<PAGE>   1


                                                                   EXHIBIT 10.02

                         EXECUTIVE EMPLOYMENT AGREEMENT


        This EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement"), dated as of
September 1, 1999, (the "Effective Date"), by and between PACIFICARE HEALTH
SYSTEMS, INC., a Delaware corporation (the "Company"), with its principal place
of business located at 3120 Lake Center Drive, Santa Ana, California 92799, and
Jeffrey M. Folick, an individual ("EXECUTIVE"), residing at 13601 Belle Rive,
Santa Ana, California 92705:


                                    RECITALS:

        WHEREAS, on or about December 12, 1994, the Company and EXECUTIVE
entered into an Executive Employment Agreement, pursuant to which the Company
engaged EXECUTIVE in the capacity of President of the Company (as such agreement
heretofore may have been amended, modified, or revised, the "Old Agreement");

        WHEREAS, EXECUTIVE has advised the Company of his desire to retire
effective upon a mutually agreeable future date;

        WHEREAS, the Company and EXECUTIVE mutually desire to terminate the Old
Agreement and to provide for the complete satisfaction and settlement of all
obligations arising under the Old Agreement upon the terms and subject to the
conditions set forth in this Agreement; and

        WHEREAS, in view of EXECUTIVE'S impending retirement from the Company,
EXECUTIVE desires to resign from the offices, positions, and board memberships
that EXECUTIVE currently holds with the Company and with the Company's
subsidiaries and affiliates.

        NOW THEREFORE, in consideration of the above premises and the
representations, warranties, conditions, covenants, and promises exchanged by
the parties expressed below, the Company and EXECUTIVE agree as follows:


                                    ARTICLE I
                    TERMINATION OF PRIOR EMPLOYMENT AGREEMENT

SECTION 1.01 EFFECT OF THIS AGREEMENT.

        This Agreement, as of the Effective Date, shall supersede the Old
Agreement. However, EXECUTIVE shall continue to receive the compensation and
benefits provided by the Old Agreement through December 31, 1999. Effective
January 1, 2000, EXECUTIVE'S compensation and benefits shall be as provided in
this Agreement, and the Old Agreement will have no further force or effect.



                                      -1-
<PAGE>   2

SECTION 1.02 TERM OF AGREEMENT.

        The Initial Term of this Agreement will expire December 31, 2000.
However, this Agreement shall automatically be extended for an Additional Term
of six months, through June 30, 2001, unless either party gives to the other
written Notice of Non-Extension on or before October 1, 2000.

SECTION 1.03 EXECUTIVE'S ANTICIPATED TIME COMMITMENT.

        Commencing January 1, 2000, Executive will work on an as-needed basis.
Therefore, the time commitment will vary. Generally, the time commitment will be
less than full time, although the time commitment will vary on a weekly basis
from nominal to full-time.

SECTION 1.04 RETIREMENT UPON EXPIRATION OF AGREEMENT.

        Executive's retirement from the Company shall become effective upon the
expiration of this Agreement, unless the Agreement is terminated, in accordance
with its terms, prior to its expiration. On the Expiration or Termination Date
and without further action, EXECUTIVE shall resign from any offices,
directorships or positions he then holds in the Company or in any of the
subsidiaries of the Company except as mutually agreed upon by EXECUTIVE and the
Company's Chief Executive Officer.


                                   ARTICLE II
                                DUTIES AND TITLE

SECTION 2.01 EXECUTIVE'S TITLE.

        EXECUTIVE'S current title shall remain unchanged through December 31,
1999. Thereafter, EXECUTIVE'S title will be as an Executive Vice President or as
otherwise determined by the Company's Chief Executive Officer.

SECTION 2.02 EXECUTIVE'S DUTIES.

        EXECUTIVE'S current duties shall remain unchanged through December 31,
1999. Thereafter, it is anticipated that EXECUTIVE will serve in a number of
roles, as directed by the Chief Executive Officer of the Company or the
President of the HMO Division. The roles assigned to EXECUTIVE will be
situation-dependent, and may include, but will not be limited to, the following:

        -   Project Management and Oversight. Likely projects would be market or
            product specific, such as integrating a local acquisition,
            implementing a new product or system, or addressing a performance
            variation.



                                      -2-
<PAGE>   3

        -   Advice and Consultation. Participate in many routine management
            meetings as well as some retreats that are strategically or issue
            oriented. Be generally available to both the Chief Executive Officer
            of the Company and to the President of the HMO Division for personal
            consultation.

