Document:

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                                                                   EXHIBIT 10.10

             (Contract Period January 1, 2001 to December 31, 2001)

         Contract With Eligible Medicare+Choice Organization Pursuant to
     sections 1851 through 1859 of the Social Security Act for the operation
                  of a Medicare+Choice coordinated care plan(s)

                              CONTRACT (P________)

                                     Between

     Health Care Financing Administration (hereinafter referred to as HCFA)

                                       and

                (hereinafter referred to as the M+C Organization)

HCFA and the M+C Organization, an entity which has been determined to be an
eligible Medicare+Choice Organization by the Administrator of the Health Care
Financing Administration under 42 CFR 422.501, agree to the following for the
purposes of sections 1851 through 1859 of the Social Security Act (hereinafter
referred to as the Act):

(NOTE: Citations indicated in brackets are placed in the text of this contract
to note the authority for certain contract provisions in the regulations
promulgated pursuant to the Balanced Budget Act of 1997. All references to part
422 are to 42 CFR part 422.)

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                                    Article I

                                Term of Contract

A.   Term: The term of this contract shall be from January 1, 2001 through
     December 31, 2001.
     [422.504]

                                   Article II

                              Coordinated Care Plan

The Medicare+Choice Organization agrees to operate coordinated care plans (as
defined in 42 CFR Section 422.4(a)(1)) as described in Attachment D to this
contract in compliance with the requirements of this contract and applicable
Federal statutes, regulations, and policies. This contract is deemed to
incorporate any changes that are required by statute to be implemented during
the term of the contract and any regulations or policies implementing or
interpreting such statutory provisions. However, any regulations or policy
statements issued by HCFA after July 1, 2000 for which implementation during the
contract year is not required by statute or in connection with litigation
challenging HCFA policies, and which create significant new operational costs of
which the M+C Organization did not have reasonable notice prior to such date,
shall not become effective before January 1, 2002. HCFA retains the authority to
issue, with an effective date during the term of this contract, policies to
implement the statutory requirement that M+C Organizations provide their
enrollees those items and services for which benefits are available under
Medicare Parts A and B. Clarifications or explanations of M+C operational
requirements issued prior to July 1, 2000 are not considered to create new
operational costs of which the M+C organization did not have notice.

                                   Article III

            Functions To Be Performed By Medicare+Choice Organization

A.  PROVISION OF BENEFITS

The M+C Organization agrees to provide enrollees in each of its M+C plans the
basic benefits as required under Section 422.101 and, to the extent applicable,
supplemental benefits under Section 422.102 and as established in the M+C
Organization's adjusted community rate (ACR) proposal as approved by HCFA. The
M+C Organization agrees to provide access to such benefits as required under
subpart C in a manner consistent with professionally recognized standards of
health care and according to the access standards stated in Section 422.112.
     [422.502(a)(3)]

B.   ENROLLMENT REQUIREMENTS

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1. The M+C Organization agrees to accept new enrollments, make enrollments
effective, process voluntary disenrollments, and limit involuntary
disenrollments, as provided in subpart B of part 422.

2. The M+C Organization shall comply with the provisions of Section 422.110
concerning prohibitions against discrimination in beneficiary enrollment.
[422.502(a)(2)]

C.   BENEFICIARY PROTECTIONS

1. The Medicare+Choice Organization agrees to comply with all requirements in
subpart M of part 422 governing coverage determinations, grievances, and
appeals. [422.502(a)(7)]

2. The Medicare+Choice Organization agrees to comply with the confidentiality
and enrollee record accuracy requirements in Section 422.118.

3. Beneficiary Financial Protection. The M+C Organization agrees to comply with
the following requirements:

     (a) Each M+C Organization must adopt and maintain arrangements satisfactory
to HCFA to protect its enrollees from incurring liability for payment of any
fees that are the legal obligation of the M+C Organization. To meet this
requirement the M+C Organization must--

     (i) Ensure that all contractual or other written arrangements with
providers prohibit the Organization's providers from holding any beneficiary
enrollee liable for payment of any fees that are the legal obligation of the M+C
Organization; and

     (ii) Indemnify the beneficiary enrollee for payment of any fees that are
the legal obligation of the M+C Organization for services furnished by providers
that do not contract, or that have not otherwise entered into an agreement with
the M+C Organization, to provide services to the organization's beneficiary
enrollees. [422.502(g)(1)]

     (b) The M+C Organization must provide for continuation of enrollee health
care benefits-

     (i) For all enrollees, for the duration of the contract period for which
HCFA payments have been made; and

     (ii) For enrollees who are hospitalized on the date its contract with HCFA
terminates, or, in the event of an insolvency, through the date of discharge.
[422.502(g)(2)]

     (c) In meeting the requirements of this section (C), other than the
provider contract requirements specified in paragraph (C)(3)(a) of this Article,
the M+C Organization may use--

     (i) Contractual arrangements;

     (ii) Insurance acceptable to HCFA;

     (iii) Financial reserves acceptable to HCFA; or

     (iv) Any other arrangement acceptable to HCFA. [422.502(g)(3)]

D.   PROVIDER PROTECTIONS

1. The M+C Organization agrees to comply with all applicable provider
requirements in subpart E of part 422, including provider certification
requirements, anti-discrimination requirements, provider participation and
consultation requirements, the prohibition on interference with provider advice,
limits on provider indemnification, rules governing payments to providers, and
limits on physician incentive plans. [422.502(a)(6)]

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2. Prompt Payment.

     (a) The M+C Organization must pay 95 percent of the "clean claims" within
30 days of receipt if they are claims for covered services that are not
furnished under a written agreement between the organization and the provider.

     (i) The M+C Organization must pay interest on clean claims that are not
paid within 30 days in accordance with sections 1816(c)(2)(B) and 1842(c)(2)(B)
of the Act.

     (ii) All other claims must be approved or denied within 60 calendar days
from the date of the request. [422.520(a)]

     (b) Contracts or other written agreements between the M+C Organization and
its providers must contain a prompt payment provision, the terms of which are
developed and agreed to by both the M+C Organization and the relevant provider.
[422.520(b)]

     (c) If HCFA determines, after giving notice and opportunity for hearing,
that the M+C Organization has failed to make payments in accordance with
paragraph (2)(a) of this section, HCFA may provide--

     (i) For direct payment of the sums owed to providers; and

     (ii) For appropriate reduction in the amounts that would otherwise be paid
to the M+C Organization, to reflect the amounts of the direct payments and the
cost of making those payments.[422.520(c)]

E. QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM

1. The M+C Organization agrees to operate an ongoing quality assessment and
performance improvement program (as stated in 422.154 of subpart D). The quality
assurance program must incorporate and meet the standards and guidelines
outlined in the Quality Improvement System for Managed Care (QISMC)Standards and
Guidelines.

2. Quality Assessment and Performance Improvement Projects: The M+C Organization
agrees to:

     (a) conduct quality assessment and performance improvement (QAPI) projects
as directed annually by HCFA. These projects must be outcomes-oriented and
targeted at achieving demonstrable, sustained improvement in significant aspects
of specified clinical and non-clinical areas which can be expected to have a
favorable effect on enrollees' health outcomes and satisfaction. HCFA shall
establish the obligations of the M+C Organization for the number and
distribution of projects among the required clinical and non-clinical areas as
identified in section (E)(2)(c) of this Article.

     (b) In those years when HCFA establishes a national improvement project for
the Medicare+Choice program, the M+C Organization may participate in the
HCFA-sponsored national QAPI initiative or substitute a similarly-focused
project of their own design.

     (c) QAPI project focus areas must be representative of the entire spectrum
of clinical and non- clinical care areas associated with a plan.

     (i) The clinical areas include:

     (aa) prevention and care of acute and chronic conditions

     (bb) high-volume services

     (cc) high-risk services

     (dd) continuity and coordination of care

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     (ii) The non-clinical areas include:

     (aa) appeals, grievances and other complaints

     (bb) access to, and availability of services (such as culturally competent
care).

     (d) For each QAPI project, the M+C Organization must:

     (i) use quality indicators that are objective, clearly and unambiguously
defined, and based on current clinical knowledge or health services research;

     (ii) assure that those quality indicators are capable of measuring outcomes
such as changes in health and functional status, enrollee satisfaction, or valid
proxies of those outcomes;

     (iii) assess performance on selected indicators using systematic on-going
collection and analysis of valid, reliable data;

     (iv) perform ongoing measurement of performance:

     (aa) The M+C Organization must measure and report to HCFA performance
achieved under the project, utilizing standard measures. The standard measures
required by HCFA during the term of this contract will be uniform data
collection and reporting instruments, to include the Health Plan and Employer
Data Information Set (HEDIS), Consumer Assessment of Health Plan Satisfaction
(CAHPS) survey, and Health Outcomes Survey (HOS).

     (bb) These measures must address clinical areas, including effectiveness of
care, enrollee perception of care and use of services; and non-clinical areas
including access to and availability of services, appeals and grievances, and
organizational characteristics. [422.152(c)(1)&(2)].

     (v) conduct system interventions, including the adoption and/or revision of
practice guidelines;

     (vi) improve performance; and

     (vii) perform systematic follow-up on the effect of the interventions
[422.152(d)]

3. Utilization Review: If the M+C Organization uses written protocols for
utilization review, those policies and procedures must reflect current standards
of medical practice in processing requests for initial or continued
authorization of services.[422.152(b)(3)]. The M+C Organization must also have
in effect mechanisms to detect both underutilization and overutilization of
services.[422.152(b)(4)].

4. Information Systems:

     (a) The M+C Organization must make available to HCFA information on quality
and outcomes measures that will enable beneficiaries to compare health coverage
options and select among them, as provided in Section 422.64(c)(10).
[422.152(b)(5)].

