  any  event be
effective without  the  written  concurrence  of  the  Lender.  Any
waiver or consent shall be  effective only in the specific instance
and for the specific purpose for which given.

      SECTION 16.    Addresses  for  Notices.    Any communications
between the parties hereto  or  notices or requests provided herein
to be given may be given  by  mailing the same, postage prepaid, or
by facsimile transmission to each party at its address set forth on
the signature pages hereof or to such other addresses as each party
may in writing hereafter indicate.    Any notice, request or demand
to or upon  the  Lender  or  Pledgor  shall  not be effective until
received (provided, in  the  case  of  facsimile transmission, that
receipt is confirmed).

      SECTION 17.  Effect  of  Disposition  of Collateral. Any sale
of, or the grant of  options  to purchase, or any other realization
upon, any Collateral by  Lender  hereunder  shall operate to divest
all right, title, interest, claim  and  demand, either at law or in
equity, of Pledgor therein  and  thereto,  and shall be a perpetual
bar both at law and in  equity  against Pledgor and against any and
all persons claiming or attempting to claim the Collateral so sold,
optioned or realized upon, or  any  part thereof, from, through and
under Pledgor.

      SECTION  18.    Continuing  Security  Interest;  Transfer  of
Secured Obligations; Termination.    This  Agreement shall create a
continuing security interest in the Collateral and shall:

            (i)      remain  in  full  force  and  effect until the
indefeasible  payment  and  performance  in  full  of  the  Secured
Obligations;

            (ii)        be   binding   upon   Pledgor,  his  heirs,
representatives, successors and assigns; and

            (iii)  inure, together with  the rights and remedies of
the Lender,  to  the  benefit  of  the  Lender  and its successors,
transferees and assigns.

                           160 of 193

<PAGE>

Without limiting the generality of  the foregoing clause (iii), the
Lender may assign or  otherwise  transfer  all  or a portion of its
interests and rights under the Note  to any other person or entity,
and such other person or  entity shall thereupon become vested with
all the benefits in respect thereof granted to the Lender herein or
otherwise.  Upon the  date  set  forth in subsection 18(i), Pledgor
shall be entitled  to  the  return,  upon  his  request  and at his
expense, of such of the Collateral  as  shall not have been sold or
otherwise applied pursuant to the terms hereof.

      SECTION 19.  Headings.    Section  and subsection headings in
this Agreement are  included  herein  for  convenience of reference
only and shall not constitute a  part of this Agreement or be given
any substantive effect.

      SECTION 20.   Severability.    In  case  any  provision in or
obligation  under  this  Agreement  shall  be  invalid,  illegal or
unenforceable  in  any  jurisdiction,  the  validity,  legality and
enforceability of the  remaining  provisions  or obligations, or of
such provision or obligation  in  any other jurisdiction, shall not
in any way be affected or impaired thereby.

      SECTION 21.  Counterparts.  This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original
and all  of  which  together  shall  constitute  one  and  the same
agreement.

      SECTION 22.  Governing  Law;  Terms.   THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS  OF  PLEDGOR  AND  THE  LENDER AND ALL OTHER
ASPECTS HEREOF SHALL BE DEEMED TO  BE MADE UNDER, SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF  THE  STATE  OF  CALIFORNIA,  EXCEPT  AS  REQUIRED  BY MANDATORY
PROVISIONS OF LAW AND  EXCEPT  TO  THE  EXTENT THAT THE VALIDITY OR
PERFECTION  OF  THE   SECURITY   INTEREST  HEREUNDER,  OR  REMEDIES
HEREUNDER, IN RESPECT OF ANY  PARTICULAR COLLATERAL ARE GOVERNED BY
THE LAWS OF A  JURISDICTION  OTHER  THAN  THE STATE OF CALIFORNIA.
Unless otherwise defined herein,  in  the  Loan Agreement or in the
Note, terms defined in Divisions 8 and 9 of the UCC are used herein
as therein defined.

      SECTION 23.  Interpretation.   Wherever in this Agreement the
context may  require,  the  masculine  gender  shall  be  deemed to
include the feminine and/or neuter, and the singular to include the
plural.