        -   Acquisitions. Serve as needed in the consideration and analysis of
            potential acquisitions. Oversee, advise, and evaluate plans for
            implementation and integration of acquisitions.

        -   Provider Relations. Maintain certain relationships with key
            providers. These relationships may be focused on evolving risk
            arrangements, business relationships, or new products.

        -   Customer Relationships. Assist in enhancing some customer
            relationships. These most likely would include large purchasing
            coalitions or employers.


                                   ARTICLE III
              COMPENSATION AND BENEFITS COMMENCING JANUARY 1, 2000


SECTION 3.01 COMPENSATION.

        Commencing January 1, 2000, EXECUTIVE shall be compensated at a salary
of $480,000 per year.

SECTION 3.02 BENEFITS.

        Commencing January 1, 2000, EXECUTIVE shall continue to receive life,
health and disability benefits as previously provided to EXECUTIVE and EXECUTIVE
shall continue to participate in the Company's 401(k) plan and restoration plan
through the term of this Agreement.

SECTION 3.03   STOCK OPTIONS.

        EXECUTIVE'S stock options shall continue to vest, in accordance with the
terms of the Stock Option Plan and the various Stock Option Agreements.

SECTION 3.04 CAR ALLOWANCE.

        EXECUTIVE shall receive a car allowance of $600 per month throughout the
term of this Agreement.



                                      -3-
<PAGE>   4

SECTION 3.05 OFFICE AND SECRETARIAL SUPPORT.

        EXECUTIVE shall be provided office space and secretarial support as
necessary.

SECTION 3.06 CELLULAR TELEPHONE.

        Company will provide EXECUTIVE with a cellular telephone for use during
the term of this Agreement.

SECTION 3.07   NO ADDITIONAL BENEFITS.

        EXECUTIVE shall not participate in the 1996 Management Incentive
Compensation Plan and, except as expressly provided this Agreement, EXECUTIVE
shall not be eligible for other compensation and benefits.


                                   ARTICLE IV
                        BENEFITS UPON EXPIRATION OF TERM

SECTION 4.01 STOCK OPTIONS.

        Stock Options shall cease vesting upon expiration of the term of this
Agreement, and all unvested options shall expire. EXECUTIVE may exercise any
vested options for a period of one year following the expiration of the term.
Any vested options not exercised within that period shall expire.

SECTION 4.02 COBRA CONTINUATION COVERAGE.

        The Company shall pay for COBRA continuation coverage for a period of
twelve months following the expiration of the term of this Agreement, or until
EXECUTIVE sooner becomes eligible for comparable benefits through another
employer.

SECTION 4.03 TERMINATION OF EMPLOYEE BENEFITS.

        Except as expressly set forth in this Agreement, EXECUTIVE shall not be
entitled to receive any cash, in-kind compensation, or benefits of any kind or
nature, for any periods after the expiration of the term of this Agreement.

        The foregoing prohibitions are not intended to limit, restrict, or deny
EXECUTIVE any benefits under employee mandatory or fringe benefit plans or
programs, in which EXECUTIVE participates on the Effective Date, that are earned
by EXECUTIVE on or before the expiration date of this Agreement while being
payable or distributable to EXECUTIVE after the expiration date.



                                      -4-
<PAGE>   5

                                    ARTICLE V
                     TERMINATION PRIOR TO EXPIRATION OF TERM

SECTION 5.01 TERMINATION WITHOUT CAUSE.

        Either EXECUTIVE or the Company may terminate this Agreement prior to
the expiration of the term of this Agreement, with or without cause, on fifteen
days' prior written notice.

SECTION 5.02 TERMINATION BY EXECUTIVE.

        If EXECUTIVE terminates before the expiration of the term of this
Agreement, then his base salary shall cease and any unvested options shall
immediately expire. EXECUTIVE may exercise any vested options for a period of
one year following the termination. Any vested options not exercised within that
period shall expire.

SECTION 5.03 TERMINATION BY COMPANY.

        If the Company terminates EXECUTIVE, then EXECUTIVE'S base compensation
as set forth in Section 3.01 of this Agreement shall continue for the remainder
of either the Initial Term or the Additional Term of this Agreement, whichever
is then applicable, and EXECUTIVE'S unvested stock options shall continue to
vest, in accordance with the terms of the Stock Option Plan and the various
Stock Option Agreements, for the remainder of the applicable term of this
Agreement. Thereafter, EXECUTIVE will be entitled to benefits in accordance with
Section 4 herein.