     (b) The M+C Organization must maintain a health information system that:

     (i) collects, analyzes and integrates the data necessary to implement its
quality assessment and performance improvement program, and

     (ii) assures that the information entered into the system (particularly
that received from providers) is reliable and complete.

     (c) The M+C Organization must make all collected data, including
information on quality and outcome measures, available to HCFA to enable
beneficiaries to compare health coverage options and select among them, as
provided in Section 422.64(c)(10). [422.152(b)(5)]

5. External Review: The M+C Organization will have an agreement with an
independent quality review and improvement organization (review organization)
approved by HCFA. [422.154(a)]

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     (a) The agreement will be consistent with HCFA guidelines and will:

     (i) Require that the M+C Organization allocate adequate space for use of
the review organization whenever it is conducting review activities and provide
all pertinent data, including patient care data, at the time the review
organization needs the data to carry out the reviews and make its
determinations, and

     (ii) Except in the case of complaints about quality, exclude review
activities that HCFA determines would duplicate review activities conducted as
part of an accreditation process or as part of HCFA monitoring. [422.154(b)]

F. COMPLIANCE PLAN

1. The M+C Organization agrees to implement a compliance plan in accordance with
the requirements of Section 422.501(b)(vi).
[422.501(b)(3)(vi)]

     G. COMPLIANCE DEEMED ON THE BASIS OF ACCREDITATION: HCFA may deem the M+C
Organization to have met the quality assessment and performance improvement
requirements of Section 422.152, the confidentiality and accuracy of enrollee
records requirements of Section 422.118, the anti-discrimination requirements of
Section 1852(b) of the Act, the access to services requirements of Section
1852(d) of the Act, the advance directives requirements of Section 422.128,
and/or the provider participation requirements of Section 1852(j) of the Act if
the M+C Organization is fully accredited (and periodically reaccredited) by a
private, national accreditation organization approved by HCFA and the
accreditation organization used the standards approved by HCFA for the purposes
of assessing the M+C Organization's compliance with Medicare requirements. The
provisions of Section 422.156 shall govern the M+C Organization's use of deemed
status to meet M+C program requirements.

                                   Article IV

                        HCFA Payment to M+C Organization

A. The M+C Organization agrees to develop its annual adjusted community rate
(ACR) proposal and submit to HCFA all required information on premiums,
benefits, and cost sharing by July 1 of each year, as required under 42 CFR 422,
subpart G. [422.502(a)(10)]

B. Methodology. HCFA agrees to pay the M+C Organization under this contract in
accordance with the payment rules in subpart F of part 422. HCFA agrees to make
monthly payments based on the greatest of the blended capitation rate under
Section 422.252(a), the minimum amount rate under Section 422.252(b), or the
minimum percentage increase rate under Section 422.252(c), as adjusted by such
demographic risk factors as a beneficiary's age, disability status, sex,
institutional status, and such factors as HCFA determines appropriate per
Section 422.250(a). During contract year 2001, monthly capitation payments made
by HCFA to M+C Organizations shall be adjusted by both the above-stated

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demographic factors and the health status factors as described in Section
422.256(d). The health status factors shall be based on the collection of
encounter data as described in Section 422.257. The demographic and health
status factors shall be combined to calculate payment to the M+C Organization
according to a formula stated in HCFA's Advance Notice of Methodological
Changes, published in January of each year. During contract year 2001, the
demographic and health status factors shall be combined according to the
following ratios to calculate payment to the M+C organizations: 90% demographic
/ 10% health status.
[422.502(a)(9)]

C. Certification of data that determine payment.

1. As a condition for receiving a monthly payment under paragraph B of this
article, subpart F of part 422, the M+C Organization agrees that its chief
executive officer (CEO), chief financial officer (CFO), or an individual
delegated with the authority to sign on behalf of one of these officers, and who
reports directly to such officer, must request payment under the contract on the
forms attached as Attachment A (enrollment certification), Attachment B
(encounter data), and Attachment C (adjusted community rate (ACR) proposal
information certification), hereto which certify the accuracy, completeness, and
truthfulness of the data identified on these attachments. Attachment A requires
certification based on best knowledge, information, and belief, that each
enrollee for whom the M+C Organization is requesting payment is validly
enrolled, or was validly enrolled during the period for which payment is
requested, in an M+C plan offered by the M+C Organization. The M+C Organization
shall submit completed enrollment certification forms to HCFA on a monthly
basis. (NOTE: The forms included as attachments to this contract are for
reference only. HCFA will provide instructions for the completion and submission
of the forms in separate documents. M+C Organizations should not take any action
on the forms until appropriate HCFA instructions become available.)

2. The CEO or CFO of the M+C Organization, or an individual delegated with the
authority to sign on behalf of one of these officers, and who reports directly
to such officer, shall make a certification on Attachment B based on best
knowledge, information, and belief that the encounter data the M+C Organization
submits to HCFA under Section 422.257 are accurate, complete, and truthful. The
M+C Organization shall make annual certifications of encounter data on
Attachment B and according to a schedule to be published by HCFA. If such
encounter data are generated by a related entity, contractor, or subcontractor
of the M+C Organization, such entity, contractor, or subcontractor must
similarly certify the accuracy, completeness, and truthfulness of the data.
During contract year 2001, the M+C Organization shall submit inpatient hospital
data and physician encounter data to HCFA on a monthly basis. Also, M+C
Organizations shall begin submitting on January 1, 2001 outpatient hospital data
for services provided on or after October 1, 2000. HCFA shall use inpatient
hospital encounter data to calculate payment to M+C Organizations and therefore
M+C Organizations shall certify only inpatient hospital encounter data on
Attachment B. [422.502(l)]

3. The CEO or CFO of the M+C Organization, or an individual delegated with the
authority to sign on behalf of one of these officers, and who reports directly
to such officer, shall make an annual certification on Attachment C based on
best knowledge, information, and belief, that all information and documentation
comprising the ACR proposal are accurate, complete, and truthful, and that the
benefits

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described in the HCFA-approved ACR proposal agree with the benefit package the
M+C Organization will offer during the period covered by the ACR proposal. The
M+C Organization must submit its ACR proposal(s) to HCFA by July 1 of each year.
[422.502(m)]

                                    Article V

     M+C Organization Relationship with Related Entities, Contractors, and
Subcontractors

A. Notwithstanding any relationship(s) that the M+C Organization may have with
related entities, contractors, or subcontractors, the M+C Organization maintains
full responsibility for adhering to and otherwise fully complying with all terms
and conditions of its contract with HCFA. [422.502(i)(1)]

B. The M+C Organization agrees to require all related entities, contractors, or
subcontractors to agree that--

     (1) HHS, the Comptroller General, or their designees have the right to
inspect, evaluate, and audit any pertinent contracts, books, documents, papers,
and records of the related entity(s), contractor(s), or subcontractor(s)
involving transactions related to the this contract; and

     (2) HHS's, the Comptroller General's, or their designee's right to inspect,
evaluate, and audit any pertinent information for any particular contract period
will exist through 6 years from the final date of the contract period or from
the date of completion of any audit, whichever is later. [422.502(i)(2)]

C. The M+C Organization agrees that all contracts or written arrangements into
which the M+C Organization enters with providers, related entities, contractors,
or subcontractors shall contain the following elements:

     (1) Enrollee protection provisions that provide--

     (a) Consistent with Article III(C), arrangements that prohibit providers
from holding an enrollee liable for payment of any fees that are the legal
obligation of the M+C Organization; and

     (b) Consistent with Article III(C), provision for the continuation of
benefits.

     (2) Accountability provisions that indicate that--

     (a) The M+C Organization oversees and is accountable to HCFA for any
functions or responsibilities that are described in these standards; and

     (b) The M+C Organization may only delegate activities or functions to a
provider, related entity, contractor, or subcontractor in a manner consistent
with requirements set forth at paragraph D of this article.

     (3) A provision requiring that any services or other activity performed by
a related entity, contractor or subcontractor in accordance with a contract or
written agreement between the related entity, contractor, or subcontractor and
the M+C Organization will be consistent and comply with the M+C Organization's
contractual obligations to HCFA.
[422.502(i)(3)]

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D. If any of the M+C Organization's activities or responsibilities under this
contract with HCFA are delegated to other parties, the following requirements
apply to any related entity, contractor, subcontractor, or provider:

     (1) Written arrangements must specify delegated activities and reporting
responsibilities.

     (2) Written arrangements must either provide for revocation of the
delegation activities and reporting requirements or specify other remedies in
instances where HCFA or the M+C Organization determine that such parties have
not performed satisfactorily.

     (3) Written arrangements must specify that the performance of the parties
is monitored by the M+C Organization on an ongoing basis.

     (4) Written arrangements must specify that either--

     (a) The credentials of medical professionals affiliated with the party or
parties will be either reviewed by the M+C Organization; or

     (b) The credentialing process will be reviewed and approved by the M+C
Organization and the M+C Organization must audit the credentialing process on an
ongoing basis.

     (5) All contracts or written arrangements must specify that the related
entity, contractor, or subcontractor must comply with all applicable Medicare
laws, regulations, and HCFA instructions.
[422.502(i)(4)]

E. If the M+C Organization delegates selection of the providers, contractors, or
subcontractors to another organization, the M+C Organization's written
arrangements with that organization must state that the M+C Organization retains
the right to approve, suspend, or terminate any such arrangement.
[422.502(i)(5)]

                                   Article VI

                              Records Requirements

A. MAINTENANCE OF RECORDS

1. The M+C Organization agrees to maintain for 6 years books, records,
documents, and other evidence of accounting procedures and practices that--

     (a) Are sufficient to do the following:

     (i) Accommodate periodic auditing of the financial records (including data
related to Medicare utilization, costs, and computation of the ACR) of the M+C
Organization.

     (ii) Enable HCFA to inspect or otherwise evaluate the quality,
appropriateness and timeliness of services performed under the contract, and the
facilities of the M+C Organization.

