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                                                                    EXHIBIT 10.5
                                                                  Execution Copy

                              EMPLOYMENT AGREEMENT


        THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into
as of this day of December, 1997, effective as of February 9, 1998 (the
"Effective Date") by and between Physician Partners, Inc., a Delaware
corporation (the "Company"), and Kerry Barnett (the "Executive").

                              W I T N E S S E T H:

        WHEREAS, the Executive and the Company deem it to be in their respective
best interests to enter into an agreement providing for the Company's employment
of Executive pursuant to the terms herein stated;

        WHEREAS, Executive is an experienced business manager who is capable of
being the senior executive of a medical group such as HealthFirst, P.C. (the
"Medical Group");

        WHEREAS, Company is a physician practice management company experienced
in management of medical practices such as Medical Group;

        WHEREAS, Company wishes to employ Executive to oversee the operations of
Medical Group as part of the management of the practice of Medical group by
Company; and

        WHEREAS, Executive and Company deem it to be in their respective best
interests to enter into an agreement to set forth the terms and conditions of he
employment of Executive after the Effective Date;

        NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, it is hereby agreed as follows:

        1. Duties. The Company hereby agrees to employ Executive as CEO of
HealthFirst Medical Group for the "Term of Employment" (as herein defined).
Executive in this capacity agrees to use his best efforts during the Term of
Employment to protect, encourage, and promote the interests of the Company.
During the Term of Employment, Executive shall also perform such other duties
consistent with the office held by Executive as may be reasonably assigned to
him from time to time by the Board of Directors of the Company, and will devote
substantial time and attention to such duties, except while on sick leave,
reasonable vacations, and excused leaves of absence. During such period,
Executive may also be required to perform services for one or more affiliates of
the Company.

        2. Compensation.

               (a) Base Salary. Beginning on the Effective Date Company agrees
to pay to Executive base salary at an annual rate of One Hundred Fifty-Eight
Thousand Dollars ($158,000) payable in regular installments in accordance with
the Company's normal payroll procedures (the "Base Salary"). Executive's Base
Salary may be increased from time to time at the discretion of the Chief
Executive Officer of the Company.



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               (b) Annual Incentive. Effective on the Effective Date, Executive
will be eligible to participate in the Company's annual management incentive
plan (or such other incentive plan established in place of the Company's annual
management incentive plan). The actual amount of the annual bonus award, if any,
for a fiscal year shall be dependent upon the achievement of certain financial
standards of performance for the operations of Medical Group, the achievement of
certain non-financial objectives mutually agreed upon by Executive and the
Company at the beginning of the fiscal year and a discretionary component for
performance above targets. For the 1998 fiscal year, the incentive standards and
target goals for Executive shall be mutually agreed upon by Executive and the
Company and submitted to the Compensation Committee of the Board of Directors
(the "Committee") within sixty (60) days after the Effective Date (and when
approved shall be included as Exhibit A of this Agreement) and Executive shall
be entitled to receive a bonus award not less than Thirty-two thousand dollars
($32,000) assuming achievement of the agreed upon financial standards of
performance (as determined based on the approved Medical Group operating budget)
and 100% of the agreed upon non-financial objectives. No bonus award for the
1998 fiscal year shall be awarded if Executive fails to achieve at least 85% of
the agreed upon non-financial objectives. The Company will review Executive's
performance from time to time and assuming satisfactory performance, additional
bonus awards as the Company may determine in its sole discretion may be made.

               (c) Long-Term Incentives. As soon as practicable after the date
hereof and upon the execution of a Stock Option Agreement by Executive,
Executive shall be granted an option to purchase 10,000 shares of Class A Common
Stock of the Company at Eight Dollars ($8.00) per share subject to the terms and
conditions of (the PPI Employee Stock Option Plan-Exhibit B to this Agreement).
The option shall vest and become exercisable with respect to twenty percent
(20%) of the shares subject to the option as of each of the first through fifth
anniversaries of the Effective Date, provided that Executive is still employed
on each such anniversary. The Committee will review Executive's performance from
time to time and assuming satisfactory performance, may make additional awards
of long term incentives in such form and in such amounts as the Committee may
determine in its sole discretion.