SECTION 5.04 COMPANY'S RIGHT TO OFFSET

        Notwithstanding the foregoing, in the event EXECUTIVE engages in
employment with a competitor of Company during the term of this Agreement or any
extension thereof, Executive's compensation as set forth in Section 3.01 of this
agreement shall be reduced by the amount of any and all gross earnings EXECUTIVE
earns from employment with any such competitor or competitors, which earnings
EXECUTIVE shall promptly disclose to the Company. For purposes of this Section
5.04, a "competitor" shall include, without limitation, a health maintenance
organization, competitive medical plan, or preferred provider organization, or
health or life insurance company that owns a managed care plan or program.



                                      -5-
<PAGE>   6

                                   ARTICLE VI
                        RETURN OF THE COMPANY'S PROPERTY

        On or before the Expiration/Termination Date, EXECUTIVE shall return all
of the Company's property, equipment, keys, credit cards, books, records, and
any and all other documents, property, or other items belonging to the Company.


                                   ARTICLE VII
                           CONFIDENTIALITY PROVISIONS


SECTION 7.01 TRADE SECRETS.

        EXECUTIVE acknowledges that, during the course of his employment with
the Company or with any affiliate or subsidiary of the Company, EXECUTIVE has
had, and will continue to have through the Expiration/Termination Date, access
to certain Trade Secrets in the form of know-how, trade secrets, or proprietary
information of the Company or its subsidiaries or affiliates ("Trade Secrets ")
and that such Trade Secrets were acquired, or will be acquired, in confidence
and as a fiduciary of the Company or its subsidiaries or affiliates. For the
purposes of this Agreement, Trade Secrets shall include, without limitation, any
and all cost and expense data, marketing and customer data, sales manuals,
underwriting guidelines, case management policies and procedures, utilization
review and quality assurance policies and procedures, provider manuals,
individual and group subscriber information (including, the name, address,
telephone number, or contact person for an individual or group subscriber),
subscriber group manuals, processes, designs, devices, compilations of
information, operating manuals, symbols, service marks, logos, customer and
vendor lists (including, without limitation, lists of subscribers, subscriber
groups, clients, brokers, and providers contracting with the Company or any
subsidiary or affiliate of the Company), business information, marketing
programs, plans, and strategies, contracts and licenses, advertising and
promotional materials, financial information and strategies, computer software
and other computer-related materials, copyrightable material, and other legally
protected information owned by or used in the respective businesses of the
Company or its subsidiaries or affiliates which are confidential or proprietary
in nature.

        For the purposes of this Agreement, Trade Secrets shall not include
information which: (i) EXECUTIVE can prove became known to him other than
through his relationship with the Company through either (a) completely
independent development of such information not within the course of his
employment with the Company, or (b) a source other than the Company or a
subsidiary, affiliate, shareholder, director, officer, employee, consultant,
agent, or advisor of the Company, but only if such source did not disclose such
information in violation of a duty of nondisclosure owed to the Company or a
subsidiary or affiliate of the



                                      -6-
<PAGE>   7

Company; (ii) is a matter of public knowledge through no fault of EXECUTIVE;
(iii) is approved in advance for release or use by the Company's Board of
Directors; or (iv) is required to be disclosed by law.

SECTION 7.02 CONFIDENTIALITY COVENANT.

        EXECUTIVE acknowledges and agrees that maintaining the confidentiality
of all of the Trade Secrets is integral to the value of the Company and is vital
to the successful operations of the Company and its subsidiaries and affiliates.
In view of the foregoing, EXECUTIVE agrees to, at all times after the Effective
Date, maintain the confidentiality of all Trade Secrets and to not disclose,
divulge, exploit, or use, in any manner whatsoever, the Trade Secrets for
EXECUTIVE'S own benefit or the benefit of another individual or entity.

SECTION 7.03 EQUITABLE RELIEF.

        EXECUTIVE acknowledges and agrees that it would be difficult to measure
the damage to the Company (or any subsidiary or affiliate, as the case may be)
from any breach of EXECUTIVE'S obligations under this Section 7.03, that injury
to the Company (or to any subsidiary or affiliate, as the case may be) from any
such breach would be impossible to calculate, and that money damages would
therefore be an inadequate remedy for any such breach. Therefore, EXECUTIVE
acknowledges and agrees that the Company, in addition to any of its other rights
or remedies, shall be entitled to seek injunctive or other equitable relief
without bond or other security in the event of an actual or threatened breach of
this Agreement. The obligations of EXECUTIVE and the rights and remedies of the
Company under this Agreement are cumulative and in addition to, and not in lieu
of, any obligations, rights, or remedies created by applicable patent,
copyright, or other laws, including the statutory and common laws governing
unfair competition, misappropriation or theft of trade secrets, proprietary
rights, or Trade Secrets generally.