     (iii) Enable HCFA to audit and inspect any books and records of the M+C
Organization that pertain to the ability of the organization to bear the risk of
potential financial losses, or to services performed or determinations of
amounts payable under the contract.

     (iv) Properly reflect all direct and indirect costs claimed to have been
incurred and used in the preparation of the ACR proposal.

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     (v) Establish component rates of the ACR for determining additional and
supplementary benefits.

     (vi) Determine the rates utilized in setting premiums for State insurance
agency purposes and for other government and private purchasers; and

     (b) Include at least records of the following:

     (i) Ownership and operation of the M+C Organization's financial, medical,
and other record keeping systems.

     (ii) Financial statements for the current contract period and six prior
periods.

     (iii) Federal income tax or informational returns for the current contract
period and six prior periods.

     (iv) Asset acquisition, lease, sale, or other action.

     (v) Agreements, contracts, and subcontracts.

     (vi) Franchise, marketing, and management agreements.

     (vii) Schedules of charges for the M+C Organization's fee-for-service
patients.

     (viii) Matters pertaining to costs of operations.

     (ix) Amounts of income received, by source and payment.

     (x) Cash flow statements.

     (xi) Any financial reports filed with other Federal programs or State
authorities.

     [422.502(d)]

2. Access to facilities and records. The M+C Organization agrees to the
following:

     (a) The Department of Health and Human Services (HHS), the Comptroller
General, or their designee may evaluate, through inspection or other means--

     (i) The quality, appropriateness, and timeliness of services furnished to
Medicare enrollees under the contract;

     (ii) The facilities of the M+C Organization; and

     (iii) The enrollment and disenrollment records for the current contract
period and six prior periods.

     (b) HHS, the Comptroller General, or their designees may audit, evaluate,
or inspect any books, contracts, medical records, documents, papers, patient
care documentation, and other records of the M+C Organization, related entity,
contractor, subcontractor, or its transferee that pertain to any aspect of
services performed, reconciliation of benefit liabilities, and determination of
amounts payable under the contract, or as the Secretary may deem necessary to
enforce the contract.

     (c) The M+C Organization agrees to make available, for the purposes
specified in section (A) of this article, its premises, physical facilities and
equipment, records relating to its Medicare enrollees, and any additional
relevant information that HCFA may require, in a manner that meets HCFA record
maintenance requirements.

     (d) HHS, the Comptroller General, or their designee's right to inspect,
evaluate, and audit extends through 6 years from the final date of the contract
period or completion of audit, whichever is later unless-

     (i) HCFA determines there is a special need to retain a particular record
or group of records for a longer period and notifies the M+C Organization at
least 30 days before the normal disposition

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date;

     (ii) There has been a termination, dispute, or fraud or similar fault by
the M+C Organization, in which case the retention may be extended to 6 years
from the date of any resulting final resolution of the termination, dispute, or
fraud or similar fault; or

     (iii) HHS, the Comptroller General, or their designee determine that there
is a reasonable possibility of fraud, in which case they may inspect, evaluate,
and audit the M+C Organization at any time. [422.502(e)]

B. REPORTING REQUIREMENTS

1. The M+C Organization shall have an effective procedure to develop, compile,
evaluate, and report to HCFA, to its enrollees, and to the general public, at
the times and in the manner that HCFA requires, and while safeguarding the
confidentiality of the doctor-patient relationship, statistics and other
information as described in the remainder of this section (B). [422.516(a)]

2. The M+C Organization agrees to submit to HCFA certified financial information
that must include the following:

     (a) Such information as HCFA may require demonstrating that the
organization has a fiscally sound operation, including:

     (i) The cost of its operations;

     (ii) A description, submitted to HCFA annually and within 120 days of the
end of the fiscal year, of significant business transactions (as defined in
Section 422.500) between the M+C Organization and a party in interest showing
that the costs of the transactions listed in paragraph (2)(a)(v) of this section
do not exceed the costs that would be incurred if these transactions were with
someone who is not a party in interest; or

     (iii) If they do exceed, a justification that the higher costs are
consistent with prudent management and fiscal soundness requirements.

     (iv) A combined financial statement for the M+C Organization and a party in
interest if either of the following conditions is met:

     (aa) Thirty-five percent or more of the costs of operation of the M+C
Organization go to a party in interest.

     (bb) Thirty-five percent or more of the revenue of a party in interest is
from the M+C Organization. [422.516(b)]

     (v) Requirements for combined financial statements.

     (aa) The combined financial statements required by paragraph (2)(a)(iv)
must display in separate columns the financial information for the M+C
Organization and each of the parties in interest.

     (bb) Inter-entity transactions must be eliminated in the consolidated
column.

     (cc) The statements must have been examined by an independent auditor in
accordance with generally accepted accounting principles and must include
appropriate opinions and notes.

     (dd) Upon written request from the M+C Organization showing good cause,
HCFA may waive the requirement that the organization's combined financial
statement include the financial information required in paragraph (2)(a)(v) with
respect to a particular entity. [422.516(c)]

     (vi) A description of any loans or other special financial arrangements the
M+C Organization

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makes with contractors, subcontractors, and related entities.

     (b) Such information as HCFA may require pertaining to the disclosure of
ownership and control of the M+C Organization. [422.502(f)(1)(ii)]

     (c) Patterns of utilization of the M+C Organization's services.

3. The M+C Organization agrees to participate in surveys required by HCFA and to
submit to HCFA all information that is necessary for HCFA to administer and
evaluate the program and to simultaneously establish and facilitate a process
for current and prospective beneficiaries to exercise choice in obtaining
Medicare services. This information includes, but is not limited to:

     (a) The benefits covered under the M+C plan;

     (b) The M+C monthly basic beneficiary premium and M+C monthly supplemental
beneficiary premium, if any, for the plan.

     (c) The service area and continuation area, if any, of each plan and the
enrollment capacity of each plan;

     (d) Plan quality and performance indicators for the benefits under the plan
including --

     (i) Disenrollment rates for Medicare enrollees electing to receive
benefits through the plan for the previous 2 years;

     (ii) Information on Medicare enrollee satisfaction;

     (iii) The patterns of utilization of plan services;

     (iv) The availability, accessibility, and acceptability of the plan's
services;

     (v) Information on health outcomes and other performance measures required
by HCFA;

     (vi) The recent record regarding compliance of the plan with requirements
of this part, as determined by HCFA; and

     (vii) Other information determined by HCFA to be necessary to assist
beneficiaries in making an informed choice among M+C plans and traditional
Medicare;

     (e) Information about beneficiary appeals and their disposition;

     (f) Information regarding all formal actions, reviews, findings, or other
similar actions by States, other regulatory bodies, or any other certifying or
accrediting organization;

     (g) Any other information deemed necessary by HCFA for the administration
or evaluation of the Medicare program. [422.502(f)(2)]

4. The M+C Organization agrees to provide to its enrollees and upon request, to
any individual eligible to elect an M+C plan, all informational requirements
under Section 422.64 and, upon an enrollee's, request, the financial disclosure
information required under Section 422.516. [422.502(f)(3)]

5. Reporting and disclosure under ERISA.

     (a) For any employees' health benefits plan that includes an M+C
Organization in its offerings, the M+C Organization must furnish, upon request,
the information the plan needs to fulfill its reporting and disclosure
obligations (with respect to the M+C Organization) under the Employee Retirement
Income Security Act of 1974 (ERISA).

     (b) The M+C Organization must furnish the information to the employer or
the employer's designee, or to the plan administrator, as the term
"administrator" is defined in ERISA. [422.516(d)]

6. Electronic communication. The M+C Organization must have the capacity to
communicate with HCFA electronically. [422.502(b)]

                                       11

<PAGE>

7. Encounter data. The M+C Organization agrees to comply with the requirements
in Section 422.257 for submitting encounter data to HCFA. [422.502(a)(8)]

                                   Article VII

                           Renewal of the M+C Contract

A. Renewal of contract: In accordance with Section 422.506, the contract is
renewable annually only if-

     (1) HCFA informs the M+C Organization that it authorizes a renewal; and

     (2) The M+C Organization has not provided HCFA with a notice of intention
not to renew.

[422.504(c)]

B. Nonrenewal of contract:

     (1) Nonrenewal by the Organization.

     (a) In accordance with Section 422.506, the M+C Organization may elect not
to renew its contract with HCFA as of the end of the term of the contract for
any reason, provided it meets the time frames for doing so set forth in
paragraphs (b) and (c) of this paragraph.

     (b) If the M+C Organization does not intend to renew its contract, it must
notify--

     (i) HCFA in writing, by July 1 of the year in which the contract would end;

     (ii) Each Medicare enrollee, at least 90 days before the date on which the
nonrenewal is effective. This notice must include a written description of all
alternatives available for obtaining Medicare services within the service area
of the M+C plans that the M+C Organization offers, including alternative M+C
plans, original Medicare, and Medigap options and must receive HCFA approval.

     (iii) The general public, at least 90 days before the end of the current
calendar year, by publishing a HCFA-approved notice in one or more newspapers of
general circulation in each community located in the M+C Organization's service
area.

     (c) HCFA may accept a nonrenewal notice submitted after July 1 if --

     (i) The M+C Organization notifies its Medicare enrollees and the public in
accordance with paragraph (1)(b)(ii) and (1)(b)(iii) of this section; and

     (ii) Acceptance is not inconsistent with the effective and efficient
administration of the Medicare program.

     (d) If the M+C Organization does not renew a contract under this paragraph
(1), HCFA will not enter into a contract with the Organization for 2 years from
the date of contract separation unless there are special circumstances that
warrant special consideration, as determined by HCFA. This provision shall not
apply when statutory or regulatory changes are made to the M+C program within
six (6) months of the M+C Organization's notice of withdrawal that would
increase payments for the service area from which the M+C Organization had
withdrawn. [422.506(a)]

     (2) HCFA decision not to renew.