      SECTION 24.  Consent to  Jurisdiction and Service of Process;
Waiver of Trial by Jury.  Pledgor hereby irrevocably submits to the
jurisdiction of any California  State  or  Federal court sitting in
the Central District  of  California  in  any  action or proceeding
arising out of  or  relating  to  the  Loan  Documents, and Pledgor
hereby irrevocably agrees that all claims in respect of such action
or proceeding may be heard  and determined in such California State
or Federal  court.    Pledgor  hereby  irrevocably  waives,  to the
fullest extent he may effectively do so, the defense of an

                           161 of 193

<PAGE>

inconvenient forum to the maintenance of such action or proceeding.
Pledgor  agrees  that  a  final  judgment  in  any  such  action or
proceeding  shall  be  conclusive  and  may  be  enforced  in other
jurisdictions by  suit  on  the  judgment  or  in  any other manner
provided by law.  Nothing in this Section 24 shall affect the right
of the Lender to bring any  action or proceeding against Pledgor or
his property in  the  courts  of  any  other  jurisdiction.  IN ANY
LITIGATION ARISING OUT OF OR  RELATING  TO THE LOAN DOCUMENTS, EACH
PARTY HERETO WAIVES TRIAL BY JURY.

      SECTION 25.  Security Interest  Absolute.   All rights of the
Lender and security  interests  hereunder,  and  all obligations of
Pledgor hereunder, shall be absolute and unconditional irrespective
of:

            (i)    any  lack  of  validity or enforceability of the
Note or any other  agreement  or  instrument relating thereto; (ii)
any change in the time, manner  or  place  of payment of, or in any
other term of, all or any  of the Secured Obligations, or any other
amendment or waiver of  or  any  consent  to any departure from the
Note or any other related document;

            (iii)  any exchange,  release  or non-perfection of any
other collateral, or  any  release  or  amendment  or  waiver of or
consent to any departure from  any  guaranty  for all or any of the
Secured Obligations; or

            (iv)    any  other  circumstance  which might otherwise
constitute a defense available to, or a discharge of, Pledgor.

      SECTION 26.  Pledgor Remains  Liable.  Anything herein to the
contrary notwithstanding, (i) Pledgor shall remain liable under the
contracts and agreements included in  or relating to the Collateral
to the extent set forth  therein  to  perform all of his duties and
obligations thereunder to the same  extent as if this Agreement had
not been executed, (ii) the  exercise  by  the Lender of any of the
rights hereunder shall not release  Pledgor  from any of his duties
or obligations under the  contracts  and  agreements included in or
relating to the Collateral and (iii)  the Lender shall not have any
obligation or liability under the contracts and agreements included
in or relating to the  Collateral  by reason of this Agreement, nor
shall the Lender be obligated to  perform any of the obligations or
duties of Pledgor thereunder or  to  take  any action to collect or
enforce any claim for payment assigned hereunder.

      SECTION  27.    Facsimile   Execution.    Execution  of  this
Agreement shall be  deemed  binding  upon  the party executing this
Agreement notwithstanding that  delivery  of  the executed document
may be by facsimile transmission.    Any party shall be entitled to
rely on a faxed  execution  copy  of  this  Agreement with the same
force and effect  as  if  an  originally  inked execution copy were
delivered.  Inked  original  documents  shall  be  delivered to the
other parties by Federal  Express  mail  within one business day of
the facsimile transmission.

                           162 of 193

<PAGE>

      IN WITNESS WHEREOF, Pledgor  and  the Lender have caused this
Agreement to be duly executed  and  delivered  as of the date first
above written.


                         PLEDGOR:


                         ---------------------------
                         EUGENE L. FROELICH


                         Notice Address for Pledgor:

                         14152 Valley Vista Blvd.
                         Sherman Oaks, California 91423
                         Fax No.: (818) 990-7130


                         LENDER:

                         MAXICARE HEALTH PLANS, INC.,
                         a Delaware corporation


                         /s/ ROBERT J. LANDIS
                         --------------------
                                TREASURER


                         Notice Address:

                         1149 South Broadway Street, Suite 910
                         Los Angeles, California 90015
                         Fax No.:  (213) 765-2694

                         with a copy to:

                         Jeffer, Mangels, Butler & Marmaro LLP
                         2121 Avenue of the Stars
                         Tenth Floor
                         Los Angeles, California  90067
                         Attn: Barry L. Burten, Esq.
                         Fax No.: (310) 203-0567

                           163 of 193