                                  ARTICLE VIII
                      GENERAL RELEASE OF ANY AND ALL CLAIMS


SECTION 8.01 GENERAL RELEASE OF ALL CLAIMS BY EXECUTIVE AGAINST COMPANY.

        EXECUTIVE hereby irrevocably and unconditionally, fully and forever
releases and discharges the Company and the Company's parents, shareholders,
successors, assigns, directors, officers, agents, and representatives and
subsidiaries (collectively, the "Company Group") from any and all claims,
demands, actions, causes of action (whether at law or in equity), suits, and
administrative actions or proceedings, of every kind and nature, whether known
or unknown, past or present, suspected or unsuspected, foreseeable or
unforeseeable, whether or not heretofore asserted, that EXECUTIVE may now have,
have ever had, or in the future may have against the Company or any other member
of the Company Group for any losses, liabilities, damages (of any kind or
nature), obligations, debts, indebtedness, costs, expenses, or fees (including,
without limitation, attorneys' fees), which in any way have arisen



                                      -7-
<PAGE>   8

from or are related to: (i) the Employment Agreement or EXECUTIVE'S employment
with the Company; (ii) the termination of the Employment Agreement or
EXECUTIVE'S separation from the Company; or (iii) any discriminatory conduct or
consequences, whether arising under (A) Title VII of the Civil Rights Act of
1964, (race, color, religion, sex, and national origin discrimination), (B) 42
U.S.C. Section 1981 (discrimination), (C) 29 U.S.C. Section 621-634 (age
discrimination), (D) 29 U.S.C. Section 206(d)(1) (equal pay), (E) The Americans
with Disabilities Act (disability discrimination) or (E) The California Fair
Employment and Housing Act (discrimination including race, color, national
origin, ancestry, physical handicap, medical condition, marital status, sex, or
age); (iv) retaliation or constructive or wrongful discharge relating to any
allegation of the above claims; (v) any claim that the Company violated any law
or public policy, (e.g. "whistle blower" claims or "qui tam" claims); (vi) any
past compensation, including regular wages, bonuses, commissions, overtime and
liquidated damages, or benefits relating to EXECUTIVE'S employment with the
Company Group; (vii) any claim capable of being raised in any complaint filed
with the United States Department of Labor ("DOL"), the California Department of
Fair Employment and Housing or the California Division of Labor Standards
Enforcement against the Company Group; (viii) any claim that the Company Group
has violated any written, oral, or implied release with EXECUTIVE; (ix) any
claim of breach of any express or implied covenant of good faith and fair
dealing; (x) any claims in tort including, but not limited to, intentional
infliction of mental or emotional distress, interference with business or
employment relationship, invasion of privacy, defamation of character, slander,
libel, negligent supervision, gross negligence, or negligence of any kind; (xi)
any claim of personal injury or unreported work-related injury arising from or
relating to any act or omission by the Company Group; (xii) any claim that the
Company Group has violated EXECUTIVE'S rights, if any, under the Constitutions
of the United States or the state of California.

SECTION 8.02 SPECIFIC WAIVER OF ANY UNKNOWN CLAIMS.

        Effective as of the Termination Date, EXECUTIVE expressly waives and
relinquishes all rights and benefits afforded by Section 1542 of the Civil Code
of the State of California, and does so understanding and acknowledging the
significance of such specific waiver of Section 1542. Section 1542 of the Civil
Code of the State of California states as follows:

               A general release does not extend to claims which the creditor
               does not know or suspect to exist in his favor at the time of
               executing the release, which if known by him must have materially
               affected his settlement with the debtor.

Thus, notwithstanding the provisions of Section 1542, and for the purpose of
implementing a full and complete release and discharge of all claims, EXECUTIVE
expressly acknowledges that this Agreement is intended to include in its effect,
without limitation, all claims which EXECUTIVE does not know or suspect to exist
in his favor at the time of execution hereof,



                                      -8-
<PAGE>   9

and that this Agreement contemplates the extinguishment of any such claim or
claims. This waiver, however, does not extend to any actions or claims, which
may arise after execution of this Agreement.