     (a) HCFA may elect not to authorize renewal of a contract for any of the
following reasons:

                                       12

<PAGE>

     (i) The M+C Organization has not fully implemented or shown discernable
progress in implementing quality assessment and performance improvement projects
as defined in Article III, section (E)(2) of this contract.

     (ii) The M+C Organization's level of enrollment, growth in enrollment, or
insufficient number of contracted providers is determined by HCFA to threaten
the viability of the organization under the M+C program and or be an indicator
of beneficiary dissatisfaction with the M+C plan(s) offered by the organization.

     (iii) For any of the reasons listed in Section 422.510(a) [Article VIII,
section (B)(1)(a) of this contract], which would also permit HCFA to terminate
the contract.

     (iv) The M+C Organization has committed any of the acts in Section
422.752(a) that would support the imposition of intermediate sanctions or civil
money penalties under subpart O of part 422.

     (b) Notice. HCFA shall provide notice of its decision whether to authorize
renewal of the contract as follows:

     (i) To the M+C Organization by May 1 of the contract year.

     (ii) To the M+C Organization's Medicare enrollees by mail at least 90 days
before the end of the current calendar year.

     (iii) To the general public at least 90 days before the end of the current
calendar year, by publishing a notice in one or more newspapers of general
circulation in each community or county located in the M+C Organization's
service area.

     (c) Notice of appeal rights. HCFA shall give the M+C Organization written
notice of its right to reconsideration of the decision not to renew in
accordance with Section 422.644.
[422.506(b)]

                                  Article VIII

                   Modification or Termination of the Contract

A. Modification or Termination of Contract by Mutual Consent

1. This contract may be modified or terminated at any time by written mutual
consent.

     (a) If the contract is terminated by mutual consent, except as provided in
section (B)(1)(c) of this article, the M+C Organization must provide notice to
its Medicare enrollees and the general public as provided in Section
422.512(b)(2) and (b)(3) [Article VIII, section B(2)(b) of this contract].

     (b) If the contract is modified by mutual consent, the M+C Organization
must notify its Medicare enrollees of any changes that HCFA determines are
appropriate for notification within time frames specified by HCFA.

2. If this contract is terminated by mutual consent and replaced the day
following such termination by a new M+C contract, the M+C Organization is not
required to provide the notice specified in section B of this article.
[422.508]

                                       13

<PAGE>

B. Termination of the Contract by HCFA or the M+C Organization

1. Termination by HCFA.

     (a) HCFA may terminate a contract for any of the following reasons:

     (i) The M+C Organization has failed substantially to carry out the terms of
its contract with HCFA.

     (ii) The M+C Organization is carrying out its contract with HCFA in a
manner that is inconsistent with the effective and efficient implementation of
this part.

     (iii) HCFA determines that the M+C Organization no longer meets the
requirements of this part for being a contracting organization.

     (iv) The M+C Organization commits or participates in fraudulent or abusive
activities affecting the Medicare program, including submission of fraudulent
data.

     (v) The M+C Organization experiences financial difficulties so severe that
its ability to make necessary health services available is impaired to the point
of posing an imminent and serious risk to the health of its enrollees, or
otherwise fails to make services available to the extent that such a risk to
health exists.

     (vi) The M+C Organization substantially fails to comply with the
requirements in subpart M of this part relating to grievances and appeals.

     (vii) The M+C Organization fails to provide HCFA with valid encounter data
as required under Section 422.257.

     (viii) The M+C Organization fails to implement an acceptable quality
assessment and performance improvement program as required under subpart D of
part 422.

     (ix) The M+C Organization substantially fails to comply with the prompt
payment requirements in Section 422.520.

     (x) The M+C Organization substantially fails to comply with the service
access requirements in Section 422.112 or Section 422.114.

     (xi) The M+C Organization fails to comply with the requirements of Section
422.208 regarding physician incentive plans.

     (b) Notice. If HCFA decides to terminate a contract for reasons other than
the grounds specified in section (B)(1)(a) above, it will give notice of the
termination as follows:

     (i) HCFA will notify the M+C Organization in writing 90 days before the
intended date of the termination.

     (ii) The M+C Organization will notify its Medicare enrollees of the
termination by mail at least 30 days before the effective date of the
termination.

     (iii) The M+C Organization will notify the general public of the
termination at least 30 days before the effective date of the termination by
publishing a notice in one or more newspapers of general circulation in each
community or county located in the M+C Organization's service area.

     (c) Immediate termination of contract by HCFA.

     (i) For terminations based on violations prescribed in paragraph
(B)(1)(a)(v) of this article, HCFA will notify the M+C Organization in writing
that its contract has been terminated effective the date of the termination
decision by HCFA. If termination is effective in the middle of a month, HCFA has
the right to recover the prorated share of the capitation payments made to the
M+C Organization

                                       14

<PAGE>

covering the period of the month following the contract termination.

     (ii) HCFA will notify the M+C Organization's Medicare enrollees in writing
of HCFA's decision to terminate the M+C Organization's contract. This notice
will occur no later than 30 days after HCFA notifies the plan of its decision to
terminate this contract. HCFA will simultaneously inform the Medicare enrollees
of alternative options for obtaining Medicare services, including alternative
M+C Organizations in a similar geographic area and original Medicare.

     (iii) HCFA will notify the general public of the termination no later than
30 days after notifying the M+C Organization of HCFA's decision to terminate
this contract. This notice will be published in one or more newspapers of
general circulation in each community or county located in the M+C
Organization's service area.

     (d) Corrective action plan

     (i) General. Before terminating a contract for reasons other than the
grounds specified in section (B)(1)(a)(v) of this article, HCFA will provide the
M+C Organization with reasonable opportunity, not to exceed time frames
specified at subpart N of part 422, to develop and receive HCFA approval of a
corrective action plan to correct the deficiencies that are the basis of the
proposed termination.

     (ii) Exception. If a contract is terminated under section (B)(1)(a)(v) of
this article, the M+C Organization will not have the opportunity to submit a
corrective action plan.

     (e) Appeal rights. If HCFA decides to terminate this contract, it will send
written notice to the M+C Organization informing it of its termination appeal
rights in accordance with subpart N of part 422.
[422.510]

2. Termination by the M+C Organization

     (a) Cause for termination. The M+C Organization may terminate this
contract:

     (i) if HCFA fails to substantially carry out the terms of the contract, or

     (ii) if HCFA has not approved by September 30, 2000 the ACR proposal
submitted by the M+C Organization, and the revisions to the ACR required by HCFA
represent a material change to the proposal which would significantly affect the
M+C Organization's ability to operate an M+C plan in a financially responsible
manner.

     (b) Notice. The M+C Organization must give advance notice as follows:

     (i) To HCFA, at least 90 days before the intended date of termination. This
notice must specify the reasons why the M+C Organization is requesting contract
termination.

     (ii) To its Medicare enrollees, at least 60 days before the termination
effective date. This notice must include a written description of alternatives
available for obtaining Medicare services within the service area, including
alternative M+C plans, Medigap options, and original Medicare and must receive
HCFA approval.

     (iii) To the general public at least 60 days before the termination
effective date by publishing a HCFA-approved notice in one or more newspapers of
general circulation in each community or county located in the M+C
Organization's geographic area.

     (c) Effective date of termination. The effective date of the termination
will be determined by HCFA and will be at least 90 days after the date HCFA
receives the M+C Organization's notice of

                                       15

<PAGE>

intent to terminate.

     (d) HCFA's liability. HCFA's liability for payment to the M+C Organization
ends as of the first day of the month after the last month for which the
contract is in effect, but HCFA shall make payments for amounts owed prior to
termination but not yet paid.

     (e) Effect of termination by the organization. HCFA will not enter into an
agreement with the M+C Organization for a period of two years from the date the
Organization has terminated this contract, unless there are circumstances that
warrant special consideration, as determined by HCFA.
[422.512]

                                   Article IX

                   Requirements of Other Laws and Regulations

A. The M+C Organization agrees to comply with--

     (1) Title VI of the Civil Rights Act of 1964 as implemented by regulations
at 45 CFR part 84;

     (2) The Age Discrimination Act of 1975 as implemented by regulations at 45
CFR part 91;

     (3) The Americans With Disabilities Act;

     (4) The Rehabilitation Act of 1973 and

     (5) Other laws applicable to recipients of Federal funds; and

     (6) All other applicable laws, regulations, and rules.
[422.502(h)(1)]

B. The M+C Organization is receiving Federal payments under this contract, and
related entities, contractors, and subcontractors paid by the M+C Organization
to fulfill its obligations under this contract are subject to certain laws that
are applicable to individuals and entities receiving Federal funds. The M+C
Organization agrees to inform all related entities, contractors and
subcontractors that payments that they receive are, in whole or in part, from
Federal funds.
[422.502(h)(2)]

C. In the event that any provision of this contract conflicts with the
provisions of any statute or regulation applicable to an M+C Organization, the
provisions of the statute or regulation shall have full force and effect.
[422.502(j)]

                                    Article X

                                  Severability

The M+C Organization agrees that, upon HCFA's request, this contract will be
amended to exclude

                                       16

<PAGE>

any M+C plan or State-licensed entity specified by HCFA, and a separate contract
for any such excluded plan or entity will be deemed to be in place when such a
request is made.
[422.502(k)]

                                       17

<PAGE>

In witness whereof, the parties hereby execute this contract.