        3. Benefits. During the Term of Employment:

               (a) The Company shall furnish Executive with, and Executive shall
be allowed full use of, office facilities, automobiles, secretarial and clerical
assistance, and other Company property and services of a quality, nature and to
the extent made available to senior executive employees of the Company from time
to time;

               (b) Executive shall be eligible to participate in life, health,
long-term disability insurance and severance programs, stock purchase programs,
stock option plans, qualified and non-qualified pension and retirement plans,
incentive compensation programs and other fringe benefit programs, if any,
available to other senior executive employees of the Company (a copy of the 1998
benefit plan is attached as Exhibit C of this Agreement);

               (c) Executive shall be allowed 4 weeks of vacation and paid
leaves of absence on the same basis as other senior executive employees of the
Company; and


               (d) Company will reimburse Executive for reasonable business
expenses in performing Executive's duties and promoting the business of the
Company, including, without limitation, reasonable business expenses,
entertaining expenses, automobile 



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expenses, and travel and lodging, when incurred. The cost of these items shall
be borne by the Company upon presentation of an itemized expense voucher.

        4. Term of Employment. As used herein, the phrase "Term of Employment"
shall mean the period commencing on the Effective Date and ending three (3)
years from the Employment Date. The Company shall provide Executive with at
least ninety (90) days notice of its intent not to renew this Agreement.
Notwithstanding the foregoing, the Term of Employment shall expire on the first
to occur of the following:

               (a) Termination Without Cause. Notwithstanding anything to the
contrary in this Agreement, whether express or implied, the Company may at any
time terminate Executive's employment with the Company. In the event of such
termination, Executive shall be entitled to receive his Base Salary (at the rate
in effect immediately prior to such notice) during the period commencing on the
effective date of such termination and ending on the six (6) month anniversary
of such date (the "Severance Period") as though Executive's employment had
continued during the Severance Period. Executive shall also be entitled to
continue to be covered by all medical, health and accident and disability
insurance, at the same coverage level maintained for Executive's benefit
immediately prior to the date of Executive's termination, until the end of the
Severance Period. In the event Executive is ineligible under the terms of such
insurance to continue to be so covered, the Company shall provide Executive with
substantially equivalent coverage through other sources or will provide the
Executive with a lump sum payment equal to the agreed upon present value of the
continuation of such insurance coverages to which Executive is entitled under
this section 4(a).

               (b) Termination for Cause. The Company shall have the right to
terminate Executive's employment at any time for Cause by giving Executive
written notice of the effective date of termination (which effective date may,
except as otherwise provided below, be the date of such notice). For purposes of
this Agreement, Cause shall mean:

                      (i) fraud, misappropriation, embezzlement or other act of
material misconduct against the Company or any of its affiliates thereof or an
act contrary to their best interests;

                      (ii) failure to render services in accordance with the
terms of this Agreement and in a manner that meets the performance standards
mutually agreed upon between Executive and the Chief Executive Officer of the
Company, provided that (A) a demand for performance of services had been
delivered to the Executive by the Chief Executive Officer of the Company at
least thirty (30) days prior to termination identifying the manner in which such
Chief Executive Officer believes that the Executive has failed to perform and
(B) the Executive has thereafter failed to remedy such failure to perform;





                      (iii) willful and knowing violation of any rules or
regulations of any governmental or regulatory body material to the business of
the Company;

                      (iv) conviction of or plea of guilty or nolo contendere to
a felony; or


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                      (v) failure to comply with the Corporate Code of Conduct
established by the Company and attached hereto as Exhibit D, as such Corporate
Code of Conduct is modified from time to time by the Company.

If Company terminates Executive's employment for any of the reasons set forth in
this section 4(b), Company shall have no further obligations hereunder from and
after the effective date of termination and shall have all other rights and
remedies available under this or any other agreement and at law or in equity.

               (c) Termination on Account of Death. In the event of Executive's
death while in the employ of the Company, the Company shall pay to the
Executive's Designated Beneficiaries (as defined below) one hundred percent
(100%) of Executive's Base Salary as in effect immediately prior to Executive's
death, payable to Executive's Designated Beneficiary at the beginning of each
month for a period of six (6) months following Executive's death or until the
end of the Term of Employment, whichever is sooner. Alternatively, the Company
may provide key man life insurance covering Administrator providing amounts to
the Designated Beneficiaries equivalent to those specified in the previous
sentence.