SECTION 8.03 NO CLAIMS OR ASSIGNMENT OF CLAIMS.

        EXECUTIVE represents and warrants to the Company and to all members of
the Company's Group that he has not suffered any workplace injury and that he
has not made or commenced, and will not make or commence, any claim with any
governmental or administrative agency, department, or other regulatory body,
whether federal, state, or local, that in any way relates to his employment with
or severance from the Company and from any of its subsidiaries or affiliates.
EXECUTIVE further represents and warrants to the Company and to all members of
the Company's Group that no portion of any claim, right, demand, action, or
cause of action that he has or may have arising out of or relating to his
employment with or severance from the Company (or any subsidiary or affiliate
thereof), nor any portion of any recovery or settlement to which he might be
entitled, has been assigned or transferred to any individual or entity in any
manner whatsoever, including by way of subrogation, operation of law, or
otherwise.

SECTION 8.04 EFFECT OF SETTLEMENT.

        The parties hereto expressly acknowledge and agree that this Agreement
pertains to disputed issues or claims and that any settlement discussions,
including proposing, negotiating, and entering into this Agreement, neither
indicate nor constitute an admission of any liability or wrongdoing of any
nature whatsoever by any party hereto. By considering, negotiating, and entering
into this Agreement, the parties hereto are simply buying their peace and
avoiding any potential legal costs or expenses. Therefore, this Agreement shall
not be used as evidence of any liability or wrongdoing for any purpose
whatsoever except as may be necessary to enforce the terms and conditions of
this Agreement.


                                   ARTICLE IX
                                     NOTICES

        Any and all notices, requests, consents, demands, and/or other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given (i) when delivered, if sent by
United States registered or certified mail (return receipt requested), (ii) when
delivered, if delivered personally by commercial courier, or (iii) on the next
following business day, if sent by United States Express Mail or overnight
courier, in each case to the parties at the following addresses (or at such
other addresses as shall be specified by like notice) with postage or delivery
charges prepaid:



                                      -9-
<PAGE>   10

If to the Company:

PacifiCare Health Systems, Inc.
3120 Lake Center Drive
Santa Ana, California 92799
Attn:  Chairman of the Board


If to EXECUTIVE:

Mr. Jeffrey M. Folick
13601 Belle Rive
Santa Ana, California 92705


                                    ARTICLE X
                               GENERAL PROVISIONS


SECTION 10.01 INTEGRATED AGREEMENT.

        This Agreement, when executed, constitutes the entire and complete
understanding and fully integrated agreement between the Company and EXECUTIVE
with respect to the termination of EXECUTIVE'S employment with the Company; and
this Agreement and the Certificate of Compensation supersede any and all prior
or contemporaneous negotiations, agreements, or communications, whether oral or
written, between the Company and EXECUTIVE with respect to such matter.

SECTION 10.02 AMENDMENTS; WAIVER.

        This Agreement shall not be amended, modified, revised, or supplemented
orally unless evidenced by a dated written instrument executed by the Company
and EXECUTIVE. No waiver of any provision of this Agreement shall be effective
unless evidenced by a dated, written instrument executed by the Company. No
waiver of any provision hereof shall be construed as a further or continuing
waiver of such provision or of any other provision hereof.

SECTION 10.03 SEVERABILITY.

        If any provision in this Agreement shall be found by a court of
competent jurisdiction to be invalid, illegal, or unenforceable, such provision
shall be construed and enforced as if it had been narrowly drawn so as not to be
invalid, illegal, or unenforceable, and the validity, legality, and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.



                                      -10-
<PAGE>   11

SECTION 10.04 GOVERNING LAW.

        This Agreement shall be governed by and construed in accordance with the
laws of the State of California, withoUt regard to principles of conflicts of
law.

SECTION 10.05 SUCCESSORS aND ASSIGNS.

        This Agreement shall be binding upon the parties hereto and their
respective successors, transferees, heirs, devisees, assigns, and legal
representatives.

SECTION 10.06 CONSTRUCTION.

        This Agreement has been drafted with the joint participation of each of
the parties hereto and shall be construed to be neither against nor in favor of
either party hereto, but rather in accordance with the fair meaning hereof.

SECTION 10.07 REPRESENTATION BY LEGAL COUNSEL.