FOR THE M+C ORGANIZATION

------------------------------------    ------------------------------------
          Printed Name                  Title

------------------------------------    ------------------------------------
           Signature                              Date

------------------------------------    ------------------------------------
         Organization

                                        ------------------------------------
                                                  Address

FOR THE HEALTH CARE FINANCING ADMINISTRATION

------------------------------------          ------------------------------
Gary A. Bailey                          Date
Director, Health Plan Administration Group
Center for Health Plans and
Providers

                                       18

<PAGE>

                                  ATTACHMENT A

                     CERTIFICATION OF ENROLLMENT INFORMATION
                            RELATING TO HCFA PAYMENT
                        TO A MEDICARE+CHOICE ORGANIZATION

     Pursuant to the contract(s) between the Health Care Financing
Administration (HCFA) and (INSERT NAME OF M+C ORGANIZATION), hereafter referred
to as the "M+C Organization," governing the operation of the following Medicare
+Choice plans (INSERT PLAN IDENTIFICATION NUMBERS HERE), the M+C Organization
hereby requests payment under the contract, and in doing so, makes the following
certifications concerning HCFA payments to the M+C Organization. The M+C
Organization acknowledges that the information described below directly affects
the calculation of HCFA payments to the M+C Organization and that
misrepresentations to HCFA about the accuracy of such information may result in
Federal civil action and/or criminal prosecution. This certification shall not
be considered a waiver of the M+C Organization's right to seek payment
adjustments from HCFA based on information or data which does not become
available until after the date the M+C Organization submits this certification.

     1. The M+C Organization has reported to HCFA for the month of (INDICATE
MONTH AND YEAR) all new enrollments, disenrollments, and changes in enrollees'
institutional status with respect to the above-stated M+C plans. Based on best
knowledge, information, and belief, all information submitted to HCFA in this
report is accurate, complete, and truthful.

     2. The M+C Organization has reviewed the HCFA monthly membership report and
reply listing for the month of (INDICATE MONTH AND YEAR) for the above-stated
M+C plans and has reported to HCFA any discrepancies between the report and the
M+C Organization's records. For those portions of the monthly membership report
and the reply listing to which the M+C Organization raises no objection, the M+C
Organization, through the certifying CEO/CFO, will be deemed to have attested,
based on best knowledge, information, and belief, to their accuracy,
completeness, and truthfulness.

                                        ----------------------------------------
                                        (INDICATE TITLE [CEO, CFO, or delegate])
                                                      on behalf of
                                              (INDICATE M+C ORGANIZATION)
                                              ---------------------------

                                       19

<PAGE>

                                  ATTACHMENT B

          CERTIFICATION OF ENCOUNTER DATA INFORMATION RELATING TO HCFA
                    PAYMENT TO A MEDICARE+CHOICE ORGANIZATION

     Pursuant to the contract(s) between the Health Care Financing
Administration (HCFA) and (INSERT NAME OF M+C ORGANIZATION), hereafter referred
to as the "M+C Organization," governing the operation of the following Medicare
+Choice plans (INSERT PLAN IDENTIFICATION NUMBERS HERE), the M+C Organization
hereby requests payment under the contract, and in doing so, makes the following
certification concerning HCFA payments to the M+C Organization. The M+C
Organization acknowledges that the information described below directly affects
the calculation of HCFA payments to the M+C Organization or additional benefit
obligations of the M+C Organization and that misrepresentations to HCFA about
the accuracy of such information may result in Federal civil action and/or
criminal prosecution.

     The M+C Organization has reported to HCFA for the period of (INDICATE
DATES) all inpatient hospital encounter data available to the M+C Organization
with respect to the above-stated M+C plans. Based on best knowledge,
information, and belief, all information submitted to HCFA in this report is
accurate, complete, and truthful.

                                        ----------------------------------------
                                        (INDICATE TITLE [CEO, CFO, or delegate])
                                                      on behalf of
                                              (INDICATE M+C ORGANIZATION)
                                              ---------------------------

                                       20

<PAGE>

                                  ATTACHMENT C

         CERTIFICATION OF ADJUSTED COMMUNITY RATE INFORMATION RELATING
                TO HCFA PAYMENT TO A MEDICARE+CHOICE ORGANIZATION

     Pursuant to the contract(s) between the Health Care Financing
Administration (HCFA) and (INSERT NAME OF M+C ORGANIZATION), hereafter referred
to as the "M+C Organization," governing the operation of the following Medicare
+Choice plans (INSERT PLAN IDENTIFICATION NUMBERS HERE), the M+C Organization
hereby requests payment under the contract, and in doing so, makes the following
certification concerning HCFA payments to the M+C Organization. The M+C
Organization acknowledges that the information described below directly affects
the calculation of HCFA payments to the M+C Organization or additional benefit
obligations of the M+C Organization and that misrepresentations to HCFA about
the accuracy of such information may result in Federal civil action and/or
criminal prosecution.

     The M+C Organization has submitted to HCFA an adjusted community rate (ACR)
proposal for the period (INDICATE DATES). Based on best knowledge, information,
and belief, all of the information submitted to HCFA in this ACR proposal is
accurate, complete, and truthful, and the benefit package the M+C Organization
will offer during the above-stated period agrees with the HCFA-approved ACR
proposal.

                                        ----------------------------------------
                                        (INDICATE TITLE [CEO, CFO, or delegate])
                                                      on behalf of
                                              (INDICATE M+C ORGANIZATION)
                                              ---------------------------

                                       21

<PAGE>

                                  ATTACHMENT D

                   M+C PLANS OFFERED DURING CONTRACT YEAR 2001

(HCFA WILL COMPLETE THIS ATTACHMENT ONCE THE M+C ORGANIZATION HAS NOTIFIED HCFA
OF THE M+C PLANS IT WILL OPERATE DURING 2001. THE COMPLETED ATTACHMENT WILL BE
RETURNED TO THE M+C ORGANIZATION AS PART OF THE FINAL SIGNED COPY OF THIS
CONTRACT.)

                                       22<PAGE>
                                                                EXHIBIT 10.26.01

                      SENIOR EXECUTIVE EMPLOYMENT AGREEMENT

      This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as
of January 1, 2002, 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 92704 and JOSEPH S. KONOWIECKI
("Executive"), residing at 277 Argonne Avenue, Long Beach, CA 90803.

                                    RECITALS

      WHEREAS, the Company desires to employ Executive the capacity of Executive
Vice President and General Counsel.

      WHEREAS, the Company and Executive are entering into this Agreement to
establish the terms and conditions of the employment relationship.

      NOW, THEREFORE, in consideration of the following covenants, conditions
and promises contained herein, and other good and valuable consideration, the
Company and Executive hereby agree as follows:

1.    EMPLOYMENT

      1.1 Executive's General Duties. The Company employs Executive and
Executive serves the Company in the capacity of Executive Vice President and
General Counsel, having such usual and customary duties and authority as an
officer of similar capacity in a corporation of comparable size, holdings, and
business as that of the Company.

      Executive shall do and perform all services, acts, or things necessary or
advisable to manage and conduct the business of the Company and shall preside
over such other areas of corporate activity as specified from time to time by
the Board of Directors of the Company. During the term of this Agreement,
Executive shall perform such additional duties, and accept the election or
appointment to such other offices or positions as may be assigned, so long as
Executive's primary duties revolve around the office of General Counsel and
Executive reports to the Company's Chief Executive Officer.

      1.2 Devotion of Executive. During the term of this Agreement, Executive
shall devote his entire productive time, ability, and attention to the business
of the Company. Executive shall use Executive's best efforts, skills, and
abilities to promote the general welfare and interests of the Company and to
preserve, maintain, and foster the Company's business and business relationships
with all persons and entities associated therewith, including, without
limitation, employer groups, medical service providers, shareholders,
affiliates, officers, employees, and banks and other financial institutions. The
Company shall give Executive a reasonable opportunity to perform Executive's
duties and shall neither expect Executive to devote more time,

                                      -1-
<PAGE>
nor assign more duties or functions to Executive, than are customary and
reasonable for a person in Executive's position.

2.    TERM AND TERMINATION

      2.1 Term. The initial term of Executive's employment under this Agreement
shall be 36 months, commencing on the effective date of this Agreement. The
Company may extend this Agreement for successive one-year terms by giving
Executive written notice at least 60 days prior to the expiration of the term.
Notwithstanding the foregoing, if a Change-of-Control occurs, as defined in
Section 5.1(c) of this Agreement, then the term of the Agreement shall be
extended for a period of 36 months from the effective date of the
Change-of-Control. Except as provided by Section 2.2(f), if the Company offers
Executive a new employment agreement but Executive does not accept the new
employment agreement, then Executive's continued employment with the Company
will be without the benefit of a written employment agreement, in which case
Executive's entitlement to severance benefits on termination shall be governed
by then-existing Company policies and practices that apply to employees without
written employment contracts.

      2.2 Termination. This Agreement, and Executive's employment with the
Company, shall be terminated upon the occurrence of any one of the following
events:

            a. The death of the Executive.

            b. Executive becomes incapacitated or disabled, which incapacity or
      disability prevents Executive from fully performing his duties to the
      Company for a period in excess of 90 days and, after such 90-day period,
      the Company and a physician, duly licensed and qualified in the specialty
      of Executive's incapacity, decide in their reasonable judgments, that such
      incapacity will be of such continued duration as to prevent Executive from
      resuming the rendition of services to the Company for at least an
      additional six-month period. For purposes of this Agreement, Executive
      shall be deemed permanently disabled, and this Agreement terminated upon
      the date Executive receives written notice from the Company that such
      determination has been made.

            c. Executive habitually neglects his duties to the Company or
      engages in gross misconduct during the term of this Agreement. For the
      purposes of this Agreement, "gross misconduct" shall mean Executive's
      misappropriation of funds; securities fraud; insider trading; unauthorized
      possession of corporate property; the sale, distribution, possession or
      use of a controlled substance; conviction of any criminal offense (whether
      or not such criminal offense is committed in connection with Executive's
      duties hereunder or in the course of his employment with the Company); or
      engaging in any unlawful activity which places the Company at financial
      risk or which could reasonably be expected to embarrass the Company or
      cause damage to the Company's reputation. In such event, Executive's
      termination shall be effective immediately upon receipt of written notice
      from the Company.