               (d) Voluntary Termination by Executive. In the event that
Executive's employment with the Company is voluntarily terminated by Executive,
the Company shall have no further obligations hereunder from and after the
effective date of such termination and shall have all other rights and remedies
available under this or any other agreement and at law or in equity.

        5. Designated Beneficiary. In the event of the death of Executive while
in the employ of the company, or at any time thereafter during which amounts
remain payable to the Executive under Section 4(a) or (c) hereof, such payments
shall thereafter be made to such person or persons as the Executive may
specifically designate (successively or contingently) to receive payments under
this Agreement following the Executive's death by filing a written beneficiary
designation with the Company during the Executive's lifetime. Such beneficiary
designation shall be in such form as may be prescribed by the Company and may be
amended from time to time or may be revoked by the Executive pursuant to written
instruments filed with the Company during his lifetime. Beneficiaries designated
by Executive may be any natural or legal person or persons, including a
fiduciary, such as a trustee or a trust or the legal representative of an
estate. Unless otherwise provided by the beneficiary designation filed by
Executive, if all of the persons so designated die before Executive on the
occurrence of a contingency not contemplated in such beneficiary designation,
then the amount payable under this Agreement shall be paid to the Executive's
estate.



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        6. Miscellaneous. This Agreement shall also be subject to the following
miscellaneous considerations:

               (a) The Company represents and warrants to Executive that it has
the authorization, power and right to deliver, execute and fully perform its
obligations under this Agreement in accordance with its terms.

               (b) Except as provided in Section 5, this Agreement contains a
complete statement of all the arrangements between the parties with respect to
Executive's employment by the Company, this Agreement supersedes all prior and
existing negotiations and agreements between them concerning the Executive's
employment, and this Agreement can only be changed or modified pursuant to a
written instrument executed by each of the parties hereto.

               (c) If any provisions of this Agreement or any portion hereof is
declared invalid, illegal or incapable of being enforced by any court of
competent jurisdiction, the remainder of such provisions and all of the
remaining provisions of this Agreement shall continue in full force and effect.

               (d) This Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon, except to the extent governed
by federal law.

               (e) All compensation payable hereunder shall be subject to such
withholding taxes as may be required by law.

               (f) This Agreement shall be binding upon and inure to the benefit
of the Successors and assigns of the Company. The Company will require any
successor, whether direct or indirect, by purchase, merger, consolidation or
otherwise, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Except as expressly provided herein,
Executive may not sell, transfer, assign, or pledge any of his rights or
interests pursuant to this Agreement.

               (g) Except as otherwise provided in Section 4(b) hereof, in the
event of any dispute between the Company and the Executive with respect to any
of the provisions of this Agreement, the Company and the Executive agree that
either party may request that the dispute be resolved by submitting the issue to
arbitration or such other form of alternative dispute resolution as the parties
may agree upon (collectively, "Alternative Dispute Resolution"). The parties
expressly agree and acknowledge, however that, except as otherwise provided in
Section 4(b) hereof, nothing in this Agreement (whether express or implied)
shall under any circumstances require either party to consent to Alternative
Dispute Resolution.

               (h) Any rights of Executive hereunder shall be in addition to any
rights Executive may otherwise have under benefit plans or agreements of the
Company to which he is a party or in which he is a participant, including,
without limitation, any Company sponsored employee benefit plans. Provisions of
this Agreement shall not in any way abrogate Executive's rights under such other
plans and agreements.


               (i) The Company shall, to the maximum extent permitted by law,
indemnify Executive against expenses (including, without limitation, reasonable
attorneys' fees), 


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judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with any proceedings arising by reason of the fact that Executive
is or was an employee, officer, or agent of the Company. The Company shall
advance to Executive expenses incurred in defending any such proceedings to the
maximum extent permitted by law. The Company's obligations under this provision
shall not cease upon termination of this Agreement.

               (j) Either party's failure to enforce any provision or provisions
of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, or prevent that party thereafter from enforcing each
and every other provision of this Agreement.

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


PHYSICIAN PARTNERS, INC.


By______________________________
    David M. Goldberg,
    President


Executive:

By:__________________________
      Kerry Barnett


AGREED AND ACKNOWLEDGED:

HealthFirst, P.C.

By: _______________________
      David L. Perry, M.D.
      President


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