        Each party has had an opportunity to consult with his or its legal
counsel with respect to this Agreement and has entered into this Agreement,
after consultation with such counsel, voluntarily, and without duress. Without
limiting the generality of the foregoing, EXECUTIVE acknowledges that he is
hereby advised in writing that EXECUTIVE should consult an attorney prior to
executing this Agreement. EXECUTIVE represents and agrees that he fully
understands his right to discuss all aspects of this Agreement with his private
attorney and that he has availed himself of this right, that he has carefully
read and fully understands all of the provisions of this Agreement, and that he
is voluntarily entering into this Agreement after having consulted with his
independent legal counsel.

SECTION 10.08 TIME TO CONSIDER AGREEMENT.

        EXECUTIVE acknowledges that Company is giving him a period of forty-five
(45) days within which to consider this Agreement, during which the offer of the
provisions of this Agreement will not be revoked by Company. EXECUTIVE may
accept and sign this Agreement before the expiration of the forty-five (45) day
time period, but he is not required to do so and failing to do so will not
prejudice him in any way as long as the Agreement is signed prior to the end of
the forty-five (45) day time period. For a period of seven (7) days following
the signing and submission of this Agreement to the Company, EXECUTIVE may
revoke this Agreement. Any such notice of revocation must be in writing to
Company's legal counsel. If EXECUTIVE has already received any payment
anticipated by this Agreement, the revocation will not be effective unless the
written notice is accompanied by a complete refund of all amounts paid. This
Agreement shall become effective on the eighth day after EXECUTIVE signs it, if
it has not been revoked during the revocation period.



                                      -11-
<PAGE>   12

SECTION 10.09 SECTION HEADINGS.

        The section headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.

SECTION 10.10 ARBITRATION.

        Except that any party to this Agreement may seek injunctive relief or a
prejudgment attachment in a court of competent jurisdiction, and except as
otherwise specifically provided for herein, any and all controversies, disputes,
or claims arising out of or relating to this Agreement, or any part hereof,
including, without limitation, the meaning, applicability, or scope of this
Section 10.10 and to the performance, breach, interpretation, meaning,
construction, or enforceability of this Agreement, or any portion hereof, and
all claims for rescission or fraud in the inducement of this Agreement, shall,
at the request of either party, be settled or resolved by binding arbitration.
The parties shall mutually agree upon an arbitrator and rules of arbitration. If
they are unable to agree on an arbitrator and arbitration rules within 45 days
of a written demand for arbitration, then the parties shall arbitrate pursuant
to the American Arbitration Association's (the AAA's) National Rules for the
Resolution of Employment Disputes, except as modified hereinbelow. Any party
requesting arbitration under this Agreement shall make a demand on the other
party by registered or certified mail with a copy to the AAA. The parties
consent and agree to have any such arbitration proceedings heard in Orange
County, California or in the place closest thereto which the AAA may select for
convenience of the arbitrator(s). The arbitration shall take place as noticed by
the AAA regardless of whether one side to the dispute or controversy fails or
refuses to participate. The arbitrators shall apply California substantive law
and federal substantive law where state law is preempted. Civil discovery for
use in such arbitration may be conducted in accordance with the California Code
of Civil Procedure and the California Evidence Code, and the arbitrator(s)
selected shall have the power of discovery by the imposition of the same terms,
conditions, and penalties as may be imposed in like circumstances in a civil
action by a superior court of the State of California. Without limiting the
generality of the foregoing, the provisions of Section 983.05 of the California
Code of Civil Procedure, as amended, permitting the taking of depositions and
the obtaining of discovery, are hereby incorporated in full herein by this
reference. The arbitrators shall have the power to grant all legal and equitable
remedies and award compensatory damages provided by California law. The
arbitrators shall prepare in writing and provide to the parties an award
including factual findings and the legal reasons on which the decision is based.
The arbitrators shall not have the power to commit errors of law or legal
reasoning and the award may be vacated or corrected pursuant to California Code
of Civil Procedure Section 986.2 or Section 986.6 for any such error. Judgment
upon any award may be entered in any court having jurisdiction thereof.



                                      -12-
<PAGE>   13

SECTION 10.11 COUNTERPARTS.

        This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original and all of which shall be considered one
and the same agreement.

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



THE COMPANY:                        PACIFICARE HEALTH SYSTEMS, INC.,
                                    a Delaware corporation



                                    By: /s/ Alan Hoops
                                        ---------------------------------------
                                            Alan Hoops
                                    Title: Chairman and Chief Executive Officer




EXECUTIVE:                              /s/ Jeffrey M. Folick
                                        ----------------------------------------
                                            Jeffrey M. Folick



                                      -13-