                                      -2-
<PAGE>
            d. Company may terminate this Agreement, with or without cause, upon
      written notice to Executive. Except for the circumstances described in
      Subsections (a), (b), (e) and (f) of this Section 2.2, Executive's
      termination shall be effective upon receipt of such written notice.
      Executive may terminate this Agreement upon 30 days written notice to
      Company.

            e. Upon the expiration of the term of this Agreement, the Company
      neither extends the Agreement pursuant to Section 2.1 nor offers Executive
      a new employment agreement.

            f. Executive voluntarily terminates his employment, upon written
      notice to the Company, to be effective at the end of the term of this
      Agreement, after the Company offers Executive a new employment agreement
      that either establishes duties materially inconsistent with those
      described in Section 1.1 or reduces Executive's salary by more than 10
      percent below the salary in effect at the end of the term of this
      Agreement.

3.    COMPENSATION DURING THE TERM OF THIS AGREEMENT

      3.1 Base Salary. As long as Executive satisfactorily performs all of his
obligations under this Agreement, the Company shall pay Executive an annual base
salary, payable in equal installments on the Company's regular payroll dates. As
of this date, Executive's annual base salary has been set at $550,000 (five
hundred and fifty thousand dollars). On an annual basis, the Company shall
review Executive's salary, but shall be under no obligation to increase
Executive's salary. Executive authorizes the Company to take such deductions and
withholdings from his salary as are required by law, directed by Executive, or
as reasonably directed by the Company for its employees, which deductions shall
include, without limitation, withholding for federal and state income taxes and
social security.

      3.2 Loan. Executive shall receive a loan of $250,000 from Company subject
to the terms and conditions of the loan agreement executed concurrently herewith
by Executive and Company

      3.3 Benefits. Executive shall be entitled to fully participate in all of
the employee benefit plans and programs at a level commensurate with other
high-level executives of the Company, including, without limitation, health,
dental, and life insurance benefits for Executive and Executive's dependents,
pension and profit sharing programs, and vacation and sick leave benefits, the
Amended and Restated PacifiCare Health Systems, Inc. Savings and profit-sharing
Plan, and the trust Agreement implemented pursuant thereto, adopted as of July
1999, the Company's Statutory Restoration Plan and the Company's Deferred
Compensation Plan. However, the terms of this Agreement shall not restrict the
Company's right to change, amend, modify, or terminate any existing benefit plan
or program, or to change any insurance company or modify any insurance policy
adopted incident to such existing benefit plan and program. Executive shall be
immediately vested in the Company contributions provided under the Statutory
Restoration Plan.

                                      -3-
<PAGE>
      3.4 Automobile Allowance. The Company shall provide Executive with a $850
(eight hundred and fifty dollars) per month automobile allowance. The Company
shall furnish Executive with a cellular telephone. Executive shall provide and
maintain automobile insurance for Executive's car including collision,
comprehensive liability, personal and property damage, and uninsured and
underinsured motorist coverage in amounts customarily obtained to cover such
contingencies in the State of California. Executive shall provide proof of such
coverage to the Company upon the Company's request.

      3.5 Reimbursement of Expenses. The Company shall pay for or reimburse
Executive for all reasonable travel, entertainment, and other business expenses
incurred or paid for by Executive in connection with the performance of his
services under this Agreement. The Company shall not be obligated to make any
such reimbursement unless Executive presents corresponding expense statements or
vouchers and such other supporting information as the Company may from time to
time reasonably request. The Company reserves the right to place subsequent
limitations or restrictions on business expenses to be incurred or reimbursed.

      3.6 Annual Incentive Plan. Executive shall be entitled to participate
fully in the Company's 1996 Management Incentive Compensation Plan, as amended
(the "MICP"), and as may be further amended, modified, or replaced, from time to
time, in accordance with the terms and conditions set forth herein and therein.

      3.7 Stock Option Plans. Executive shall be entitled to participate in the
applicable Stock Option Plans for Officers and Key Employees of PacifiCare
Health Systems, Inc., as amended, and as may be further amended modified or
replaced, from time to time, in accordance with the terms and conditions set
forth herein and therein.

      3.8 Insurance. During the term of this Agreement, the Company shall insure
Executive under its general liability insurance for all conduct committed in
good faith while acting in the capacity of Executive Vice President and General
Counsel of the Company or in any other capacity to which Executive may be
appointed or elected.

      3.9 Professional Fees and Expenses. Company shall pay all bar dues and
professional association fees for Executive.

      3.10 Paid Time Off (PTO). Company will grant Paid time off to Executive at
the level of five weeks per year.

      3.11 Initial Grant of Stock Options. Company shall grant Executive options
to purchase 300,000 shares of the Company's stock. The options shall be priced
at the closing price on January 2, 2002. The options shall have a 10 (ten)-year
term, and vesting shall be 25% (twenty five per cent) per year, commencing on
the first anniversary of the grant date.

                                      -4-
<PAGE>
      3.12 Life Insurance. Company will, during the term of this Agreement, pay
to Executive annually a sum of $1,700 (one thousand seven hundred) equivalent to
Executive's annual premium for a one and one half million dollar term life
insurance policy.

      3.13 Year 2002 Annual Incentive Plan (MICP). Executive will receive an
award for the year 2002 that is the greater of target or actual achievement.
Target bonus for 2002 is 65% of base salary.

      3.14 Sign-on Bonus. Executive will receive a sign-on bonus of $100,000 in
January 2002. However, if prior to the first anniversary of the commencement of
Executive's employment with the Company, Executive either resigns (except for
resignation for good cause pursuant to 5.1(d)) or is terminated pursuant to
Section 4.3, then Executive shall not be entitled to, and shall repay, the
entire signing bonus.

4.    COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT PURSUANT TO SECTION 2.2

      4.1 Death. In the event that this Agreement is terminated by reason of
Executive's death, Executive's estate or legal representative shall be entitled
to receive the following:

            a. Payment of benefits under the life insurance policy purchased by
      the Company on Executive's behalf, if any;

            b. Payments of benefits under the MICP set forth in Section 3.5 in
      accordance with the terms of the MICP plan document;

            c. Executive's legal representative shall be permitted to exercise
      any vested and unexercised options granted under the 1996 Stock Option
      Plan and any other existing stock option plans of the Company
      (collectively, the "Stock Option Plans") in accordance with their terms
      for a period of one year following Executive's death.

      4.2 Disability. In the event that Executive is terminated because of
incapacity or disability, the Company shall provide Executive with the
following:

            a. Payment of benefits under the disability insurance policy
      maintained by the Company on Executive's behalf, if any;

            b. Payment of benefits under the MICP set forth in Section 3.5 in
      accordance with the terms of the MICP plan document;

            c. The right to exercise any vested and unexercised options under
      the Stock Option Plans in accordance with the terms stated therein;

            d. Payment of the automobile allowance as provided under Section 3.3
      for a period of 36 months following the effective date of such
      termination.

                                      -5-
<PAGE>
      4.3 Neglect, Misconduct or Voluntary Termination. In the event this
Agreement is terminated because of Executive's habitual neglect or gross
misconduct pursuant to Section 2.2(c) or because of Executive's voluntary
termination (except for resignation pursuant to Section 2.2(f)), the Company
shall be relieved from any and all further or future obligations to compensate
Executive; provided, however, that Executive shall be able to exercise any
vested and unexercised awards under the Stock Option Plans in accordance with
the terms set forth therein.

      4.4 Discharge by Company Pursuant to Section 2.2(d) or 2.2(e). In the
event that the Company terminates Executive pursuant to Section 2.2(d) or 2.2(e)
under circumstances other than a Change-of-Control (as defined herein) and for
any reason other than Executive's incapacity or disability or neglect/misconduct
as described in Sections 2.2(b) and 2.2(c), respectively, then Executive shall
be entitled to the following compensation:

            a. An amount equal to three times Executive's then current annual
      salary under Section 3.1;

            b. An amount equal to three times the average of the last two MICP
      bonuses paid to Executive. If Executive has been employed by the Company
      for more than one, but less than two years, then the MICP bonus severance
      payment shall equal three times the average of the MICP bonus paid to
      Executive for the prior year and the target for Executive for the current
      year. If Executive has been employed by the Company for less than one
      year, Executive's bonus will be three times target. For purposes of this
      Section 4.4(b), the word "paid" shall include $0.00 for any year in which
      Executive was eligible for, but was not paid, an MICP bonus;

            c. The right to exercise any vested and unexercised options under
      the Stock Option Plans in accordance with their terms within one year of
      the effective date of such termination;

            d. Continuation of Executive's and his dependents' medical, dental
      and vision benefits, on the same terms as other executives who remain
      employed with the Company, for a period of 36 months following the
      effective date of such termination;

            e. An amount equal to 36 months of Executive's automobile allowance;

            f. The Company shall provide to Executive outplacement services to
      assist Executive in securing a position comparable to the one from which
      Executive was terminated. The Company shall be obligated to provide those
      outplacement services which are customarily provided by companies of
      similar size and holdings as those of the Company to executives with
      comparable responsibility and longevity as Executive and for reasonable
      cost as approved by the Company. The Company's provision of such
      outplacement services shall not limit, restrict, or reduce, in any manner,
      any and all other compensation to which Executive is entitled hereunder;

                                      -6-
<PAGE>
            g. Executive shall receive, or have paid, the amounts of severance
      compensation provided in clauses (a), (b) and (e) above in equal
      installments over a period of 36 months. Payments will be made either in
      biweekly installments on the Company's regular paydays or as currently
      being paid to Executive;

            h. Notwithstanding the foregoing, in the event Executive engages in
      employment, whether as an employee, consultant or contractor with a
      competitor of the Company during the 36 month period in which Executive's
      salary continues pursuant to this Section 4.4, the severance compensation
      available to Executive under this Section 4.4 shall be reduced by the
      amount of any and all gross earnings Executive earns while engaged in
      employment with any such competitor or competitors. For the purposes of
      this Section 4.4, a "competitor of the Company" shall include, without
      limitation, managed care organizations, including a health maintenance
      organization, competitive medical plan, preferred provider organization,
      provider sponsored organization ("PSO"), or health or life insurance
      company which owns a managed care organization, plan or program. Executive
      agrees to provide immediate notice to Company upon receipt of any gross
      earnings received by Executive from a competitor of Company. Quarterly,
      Executive shall provide the Company a certificate certifying as to his
      employment status and if employed, the name and business of his current
      employer;

            i. If Executive is rehired by Company, payments of severance
      compensation provided for in this Section 4.4 shall cease; and

            j. If Executive dies while receiving the salary continuation benefit
      as provided in this Section 4.4, Executive's estate will receive a lump
      sum payment of the remaining salary continuation benefit.

      4.5 Resignation by Executive Pursuant to Section 2.2(f). In the event that
Executive resigns pursuant to Section 2.2(f), then Executive shall be entitled
to the compensation provided by Section 4.4 of this Agreement.

5.    COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT AS A RESULT OF A
      CHANGE-OF-CONTROL

      5.1 Termination of Employment or Resignation for Good Cause

            a. Executive's Rights. In the event that, during the term of this
      Agreement, the Company undergoes a Change-of-Control, (as that term is
      defined below) and if within 24 months after the consummation of such
      change either (1) Executive is involuntarily terminated, except as
      provided in Section 5.1(b), or (2) Executive voluntarily terminates his
      employment for "good cause" as defined in Section 5.1(d), then Executive
      shall be entitled to the following compensation:

                                      -7-
<PAGE>
                  1. A lump sum payment consisting of: (i) an amount equal to
            three times Executive's then annual salary; (ii) an amount equal to
            three times the average of the last two MICP bonuses paid to
            Executive; or, if Executive has been employed by the Company for
            more than one, but less than two years, then the MICP bonus
            severance payment shall equal three times the average of the MICP
            bonus paid to Executive for the prior year and the target for
            Executive for the current year. If Executive has been employed by
            the Company for less than one year, Executive's bonus will be three
            times target. For purposes of this Section 5.1(a)(1), the word
            "paid" shall include $0.00 for any year in which Executive was
            eligible for, but was not paid, an MICP bonus; (iii) a prorated
            bonus based on target opportunity for the year in which the
            Change-of-Control occurs; (iv) an amount equal to the equivalent of
            the cost of 36 months of COBRA benefits; and (v) an amount equal to
            36 months of Executive's automobile allowance.

                  2. The right to exercise any and all unexercised stock options
            granted under the Stock Option Plans in accordance with their terms,
            as if all such unexercised stock options were fully vested, within
            one year of the effective date of such termination;

                  3. A payment to executive to compensate for any excise penalty
            or other associated taxes resulting from severance payments
            exceeding the cap imposed by Internal Revenue Code Section 280(G);

                  4. The Company shall provide to Executive the outplacement
            services described in Section 4.4(f).

            b. Limitation of Benefits. In the event that Executive is terminated
      within 24 months after a Change-of-Control of the Company, and such
      termination results from either Executive's death, incapacity or
      disability or habitual neglect or gross misconduct, then, notwithstanding
      anything in this Article 5 to the contrary, Executive shall receive only
      that compensation, if any, to which he is entitled to under Sections 4.1,
      4.2 and 4.3, respectively.

            c. Change-of-Control. As used in this Article 5, the term
      "Change-of-Control" means and refers to:

                  1. The acquisition by any Person (as hereinafter defined) of
            Beneficial Ownership (as hereinafter defined) of 20% or more of
            either the then outstanding Stock (the "Outstanding Company Stock")
            or the combined voting power of the then outstanding voting
            securities of the Company entitled to vote generally in the election
            of directors (the "Outstanding Company Voting Securities"), provided
            that, for purposes of this subsection (1), the following
            acquisitions shall not constitute a Change of Control: (I) any
            acquisition by the Company, (II) any acquisition by any employee
            benefit plan (or related trust) sponsored or maintained by the
            Company or

                                      -8-
<PAGE>
            any Person that controls, is controlled by or is under common
            control with, the Company or (III) any acquisition by any Person
            pursuant to a transaction which complies with clauses (I), (II) and
            (III) of subsection (3) of this definition; or

                  2. Individuals who, as of the Effective Date, constitute the
            Board (the "Incumbent Board") cease for any reason to constitute at
            least a majority of the Board, provided that, for purposes of this
            subsection (2), any individual who becomes a director subsequent to
            the Effective Date whose election, or nomination for election by the
            Company's shareholders, was approved by a vote of at least a
            majority of the directors then comprising the Incumbent Board shall
            be considered as though such individual were a member of the
            Incumbent Board, excluding, however, any such individual who
            initially assumes office as a result of an actual or threatened
            election contest with respect to the election or removal of
            directors or other actual or threatened solicitation of proxies or
            consents by or on behalf of a Person other than the Board; or

                  3. Consummation of a reorganization, merger or consolidation
            or sale or other disposition of all or substantially all of the
            assets of the Company or the acquisition of assets or stock of
            another corporation (a "Business Combination"), in each case,
            unless, following such Business Combination, (I) the Persons who had
            Beneficial Ownership, respectively, of the Outstanding Company Stock
            and Outstanding Company Voting Securities immediately prior to such
            Business Combination have Beneficial Ownership immediately following
            the consummation of such Business Combination, directly or
            indirectly, of more than 50% of, respectively, the then outstanding
            common shares and the combined voting power of the then outstanding
            voting securities entitled to vote generally in the election of
            directors, as the case may be, of the corporation resulting or
            surviving from such Business Combination (including, without
            limitation, a corporation which as a result of such transaction owns
            the Company or all or substantially all of the Company's assets
            either directly or through one or more subsidiaries) in
            substantially the same proportions as their ownership immediately
            prior to such Business Combination of the Outstanding Company Stock
            and Outstanding Company Voting Securities, as the case may be, (II)
            no Person (excluding any entity resulting from such Business
            Combination or any employee benefit plan (or related trust) of the
            Company or such entity resulting from such Business Combination) has
            Beneficially Ownership, directly or indirectly, of 20% or more of,
            respectively, the then outstanding common shares of the entity
            resulting from such Business Combination or the combined voting
            power of the then outstanding voting securities of such entity,
            except to the extent that such ownership existed in respect of the
            Company prior to such Business Combination and (III) at least a
            majority of the members of the board of directors or similar body of
            the entity resulting from such Business Combination were members of
            the Incumbent Board at the time of the execution of the initial
            agreement, or of the action of the Board of Directors, providing for
            such Business Combination; or

                                      -9-
<PAGE>
                  4. Approval by the shareholders of the Company of a complete
            liquidation or dissolution of the Company.

            Notwithstanding the foregoing provisions of this definition, unless
      otherwise determined by the Board, no Change of Control shall be deemed to
      have occurred if (I) Executive is a member of a group that first announces
      a proposal which, if successful, would result in a Change of Control and
      which proposal (including any modifications thereof) is ultimately
      successful, or (II) Executive acquires a two percent (2%) or more equity
      interest in the entity which ultimately acquires the Company pursuant to
      the transaction described in clause (I), above.

            For purposes of this definition, "Person" means an individual,
      partnership, joint venture corporation, trust, unincorporated
      organization, government (or agency or political subdivision thereof),
      group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
      Act) or any other entity, and "Beneficial Ownership" means beneficial
      ownership within the meaning of Rule 13d-3 promulgated under the Exchange
      Act.

            d. Good Cause. As used in this Agreement "good cause" for Executive
      to terminate his employment shall be deemed to exist if Executive
      voluntarily terminates employment within 24 months of a Change-of-Control
      for any of the following reasons:

                  1. Without Executive's express prior written consent,
            Executive is assigned duties materially inconsistent with
            Executive's position, duties, responsibilities, or status with the
            Company which substantially varies from that which existed
            immediately prior to such Change-of-Control;

                  2. Without Executive's express prior written consent,
            Executive experiences a change in his reporting level, title, or
            business location (of more than 50 miles from Executive's current
            business location or residence whichever is closer to the new
            business location) which substantially varies from that which
            existed immediately prior to the Change-of-Control; except that if
            Executive is not located at the Company's corporate headquarters in
            California, a relocation to the Company's corporate headquarters in
            California shall not be deemed a substantial variation, unless
            Executive's reporting level or title is also substantially varied;

                  3. Without Executive's express prior written consent,
            Executive is removed from any position held immediately prior to the
            Change-of-Control, or if Executive fails to obtain reelection to any
            position held immediately prior to the Change-of-Control, which
            removal or failure to reelect is not directly related to Executive's
            incapacity or disability, habitual neglect, gross misconduct or
            death;

                  4. Without Executive's express prior written consent,
            Executive experiences a reduction in salary of more than 10 percent
            below that which existed immediately prior to the Change-of-Control;

                                      -10-
<PAGE>
                  5. Without Executive's express prior written consent,
            Executive experiences an elimination or reduction of any employee
            benefit, business expense reimbursement or allotment, incentive
            bonus program, or any other manner or form of compensation available
            to Executive immediately prior to the Change-of-Control and such
            change is not otherwise applied to others in the Company with
            Executive's position or title;

                  6. The Company fails to obtain from any successor, before the
            succession takes place, a written commitment obligating the
            successor to perform this Agreement in accordance with all of its
            terms and conditions; or

                  7. The Company or any successor thereto purports to terminate
            Executive pursuant to Section 4.4 without first giving Executive
            prior written notice thereof that specifies the facts and
            circumstances, in reasonable detail, serving as the basis for
            Executive's termination.

      5.2 Resignation for Other Than Good Cause After a Change-of-Control. In
the event that the Company undergoes a Change-of-Control and Executive remains
with the Company for 12 months following the effective date of the
Change-of-Control, Executive will be given a 30-day "window period" in which to
elect to voluntarily terminate Executive's employment for reasons other than
good cause. Should Executive choose to terminate Executive's employment within
the 30-day "window period," then Executive shall be entitled to the following
compensation:

            a. One-half the lump sum payment referred to in Section 5.1(a)(1);

            b. The right to exercise all vested and unexercised stock options
      granted under the Stock Option Plans in accordance with their terms within
      one year of the effective date of such termination;

            c. Outplacement services as defined in Section 4.4(f).

6.    CONFIDENTIALITY AND OWNERSHIP OF PROPRIETARY INFORMATION

      6.1 Confidential Information. Executive acknowledges that, during the
course of Executive's employment with the Company or with any subsidiary or
affiliate of the Company, Executive will have access to certain confidential
information in the form of know-how, trade secrets, or proprietary information
of the Company or its subsidiaries or affiliates ("Confidential Information")
and that such Confidential Information will be acquired in confidence and as a
fiduciary of the Company or its subsidiaries or affiliates. For the purposes of
this Agreement, Confidential Information shall include, without limitation,
member health data and medical records and any other protected healthcare
information, 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

                                      -11-
<PAGE>
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, operational techniques 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, research and development
plans, contracts and licenses, licensing techniques and practices, advertising
and promotional materials, financial information and strategies, computer
software and other computer-related materials, copyrightable material, security
controls, including computer system passwords, 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 and
may include confidential or proprietary information received from third parties.
In addition to the foregoing, Confidential Information also includes any
information which is not generally known to the public, or within the market or
trade in which the Company competes, and the physical embodiments of such
information in any tangible form, whether written or machine-readable in nature,
or any information which is marked or designated as "Confidential" or
"Proprietary."

      6.2 Ownership of Inventions. Executive agrees to assign and does hereby
assign to the Company any and all ideas, designs, know-how, programs,
improvements, inventions, discoveries and literary creations (collectively
referred to as "Inventions") which Executive alone or with others may conceive
or make, and which (a) are made wholly or partially with the Company's assets or
confidential or trade secret information; or (b) are developed wholly or
partially on the Company's time; or (c) relate at the time of conception or
reduction to practice to the Company's business, including actual or
demonstrably anticipated research or development of the Company; or (d) result
from Executive's work for the Company. Such Inventions are and shall be the
property of the Company and shall be deemed to be part of the Company's
business, whether or not any applications for patents, trademarks or copyrights
are filed thereon. Further, all such Inventions shall constitute Confidential
Information. Executive shall not claim to own any Inventions relating to the
business of the Company. Executive agrees that, upon request of the Company,
Executive shall execute any and all papers and do all other lawful acts that may
be required by the Company in order to make applications for Letters Patent, of
the United States and of any and all other countries, on such Inventions, or
that may be required to vest ownership of such applications, patents and
copyrights in the Company, or that may be required to prosecute or obtain such
patents, or to maintain, preserve or enforce the rights of the Company in such
Inventions, patents and copyrights. Except as otherwise prohibited by law
(including but not limited to California Labor Code section 2870), and except
for Inventions made prior to commencement of Executive's employment with the
Company, in addition to the above assignment of Inventions to the Company,
without further consideration, Executive hereby fully, forever, and irrevocably
assigns, transfers, and conveys to the Company: (i) all patents, patent
applications, copyrights, mask works, trade secrets, and other intellectual
property rights in any Invention; and (ii) any and all "Moral Rights" (as
defined below) which Executive may have in, to, or with respect to any
Invention. For purposes of this Agreement, "Moral Rights" shall mean any rights
to claim authorship of an Invention, to object to or prevent the modification of
any

                                      -12-
<PAGE>
Invention, or to withdraw from circulation or control the publication or
distribution of any Invention, and any similar right, existing under judicial or
statutory law of any country in the world, or under any treaty, regardless of
whether or not such right is denominated or generally referred to as a "moral
right." Executive will promptly disclose any Inventions to the Company whether
developed or created alone or jointly with others.

      6.3 Confidentiality Covenant. Executive acknowledges and agrees that
maintaining the confidentiality of all of the Confidential Information 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 maintain the confidentiality of all Confidential Information
and to not disclose, divulge, exploit, or use, in any manner whatsoever, the
Confidential Information for Executive's own benefit or the benefit of another
person. Executive will additionally take all reasonable precautions to prevent
the inadvertent or accidental exposure of the Confidential Information.
Executive shall not remove any Confidential Information from the Company's
premises or make copies of any of such information except for the benefit of the
Company and in furtherance of Executive's duties as an employee of the Company.
Upon Executive's termination of employment with the Company, Executive shall not
remove from the Company's premises any materials containing any Confidential
Information, and will promptly return to the Company any material which contain
Confidential Information which are in Executive's possession or control.

      6.4 No Solicitation Executive acknowledges and agrees that Executive will
not solicit or participate in or assist in any way in the solicitation of any
employees of Company. For purposes of this provision, "solicitation" means
directly or indirectly influencing or attempting to influence employees of
Company to become employed with any other person, partnership, firm or entity.

      6.5 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
Article 6, 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 confidential information generally.

      6.6. Survival of Obligations. Executive's obligations under this Article 6
shall survive the termination of Executive's employment regardless of the manner
of such termination and shall be binding upon Executive's heirs, executors,
administrators and legal representatives. The

                                      -13-
<PAGE>
remedies to which the Company is entitled under this Article 6 shall survive the
termination of Executive's employment with the Company.

7.    NOTICES

      All notices or other communications required or permitted to be made
hereunder shall be given in writing and sent by either personal delivery,
overnight delivery, or United States registered or certified mail, return
receipt requested, all of which shall be properly addressed with postal or
delivery charges prepaid, to the parties at their respective addresses set forth
below, or to such other addresses as either party may designate to the other in
accordance with this Article 7:

      If to the Company:      PacifiCare Health Systems, Inc.
                              3120 Lake Center Drive
                              Santa Ana, California 92704
                              Attn: President and
                              Chief Executive Officer

      If to Executive:        Joseph S. Konowiecki
                              277 Argonne Avenue
                              Long Beach, CA  90803

All notices sent by personal delivery shall be deemed given when actually
received. All notices sent by overnight delivery shall be deemed received on the
next business day. All other notices sent via United States mail shall be deemed
received no later than two business days after mailing. Any notice given by any
method not expressly authorized herein, shall nevertheless be effective if
actually received, and shall be deemed given upon actual receipt.

8.    GENERAL PROVISIONS

      8.1 Severance Agreement. Any payments of compensation made pursuant to
Articles 4 and 5 are contingent on Executive's executing the Company's standard
severance agreement, including a general release of the Company, its owners,
partners, stockholders, directors, officers, employees, independent contractors,
agents, attorneys, representatives, predecessors, successors and assigns,
parents, subsidiaries, affiliated entities and related entities. Executive must
execute the standard severance agreement and release within 45 days of being
provided with the document to sign or offer will expire.

      8.2 Assignability. This Agreement shall inure to the benefit of, and shall
be binding upon the heirs, executors, administrators, successors, and legal
representatives of Executive and shall inure to the benefit of, and be binding
upon the Company and its successors and assigns. Executive shall not assign,
delegate, subdelegate, transfer, pledge, encumber, hypothecate, or otherwise
dispose of this Agreement, or any rights, obligations, or duties hereunder, and
any such attempted delegation or disposition shall be null and void and without
any force or effect; provided, however, that nothing contained herein shall
prevent Executive from designating beneficiaries for

                                      -14-
<PAGE>
insurance, death or retirement benefits.

      8.3 Entire Agreement. This Agreement is a fully integrated document and
contains any and all promises, covenants, and agreements between the parties
hereto with respect to Executive's employment. This Agreement supersedes any and
all other, prior or contemporaneous, discussions, negotiations, representations,
warranties, covenants, conditions, and agreements, whether written or oral,
between the parties hereto. Except as expressed herein, the parties have not
exchanged any other representations, warranties, inducements, promises, or
agreements respecting Executive's employment with the Company.

      8.4 Severability. In the event any one or more of the provisions of this
Agreement shall be rendered by a court of competent jurisdiction to be invalid,
illegal, or unenforceable, in any respect, such invalidity, illegality, or
unenforceability shall not affect or impair the remainder of this Agreement
which shall remain in full force and effect and enforced accordingly, unless a
party demonstrates by a preponderance of the evidence that the invalidated
provision was an essential economic term of this Agreement.

      8.5 Amendment. This Agreement shall not be changed, amended, or modified,
nor shall any performance or condition hereunder be waived, in whole or in part,
except by written instrument signed by the party against whom enforcement or
waiver is sought. The waiver of any breach of any term or condition of this
Agreement shall not be deemed to constitute the waiver of any other or
subsequent breach of the same or any other term or condition of this Agreement.

      8.6 Governing Law. This Agreement shall be governed by, enforced under,
and construed in accordance with the laws of the State of California.

      8.7 Membership on Boards. Executive, with the permission and knowledge of
the Company's Chief Executive Officer, may serve on the Board of Directors of
other companies and institutions during the course of his Agreement with the
Company, as long as such service does not interrupt Executive in the performance
of his duties as the full-time Executive Vice President and General Counsel of
the Company or other then-current position with the Company.

                                      -15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.

The Company:                        PACIFICARE HEALTH SYSTEMS, INC.,
Date:____/____/____                       a Delaware corporation

                                    By: ________________________________________
                                          Howard G. Phanstiel
                                          President and
                                          Chief Executive Officer

Executive:                          ____________________________________________
Date:  ____/____/____                         Joseph S. Konowiecki

                                      -16-

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